Illinois Joins Trend Making General Contractors Liable for Paying Subcontractors’ Workers

Posted by National Alliance for Fair Contracting on

June 14, 2022
JD Supra

On June 10, 2022, Governor J.B. Pritzker signed into law two related bills, HB 5412 and HB 4600, sent to him the previous month by the Illinois legislature that will hold a primary contractor (one who has a contract with an owner) liable for the unpaid wages and other amounts owed to employees of subcontractors, of any tier, on Illinois private construction projects. The bills, enacted as, Public Acts 102-1076, and 102-1065 (the “Acts”), will supplement the existing remedies in the Illinois Wage Payment and Collection Act (“WPCA”) for contracts made on or after July 1, 2022. Primary contractors already have liability for employee wages owed by their subcontractors on public projects covered by the Federal Davis Bacon Act, and the same responsibility is owed under the prevailing wage acts of many states, including Illinois. Primary contractors may also have liability for subcontractors’ wages on private projects pursuant to some states’ mechanics lien acts (including Illinois), as well as obligations contained in union collective bargaining agreements to which a primary contractor may be signatory. However, these amendments to the WPCA represent a significant departure from the well-established legal concept known as privity of contract, which provides that a contractor, with few noted exceptions, is not liable for obligations (including debts to workers) of its independent contractors, such as subcontractors on construction projects. This law will impose far-reaching and unpredictable liability for primary contractors in Illinois and, as a result, some construction industry experts foresee fundamental changes in the role of subcontractors on Illinois private construction projects. This article will discuss the new law as well as important exceptions within it. …

The enactments would expand a primary contractor’s liability to include debts due a subcontractor’s employee for “unpaid wages or fringe or other benefit payments or contributions, including interest owed, penalties assessed by the Department, and reasonable attorneys’ fees, but shall not extend to liquidated damages.” HB 5412, § 13.5 (c). Actions against a primary contractor may be brought by the unpaid wage earner or others on behalf of the wage earner, including the Illinois Department of Labor, which has the authority to impose civil penalties and seek criminal sanctions against liable parties for failure to pay compensation to employees. Under the WPCA, a liable party must pay, in addition to other amounts, attorneys’ fees incurred by the employee, interest, and an additional sixty percent (60%) per year for as long as the debt is unpaid. If a court interprets the 60% per year imposed by Section 14 of the WPCA to be liquidated damages, then a primary contractor would not be liable for that amount because liquidated damages are exempted. Further, though the liability imposed on a primary contractor under the new law includes “penalties assessed by the Department” of Labor, it does not expressly authorize criminal sanctions, which may be imposed under the WPCA against recalcitrant direct employers found guilty of not paying a wage earner.

The intent of some other provisions likewise is uncertain. For example, Section 13.5 (b) of HB 5412 includes this language: “A property owner who acts as a primary contractor related to the erection, construction, alteration, or repair of his or her primary residence shall be exempt from liability under this Section.” Since a primary contractor is defined as a party who has a contract with a property owner, it is difficult to imagine what was intended by the foregoing exemption, especially because the amendments impose no liability on owners. Also, it is unclear whether the following is intended to impose liability on the first-tier subcontractor, or on the subcontractor who fails to pay its employee, which could be a lower-tier subcontractor. Section 13.5 (d) of HB 5412 provides, in part:

Except as otherwise provided in a contract between the primary contractor and the subcontractor, the subcontractor shall indemnify the primary contractor for any wages, fringe or other benefit payments or contributions, damages, interest, penalties, or attorney’s fees owed as a result of the subcontractor’s failure to pay wages or fringe or other benefit payments or contributions as provided in this Section, unless the subcontractor’s failure to pay was due to the primary contractor’s failure to pay moneys due to the subcontractor in accordance with the terms of their contractual relationship.

(Read More)

 

Feds reach settlement with Santee contractor to pay stiffed workers

Posted by National Alliance for Fair Contracting on

By Carl Prine
March 28, 2018

The U.S. Department of Labor announced Wednesday that investigators had reached a settlement with a Santee builder to repay back wages owed to the workers by a defunct subcontractor.

A & D General Contracting, Inc.. the prime contractor on a pair of federally funded projects for the Marine Corps, will compensate 16 workers $52,969 after El Cajon-based Amigos Design Build Landscapes failed to pay prevailing wages before declaring bankruptcy.

“The prime contractor in this case is stepping up to the plate and doing the right thing,” said Department of Labor spokesman Leo Kay during a telephone interview.

The case spun out of a probe by the agency’s Wage and Hour Division into Amigos Design’s work on two projects – a control gate at Marine Corps Recruit Depot in San Diego and Camp Pendleton’s Combat Training Tank and Instruction Facility, according to a Department of Labor press release.

Amigos Design filed for federal bankruptcy protection in late 2016, four years after the company was founded. In his Chapter 7 paperwork, company president Douglas Leal estimated $579,562 in debt to 113 creditors and only $482,182 in property to pay them.

…

Wage and Hour Division investigators determined that Amigos Design violated the Davis-Bacon and Related Acts by failing to pay required health and welfare rates to its employees.

The firm also incorrectly categorized some workers in jobs so that they would receive lower compensation rates than they deserved. Others were slotted as apprentices to pay them below the prevailing wage rates but they weren’t enrolled in any apprenticeship programs.

And on top of that, the company falsified its certified payroll reports, according to the Department of Labor.

(Read More)

Federal contractor pays $200k in back wages to employees (WV)

Posted by National Alliance for Fair Contracting on

Dec 15, 2017
Charleston Gazette-Mail

A federal contractor has paid more than $200,000 in back wages to seven employees to resolve three violations of federal law.

B&F Contracting Inc. is the prime contractor for repair and renovation projects at federal buildings in West Virginia and Kentucky, according to a news release from the United States Department of Labor.

The company paid employees less than the prevailing wages required by law, failed to pay overtime to one employee, and failed to maintain required payroll records, according to
an investigation completed by employees in the department’s Wage and Hour Division.

Those actions violated the Davis-Bacon and Related Acts and the Contract Work Hours and Safety Standards Act.

The company paid approximately $213,282 in back wages to the affected employees, and all back wages have been paid in full, according to the news release.

“The resolution of this case helps to level the playing field for federal contractors who play by rules and must not be underbid by those who do not,” District Director John DuMont, who is based in Pittsburgh, said in the release.

In addition to the back wages, the company will hire a certified public accountant to oversee its compliance with federal laws and to provide the department with copies of certified payroll records and corresponding time records on a semi-annual basis for a one-year period, according to the release.

If the company commits another violation of the same labor laws, it will be debarred from bidding on federal contracts for three years after the violation.

(See Article)