The Governor signed a bill on January 25, 2021 (the “Bill”), “to back New York’s construction workers in their fight against wage theft and help those seeking justice to navigate their claims against such crimes.”[1]  The Bill takes effect on January 4, 2022, “and shall apply to construction contracts entered into, renewed, modified or amended on or after such date.”[2]

“The purpose of this bill is to amend the existing wage theft law to increase the likelihood that exploited workers in the construction industry will be able to secure payment and collect unpaid wages and benefits for work that has already been performed.”[3]  The Bill provides that:

“a contractor making or taking a construction contract shall assume liability for any debt resulting from making a wage claim, 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 contractor for the wage claimant’s performance of labor; provides for wage theft prevention and enforcement.”[4]

Before the enactment of this Bill, a construction worker could file “a private lawsuit against his/her direct employer to collect any unpaid wages, including overtime and fringe benefits.”[5] Notwithstanding, despite a worker’s ability to file a lawsuit against its direct employer, often that employer was judgment proof.[6]  This Bill now “amends existing wage theft law to require general contractors to assume joint and several liability for any debt resulting from making a wage claim, owed to a wage claimant or third party on the wage claimant’s behalf.”[7]

The hope of this Bill is that by holding the general contractor liable for all subcontractors that it chooses to utilize on a jobsite, the general contractor will monitor its subcontractors more carefully to ensure that they are properly paying their employees.  Essentially, the Bill is intended to create an “incentive for the construction industry to better self-police itself in turn, this will hopefully lead to a decreased burden on State and City Agencies, including the Department of Labor and Workers’ Compensation Board, in terms of enforcement resources.”[8]

The Bill permits general contractors the “authority to oversee the books of subcontractors in order to better ensure that workers are being paid all owed wages.”[9]  In particular, General Business Law was amended, and section 756-f was added which provides, in pertinent part, that:

“Upon request of a contractor, or a contractor’s subcontractor, to any subcontractor which performs any portion of work within the scope of the contractor’s construction contract with an owner, such subcontractor shall provide certified payroll records which, at a minimum, contain all lawfully required information required for all employees providing labor on the project. Such payroll records shall contain sufficient information to apprise the contractor or subcontractor of such subcontractor’s payment status in paying wages and making any applicable fringe or other benefit payments or contributions to a third party on its employee’s behalf.”[10]

“[A] contractor may withhold payment to a subcontractor or lower tier subcontractor for failure to provide certain payroll records.”[11]

What is the impact of this Bill? Essentially, it has now made the general contractor liable in the event that its subcontractor does not properly pay their workers. In order to mitigate the general contractor’s liability, the Bill allows the general contractor to oversee the books and records of the subcontractor to ensure that they are properly paying their employees and to withhold payments to a subcontractor if the subcontractor fails to provide certain payroll records.

It is important for contractors (and subcontractors) to ensure that the contractors they retain are properly paying their workers. If such subcontractor fails to properly pay their workers, the general contractor will be liable. Accordingly, it is imperative that general contractors review the subcontractors’ payrolls and make sure that the workers are properly being paid.

Jaspan Schlesinger LLP can help you navigate these issues and other construction law related matters. If you need assistance, please contact Christopher E. Vatter at cvatter@jaspanllp.com or Charles W. Segal at csegal@jaspanllp.com.

[1] Senate Acts To Penalize, Prevent Wage Theft, Press Release, June 2, 2021.

[2] 2021 NY A.B. A3550. § 4.

[3] 2021 NY S.B. S2766C at “Purpose or General Idea of Bill”. The purpose of the Bill is found in the New York State Senate Bill S2766C, which was substituted by New York State Assembly Bill A3350 on June 2, 2021.

[4] 2021 NY A.B. A3550.

[5] 2021 NY S.B. S2766C at “Justification”. The justification of the Bill is found in the New York State Senate Bill S2766C, which was substituted by New York State Assembly Bill A3350 on June 2, 2021.

[6] Senate Acts To Penalize, Prevent Wage Theft, Press Release, June 2, 2021.

[7] Id.

[8] 2021 NY S.B. S2766C at “Justification”.

[9] Senate Acts To Penalize, Prevent Wage Theft, Press Release, June 2, 2021.

[10] General Business Law §756-f.

[11] 2021 NY S.B. S2766C at “Summary of Provisions”. “Failure to timely comply with a request for information as provided herein shall be a basis for a contractor to withhold payments owed to a subcontractor at any tier.” General Business Law §756-f.