Protect Again Wage Claim of Subcontractor Employees

May 17, 2022

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Time Is Money: A Quick Wage-Hr Tip on … New York'southward New Rule on Contractors' Liability for Subcontractor Employee Wages

Tuesday, Nov 2, 2021

The doctrine "joint employer" liability has received significant attention in recent months, including on this web log. Nether the Fair Labor Standards Human activity, an employee may be deemed to have multiple employers—each of whom would be liable jointly for all aspects of FLSA compliance, including with regard to the payment of wages—in connection with his or her performance of the aforementioned work. During the prior administration, the U.S. DOL issued a rule intended to standardize the parameters of joint employer liability.  Months later, however, a federal court invalidated a portion of the new dominion, holding that information technology impermissibly narrowed the scope of the joint employer doctrine. And, in July 2021, the DOL appear its outright repeal of the dominion—i.eastward., whether a business might face up articulation employer liability volition over again be governed past the multi-factor "economic reality" test subject to varying judicial interpretations.

An important new development in New York law, however, essentially renders the concept of joint employment, and the standards that govern it, a moot point—at least in terms of wage liability in the construction manufacture. In September 2021, Governor Hochul signed Senate Beak S2766C (A3350), titled "An act to amend the labor law and the general business organization law, in relation to actions for non-payment of wages," which adds new sections to the New York Labor Police (198-e) and Full general Business Law (756-f). As stated in the bill's Justification, the police is intended to "provide New York construction workers with a new remedy against wage theft"—specifically, by pinning liability on contractors when i of their subcontractors fails to pay wages owed to its (the subcontractor'south) employees.  This transfer of liability occurs without whatever regard to whether the contractor could rightly exist considered a joint employer of the subcontractor's employee.

The disquisitional aspects of Labor Law § 198-e, which will take issue on January four, 2022, are every bit follows:

• The law transfers liability to "contractors," which includes any person or business concern entity that "enters into a construction contract with an possessor."

• The law applies to work performed pursuant to a "construction contract," which is defined broadly, butexcludes public works contracts, domicile comeback contracts made past the owners of an owner-occupied dwelling, and some (simply not all) contracts for the construction of ane- or ii-family homes.

• The law renders contractors liable for wages owed just not paid by subcontractors at "any tier"—i.due east., the contractor is accountable for the wages of its subcontractors' subcontractors, etc.

• Releases of liability granted to contractors by subcontractors or their employees will more often than not be invalid—though waivers granted by way of a collective bargaining agreement may be effective, provide sure criteria are met.

• The law establishes an abridged, three-twelvemonth menstruum limitation for wage claims that a subcontractor's employee may wish to affirm against a contractor—in contrast to the ordinary 6-yr menstruation of limitation that applies in other contexts under the Labor Law.

• While contractors must presume liability for wages owed by subcontractors in the first instance, they may bring an activeness against the relevant subcontractor to recover wages paid to the subcontractor's employees.

Every bit noted in the beak's Justification, the legislature'due south intent was non only to ensure that "construction workers are rapidly able to collect unpaid wages," but besides, at the same time, to "creat[e] an incentive for the structure industry to better self-police itself in turn[.]" To the latter terminate, corresponding revisions to the General Business Law are purported to arm contractors with tools to monitor their subcontractors, and thereby reduce their exposure to wage liability. Specifically, upon a contractor'due south request, a subcontractor (at whatsoever tier) must provide:

• certified payroll records containing "sufficient information to apprise the contractor . . . of such subcontractor'south 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";

• the names of all of the subcontractor's workers (including independent contractors) on a projection;

• every bit applicative, "the name of the contractor's subcontractor with whom such subcontractor is under contract";

• the subcontractor's contract start date and duration of work;

• the identity of unions with which the subcontractor is a signatory; and

• contact data for the subcontractor'southward designated contact.

If a subcontractor at any tier fails to provide the foregoing information, the contractor may withhold payment otherwise due to that subcontractor.

Contractors potentially impacted past the new law should note that information technology applies not simply to new contracts made on or afterward January iv, 2022, but besides to contracts "renewed, modified or amended" on or after that date. Therefore, contractors in New York should:

• Consider revisions to their standard contracts, including, at a minimum:

1. 1. requirements that the subcontractor recurrently, without the need for an affirmative request, provide all of the information to which the contractor is entitled under the revisions to the Full general Concern Law;

   2. indemnity provisions explicitly referencing the new section of the Labor Police (such provisions are expressly permitted under the new constabulary, as it states that it does not "prohibit a contractor . . .from establishing by contract or enforcing any other lawful remedies against a subcontractor it hires for liability created by violation of this section"); and

   3. obligations that subcontractors certify and/or demonstrate compliance with applicable wage laws.

• Exist sure to implement the foregoing types of protective provisions if and when there is whatever renewal, modification, or amendment of an existing contract.

• Develop and implement practical procedures for collecting and reviewing the information that they are entitled to receive from subcontractors nether the new constabulary, and any additional data that they may otherwise demand for the purpose of reducing exposure to wage claims under the new police.

Finally, while the new law applies to ane industry, keeping an middle on its impacts may exist worthwhile even from a broader perspective. As noted, the divergence from key notions of joint employer liability is jarring. And the dual justifications for that difference—i.e., that (i) certain actors in the manufacture are "unscrupulous" and may endeavour to "make themselves judgment proof" and (two) skilful religion actors in the industry are in a position to influence the behavior of those would-be bad actors—would not necessarily be unique to this space. Time volition tell if New York'south new rule is an anomaly or the front edge of a trend.

©2022 Epstein Becker & Green, P.C. All rights reserved. National Police force Review, Volume XI, Number 306

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EDWARD Thousand. YENNOCK is a Senior Counsel in the Employment, Labor & Workforce Management and Litigation practices, in the New York function of Epstein Becker Green. He focuses his practise on the areas of employment disputes and complex civil litigation.

In 2017, Mr. Yennock was named to theNew York Metro Ascension Stars listing, in the areas of Employment Litigation: Defense and Employment & Labor.

Mr. Yennock:

• Represents employers in lawsuits, arbitrations, and mediations...

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Source: https://www.natlawreview.com/article/time-money-quick-wage-hour-tip-new-york-s-new-rule-contractors-liability

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