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New York Construction Contractors Liable for Subcontractor Wage Claims

On September 6, 2021, New York Governor Kathy Hochul signed into law (AB 3350/S2766) which adds new sections to the Labor Law (198-e) and General Business Law (756-f). The law holds construction contractors and subcontractors jointly and separately liable for wage claims brought against their subcontractors. The law is effective on January 4, 2022, and will apply to all new, renewed, modified, and amended contracts.

The law provides the following key definitions:

  • Construction Contract: A written or oral agreement for the construction, reconstruction, alteration, maintenance, moving or demolition of any building, structure, or improvement, or relating to the excavation of or other development or improvement to land.
  • Subcontractor: Any person, firm, partnership, corporation, company, association, organization or other entity (or any combination thereof) that is a party to a contract with a contractor and/or party to a contract with the contractor’s subcontractors at any tier to perform any portion of work within the scope of the contractor’s construction contract with the owner, including where the subcontractor has no direct privity of contract with the contractor.

Wage Claims Recoupment

The new law allows employees and the New York Department of Labor (DOL) to file wage claims against contractors and subcontractors for unpaid wages. Contractors that cover a wage claim on behalf of their subcontractors can bring legal actions of their own to recover any amount paid to satisfy wage claims.

Included in the definition of wages are benefits or wage supplements, defined by Labor Law Section 198-c, such as reimbursement for expenses, health, welfare and retirement benefits, and vacation, separation or holiday pay.

Statute of Limitations

The new law specifies that a contractor’s joint and separate liability for unpaid wages is limited to wage claims that take place within the three years prior to the initiation of the claim.

Union Waiver

Under AB 3550, a contractor’s liability for wage claims cannot be waived by agreement or release, except through a valid collective bargaining agreement with a bona fide building and construction trade labor organization.

Contractor Request for Information

Finally, AB 3550 also creates a right for contractors to request and inspect subcontractor records to ensure that subcontractors are complying with wage payment requirements. The law allows contractors to withhold payments owed to subcontractors that fail to provide this information on a timely basis.

Next Steps for Employers

Contractors should be closely monitoring their subcontractors’ wage practices, and subcontractors should ensure their payroll practices follow the state’s wage and hour laws.

HR Works, headquartered in Upstate New York, is a human resource management outsourcing and consulting firm serving clients throughout the United States for over thirty years. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.