New Legal Requirements For General Contractors

Effective July 1, 2020, new legal requirements will be imposed on Virginia General Contractors with the passage of the Wage Theft Act. Under the new law, General Contractors can be held liable for wage violations of a subcontractor when the GC either knew or should have known that the subcontractor was not paying employees properly. In addition, the new law permits a misclassified worker under the subcontractor to sue the General Contractor as a joint employer for the subcontractor’s wage violations.

Exceptions to Law

Although the new Wage Theft Act imposes new obligations on GCs to make sure that subcontractors are engaging in proper pay practices, the law carves out several exceptions:

- The law only applies to multi-family and commercial construction projects (i.e., it does not apply to single-family residential projects)

- It only applies to construction contracts valued at greater than $500,000.
- The law only applies to subcontractors with whom the GC has directly contracted.
- The law only applies to contracts entered into after July 1, 2020.

If you are a general contractor, there are a multitude of steps that you should consider taking to limit liability under the new law:

Steps General Contractors Should Consider Taking

Now that GCs can be held liable for wage violations committed by its subcontractors, GCs should undertake increased due diligence before entering into an agreement with a subcontractor. At a minimum, the following conditions should be added to your contracts:

(1) Require subcontractors to certify that they have and will continue to pay overtime to non-exempt workers;

(2) Require subcontractors to maintain employment records;

(3) Require subcontractors to periodically produce wage payment records;

(4) For larger contracts, require subcontractors to have their wage and hour practices reviewed by an employment attorney and to produce a letter from counsel summarizing the review.

Should you have any questions about the Virginia Wage Theft Act, please contact either Josh Jewett (jjewett@piercemccoy.com) or Aaron Siegrist (asiegrist@piercemccoy.com).