Virginia recently enacted a new wage theft law making general contractors on certain large-scale projects potentially liable for their subcontractors’ wage payment violations. On March 31, 2021, in response to pressure from industry groups, Governor Northam signed Senate Bill 1209, which amends the new wage theft law in order to mitigate some of the increased burden on general contractors.
Virginia’s new wage theft law provides that any subcontract entered into after July 1, 2020, for projects valued at more than $500,000, other than single-family residential projects, is deemed to include a provision making the general contractor and the subcontractors at any tier jointly and severally liable for ensuring that the subcontractor’s employees receive all wages due. The law also provides that the general contractor is deemed to be the employer of each subcontractor’s employees for purposes of Virginia’s wage payment laws. As a result, the general contractor may be liable for civil and criminal penalties if a subcontractor at any tier fails to pay its employees in accordance with prevailing law. In addition, the subcontractor’s employees can file suit against the general contractor and recover up to three times the amount of any unpaid wages, plus reasonable attorneys’ fees and costs.
Senate Bill 1209, which goes into effect on July 1, 2021, seeks to alleviate some of the burden imposed on general contractors in two ways.
First, the new bill narrows the scope of a general contractor’s potential liability. As originally enacted, Virginia’s new wage theft law incorporated the definitions of general contractor and subcontractor from the state’s mechanic’s lien statutes. Thus, subcontractor was defined as including contractors, laborers, mechanics, and persons furnishing materials, who do not contract with the owner but with the general contractor. Under this definition, general contractors in Virginia were theoretically liable for the wage payment violations of every supplier furnishing any amount of materials to a project. Senate Bill 1209 specifies that, for purposes of the new wage theft law, subcontractor does not include persons solely furnishing materials. As a result, general contractors no longer face liability for any entity that does not provide labor to the project.
Second, Senate Bill 1209 introduces a procedural mechanism for general contractors to use in defending themselves against wage claims by a subcontractor’s employees. As currently written, the wage theft law states that an employee asserting a wage payment claim against the general contractor must demonstrate that the general contractor knew or should have known that the subcontractor was not paying his employees all wages due. Senate Bill 1209 adds language stating that, in defending against a wage payment claim by a subcontractor’s employee, the general contractor may offer into evidence a written certification from the first-tier subcontractor stating that:
(1) the subcontractor and each of its sub-subcontractors have paid all of their employees the wages owed for the period of time in question, and
(2) to the subcontractor’s knowledge, all lower-tier subcontractors have done the same.
Such a written certification could be used to rebut any argument that the general contractor knew or should have known that the subcontractor was not paying his employees all wages due.
Senate Bill 1209 states only that the general contractor may offer the written certification as evidence of its knowledge regarding the subcontractor’s pay practices. It does not state that such a certification provides a complete defense to a claim for unpaid wages. In fact, language indicating that the written certification would provide a valid defense to a claim for unpaid wages was specifically removed from the bill before it was voted out of committee.
In order to take full advantage of the new amendments to the wage theft law, all general contractors operating in Virginia should update their subcontractor payment application forms to include the type of written certification described above.
At the same time, because the written certification does not provide a complete defense to a wage payment claim, general contractors working on projects that fall within the scope of Virginia’s wage theft law should continue taking steps to ensure that all subcontractors pay their employees in accordance with prevailing law.
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