New York Introduces Joint and Several Liability for Prime Contractors and Subcontractors for Unpaid Wage Claims

Legal Alert

December 16, 2021

New York Governor Kathy Hochul recently signed into law Senate Bill S2766-C, which amends the New York Labor Law (NYLL) and General Business Law (GBL) in relation to actions for non-payment of wages, and importantly, creates joint and several liability between a prime contractor and a subcontractor acting at any tier for unpaid wage claims brought against the subcontractor.

Specifically, S2766-C amends NYLL §198 by adding section 198-e. Section 198-e provides that a contractor will assume liability and be jointly and severally liable with a subcontractor for any debt resulting from an action brought by a wage claimant or a third party acting on their behalf, including the attorney general, against the subcontractor for unpaid wages, benefits, wage supplements, and any other remedies available pursuant to NYLL §198. The provisions of section 198-e can only be waived by a collective bargaining agreement explicitly referencing the section and that is entered into with a bona fide building and construction trade labor organization.

Despite the additional liability that a prime contractor can be exposed to in the event its subcontractor does not pay employees, section 198-e provides the prime contractor with various protections such as:

Allowing the prime contractor to maintain an action against the subcontractor for amounts or wages paid by the prime contractor pursuant to the section;
Allowing the prime contractor and subcontractor to enter into a contract that establishes “other lawful remedies against a subcontractor” for liability created by violation of the section, so long as such agreement does not limit an employee’s right to bring an action under the section; and
Creating a three-year limit on any liability a prime contractor would otherwise be exposed to pursuant to the section.

Finally, S2766-C amends GBL §756 by adding section 756-f. This new section requires a subcontractor to provide, upon request by the prime contractor or another subcontractor, certified payroll records containing all lawfully required information required for employees providing labor on the project. The records shall also contain information sufficient to apprise the requesting entity of the subcontractor’s payment status in paying wages or other benefits. The prime contractor and its subcontractors are also entitled to make a similar request for the names of all employees employed by the subcontractor on the project. Failure to comply with these requests will be a basis for the prime contractor to withhold payments to a subcontractor at any tier.