California Legislature Further Helping Subcontractors

On August 24, 2012 by

I recently found a good article on JDSupra.com, always a great source for solid legal content, regarding California Senate Bill 474. This Bill protects subcontractors when contracting so that they cannot be held liable to indemnify the general contractor or owner from certain types of negligence. Author, Maria Giardina of Sedgwick, LLP, does a very good job of explaining the step that the California Legislature has taken to further protect the interest of subcontractors who often enter into one-sided contacts with general contractors in order to procure work in this troublesome economy.

This Bill raises a bigger and more overarching question as to why do state legislatures feel the need to make rules to restrict the freedom to contract. The legislature here is essentially trying to protect the subcontractor from itself. In a perfect world, general contract presents the subcontract document to the subcontractor, and that sub has its lawyer review the contract to see if the terms can be negotiated so that its a fair document for all involved. This new Bill, allows for subs to enter into subcontract agreements with general contractors and then after-the-fact afford the sub protections because the general contractor had a well written contract.

William M. Hill and Mary-Beth McCormack author a well written article on protecting a subcontractor from itself. This article deals with a hot construction law topic, pay-when-paid vs. pay-if-paid clauses.

It seems from the face of California Senate Bill 474 and many others like it across the country, that we are on a path toward heavy government regulation of our business relations. I understand that the little man needs protection from corporate might, but I believe that we have gone too far. Let the parties contract to whatever they want. If it goes against public policy, then the provision is void on its face. There is no need to waste taxpayer money to draft, argue, and pass bills such as these.

For more on this topic, see Gordon & Reese, LLP article and Senator Noreen Evans.

On Aug 24, 2012

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