We are writing to inform you of an important bill that recently passed and was signed by the Governor, Virginia Senate Bill 838, that will have a significant impact on many general contractors in Virginia. Under the new law, any construction contract entered into on or after July 1, 2020, shall be deemed to include a provision under which the general contractor and the subcontractor are both liable to pay the wages due to the subcontractor’s employees.
KEY HIGHLIGHTS OF BILL/LAW 838:
If a general contractor’s subcontractor doesn’t pay its employees, the general contractor is subject to the same criminal and civil penalties for which any employer is liable for failing or refusing to pay wages.
Additionally, unless the subcontractor’s failure to pay wages was because of the general contractor’s failure to pay moneys due to the subcontractor, the bill requires the subcontractor to indemnify the general contractor for wages, damages, interest, penalties, or attorney fees owed as a result of the subcontractor’s failure to pay the wages.
There are some important limitations to the scope of the bill. Specifically, the bill’s provisions only apply if:
(i) it can be demonstrated that the general contractor knew or should have known that the subcontractor was not paying his employees all wages due,
(ii) the construction contract is related to a project other than a single-family residential project, and
(iii) the value of the project, or an aggregate of projects under one construction contract, is greater than $500,000.
What should you do now? For those general contractors to which this law may apply, it is important that you require your subcontractors to regularly certify that its employees are being paid their wages. This can be done by changing your agreements with your subcontractors to require such a certification, and we can help.
We will endeavor to keep you updated as additional guidance becomes available, and please do let us know if you have any questions regarding this latest update. The following CowanPerry attorneys are available to assist you:
CowanPerry PC is here to assist you in navigating these unprecedented times.