Starting in 2026, California will cap retention in private construction contracts at 5%, matching public works standards. The rule excludes non-mixed-use residential projects under four stories and applies across all contractor-subcontractor levels. Lower retention rates for direct contractors will extend to subcontractors. Advocates say that the cap will ease financial strain, especially for smaller firms. Owners may respond with stricter bonding requirements, potentially raising construction costs due to reduced protection against non-performance.

Winston will continue to monitor developments and provide updates as they become available. Please contact your Winston relationship partner should you have any questions or to request further information.

Last month, the Texas Senate passed Senate Bill 30, joining a growing group of state legislatures seeking to limit plaintiffs’ tort recovery. According to the bill’s proponents, the legislation is intended to limit so-called “nuclear verdicts,” generally understood to refer to verdicts in excess of $10 million.