This is a dramatic addition to the risk borne by the general contractor or construction manager for wages not paid by a subcontractor.
The New York State Legislature is considering Senate Bill 2766 (A3350), which would make general contractors and/or construction managers working on private projects liable for unpaid wages owed to a worker by a subcontractor “at any tier.” The bill passed the New York State Assembly and is now before the New York State Senate.
Currently, in New York, a worker may bring a private lawsuit against their direct employer to collect any unpaid wages, including overtime and fringe benefits. The Senate sponsors of the bill have stated that this is a major issue in the construction industry where, oftentimes, the direct employer is an unscrupulous or poorly funded subcontractor or labor broker willing to hide assets, change corporate identity and take part in other questionable practices to avoid liability and make themselves judgment-proof from a wage theft action.
Supporters believe that the bill will go a long way toward ensuring that exploited construction workers are quickly able to collect unpaid wages, while creating an incentive for the construction industry to better police itself. This would eventually reduce the burden on New York state and city agencies. Similar laws have already been passed in California, Maryland, Virginia and Washington, D.C.
The bill proposes to amend the New York Labor Law §198 to create a new §198-e, “Construction Industry Wage Theft,” to make a contractor liable for “any debt” owed to a “wage claimant or third party on the wage claimant’s behalf” by a subcontractor for the wage claimant’s compensation for labor. This is a dramatic addition to the risk borne by the general contractor or construction manager for wages not paid by a subcontractor.
The statute of limitations to commence an action under the bill would be six years. The new law would, in essence, make general contractors and construction managers employing subcontractors on jobs sites investigators, record keepers and―ultimately―defendants.
Many New York construction groups, such as the Associated General Contractors of New York State, the Building Contractors Association and the Business Counsel of New York State, are voicing their opposition to this bill passing the New York State Senate. These industry groups believe that, if enacted, the bill would result in higher construction costs for general contractors, construction managers and subcontractors because general contractors or construction managers would be responsible for significant administrative costs of trying to comply with the law and significant legal fees for defending against a private right of action.
If this bill passes the New York State Senate and is signed into law, general contractors and construction managers doing business in New York may be able to protect themselves contractually. For example, when an application for payment is submitted, they should request a certification from a subcontractor that all workers have been paid, or request to view certified payrolls. Indemnification provisions may also be able to protect general contractors and construction managers by ensuring that the responsibility for the costs are shifted back to the subcontractor. The bill may also increase the necessity for subcontractors to provide payment bonds on private jobs.
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