Wage theft is a serious problem within the construction industry, and one that lawmakers take seriously. In order to combat wage theft issues and better protect construction workers on the job, the California legislature modified the California Labor Code to provide that direct contractors may now be held liable for wage violations by their subcontractors. Direct contractors who work with a variety of subcontractors on different projects need to be aware of these new legal obligations.

What Does This New Law Mean for Construction Companies in Rancho Cucamonga?

Under the new law, AB 1701, starting in January 2018, direct contractors became liable for any unpaid wages or benefit payments that are owed by subcontractors that they work with on a job. AB 1701 applies to all direct contractors, or those contractors that contract directly with an owner, and applies to all private construction jobs.

The new law does not permit the employees themselves to bring a direct action against the direct contractor for their unpaid wages. But it does allow three different entities to bring claims on an employee’s behalf. These include:

  • The Labor Commissioner, which can bring an administrative action or a civil lawsuit

  • Joint labor-management cooperation committees may bring a civil action

  • Third parties that are owed contributions on behalf of employees may bring civil actions

Both joint labor-management cooperation committees and third parties may also seek attorneys fees and costs if they are required to bring a lawsuit. There is a one-year statute of limitation on bringing a lawsuit under the new law.

How Can Direct Contractors Protect Themselves?

The best way for direct contractors to protect themselves from any future lawsuit is to make sure that their subcontractors are paying the wages that they’re required to pay. This can be done by adding contractual terms that require the subcontractor to disclose all pay information, including regular payroll records, during the course of a job.

Before beginning a job, direct contractors should also require information from the subcontractors regarding any and all employees or contractors who will be performing work on the job so that these records can be compared against any future payroll records received to ensure that comprehensive information is being provided.

Beyond obtaining information directly from the subcontractor, direct contractors may also want to consider requiring subcontractors to provide a bond or letter of credit to protect the direct contractor in the event that a wage claim is made. This can help to ensure that the direct contractor does not have to go through the difficulty of handling a wage lawsuit and then turn around and attempt to recover from the subcontractor after the fact.

California Attorneys Helping You Keep Track of Your Legal Obligations

In the ever-changing world of California legislation, it can be easy to lose track of new obligations that are being imposed on contractors, or obligations that may be altered by new legislation. The failure to stay on top of these developments can have severe consequences down the road. At CKB Vienna LLP, our real estate and construction attorneys make it their job to stay on top of these types of developments, and to make sure their clients are in compliance as well. For more information, contact us online or at 909-980-1040.

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