General contractors are now liable for the wages to its subcontractors' employees - by Lisa Casa

Under the recently enacted Construction Industry Wage Theft Act, Contractors are now jointly and severally liable for the wages owed to their subcontractors’ employees on any construction contract entered into, renewed, modified or amended on or after January 4, 2022. A construction contract is defined as “a written or oral agreement for the construction, reconstruction, alteration, maintenance, moving or demolition of any building, structure or improvement, or relating to the excavation of or other development or improvement to land.”

Excluded from this provision are public works contracts that are governed by Article 8 of the New York Labor Law (“NYLL”), home improvement contracts, and residential contracts for one- or two-family dwellings, unless it is a contract for the development of ten or more one- or two- family dwellings. Further, this provision may be waived by a collective bargaining agreement with a bona fide building and construction trade labor organization which has established itself, and/or its affiliates, as the collective bargaining representative for persons performing work on a project.

Under newly enaction NYLL §198-e, Contractors are now jointly and severally liable to their subcontractors’ employees for: (a) unpaid minimum wage; (b) unpaid overtime wages; (c) liquidated damages for up to one hundred percent of the unpaid minimum wage and overtime wages; (d) statutory damages of up to $5,000 per employee for failure to receive the requisite wage notices (NYLL §195(1)); (e) statutory damage of up to $5,000 per employee for failure to provide the appropriate paystubs (NYLL §195(3)); and (f) attorneys’ fees and costs. These claims are typically filed as class actions on behalf of all employees, making any such wage and hour litigation very costly to the Contractors. Employees have three years to file these unpaid wage litigations, and neither a subcontractor nor an employee can waive the Contractor’s liability.

Contractors should begin to prepare now to limit their liability and to ensure that they will be in a position to defend against any potential wage actions. Such steps may include modifying their subcontract forms to account for this new liability and to impose additional record-keeping, indemnity and payment requirements on their subcontractors. Further, as it is the employer’s obligation to maintain accurate time and payroll records, Contractors should also consider implementing a system of daily sign-in logs, requiring each worker to sign in and sign out at the noted times, requesting copies of certified payroll records as condition of payment to a subcontractor, as well as requiring a personal guaranty from the principal(s) of the subcontractors.

Lisa Casa is an attorney at the Employment & Labor practice group at Forchelli Deegan Terrana LLP, Uniondale, N.Y.