Blog - Month: June 2026
New 5% Retention Cap for California Contractors
California construction firms must now account for a major shift in how retention payments are handled on private projects. Senate Bill 61, which took effect Jan. 1, 2026, capped retention at 5% on most private commercial construction projects in the state, halving what had long been the standard 10% withholding.
Retention is money withheld from progress payments until a project is substantially complete. Owners have traditionally used retention as leverage to ensure contractors finish the job, address punch-list items and correct deficiencies. In turn, general contractors often withhold the same percentage from subcontractors.
Before SB 61, a 10% retention was common across California private construction projects. Contractors and subcontractors often had to finance payroll, materials and overhead costs while waiting months to receive the final portion of their earned revenue.
Supporters of SB 61 argued that the old system placed too much financial strain on contractors and subcontractors, particularly smaller firms operating on tight margins. By reducing retention to 5%, the law is intended to improve cash flow throughout the construction chain while still giving owners financial protection.
The law applies to private nonresidential construction projects and mixed-use residential developments taller than four stories for contracts executed on or after Jan. 1, 2026. Residential projects and smaller mixed-use developments are generally exempt.
The new rules are straightforward:
- Owners cannot withhold over 5% when making progress payments to contractors.
- Contractors cannot withhold more than 5% from subcontractors.
- Total retention on the project cannot exceed 5% of the contract price.
- If the prime contract specifies retention below 5%, subcontract retention must match that lower percentage.
Courts are required to award attorney’s fees to the prevailing party in compliance disputes, and the statute cannot be waived through contract language.
For contractors, the biggest challenge may be managing the transition. Projects signed in 2025 may still operate under 10% retention terms, while subcontracts issued in 2026 may be limited to 5%. That can create temporary cash-flow gaps for general contractors caught between old and new rules.
What you can do
- Review and revise contract templates to account for the new requirements.
- Ensure subcontract retention mirrors primary contract requirements.
- Update accounting and billing procedures to track projects under different retention structures (if you still have projects signed in 2025).
- Communicate expectations clearly with subcontractors and suppliers.
- Reassess bonding requirements and risk-management practices.
Many industry observers expect the transition will become routine over time. States that previously adopted similar retention caps saw little disruption after implementation.
Workplace Violence Prevention Training Deadline Approaching Quickly
California employers are fast approaching another important compliance deadline under the state’s workplace violence prevention law.
By July 1, employers with 10 or more employees must provide annual workplace violence prevention training to staff and review their workplace violence prevention plan. The requirement stems from Senate Bill 553, codified in California Labor Code Section 6401.9, which took effect July 1, 2024.
This year marks the second annual compliance deadline under the law. In addition to yearly retraining, employers must also provide workplace violence prevention training to all new hires when they begin employment.
Cal/OSHA has been actively enforcing the law during workplace safety inspections, making it important for employers to ensure their plans, training and record-keeping procedures are current. Violations can result in penalties ranging from $18,000 to $25,000 per violation.
The law requires covered employers to maintain a written workplace violence prevention plan that addresses how the company will identify, evaluate and respond to workplace violence hazards.
At a minimum, employers should annually review whether:
- The individual responsible for administering the plan is still correctly identified,
- Reporting procedures remain clear,
- Emergency response procedures are up to date,
- Workplace violence hazards have changed,
- Incident investigation procedures are functioning properly, and
- Employees understand how to report concerns without fear of retaliation.
Employers should also review violent incident logs and prior investigations to determine whether any patterns or deficiencies need to be addressed.
Training requirements
The law requires employers to provide effective training both upon hire and annually thereafter. Training materials must be easy for employees to understand and should address hazards specific to the workplace and employees’ job duties.
Required training topics include:
- The employer’s workplace violence prevention plan,
- How employees can participate in the plan,
- Definitions and requirements under Labor Code Section 6401.9,
- How to report workplace violence incidents or threats,
- Protections against retaliation for reporting concerns,
- Job-specific workplace violence hazards and preventive measures,
- Emergency response procedures, and
- The purpose of the violent incident log and how employees can access related records.
Employers must also provide employees with an opportunity to ask questions and receive additional information during the training.
Record-keeping obligations
The law also includes extensive record-retention requirements. Employers must maintain:
- Hazard identification and correction records for at least five years,
- Violent incident logs for at least five years,
- Incident investigation records for at least five years, and
- Training records for at least one year.
Recent changes under SB 513 also expanded workplace training record requirements. Employers should ensure training records include the employee’s name, the trainer’s name, the competencies covered and any certifications issued.
Breakdown of penalties
Serious violations: Fines can reach up to $25,000 per violation. This applies if an employer lacks the mandated Workplace Violence Prevention Plan (WVPP) or fails to properly train staff.
Willful or repeated violations: Fines scale up to a maximum of $158,727. This is triggered when an employer knowingly ignores the law or has a history of continuous non-compliance.
Failure to keep records: Improperly maintaining the required “violent incident log” or ignoring incident reporting procedures can also lead to significant civil citations.
A final word
With the July 1 deadline approaching, employers that have not already scheduled their annual review and retraining should do so soon to avoid compliance issues and potential penalties.