New York construction contractors get a new headache on January 4, 2022. New code sections make prime contractors liable if subs don’t pay their employees or independent contractors.
Hold your breath and think about that for a second. Suppose you’ve paid your subs on a project and have a full book of lien releases. Then, surprise! A sub’s employees, tradespeople you’ve never met, sue your company for back wages on the job. That’s an entirely new risk category.
Effective January 4, New York General Business Law § 198-E makes contractors liable for wages owed and not paid by subcontractors at any level. The “Wage Theft” law is very broad – covers both commercial and public works jobs. “Wages” includes both pay and benefits. Only home improvement and residential construction of ten units or less are excluded.
Any employee owed wages by a sub can file suit against the prime contractor and collect both back wages and the cost of bringing suit. And consider this: the right to sue for back wages doesn’t expire for three years. That’s long after the project has been closed out.
Contractors don’t set pay dates or pay policies for subcontractors. They don’t get advance notice when a sub’s running short of cash. Yet, somehow, the new law makes prime contractors responsible if a sub’s employees don’t get paid. How does this make sense?
Here’s how. Effective January 4, 2022, New York contractors have a new responsibility – checking to be sure everyone on the job is getting paid. That’s New York General Business Law § 756-f.
Section 756-f gives contractors the right to demand certified employee payroll records from their subs – covering both employees and those working as independent contractors. Failure to provide these records is a defense to any claim of non-payment.
Problems With the New Law Continue reading →