California Contractors Beware: You Are Now Liable For Your Subcontractor Wages Owed To Their Employees.
As of January 1, 2018, all “direct contractors,” such as general contractors, prime contractors, or any contractors who enter into contracts directly with property owners, will be held liable for the “unpaid wage, fringe or other benefit payment or contribution, including interest owed” to employees of any subcontractor or lower tier subcontractor used. Labor Code Section 218.7(a)(1).
Although direct contractors are now liable for the subcontractor wages owed to their employees, the employees themselves do NOT have a private right of action against the direct contractor. Instead, the California Labor Commissioner or the Joint Labor-Management Cooperation Committee must bring a civil action against the direct contractor on behalf of the employee for the employee’s unpaid wages owed. Likewise, third parties such as labor unions who are owed fringe, benefit payments, or contributions can also bring a civil action against the direct contractor on behalf of the employees.
Any actions brought on behalf of the subcontractors employee for unpaid wages must be brought within one year of (1) recording of a notice of completion or a notice of cessation of work or (2) actual completion of the work.
However, direct contractors may find themselves paying for more than just unpaid wages. If an action is filed against the direct contractor by the Labor-Management Cooperation Committee or third party who is owed fringe or benefit payment or contributions, the direct contractor may be liable for reasonable attorneys fees and costs, including expert witness fees, to the prevailing plaintiff.
Importantly, just like any judgment, if a judgment is entered against the direct contractor, the direct contractor’s property may be attached in order to satisfy the judgment.
Contractors should be aware of the new law and their increased exposure for Subcontractor Wages while working on private works contracts. Speaking to an attorney about this new law can help ensure that direct contractors keep themselves apprised of their rights and obligations under the new law.