Labor Code § 218.7

On January 1, 2018, direct contractors (aka general, prime and original contractors) will be liable for the unpaid wages of their subcontractors.

Click Here for an article regarding the new requirements and to view the statute (Labor Code Section 218.7).

To prepare for the law all contractors should do the following:

Audit their HR procedures to ensure that employment offer letters, arbitration agreements, handbooks and job posters are up to date;
Update written job descriptions for all employees who are classified as exempt;
Confirm that all employees who have been classified as exempt from overtime are properly classified; and
Review payroll procedures to ensure compliance with all wage and hour requirements.

Using master subcontracts which (1) include the requirement to provide payroll records as defined in the statute; (2) include indemnity provisions to limit the risk of liability for wage violations, (3) prohibit assignments of subcontracts and sub-subcontractor without prior written authorization, (4) require subcontractors to provide payment bonds, (5) require subcontractors to obtain EPLI (Employer Protective Liability Insurance) insurance with endorsements for wage and hour liability coverage naming the direct contractor and project owner as additional insureds, (6) require personal guarantees from subcontractors, (7) require certified payroll records, (8) require a schedule of values with a breakout for all on site and off site labor, including the names of the employees who will be working on the project, (9) include site control and check in to create a record of who was on the project and for how long, and (10) proof of paid wages prior to issuing payments to subcontractors.

Article produced by: THE GREEN LAW GROUP, LLP |805.306.1100 – SIMI VALLEY, CA 93065 | www.thegreenlawgroup.com