What a subcontractor agreement should cover

A subcontractor agreement should define the work, price, payment dates, insurance requirements and responsibility for claims before work starts. Match the subcontracted scope to what you promised the customer, and have payment-risk and indemnity clauses checked under the law where the project is located.

Match the subcontractor’s scope to your customer’s scope

You already wrote a scope of work for the customer. That document is your exposure, and the sub agreement is where you hand part of it to somebody else. Every gap between the two stays with you.

The subcontractor can take a defined portion of your customer scope, but describe that portion just as specifically and include its associated responsibilities. If your estimate promises "all framing, blocking and joist hangers, debris hauled daily" and the sub agreement says "framing labor," you just bought the blocking, the hangers and the dumpster runs.

This fictional deck example illustrates scope matching, not a construction specification. Confirm structural details for the actual design and site.

Pass relevant customer obligations to the subcontractor

A flow-down clause incorporates selected obligations from the customer contract into the subcontract. Identify the documents and obligations, attach the relevant version, and have the subcontractor approve them. Do not assume a subcontractor has agreed to terms they have never seen.

Flow the terms that touch the work — warranty length, cleanup and site protection, work hours and HOA rules, permit and inspection responsibility, lien waivers. Do not blanket-flow your payment terms. That is a separate decision, and it is the next section.

Set payment dates and address customer nonpayment

State when payment becomes due for completed work. If you want payment timing to depend on the customer paying you, check whether the proposed clause is permitted before including it.

Pay-when-paid describes timing tied to receipt of the owner’s payment. It does not necessarily transfer the risk of permanent nonpayment; the wording and applicable law determine the effect.

Pay-if-paid attempts to make the owner’s payment a condition of paying the subcontractor. State law can prohibit that condition. For example, Virginia §11-4.6 generally prohibits making the customer’s payment a condition of paying the subcontractor, but includes an insolvency or bankruptcy exception. It sets deadlines for covered contracts; lower-tier requirements separately depend on project size and whether the project is single-family residential. Have a local construction attorney check the clause for your contract and tier.

Check prompt-payment deadlines, interest, withholding notices and lien requirements alongside the clause. In California, the required homeowner lien warning explains that unpaid subcontractors may claim a lien even after the owner paid the prime contractor. Notice requirements and available lien rights differ by state.

Write down the invoice requirements, lawful due date, any permitted retainage, and the required lien-release process. Use the correct conditional or unconditional release for the payment stage. As arithmetic only, a permitted 10% retainage on a $6,200 subcontract would hold back $620; the example is not a recommended or universally lawful percentage.

Confirm insurance before work starts

Ask the subcontractor’s insurance agent for a current certificate and relevant endorsements before work starts. A certificate summarizes coverage; it does not create it. Texas insurance guidance explains that additional-insured status must come from the policy.

Workers’ compensation rules may also make you responsible for coverage or premiums for people described as subcontractors. Washington L&I uses its own coverage tests and warns that a Form 1099 does not determine coverage. Ask your insurer what records and exemptions apply in your state.

Collect the certificate in the same packet as the signed agreement, the W-9 and the license number, before the first check.

Explain who bears responsibility for claims

Indemnification is an agreement to cover specified claims or losses. Define whose conduct it covers and whether defense costs are included. It does not guarantee that the subcontractor’s insurer will pay; coverage depends on the policy.

Construction indemnity clauses face state-specific limits. For example, Florida §725.06 restricts clauses covering the protected party’s own acts and imposes different conditions for public work. Have local counsel review the clause and your agent check the insurance backing it.

Check worker status separately from tax forms

The IRS looks at behavioral control, financial control and the parties’ relationship. Who supplies tools, directs the method of work and controls business decisions can matter. Calling someone a subcontractor or issuing a Form 1099 does not decide their status; misclassification can create employment-tax liability.

State tests can differ from the IRS test. California’s guidance explains its ABC test and exceptions, including conditions for construction subcontracting. Review the actual working arrangement with a local employment adviser.

Put repeat subcontractor arrangements in writing

A repeat relationship still needs written scope, payment terms and a process for changes and callbacks. Update the agreement when the work or terms change, rather than relying on an old text exchange.

Copy the approved scope into the subcontractor agreement

The subcontractor’s scope should identify the portion of the customer’s approved work they will perform. Keep the work you routinely sub out as its own line items in DoneQuote, written the way you want a customer to read them, so when you hand a piece of a job to somebody else you are copying language you already committed to instead of describing the work again from memory.