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IL Joins Others in Contractor Wage Laws

Monday, April 15, 2019

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The state of Illinois could soon become the next state to hold general contractors accountable for their subcontractors’ unpaid wages to employees.

The Illinois House of Representatives passed 70-41 an amendment to the state’s Wage Payment and Collection Act that would do just that.

What’s Happening

Illinois is just the latest in a slew of states that have recently passed such legislation, most notably Maryland, Oregon and California.

Maryland’s General Contractor Liability for Unpaid Wages Act took effect Oct. 1, 2018, and is aimed at private projects and attached to any tier of subcontractor.

© iStock.com / Micha? Chodyra

The state of Illinois could soon become the next state to hold general contractors accountable for their subcontractors’ unpaid wages to employees.

The Maryland law, though, does give the employee the right to take private action against the general contractor if the employee isn’t paid within two weeks. And, unlike California, Maryland is not giving general contractors the right to audit subcontractors, but it provides general contractors with a right of indemnity, which can be enforced though contracts.

Assembly Bill 1701 amended Section 218.7 of the California Labor Code in July 2018, making it so that general contractors on private construction projects “assume and are liable for any debt” of any tier of a subcontractor’s unpaid wages, fringe benefits or other contributions.

That legislation also permits the Commissioner of Labor to file a suit on behalf of the unpaid employee and allows labor unions to sue as well. There is a one-year statute of limitations.

As mentioned, the California law allows the general contractor to inspect subcontractors’ payroll records with the ability to withhold payment if records aren’t released.

Just a month after the California law was passed, Oregon passed House Bill 4154B, which stated that a general contractor would have to pay for a delinquent subcontractor under conditions that:

  • A claim has been filed with the Oregon Bureau of Labor and Industries for wages, overtime pay or benefits;
  • The claim was investigated and found valid;
  • The wages cannot be collected from the subcontractor; and
  • The general contractor has not already fully paid the subcontractor whatever is owed under that specific project.

Illinois’ Bottom Line

The Illinois amendment states that, “for contracts entered into on or after July 1, 2019, a direct contractor making or taking a contract in the State for the erection, construction, alteration or repair of a building, structure or other private work shall assume, and is liable for, any debt owed to a wage claimant or third party on the wage claimant's behalf, incurred by a subcontractor at any tier acting under, by, or for the direct contractor for the wage claimant's performance of labor included in the subject of the contract between the direct contractor and the owner.”

The law would also apply to all subcontractors and cover fringe and benefit payments owed by third parties as well.

That piece of legislation is now sitting in the state Senate.

   

Tagged categories: Finance; General contractors; Good Technical Practice; Laws and litigation; NA; North America; Subcontractors

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