Unpaid Wages Act Senate Bill 853 Effective October 1, 2018 Expands - - PowerPoint PPT Presentation
General Contractor Liability for Unpaid Wages Act Senate Bill 853 Effective October 1, 2018 Expands liability for wage and hour laws in the construction industry Where did Senate Bill 853 come from? California and Oregon
Senate Bill 853 Effective October 1, 2018 Expands liability for wage and
hour laws in the construction industry
California and Oregon Combat wage theft Unions Maryland legislative history
Previous laws
Adds the following text to Maryland Code, Labor and Employment
Article 3-507.2
GC’s - jointly and severally liable to employees of subcontractors for
unpaid wages
GC’s also responsible for second and third-tier subcontractors Requires subcontractors to indemnify the general contractor for "any
wages, damages, interest, penalties, or attorney's fees owed as a result
Two exceptions to indemnification:
(1) when indemnification is provided for in a contract between the general
contractor and the subcontractor; or
(2) when a violation arose due to the general contractor’s failure to make
timely payments to the subcontractor.
Broadly defined Includes:
(1) building; (2) reconstructing; (3) improving; (4) enlarging; (5) painting; (6) altering; (7) maintaining; and (8) repairing.”
“Bona fide dispute” not defined in the construction context Does not expressly exempt a general contractor for liability where
non-payment to a subcontractor is permitted under the construction contract.
Construction disputes involving backcharges, delays, and other
issues may be litigated in an employee wage payment case
If a subcontractor is insolvent or files bankruptcy, indemnity could be
worthless.
Impacts to Construction Industry Police subs Increase defense costs
GC could defend both a mechanics’ lien claims on behalf of an owner
while at the same time defending new wage claims from individual employees of the subcontractors.
GC’s likely to require subcontractors to obtain wage payment
bonds or insurance to protect themselves from wage claims.
Increase cost of a construction project Less work for startup companies, disadvantaged business entities, or
smaller subcontractors – unable to obtain requisite bonding
Back Pay Interest Attorneys Fees and Costs Treble Damages (3 times wages owed) Statute of limitations: May make a claim as soon as 2 weeks after a
violation occurs, and as late as three (3) years after the occurrence.
EMPLOYMENT (§ 3-505):
performed before the termination of employment;
the employee would have been paid the wages if the employment had not been terminated.
EMPLOYEE FOR EMPLOYMENT. “WAGE” INCLUDES:
promised for service.
Employee may bring an action against
employer to recover unpaid wages. (§ 3- 507.2).
Can be filed after 2 weeks have elapsed from
the date on which the wages were due.
Three year statute of limitations. Possible enhanced damages!
If the court finds that an employer withheld
wages not as a result of a bona fide dispute, the following may be awarded:
Treble Damages: Up to 3 times
Reasonable counsel fees and
Legitimate dispute over the validity of the
claim/amount owed
Employer must have a good faith basis for refusing
an employee's claim for unpaid wages. See Peters v. Early Healthcare Giver, Inc., 439 Md. 646, 657 (2014)
Question of fact/jury question Employer’s burden to show a bona fide dispute Employer must make an effort to understand its
legal obligations.
Failure to pay for all hours worked
Could include failure to
Failure to pay overtime
Independent contractor
Delays in paying wages
General Contractors Subcontractor/Employer Owner or high ranking manager of
Wage and Penalty? All subcontract tiers? Is indemnity meaningful, confusing, avoidable? Can a responsible contractor be competitive? Disproportionate impact on small and disadvantaged businesses?
Contractual Risk Transfer
Indemnification
Compliance with laws, regs, and ordinances
Flow down requirements
Identification and approval of sub-tier trades
Withholding/setoff/Joint Checks/Direct Payment
Basis for default and termination
Internal Risk Management
Subcontractor Selection and Qualification - $
Joint Checks - $
Catastrophic Coverage - $$$
Revise Bond Language or get specific Wage Bonds - $$
Group captives - ??
Tracking
Job starts Accountability for poor performance – “Catch 22” Job close outs Owner slow pay or no pay Levies and garnishments Impact of unrelated work Family squabbles
Contract language
Indemnification Offset
Bonds Insurance Really know subcontractors Ask questions – policies, records Increase consumer costs