Source + trust record
Source checked as of September 18, 2026. Primary authority: EDD WSD18-06, EDD WSIN25-17, and EDD’s current Active Directives list.
Check result: WSD18-06 remains active California guidance for distinguishing subrecipients from contractors. Classification turns on the substance of the relationship rather than the label on the agreement. Current federal adjustments raised the Simplified Acquisition Threshold to $350,000 and the laborer/mechanic contract threshold referenced in this directive to $100,000. Local Areas should document the classification judgment before award because it affects monitoring, audit, compliance, and procurement responsibilities. This AI-assisted brief does not receive human legal or compliance review. Official sources control.
WDB decision strip
| STATUS | ACTION | PRIMARY OWNER | CURRENT TIMING | IMPACT |
|---|---|---|---|---|
| FINAL · ACTIVE | CLASSIFY AGREEMENTS BY SUBSTANCE | Fiscal + Procurement/Contracts Leadership | Before issuing or modifying an agreement | Subrecipients · Contractors · Monitoring · Procurement · Indirect costs |
The bottom line
An agreement is a subaward or a procurement contract based on what the organization actually does, not what the document is titled. Local Areas should make the classification before selection and contracting because procurement, monitoring, indirect-cost, audit, and risk-management requirements differ materially.
The label on an agreement does not determine whether an organization is a subrecipient or contractor—the substance of the relationship does
WSD18-06 helps California workforce entities distinguish subawards from procurement contracts under federal grant rules. The classification determines monitoring, audit, procurement, reporting, terms and conditions, and the level of programmatic responsibility attached to the agreement.
Current thresholds to use
Issued
September 5, 2018
Revised
July 23, 2019
Simplified acquisition
$350,000
Laborer/mechanic threshold
$100,000
Executive takeaway
A subrecipient carries out part of the federal program and has programmatic decision-making responsibility. A contractor provides goods or services for the recipient’s own use in a normal procurement relationship. Some entities may show characteristics of both, so the Local Area should document its judgment before the agreement is signed.
Subrecipient signals vs. contractor signals
| Subrecipient | Contractor |
|---|---|
| Determines eligibility or program services | Provides goods/services within normal business operations |
| Performance is measured against federal program objectives | Provides similar goods/services to many purchasers |
| Uses funds to carry out a portion of the program | Operates in a competitive environment |
| Must comply with program-specific federal requirements | Not subject to program compliance merely because of the contract |
Threshold update: Current federal rules set the simplified acquisition threshold at $350,000 and the relevant laborer/mechanic contract threshold at $100,000. Older figures in historical guidance should not be used.
Operational considerations for Local Boards
- Complete a written classification analysis before issuing an agreement.
- Build subrecipient agreements around federal award terms, monitoring, audit, and performance responsibilities.
- Use procurement requirements for contractor relationships.
- Revisit classification when the scope changes materially.
- Train program, procurement, fiscal, and legal staff to use the same classification framework.
Source basis
Primary source: EDD WSD18-06 — Subrecipient and Contractor Distinctions