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Legal Review: General Contractors Now Liable for Failures of Subcontractors to Pay Wages

by ARLnow.com Sponsor June 5, 2018 at 6:00 am 0

By Maryland employment attorney Tom Spiggle, founder of The Spiggle Law Firm.

A law passed in Maryland in April will allow a general contractor to be sued for the failures of subcontractors to pay wages properly.

This change may put general contractors in a position where they must confirm the payment practices of any subcontractor they hire or risk additional exposure to liability.

General contractors are the companies that are hired to run an overall project and to ensure that the goal of the project is reached.

Many times, the general contractors that are hired do not have the ability to perform all the jobs called for by the project plan. To complete the project, general contractors will “sub out” the work — meaning that they will hire subcontractors to carry out specific tasks.

Subcontractors submit a bid for completing the work, and the amount of the bid is what the subcontractor is paid for the job. The subcontractor is responsible for ensuring that all its responsibilities, including proper payment of employees, are completed.

In most situations, the general contractor has no liability for any acts or failures of the subcontractor. Under Maryland law, this limitation on liability includes the failure of a subcontractor to properly pay its workers or employees. The new law changes that and allows workers who are not paid by a subcontractor to sue the general contractor for payment of those wages.

“A law like this may allow workers who go unpaid to seek repayment from a much larger entity,” said Tom Spiggle, a Maryland Wage and Hour Attorney with The Spiggle Law Firm in Maryland. “Subcontractors tend to be less stable than general contractors, which makes workers more vulnerable. The new law will place some responsibility on the general contractor to hire reputable subcontractors.”

The law should also help encourage compliance from subcontractors, who may fear that general contractors will not use them if there are any reports of failure to pay.

Workers can file claims with the State of Maryland if wages go unpaid, which will then investigate and make findings. However, this only governs work that was performed in the state.

If you are a Maryland resident that worked on a job in Virginia and failed to get paid, Virginia law will govern your claim — not that of Maryland, so be sure you are aware of the labor laws of any state you intend to work.

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