A growing number of state and local governments have adopted wage theft laws that aim to ensure employees receive full compensation by creating severe penalties. These laws often target the construction industry and impose significant penalties for employers who “misclassify” workers or fail to comply with expanded recordkeeping and notice requirements. Wage theft laws can make general contractors liable for their subcontractors’ or temporary labor brokers’ violations, even if these violations were not reasonably discoverable by the general contractor. Consequences for violating wage theft law can be severe, including fines and even criminal penalties in extreme cases. Some states have upstream liability provisions that can make the project owner liable for wage theft violations. Also, some wage theft laws negate the enforceability of specific contract provisions, while others require certain provisions to be included in contracts.
AGC of America has released a new state-by-state guide on wage theft laws. Click here for more information. The comprehensive Wage Theft Guide features information on wage theft laws from across the country in a user-friendly format not widely available from any other source.
AGC recently held a webinar entitled Wage Theft Law: What’s New and What You Need to Know, presented by Julie Reddig and Nicole Behrman of the law firm Lerch Early Brewer and moderated by Denise Gold of AGC. The webinar provided an overview of the Wage Theft Guide and offered some best practices to protect against liability and comply with the laws. Some of these best practices should be incorporated into your contracts. For instance, the ability to request payroll records from your subcontractors should be included in your subcontracts. While some wage theft laws give such a right to request such records a matter of law, most do not.
Best Practices for Compliance and Avoiding Liability
Contractors should review their contracts' termination and indemnification provisions in light of wage theft laws. Also, you should consider explicitly tailoring your indemnification provision to protect upstream parties from wage theft liability. The presenters also noted that you cannot “get blood from a stone.” This means that recoupment will be unlikely if the offending subcontractor is insolvent. Another relevant provision is termination for cause. Evidence of a violation of wage theft laws on any project could contractually be included as a cause for termination. Another pointer was to evaluate your performance and payment bonds to ensure the bonds cover liabilities under wage theft laws. Care should be given that the bonds will be in place during the course the statute of limitations applies, which in many cases is two years for wage violations.
The webinar provided other critical pointers. The first step is to ensure that your company complies with the law. Conducting an internal audit for employee classification and doing so under attorney-client privilege was recommended. Such audits should evaluate workers' actual job duties with their classification.
Several other pointers were included in the webinar. Educating, sharing resources, and verifying compliance were all recommended. Those who missed the webinar may purchase access to the recording through AGC’s learning management system.
AGC/ABA State Law Matrix
Beyond compliance with wage theft law, the AGC/ABA Construction State Law Matrix is the most comprehensive and concise resource for information on state laws affecting any construction project. Updated annually by the ABA Forum on Construction Law, your subscription provides searchable information for all fifty states which can be easily sorted by state or topic area. Subscribe here.
Comments or questions about this article may be directed to Brian Perlberg, Executive Director and Senior Counsel, ConsensusDocs Coalition, at bperlberg@ConsensusDocs.org.