John Antracoli was quoted in Construction Dive December 6, 2017, discussing California Assembly Bill 1701 that Governor Jerry Brown signed into law in October, making general contractors responsible for any employee wage or benefit payments their subcontractors fail to make.
According to the Bill, “for all contracts entered into on or after January 1, 2018, require a direct contractor be liable for, specified debt owed to a wage claimant that is incurred by a subcontractor, at any tier, acting under, by, or for the direct contractor for the wage claimant’s performance of labor included in the subject of the original contract.”
Antracoli suggests that the bill is an attempt to protect smaller subcontractors from direct contractors that deny payment in an attempt to wring every last dollar out of a job.
“That’s when [the subcontractor] has to decide whether to hire an attorney — and we’re expensive,” Antracoli said.
According to Antracoli, a potential problem with the law is that it could end up inadvertently hurting small subcontractors. The law could find direct contractors vetting subcontractors’ financials to such a degree that the stricter standards could disqualify smaller firms from jobs.
“This could result in less work going to smaller subcontractors, the very people you’re trying to protect with this statute,” Antracoli said.
The law, Antracoli said, also has the potential to create a costly sea of paperwork as direct contractors try to wrangle payroll records and other documents from subcontractors to prove they are paying their employees.
“Construction is going bonkers,” he said, in terms of the avalanche of projects underway. “Do you even have the resources to do all the checking you would want to do? Are you going to hire more people to protect you against the liability?”
There are things Direct contractors can and should do to protect themselves, Antracoli said, by requiring subcontractors to provide performance and payment bonds and to have corporate officers personally guarantee payment of employee wage claims. However, the direct contractor is responsible for those wages if employees remain unpaid.