The Virginia General Contractor Wage Law (“VGCWL”) makes general contractors on construction jobs, under certain circumstances, liable for wages owed to the employees of the general’s subcontractors. This law is an important piece of legislation to ensure that construction workers receive the compensation they are legally or contractually entitled to receive.
General and Subcontractor Joint and Several Liability
The VGCWL provides that any construction contract entered into on or after July 1, 2020, will be deemed to include a provision under which the general contractor and the subcontractor at any tier are jointly and severally liable to pay any subcontractor’s employees at any tier the greater of:
(i) all wages due to a subcontractor’s employees at the agreed-upon rate and on the terms in any employment agreement between the subcontractor and its employees, or
(ii) the amount of wages that the subcontractor is required to pay to its employees by law, including the provisions of the Virginia Minimum Wage Act, VA Code § 40.1-28.8 et seq., and the Fair Labor Standards Act, 29 U.S.C. § 201 et seq.
General Contractors Deemed Employers of Sub’s Employees
The VGCWL further provides that a general contractor is deemed to be the employer of a subcontractor’s employees at any tier for purposes of the Virginia Wage Payment Act, VA Code § 40.1-29 (“VWPA”) (governing, inter alia, the timing of payments and withholdings from wages).
Further, the law provides that if the wages due to the subcontractor’s employees under the terms of an employment agreement between a subcontractor and its employees are not paid, the general contractor is subject to all penalties, criminal and civil, to which an employer that fails or refuses to pay wages is subject under the VWPA.
The law also requires that any liability of a general contractor pursuant to the VWPA shall be joint and several with the subcontractor that failed or refused to pay the wages to its employees. This means a general contractor’s liability to workers can include not only the wages owed to the subcontractor’s employees, but also an additional amount equal to the wages owed as liquidated damages, interest, and reasonable attorney fees and costs. VA Code § 40.1-29(J). And if the employer “knowingly” failed to pay wages under the VWPA, the employer’s liability can include an amount equal to triple the amount of wages due and reasonable attorney fees and costs. VA Code § 40.1-29(J)&(K).
Indemnification
The VGCWL further provides that the subcontractor generally must indemnify the general contractor for any lost wages, damages, interest, penalties, or attorney fees owed as a result of the subcontractor’s failure to pay its workers, unless the subcontractor’s failure to pay wages to its employees was due to the general contractor’s failure to pay money owed to the subcontractor under their construction contract.
Three Threshold Requirements
Importantly, the provisions of the VGCWL only apply if three threshold requirements are met:
(i) the general contractor knew or should have known that the subcontractor was not paying his employees all wages due;
(ii) the relevant 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.
In sum, provided that the three requirements of § 11-4.6(E) can be met, the VGCWL allows the employees of construction subcontractors to pursue claims for unpaid wages directly against both the subcontractor and the general contractor. The wages covered by this law include both agreed wage rates and wages required by law, such as overtime compensation under the FLSA.
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