The 12 Days of California Labor & Employment Series – Day 7 "General Contractor Liability Clarified"

It’s the end of the year and while everyone is busy, employers in California should be aware of new laws and regulations that go into effect on January 1, 2019. In the spirit of the season, we are using the next "12 days of the holidays" to blog about one California law a day and that law's impact on California employers. On the seventh day of Christmas, my Labor and Employment attorney gave to me—seven swans a swimming and AB 1565.

On the seventh day of the California Labor and Employment Series last year, we discussed AB 1701, which provided that general contractors and developers could have increased liability beginning on January 1, 2018 as it relates to subcontractors. Under AB 1701, a general contractor making or taking a contract in the state for "the erection, construction, alteration, or repair of a building, structure, or other work" will assume, and be liable for specific debt owed to a wage claimant that was incurred by a subcontractor.

AB 1565 was enacted this year to clarify the scope of AB 1701. AB 1565 strikes language from AB 1701 providing that a general contractor’s liability for unpaid wages or benefits is in addition to any other existing rights and remedies. It further notes that in order for a general contractor to withhold disputed sums for a subcontractor’s failure to provide information, the contractor must specify in the relevant contract the documents and information that must be provided upon request. This would apply to all contracts entered into on or after January 1, 2019. General contractors need to be vigilant with their site operations and which subcontractors they work with in order to minimize their joint liability on projects.

General contractors are reminded that they are not prohibited from including indemnification language in their contracts with subcontractors for these type of claims. California general contractors should also continue to do what they can to ensure they do business with reputable subcontractors. Again, their contract language, specifically what documents and information a subcontractor must provide upon request, should be clarified in their 2019 contracts. It is also still recommended that they consider adding a provision that a subcontractor provide periodic statements of compliance with the law.

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