New York State continues to expand wage-theft protections for workers in the construction industry — and the potential scope of liability for employers in that industry. Last month, Governor Hochul signed legislation creating a new Section 198-e of the New York Labor Law. Under that Section, any “contractor” (defined broadly) who enters into a “construction contract” (whether oral or written) is liable whenever a subcontractor at any tier denies wages to an employee, provided that the employee brings suit within three years of the underpayment. For the purposes of the new statute, wages include not only hourly pay and overtime, but also wage supplements, spread-of-hours pay, and earned benefits like those commonly required by union contracts.
Contractors may demand that subcontractors produce certified copies of payrolls and certain other information about their employees, and may withhold payment from any subcontractors who fail timely to provide that information. Contractors who are held liable may also seek indemnification from the subcontractor responsible for the underpayment.
This new legislation has important repercussions for the construction industry. Contractors will no longer be able to insulate themselves from wage-and-hour liability by relying on their subcontractors to follow the law, and ignorance of a subcontractor’s failure to pay employees appropriately will not protect contractors from liability. Instead, contractors will need to affirmatively review subcontractor’s records and pay practices to ensure the laws are being followed by their subcontractors.
If you have additional questions or concerns about wage & hour laws, please contact Chaim Book at cbook@mb-llp.com, or Chris Neff at cneff@mb-llp.com.
