Posted: 12/15/2017

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Beginning January 1, 2018, general contractors in California will be liable if their subcontractors fail to pay their employees. A bill passed by State Legislators in September 2017 makes developers and general contractors who enter private work contracts responsible for unpaid wage claims made against their subcontractors, even if they have already paid the subcontractors for their work.

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Beginning January 1, 2018, general contractors in California will be liable if their subcontractors fail to pay their employees. A bill passed by State Legislators in September 2017 makes developers and general contractors who enter private work contracts responsible for unpaid wage claims made against their subcontractors, even if they have already paid the subcontractors for their work. Under the new law, the Labor Commissioner and Joint Labor-Management Cooperation Committees can take action to recover unpaid wages on behalf of the claimants within one year of the project’s completion.

With this new legislation, general contractors who engage in private contracts will need to take steps to ensure they are compliant with the law and prepared for the changes it brings. Contractors may wish to obtain legal advice and consult an attorney in the field to review their contracts and to discuss ways to protect the business in light of the new regulations. In addition, procedures to audit subcontractors to ensure wages are paid need to be made and potential approaches to take if claims are filed need to be considered.

Some strategies to consider may include:

  • Monitoring subcontractors and suppliers.
  • Implementing a withholding or chargeback clause with subcontractors for disputed amounts, claims, or failure to comply with audits.
  • Requiring subcontractors to obtain a bond.

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Tags: contractor payment, California, contractors, subcontractors

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