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NY Contractors Now Liable for Wages Owed by Subcontractors

NY Contractors Now Liable for Wages Owed by Subcontractors

Construction contractors in New York State must now be vigilant to ensure that not only their own employees are paid properly, but also that all workers on a job are paid properly.

On January 4, 2022, a new law went into effect which makes general contractors jointly and severally liable for wages, benefits, or wage supplements owed by subcontractors to construction workers. This means that construction workers can sue the general contractor on a project they worked for any unpaid wages, even if the workers were employed by a subcontractor.

The statute allows recovery of unpaid wages, liquidated damages, and attorneys’ fees from the general contractors, as long as the proceeding to recover the wages was initiated within three years after the alleged nonpayment of wages. Such a wage claim may also be brought by the New York State Department of Labor or the Attorney General.

Under the new law, a general contractor cannot claim that it does not owe the wages and is not the “employer” or “joint employer” of the subcontractor’s employees. The statute does allow general contractors to pursue a separate action against a subcontractor for indemnification of the debts owed, but this will not be much help if the subcontractor cannot pay.

The law also provides a mechanism for general contractors to monitor whether their subcontractors are properly paying employees. Upon a general contractor’s demand, subcontractors must produce certified copies of all payroll records that the New York Labor Law and regulations require employers to keep.

Subcontractors must also produce, upon request from a general contractor:

  • the names of all the subcontractor's workers on the project, including individuals designated as independent contractors;
  • when applicable, the name of the contractor's subcontractor with whom such subcontractor is under contract;
  • the anticipated contract start date;
  • the scheduled duration of work;
  • when applicable, local unions with whom such subcontractor is a signatory contractor; and
  • the name, address, and phone number of a contact for such subcontractor. If a subcontractor does not timely comply with these requests, the general contractor may withhold payment owed to the subcontractor.

This new law adds an another layer of complexity and risk for contractors doing business in New York. Contractors should consult with knowledgeable employment counsel to address the implications.