Since the start of the year, California construction contractors have been bound by a new law that puts them on the hook for unpaid wages owed to their subcontractors’ employees, a change praised by worker advocates but eyed warily by builders.
Concerns over Assembly Bill 1701, signed by the governor in October, include uncertainty about what type of work the law actually covers and the lack of a safe harbor for well-intentioned companies. Contractors are also looking for ways to hold subcontractors responsible for missed wage payments, experts said.
The law, now set down in Section 218.7 of the California Labor Code, makes any direct contractor involved in the “erection, construction, alteration or repair of a building, structure or other private work” liable for any debt owed to employees of its subcontractors. That includes wages and benefits, plus interest, but not penalties or contractual liquidated damages.
Labor organizations such as the State Building and Construction Trades Council of California supported the measure, touting it as a solution to a shady underground economy that exploits workers, leaving them little recourse if a subcontractor disappears without paying them.
“As a general contractor, this bill will make you concerned about the solvency of the subs and the reputation of the subs that you bring onto the property,” said Rutan & Tucker LLP partner Brandon Sylvia. “It wants to discourage the use of a fly-by-night subcontractor that might disappear without paying its employees.”
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