Subcontracts with general contractors: pay-when-paid, retention, indemnity, insurance, and the notices that keep you paid
In one paragraph
Working for a general contractor means signing their subcontract, and the subcontract is written to move risk downhill. Four clauses decide whether you get paid and when: the payment clause (pay-when-paid versus pay-if-paid), retention, indemnity, and insurance. California backs you with a seven-day prompt payment rule and a ten-day retention rule, but only your own 20-day preliminary notice keeps your lien and stop-notice rights alive on someone else's contract. Here is how to read the four clauses and what to send in the first twenty days.
The rule
A prime contractor must pay a subcontractor within seven days of receiving each progress payment unless otherwise agreed in writing, may withhold no more than 150% of a good-faith disputed amount, and owes a 2% per month penalty plus attorney fees for a violation (B&P 7108.5). Retention received by the direct contractor must be passed to subcontractors within 10 days (Civil Code 8814), with the same 2% penalty (8818). A subcontractor preserves lien, stop payment notice and payment bond rights only by giving preliminary notice within 20 days of first furnishing work (Civil Code 8200, 8204).
Why it matters
The subcontract is the first contract most new C-10s sign that was written by the other side's lawyer. Sign the pay-if-paid clause and the GC's collection problem becomes yours; skip the preliminary notice and your only remedy when the GC does not pay is a lawsuit against the GC. Twenty minutes with the four clauses and one certified letter in the first twenty days change both outcomes.