November 8, 2017
On October 14, 2017, Governor Brown signed Assembly Bill (AB) 1701 into law as California Labor Code § 218.7. This newly enacted law imposes potentially significant liability on general contractors for their subcontractors’ failure to pay wages, fringe, or other benefits to laborers. The following is a brief overview of AB 1701’s application:
What Can General Contractors Do? General contractors can take a number of steps to protect themselves and shift the burden of this liability.
What Can Owners Do? Be cautious in selecting the general contractor and ensure the general contractor is cautious and selective in choosing subcontractors to perform work on the projects. AB 1701 specifically provides that nothing in this section shall alter the owner’s obligation to timely pay the general contractor. Accordingly, owners should continue to timely pay their general contractors or otherwise face potential prompt payment penalties.
What Should Subcontractors Do? Subcontractors at every tier should keep and maintain accurate payroll records in order to: (1) provide such records upon the general contractor’s request, and thereby avoid payment withholds over "disputed" sums; and (2) have accurate documentation to defend against any potential claims.
General contractors, owners, and subcontractors with questions regarding the implications of AB 1701 may direct their inquiries to the authors of this alert or their usual contacts at AALRR and register for the upcoming breakfast briefing on November 30, 2017.