Labor Commissioner Fines Contractor for Wage Theft of Subcontractor

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The Labor Commissioner issued a $250,000 fine for a general contractor for wage-and-hour violations that their drywall subcontractor committed. The issued citation was for wage theft and fell under AB 1897 (Section 2810.3 of the Labor Code).

This is the first time that a general contractor was held responsible for wage theft of a sub. The statute says that businesses are responsible for their subcontractor’s wage-and-hour violations. Those that don’t follow this statute will suffer the consequences. Further, it gives clarity to the expectations set before contractors and helps them to follow the rules as outlined.

The Liability of the “Client Employer”
In short, when a contractor does not properly pay the earned compensation, then the “client employer” becomes liable. The scenario that happened in on a hotel project involved a general contractor’s drywall subcontractor that did not pay employees as promised in Southern California.
The Labor Commissioner discovered that the drywall contractor did not pay the full amount earned during a four weeks’ time period. Further, they were paying employees from an account with insufficient funds. Employees began to walk off the job site and filed complaints.

Labor Commissioner Citations
Citations were issued by the Labor Commissioner for both the general contractor and the subcontractor. The general contractor protested its liability for the subcontractor’s wage theft while the subcontractor did not. They accepted that they did not act appropriately in this situation.
After a hearing, it was found that the general contractor owed almost $250,000 for overtime, minimum wages, and penalties.

AB 1897
According to AB 1897, a client employer could be held liable for the subcontractor’s wages and penalties. They could also be charged for any workers’ compensation violations. Waiting time penalties occur if the employer does not pay the employee’s final check. They get the daily rate multiplied by the unpaid number of days up to 30 days.

The Ruling
Julie Su, the Labor Commissioner, said: “This case addresses the pervasive problem of wage theft in subcontracted industries.” She continued that businesses and contractors should not hide behind their subcontractors regardless of whether they were in charge of the work performed.
AB 1897 will protect those that follow the rules. General contractors that consistently pay as they should and protect their employees and subcontractors will thrive under this ruling. Those that choose to violate this ruling will pay the consequences and they should.

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