The Deadline to File Suit on a Public Works Payment Payment Bond is Triggered by a Claimant’s Work on a Project Not by a Claimant’s Work Under a Contract

California law requires that prime contractors furnish a payment bond – providing for payment to lower-tiered subcontractors and suppliers – on state and local public works projects with a value in excess of $25,000. There are three conditions that must be satisfied when a claimant makes a claim against a payment bond on a public works project in California:

1. First, generally, the claimant must have served a preliminary notice, unless the claimant is a first-tier subcontractor or supplier;

2. The claimant must have “ceased to provide work” on the project; and

3. The claimant must file suit against the payment bond no later than six (6) months after the period in which a stop payment notice must be given or, in other words, the earlier of 270 days after completion of the public works project or 210 days after a notice of completion or cessation was recorded on a public works project.

In Tarlton & Sons, Inc. v. Great American Insurance Company, 111 Cal.App.5th 376 (2025), the 2nd District Court of Appeal examined whether a subcontractor timely filed a claim against a payment bond when a prime contractor was terminated and replaced by another prime contractor who the subcontractor continued to perform work for.

The Tarlton & Sons Case

Oxnard Union High School District awarded a public works contract to Fast Track Construction Company. The value of the projects exceeded $25,000, and as required by statute, Fast Track furnished a payment bond. The payment bond was issued by Great American Insurance Company.

Fast Track in turn entered into a subcontract with Tarlton & Sons, Inc. to perform framing and drywall work on the project. Tarlton began performing work in April 2021.

In or about November 2021, the District terminated Fast Track due to a dispute and hired Viola, Inc. to complete the project. Tarlton entered into a separate subcontract with Viola with a modified scope of work on November 29, 2021. Tarlton was never provided formal notice of the District’s termination of Fast Track and, for unknown reasons, the District continued to issue change orders to Fast Track through January 31, 2022.

In April 2022, Tarlton submitted a payment bond claim to Great American seeking approximately a half million dollars for work Tarlton performed under its subcontract with Fast Track. When Great American refused to pay Tarlton, Tarlton sued Great American, Fast Track and the District in April 2023.

In April 2024, the trial court sustained a demurrer filed by Great American claiming that Tarlton’s payment bond claim was time-barred under Civil Code section 9558. According Great American, Tarlton’s payment bond claim was time barred because Tarlton “cease[d] to provide work” effective as of the termination of the District’s termination of Fast Track and failed to timely file suit thereafter.

Tarlton appealed.

The Appeal

On appeal, the 2nd District Court of Appeal noted that, on appeal from an order sustaining a demurrer, the Court of Appeal examines the operative complaint de novo – Latin for “anew,” “from the beginning, or “afresh” – to determine whether it alleges facts sufficient to state a cause of action under any legal theory. In other words, the Court of Appeal does not give credence to the factual or legal findings of the trial court and reviews the demurrer as though it was standing in the shoes of the trial court and reviewing the demurrer “afresh.”

Framing the issue before it, the Court of Appeal noted that the trial court sustained Great American’s demurrer “when it found that ‘completion’ occurred 60 days after Tarlton stopped work for Fast Track, i.e., on November 12, 2021” while “Tarlton contends work continued on the District’s project despite any formal termination of the Fast Track contract” and that there was no “cessation of labor” because it continued to work on the project under a separate contract with Viola.

NOTE: There are a couple of things that need to be unpacked here. First, the crux of the issue is whether Tarlton “cease[d] to provide work” under Civil Code section 9558 when Tarlton stopped performing work under its subcontract with Fast Track or whether there was no cessation of work because Tarlton continued to perform work on the project with Viola. Second, the reference to the “60 days” appears to be from Civil Code section 9200 which defines “completion” as including the “[c]essation of labor on the work of improvement for a continuous period of 60 days.” If you’re reading closely notice that the definition of “completion” is the cessation of labor “on the work of improvement,” not under a contract or subcontract.

The Court of Appeal next examined the trial court’s reliance on W.F. Hayward Co. v. Transamerica Ins. Co., 18 Cal.App.4th 1101 (1993), in support of its ruling. In Hayward, Cates Construction, Inc. contracted with the County of Los Angeles on a public works project. W.F. Hayward Co. was a subcontractor to Cates. On June 4, 1990, the County notified Hayward that it had suspended its contract with Cates and all work on the project stopped. On August 3, 1990, Cates and the County agreed to terminate their contract and Cates agreed to assign its subcontracts to the County. Work thereafter resumed. In July 1991, Hayward filed suit against Cates’ payment bond, but the trial court found that Hayward’s payment bond claim was time-barred because the parties agreed to suspend work on June 4, 1990, and when work resumed after August 1990, it was not performed under the “original bonded contract.”

The Court of Appeal noted that the parties in Hayward, unlike the parties here, agreed on a date in which work would be suspended or ceased. Further, explained the Court of Appeal, “Hayward concluded a ‘cessation of labor’ or ‘completion’ occurs when work actually stops – not when the claimant ceases work on the bonded contract (i.e., the date when an action on the bond could commence under section 9558.” (emphasis added). Thus, held the Court of Appeal, “[w]e conclude that whether a ‘cessation of labor’ occurred here, and if so, when it occurred, is a question of fact that cannot be resolved on demurrer.”

Conclusion

So, there you have it, the deadline to file suit on a payment bond depends on when “completion” is deemed to have occurred, and where a prime contractor’s contract has been terminated, completion is not necessarily triggered by the date the contract is terminated but when a claimant’s work on the project has ceased.