Skip to content
The Float

State rules

California

Public-works retention is capped by statute, and both public and private work carry statutory deadlines for passing payments and retention down the chain.

Retainage

Public works. California's Public Contract Code limits retention proceeds withheld on public works contracts to 5 percent of the payment, with an exception that allows a higher figure where the awarding body finds the project substantially complex and says so in the bid documents. The same cap generally flows down from the prime contractor to subcontractors.

Private works. California does not set a general percentage cap on retention for private construction, but the Civil Code sets deadlines for releasing it: the owner generally must pay retention within 45 days after completion of the work of improvement, and a direct contractor generally must pay each subcontractor its share within 10 days of receiving it. A party that wrongfully withholds retention owes a penalty of 2 percent per month on the amount withheld, and the prevailing party in an action to collect may recover attorney fees. Amounts in good-faith dispute may be withheld, up to a limit set by statute.

Prompt payment

Private works. A direct contractor must pay subcontractors within 7 days of receiving a progress payment, under the Business and Professions Code, with a 2 percent per month penalty for wrongful withholding. The Civil Code also requires an owner to pay a direct contractor's progress payment within 30 days after notice demanding payment, where the payment is due and undisputed.

Public works. The Public Contract Code requires public agencies to pay undisputed progress payments within set periods and to release retention within a stated time after completion, and requires prime contractors to pay subcontractors within 7 days of receiving each payment, with penalties for late payment. Deadlines differ between state agencies and local agencies; check the section that applies to your awarding body.

Rules here are summarized from the Public Contract Code, Civil Code and Business and Professions Code. Several sections have exceptions and dispute provisions that change the outcome.

Official sources

Last reviewed 2026-10-18. If you know of a change since then, reply to any issue of The Float and we will check it.