New Law Holds Contractors Liable for Subcontractors’ Non-Payment of Wages

Assembly Bill 1701 (AB 1701) provides a “direct contractor” is liable for the wages, benefits and contributions (plus interest) owed by its subcontractor(s), even if the subcontractor has been paid for the work.  A “direct contractor” is defined to mean a contractor that has a direct contractual relationship with an owner; a “subcontractor” is defined as a contractor without a direct contractual relationship with an owner.  The law applies to all private construction contracts entered into on or after January 1, 2018.

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AB 1701 does not, however, provide wage claimants the right to bring an action against the direct contractor.  Instead, the Labor Commissioner and the Joint Labor-Management Cooperation Committee may bring a civil action against the direct contractor for unpaid wages on behalf of wage claimants, and a third party such as a labor union owed benefit payments or contributions on a wage claimant’s behalf can also bring a civil action against the direct contractor.  In actions brought by the Committee or authorized third parties, the prevailing plaintiff shall be awarded attorneys’ fees and costs.

Since this law can result in direct contractors paying twice for the same project, direct contractors will have to be more careful with whom they contract to perform services.  The law provides some assistance in this regard by allow direct contractors the ability to obtain subcontractors’ payroll records to determine if their subcontractors’ workers are being paid on a timely basis.

 

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