I do a lot of prevailing wage defense and am always interested in developments in this nuanced area of wage-hour law. I have noticed a trend lately that States (e.g. New York have been legislating into effect laws that impose almost strict liability for contractors if their subcontractors do not pay prevailing wage (“PW”). Well, Illinois has now joined this “movement.” On June 10, 2022, the Governor signed amendments to the Illinois Wage Payment and Collection Act that now allows workers of subcontractors to go upstream against the general contractors “GCs”) for wages. The law became effective for contracts executed after July 1, 2022.
The amendments apply to contractors who have contracted with the property owner for the “erection, construction, alteration, or repair of a building, structure, or other private work in the State where the aggregate cost of the Project exceeds $20,000.” However, the law allows an escape clause for contractors that are signed up with a labor union so, implicitly or explicitly, the law will act as an organizing tool for the building trade unions.
Under the law, a worker must give a ten-day notice to his employer, i.e. the subcontractor and the general contractor of the claimed amount of wages and must give specifics, prior to commencing a civil action for the wages. This will give a period of time for a settlement or resolution to be effected. The end result, though, is that an employer (the GC) may be liable for “unpaid wages or fringe or other benefit payments or contributions, including interest owed” even though its employees did not do the work or were even on the construction site. Also, significantly, there is no indemnification obligation flowing from the subcontractor to the GC!
The irony, if one can call it that, is that there currently exist laws that accomplish the same thing. The Davis-Bacon Act allows the government to go upstream against GCs and a state law also provides for such a remedy. The interesting, if not sad, fact that union contractors are exempt from this law places great pressure on currently non-union contractors to become unionized to avoid these potentially dramatic liabilities.
Could this law be any more a brazen and shameless effort by the government to facilitate organizing by the building trades? I don’t think so! Now, GCs can try to protect themselves by insisting on performance bonds or by insisting on the submission of certified payrolls to the GC and proof of payment that proper PW wages are paid. If the GC can verify the financial viability of the subcontractor prior to work commencing, that would also add protection. The GC could also insist on personal guarantees by the subcontractor’s Owner but that is only as good as the financial substance of the Owner is worth. Or, dare I say, the GC could sign up with a union.
A veritable Hobson’s choice…