General Contractors On The Hook For Unpaid Wages and Benefits Owed to Subcontractor Employees

By November 22, 2017Articles

On October 14, 2017, Governor Brown signed Assembly Bill 1701, making general contractors and developers in California jointly liable for any unpaid wages and benefits, including health benefits and pension fund contributions, owed to subcontractor employees.

Effective January 1, 2018, a contractor that enters into a contract on or after that date for the construction or repair of a building or structure is responsible for subcontractors who fail to pay their employees even though they already paid the subcontractor in full for work performed.

Although subcontractor employees do not have a private right of action against a general contractor for payment of wages and/or benefits, the Labor Commissioner and labor unions may bring legal action to enforce the general contractors’ statutory liability. The new joint liability law is codified in Labor Code Section 218.7 and is subject to a one year statute of limitations.

Subcontractors will be required to provide documentation and records regarding payroll and employee benefits when requested by a direct contractor. Contract-specific information must also be provided upon request. Under this law, when a subcontractor fails to provide requested information, the contractor is entitled to withhold disputed sums of money owed until the requested information is provided.

The new law applies to private works contracts only and not public projects.

To read the full text of Assembly Bill 1701, click here: