How does it Compare to New York and Massachusetts?
In the last legislative session, the General Assembly enacted Public Act 26-12: An Act Concerning Workforce Development and Working Conditions in the State, which expands prime contractor liability for unpaid wages owed by its subcontractors in Connecticut’s construction industry. This new legislation offers an opportunity to review wage theft laws in New York’s construction industry and to examine what general contractors might expect in Massachusetts.
Connecticut
Among other things, Public Act 26-12 imposes a new liability on general contractors, now holding them jointly and severally liable for a subcontractor’s failure to pay its employees. This only applies to contractors that have entered into construction contracts with subcontractors. It does not include contracts for public works, home improvement or small residential construction projects.
A contractor can include a provision in the contract that establishes a remedy for unpaid wages, such as covering that liability by using money already withheld for retainage. However, a contractor cannot include a provision that waives liability or diminishes the right of a subcontractor’s employee to bring an action against the contractor.
This law will apply to new construction contracts commenced on or after Jan. 1, 2027. For any contract signed or renewed on or after Jan. 1, 2027, a clause that tries to waive or release the contractor from that liability is not enforceable.
Employees can bring actions against the subcontractor and/or the contractor. The employee must provide a contractor with at least 30 days’ notice before initiating a suit naming the contractor as a defendant and alleging the subcontractor failed to pay the wages owed. Once the employee gives the contractor notice, the employee need not provide additional notice of the same violation or any earlier violation by the same subcontractor.
New York
New York’s construction industry wage theft law, passed in 2022, includes many provisions similar to those adopted in Connecticut.
Labor Law § 198-e establishes that a contractor can be held jointly and severally liable for a subcontractor at any tier’s failure to pay its employees’ earned wages. This does not relieve higher-tiered subcontractors of liability; it adds the prime or general contractor as an additional party to be named.
Like the new Connecticut law, this only applies to construction contracts; it does not extend to public works, home improvement or small residential construction. Contractors cannot waive their liability in the contract or diminish the employee’s ability to bring a claim, but they can include indemnification terms that shift the costs to the subcontractors.
The contractor also reserves the right to sue the subcontractor for reimbursement of any wages the contractor was responsible for paying.
General Business Law § 756-f contains a self-help mechanism that makes it easier for prime contractors to monitor their subcontractors’ wage compliance. A contractor has the right to demand payroll records and contact information to determine whether wages are unpaid and to identify the relevant employees. If the subcontractor does not comply with timely request for information, a contractor or higher subcontractor is entitled to withhold payments.
Massachusetts
Massachusetts currently does not have automatic general contractor liability for wage theft committed by a subcontractor. Wage theft is governed by the Wage Act, which establishes liability only for direct employers and corporate officers responsible for the management of the company. A general contractor can only be liable if a court finds it to be a joint employer alongside the subcontractor, but this is a fact-specific determination.
The Massachusetts Supreme Judicial Court addressed when a contractor may be considered a joint employer for liability purposes in Jinks v. Credico, 488 Mass. 691 (2021). The court decided this issue was best resolved by examining all the relevant factors of the employment relationship, such as whether the contractor:
- Had the power to fire and hire the employee
- Supervised and controlled the employee’s work schedules or conditions of employment
- Determined the rate and method of payment
- Maintained employment records
However, a bill has been introduced in the Massachusetts legislature that seeks to expand liability for a subcontractor’s wage theft beyond the subcontractor. Bill H. 2094 would impose joint and several liability on both the lead contractor and corporate officers responsible for wage management.
This bill creates broader liability than exists under Connecticut and New York law. If passed, liability would extend beyond construction agreements and apply to any contract for labor or services connected to the contractor’s business activities. A successor company also may be liable if it maintains the same officers and continues the same type of work as the company that committed wage theft.
The bill requires a subcontractor that commits wage theft to disclose the violation to any contractor with which it contracts for up to three years after the violation. It also does not expressly permit a contractor to include contract terms that shift the cost of unpaid wages to the subcontractor, such as through retainage or indemnification.
Bill H. 2094 remains at the committee level, indicating it will likely not pass this session.
Bottom Line
Connecticut and New York’s laws reflect a clear legislative policy imposing upstream liability for unpaid wages in the construction industry. Connecticut general contractors will need to take affirmative steps to monitor their subcontractors’ payroll practices and worker classification because of the unwaivable liability imposed on construction employers seeking to do business in these states. This could include implementing active payroll auditing rights and requiring the identification of all lower-tier subcontractors before any construction work begins. Conditioning payment on the submission of payroll certifications and confirming compliance with wage payment requirements would go a long way toward mitigating the risk of a wage theft claim. What is clear is that passive compliance will not suffice to satisfy general contractor obligations. Active compliance and monitoring are the rules.
Harris Beach Murtha’s Labor and Employment Practice Group will continue to monitor this issue and report on new developments. If you have questions or need assistance with this or other labor matters, please reach out to attorney Salvatore G. Gangemi at (203) 653-5436 and sgangemi@harrisbeachmurtha.com, or the Harris Beach Murtha attorney with whom you most frequently work.
This alert is not a substitute for advice of counsel on specific legal issues.
Harris Beach Murtha’s lawyers and consultants practice from offices throughout Connecticut in Bantam, Hartford, New Haven and Stamford; New York State in Albany, Binghamton, Buffalo, Ithaca, New York City, Niagara Falls, Rochester, Saratoga Springs, Syracuse, Long Island and White Plains; as well as in Boston, Massachusetts, and Newark, New Jersey.