NY State legislature passes law imposing joint liability on general contractors for subcontractor wage theft violations

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By Kenneth C. Zirkel - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=85402306
By Kenneth C. Zirkel - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=85402306

New York’s state legislation has passed a bill that, with some exemptions, would make general contractors jointly responsible for wage theft violations committed by subcontractors.

New York Senate Bill 2766 was voted into law on June 2 and is set to be signed by Gov. Andrew Cuomo.

The would impose liability—limited to three years—on contractors if their subtrades violate state labor law wage and hour provisions. This means an individual or representative could file a lawsuit against the general contractor as well as the employer-subcontrator.

The bill generally prohibits employees and subcontractors from waiving liability for unpaid wages, benefits, wage supplements and any other remedies including attorneys’ fees and costs incurred by an employee pursuing unpaid wages, ENR has reported.

The law includes an exception that contractors may contract with subcontractors to waive liability for unpaid wages, which can allow contractors to protect themselves from automatic liability, ENR quoted Fox Rothschild LLP attorneys Glenn S. Grindlinger, regional practice lead for the firm’s labor and employment department in New York City, and Bryn Goodman, a partner who focuses on employment law.

The lawyers say that if subcontractors don’t pay their employees, contractors still will be liable for such nonpayment. As well, unions can waive the requirement through collective bargaining.

The legislation includes a provision to the state’s general business law to permit contractors to withhold payments to a subcontractor if the sub fails to comply with the contractor’s request for certified payroll records containing all lawfully required information.

“In essence, New York is relying on general contractors to audit their subcontractor’s payroll records,” Grindlinger and Goodman said in their alert.

“It will definitely be an additional burden on general contractors. It’s a huge administrative headache,” Goodman told ENR.

Bill 2766c says the New York Dept. of Labor and New York Attorney General would enforce its requirements, “but contractors will be relied upon to play a role in policing their subcontractors,” the attorneys say.

“Wage theft protection legislation is proven to broaden the legal pathways for workers to recover … wages, hold contractors accountable, and create the conditions on construction sites that ensure both the safety and dignity of workers is respected,” Gary LaBarbera, president of the New York State Building and Construction Trades Council, said in a statement.

The law is similar to one passed by New York City’s council in 2012 for projects receiving city funding. This local law required the Dept. of Housing Preservation and Development to report detailed information on subsidies awarded to projects, and to provide data on the wages of every person working for a developer or a contractor on the project.

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