Construction liability in general can be a difficult and confusing thing to nail down – it’s dictated by miles of paperwork and mountains of bureaucratic language that makes it impossible for the average Joes like us to understand.

Even worse, as construction projects become more complex, more subcontractors are required to take on the specialized work required in today’s world of hyper-complicated, highly bespoke construction. And the more people you bring on a job site, the higher the probability that something will go wrong.

When something does go wrong, you need to know how to fix it, and that first means establishing liability – which makes sense, as you need to establish liability before you can recover damages.

So, are subcontractors liable for damages on a construction job? The answer is…well, it depends. Let’s take a deeper look.

The Subcontractor-Contractor Relationship

In California, the relationship between subcontractors and contractors is complex and governed by specific laws and contractual agreements, but in general, contractors hire subcontractors to do specific, specialized construction work on their job sites.

The contractor – usually a general contractor in California, but possibly a foreman or a project manager – is responsible for finding the right person for their specialized task.

The subcontractor and contractor work hand-in-hand to get the work done. The general contractor establishes the scope, the process, and the schedule to get the work done – then the subcontractor is responsible for delivering as per the contract.

The subcontractor may work independently, but ultimately, they report to the general contractor, who is responsible for verifying and approving the work. When the job is completed, usually the general contractor is responsible for making sure the subcontractor is paid.

In some instances, a subcontractor may subcontract certain jobs out to other subs. While it’s not a general contractor hiring, the chain of command and liability is still the same.

Construction Liability in California

Who is liable for construction issues in California? What legislation defines construction liability?
There’s a series of frameworks that stipulate the entirety of construction liability law in California.

Key Aspects

• Contractual Agreements: Govern the scope of work, payment terms, and other conditions.
• Worker Classification: The California ABC test, established by Assembly Bill (AB) 5, is used to differentiate between employees and independent contractors on a state level, but in construction in particular, whoever is hiring is classified as a contractor, while anyone being hired is a subcontractor.
• Legal Penalties: Refusal or inability to cover the damages from construction defects can lead to even bigger penalties as clients seek to recover losses.

Key Legislation

• Assembly Bill 1701: Makes general contractors responsible for unpaid wages and benefits of subcontractors’ employees. Contractors have the right to inspect subcontractors’ payroll records to ensure compliance.
• Liability Limitations: In cases of defective construction, damages are strictly limited by law. The measure of damages is typically either the cost of repair or the diminution in value of the property, whichever is less. Basically, contractors have to cover the cost of poor delivery.

Legal Responsibilities For General Contractors

• Regular financial reviews of subcontractors.
• Ensuring subcontractors comply with wage and benefit obligations.
• Potential changes in contracting practices to mitigate risks.

General Contractors’ Liability for Subcontractor Damages

When it comes to subcontractors’ construction defects, whether or not they’re liable for subcontractors’ construction defects really depends on the situation. In general, these are the things that dictate liability:

• Contractual Liability: The general contractor and subcontractor relationship is typically defined by a contract. This contract often includes clauses related to indemnification, where the subcontractor may agree to indemnify the general contractor against certain types of liabilities. However, the effectiveness of these clauses can depend on the specific language used and the legal interpretations of such agreements.
• Vicarious Liability: In some cases, general contractors can be held vicariously liable for the acts of their subcontractors. This can occur when the subcontractor is deemed to be an agent of the general contractor, which often depends on the degree of control the general contractor has over the subcontractor’s work. However, because subcontractors are usually independent entities, this type of liability is less common in construction.
• Direct Liability: General contractors can also be directly liable for damages caused by their subcontractors if it is found that the general contractor was negligent in some way. This could include situations where the general contractor failed to properly supervise the subcontractor, did not hire a competent subcontractor, or if the general contractor was involved in the activity that caused the damage.

While they are not directly liable for penalties or liquidated damages against the subcontractor, they are responsible for the unpaid wages, benefits, and interest. This responsibility necessitates a change in how general contractors manage and audit their subcontractors.

What Are Subcontractors Liable For?

Subcontractors are liable for their own taxes, liability insurance, and workers’ compensation coverage. They are responsible for the quality of their work and may be liable for damages caused by their negligence or contractual breaches.

In cases of defective construction, subcontractors can be held liable to the owner, with damages limited to repair costs or property value diminution. However, it’s dictated by the three types of liability we covered in the previous section.

Pursuing Damages from a Subcontractor

If a general contractor needs to pursue damages from a subcontractor, they must:

• Review the contractual agreement for breach clauses.
• Gather evidence of the subcontractor’s failure to comply with the agreement.
• Take legal action based on contract law and specific construction laws in California.

Protecting Against Unscrupulous Subcontractors

To protect against hiring unscrupulous subcontractors, general contractors should:

• Conduct thorough background checks.
• Review the subcontractor’s financial stability and past project history.
• Ensure clarity in contracts regarding responsibilities and liabilities.
• Regularly monitor the subcontractor’s compliance with laws and contract terms.

Situations Where Subcontractors Are And Are Not Liable

Here are some of the main areas when it comes to general contractor liability when dealing with subcontractors.

• Defective Construction Work
  • Subcontractor Liable: If a subcontractor performs a specific construction task (like plumbing or electrical work) and the work is faulty or doesn’t meet the contract’s specifications, the subcontractor is typically liable for the damages caused by this defective work.
  • Subcontractor Not Liable: If the defect is due to design errors provided by the general contractor or another party, the subcontractor may not be liable, provided they followed the design specifications accurately.
• Injury on the Job Site
  • Subcontractor Liable: If an employee of the subcontractor or a third party is injured due to the subcontractor’s negligence or failure to adhere to safety standards, the subcontractor can be held liable for these injuries.
  • Subcontractor Not Liable: If the injury is caused by the general contractor’s negligence or by hazards outside the subcontractor’s control or work area, the subcontractor may not be held liable.
• Non-Payment of Subcontractor’s Employees
  • Subcontractor Liable: Under California law, specifically Assembly Bill 1701, subcontractors are directly liable for paying their employees. If they fail to do so, they can be held responsible for the unpaid wages and benefits.
  • Subcontractor Not Liable: If the general contractor fails to pay the subcontractor, which in turn affects the subcontractor’s ability to pay their employees, the liability may shift to the general contractor, especially if there’s a breach of contract.
• Environmental Damage
  • Subcontractor Liable: If a subcontractor’s actions lead to environmental damage, such as improper disposal of hazardous materials, they can be held liable for the cleanup costs and any related damages.
  • Subcontractor Not Liable: If the environmental damage is due to factors beyond the subcontractor’s control or due to adherence to the general contractor’s specific instructions, the subcontractor might not be held liable.
• Project Delays
  • Subcontractor Liable: If a subcontractor fails to complete their portion of the project on time, and this delay is solely due to their mismanagement or lack of resources, they can be held liable for any damages resulting from the delay.
  • Subcontractor Not Liable: If the delay is caused by factors such as change orders from the general contractor, unforeseen site conditions, or delays in other parts of the project not related to the subcontractor’s scope of work, the subcontractor may not be liable for these delays.

Conclusion

In California, both general contractors and subcontractors have specific responsibilities and potential liabilities. Keeping strict track of these liabilities and responsibilities for operating within the legal framework and ensuring a smooth construction process.

As a general contractor or a homeowner signing on with a subcontractor – the best thing you can possibly do for yourself is to outline liability specifically and comprehensively in the contractor. That way, you have it in writing – so you have a legal leg to stand on if something goes wrong.