In September, New York Governor Kathy Hochul signed into law legislation that makes general contractors jointly and severally liable for any unpaid wages owed to employees of their subcontractors. The law goes into effect on January 4, 2022, and applies to any construction contracts entered into, extended, or amended on or after that date.
While the new law is intended to provide construction workers with stronger legal protections against wage theft by subcontractors, it takes an experienced wage and hour lawyer to protect your rights.
Wage theft is a pervasive issue in the construction industry because subcontractors often engage in unscrupulous practices, such as hiding assets to avoid liability for wage and hour violations. The new law amends the New York Labor Law (NYLL) in the following ways:
General Contractor Liability
Any contractor entering into a construction contract will assume liability for any unpaid wages owed to a worker by a subcontractor at any tier. A construction worker who sues a contractor no longer needs to prove that he or she was employed, or jointly employed, by the general contractor. Instead, joint-employer status is automatically conferred upon the general contract wage violations.
Under the new law, claims against general contractors can be brought by workers or a third-party representative within 3 years of the alleged violation, as opposed to 6 years for claims against direct employers.
No Waiver of Liability
A contractor’s joint liability for subcontractor wages cannot be waived by agreement, including an agreement with the subcontractors’ employees whereby those construction workers agree not to sue the general contractor. However, a contractor’s liability may be waived by a collective bargaining agreement with a union representing workers on a project.
Under the new law, a contractor can take legal action against a subcontractor for indemnification of the wages owed. Also, a contractor can establish by contract any other legal remedies against a subcontractor for violations of the relevant provisions of the NYLL. This means that employees of a subcontractor can sue the upstream contractor directly for unpaid wages, and the upstream contract can be held completely liable, but the upstream contract can then sue the subcontractor for anything it is required to pay.
In addition, the new law amends the General Business Law by allowing an upstream contractor to monitor a subcontractor’s wage practices by demanding all payroll records employers are required to keep. A subcontractor is also required to provide, upon request from the subcontractor, the following information:
- The names of all workers on a given project
- The name of the contractor’s subcontractor, when applicable
- The anticipated contract start date
- The scheduled duration
- Local unions for which the subcontractor is a signatory contractor
- The name, address, and phone number of a contact for the subcontractor
An upstream contractor is permitted to withhold payments owed to a subcontractor who fails to provide this information on a timely basis.
Because contractors will be on the hook for unpaid wages by subcontractors, construction workers will soon have legal recourse to sue a contractor directly to recover unpaid wages, benefits or wage supplements, liquidated damages, attorneys’ fees, and legal costs. If you have been the victim of wage theft by an unscrupulous subcontractor, talk to an experienced employment lawyer at Lipsky Lowe.