Three weeks after completing a commercial HVAC installation, one of our customers opened their pay app approval notification to find a surprise: a $23,000 back charge for "damage to third-floor drywall."
They hadn't touched the third floor. They hadn't caused any damage. But there it was, deducted from their payment.
Back charges are one of the most contentious issues in construction, and they're often abused. GCs sometimes use them as profit centers, deducting questionable amounts from subcontractor payments for issues that may or may not be legitimate.
Let me show you how to protect yourself.
What Exactly Is a Back Charge?
A back charge is a cost deduction made by a general contractor against a subcontractor for work that the sub was supposed to perform but allegedly didn't, or for damages the sub allegedly caused.
Common examples include:
The key word here is "allegedly." Back charges are only legitimate when the claimed issue is real, attributable to you, and you were given proper notice and opportunity to cure.
When Back Charges Are Legitimate
Let's be fair here — sometimes back charges are earned. If your crew genuinely damaged another trade's work and you refused to fix it, a back charge is reasonable. If you left a mess and ignored cleanup requests, the GC is within their rights to have someone else clean it and charge you.
Legitimate back charges typically have these characteristics:
Clear documentation of the issue (photos, reports)
Written notice to you before the work was performed by others
Reasonable opportunity for you to address the issue yourself
Charges that reflect actual costs (not inflated markups)
When Back Charges Are Unfair
Unfortunately, many back charges don't meet these standards. Here are the warning signs of an unfair back charge:
No Prior Notice
You learned about the "problem" only when you saw the deduction on your pay app. The GC never told you about an issue, never gave you a chance to address it.
Vague Documentation
The back charge says "damage repair - $5,000" with no photos, no description, no explanation of what was damaged or how you supposedly caused it.
Excessive Markup
The GC paid $2,000 for cleanup but is charging you $6,000. Those markups aren't legitimate costs.
Work You Didn't Do
The back charge is for damage in an area where you never worked, or for a trade that has nothing to do with your scope.
Timing Manipulation
The back charge appears months after alleged incident, conveniently timed to offset your final payment or retainage.
Your Contractual Rights
Most well-drafted subcontracts include back charge provisions that protect both parties. Key provisions to look for:
Notice Requirements
The GC must notify you in writing of any issue before performing corrective work. This gives you the opportunity to investigate and address it yourself.
Cure Period
You're entitled to a reasonable time to fix the issue — typically 24-72 hours for urgent matters, longer for non-urgent items.
Documentation Requirements
The GC should provide documentation of the issue, the corrective work performed, and the actual costs incurred.
Dispute Procedures
The contract should outline how to dispute a back charge you believe is unfair.
If your contract doesn't include these protections, you may have less recourse. That's why reviewing contracts carefully before signing is so important.
How to Dispute an Unfair Back Charge
Here's my recommended process when you receive a back charge you believe is unjustified:
Step 1: Respond Immediately (Within 48 Hours)
Don't wait. Put your objection in writing right away. State that you dispute the back charge and are preserving your rights while you investigate.
Step 2: Request Documentation
Demand copies of all documentation supporting the back charge: photos, repair invoices, labor records, correspondence. You're entitled to see what they're basing the charge on.
Step 3: Investigate
Review your own records. Were you even on-site when the damage allegedly occurred? Do you have photos of the area from that date? Does your daily log mention anything relevant?
Step 4: Build Your Defense
Gather evidence that counters the back charge. Maybe you have photos showing the damage existed before you arrived. Maybe the area was under the control of another trade.
Step 5: Respond Formally
Submit a written response with your evidence. Be professional but firm. State specifically why the back charge is invalid and demand it be removed.
Step 6: Escalate if Necessary
If the GC refuses to remove an invalid back charge, consider escalating to their management, requesting mediation, or consulting with a construction attorney.
Preventing Back Charges
The best defense is prevention. Here's how to minimize your exposure:
Document Everything
Take date-stamped photos of your work areas before you start, during installation, and after completion. Document the condition of adjacent work.
Daily Logs
Keep detailed daily logs of work performed, areas accessed, and any issues observed. Note when other trades are working in your areas.
Clean As You Go
Don't give the GC legitimate cleanup complaints. Leave each area cleaner than you found it. Take photos.
Respond to Issues Promptly
If the GC reports a problem, address it immediately. Don't let small issues become big back charges.
Confirm in Writing
If the GC verbally claims you caused damage, request written documentation. Don't admit fault without evidence.
Witness Conditions
Have your crew witness conditions in critical areas. Multiple observers mean multiple potential witnesses if disputes arise.
The Hidden Cost of Back Charges
Beyond the direct dollar amount, back charges have hidden costs:
Cash flow disruption when expected payments are reduced
Time spent investigating and disputing charges
Relationship damage with the GC
Potential impact on future work opportunities
Legal costs if disputes escalate
Some contractors estimate they spend 5-10% of their administrative time dealing with back charge issues. That's time not spent on productive work.
When to Involve an Attorney
Consider getting legal help when:
The back charge is large (I'd say $10,000+ warrants a legal review)
The GC refuses to provide documentation
Multiple back charges are being applied without justification
The dispute threatens a significant portion of your contract value
You believe the GC is acting in bad faith
Construction attorneys see these disputes constantly and know what arguments work.
A Better Approach: Technology-Enabled Documentation
This is where tools like SubPaid become invaluable. Instead of scrambling to recreate documentation after a back charge appears:
Every job is documented with date-stamped photos
Progress is tracked in real-time
Any issues reported are logged with full context
You always have evidence ready if disputes arise
One SubPaid customer told me he won three back charge disputes in a row simply by pulling up photos from his phone showing the area in question was pristine when he left. Total time to resolve each dispute: 10 minutes.
Frequently Asked Questions
Can a GC back charge me without prior notice?
In most cases, no — if your contract includes notice requirements. Without contractual notice, you may have grounds to dispute the charge as procedurally invalid.
Is there a limit to what GCs can back charge?
There should be. Legitimate back charges should reflect actual costs, not profit opportunities. Excessive markups can be challenged.
What if I caused the damage but think the charge is too high?
Acknowledge the issue but dispute the amount. Request itemized costs and compare to market rates for the repair.
Can back charges exceed my remaining contract balance?
Technically yes — GCs have tried to pursue subcontractors for amounts exceeding what's owed. Consult an attorney if this happens.
Should I sign a back charge acceptance form?
Never without reading it carefully. Signing may waive your right to dispute. Add language like "accepted without prejudice and subject to review" if pressured to sign.