• Joseph Leiva, PE

New MD law places responsibility of subcontractor wage violations on the prime contractor

On October 18, 2018, the “General Contractor Liability for Unpaid Wages Act” amended the text to Maryland Code, Labor and Employment Article 3-507.2 to now hold prime contractors liable for wage compliance by ALL subcontractors on a project. General contractors are now liable for compliance with Maryland wage laws, not just for the subcontractors they directly hire, but also for subcontractors hired by these third parties. General contractors are still scrambling to understand all the details of the new law, and for solutions that provide construction certified payrolls in compliance with the new Maryland law. Smart general contractors are turning to TargetDocs software to make sure that they stay on top of their compliance duties with the new law.

Broad Coverage and Severe Penalties for Non-Compliance

Employees can now sue both their employer and the general contractor for three times the amount of wages owed to them, plus costs and attorneys fees. Subcontractors themselves are not exempt, they are liable for all contractors below them in the chain. The Unpaid Wages Act also broadly defines “construction services” to include many types of work that are not actually construction. Section 3-901(b) of the Maryland Labor and Employment Code defines general contractors in “construction services,” as including services in “building, reconstructing, improving, enlarging, painting, altering and repairing property.”

Indemnification is Not Enough Protection

The new law does require subcontractors to indemnify a general contractor for violations, including “wages, damages, interest, penalties and attorney’s fees.” This is not enough protection for general contractors as indemnity is useless if the subcontractor files for bankruptcy or becomes insolvent (sometimes starting up the next day with a new corporate name.) In response, general contractors are beginning to require insurance or wage payment bonds to protect themselves from unpaid wage claims.

Monitoring Compliance Can Nip Problems in the Bud

TargetDocs is an inbox for each of your projects. It tracks and indexes every subcontractor compliance file it collects providing project teams a document checklist of what's been turned in and missing. This simple but revolutionary software puts contractors in control of compliance and all other reporting files, saving both money and time.

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