On January 1, 2018, California’s Assembly Bill 1701 (AB 1701) went into effect.
What does that mean for contractors? It means that they are now jointly responsible for their subcontractors’ failure to pay their workers. And that’s even if the general contractor has paid the subcontractor.
What Contractors Need to Know About AB 1701
Individual workers cannot bring a claim on their own behalf.
However, the Labor Commissioner may bring action against a contractor. (The silver lining: when the Labor Commissioner brings action, there are no punitive measures.)
Additionally, a third party (read: union) may bring a civil action if they were supposed to receive contributions or benefits payments.
A joint labor-management committee may also bring suit.
Upon a general contractor’s request, a subcontractor (along with any of their own lower tier subcontractors) must provide their payroll records.
What Contractors Can Do
AB 1701 does not prohibit a general contractor or sub of any tier from “establishing by contract or enforcing any otherwise lawful remedies against a subcontractor it hires for liability created by the nonpayment of wages, fringe or other benefit payments, or contributions by that subcontractor or by a subcontractor at any tier working under that subcontractor.” In other words, a contractor can include indemnification language regarding these claims.
Contractors should require subcontractors to provide a payment bond and/ or letter of credit. This can help satisfy claims made against the general contractor under AB 1701.
This bill has many detractors—but it’s Golden State law now. Contractors should focus on hiring reputable subcontractors. It’s also important to strengthen contracts to establish as much protection as possible.
Questions about bonding for subs? Just give us a call: we can help.
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