Minnesota: Expanded Liability for General Contractors When Subcontractors Violate Wage and Hour Laws

By Martin D. Kappenman - Peters, Revnew, Kappenman & Anderson, P.A.

June 29, 2023

On May 24, 2023, Minnesota Governor Tim Walz signed into law the Omnibus Jobs Bill, which carries far-reaching implications for businesses operating in Minnesota. Notably, the legislation introduces amendments that ensure contractors are liable for unpaid wages owed to construction workers by subcontractors. This publication aims to help employers in the construction industry understand their responsibilities regarding contractor liability.
 
Wage Protections for Construction Workers

The amendments are effective August 1, 2023, and cover construction contracts and agreements entered into, renewed, modified, or amended on or after that date.

Liability for contractors: When a contractor enters into agreements with subcontractors for construction projects, the contractor is responsible for any unpaid wages, benefits, penalties, and other owed payments to workers. Any agreements by workers or subcontractors to indemnify, or release or transfer liability assigned to a contractor are not valid.

Legal action against subcontractors: Contractors must first make sure that workers’ unpaid wages are taken care of before they can take legal action against subcontractors for any costs incurred.  

Misclassification of workers: Contractors cannot avoid liability by classifying workers as independent contractors instead of employees of a subcontractor, unless the workers meet the statutory definition as such.  

Joint and several liability of contractors in legal actions by workers: In legal actions taken by workers against subcontractors, the contractor shall be held jointly and severally liable for unpaid wages, benefits, penalties, and any other remedies available.  

Payroll records request by a contractor: Contractors have the right to request payroll records from subcontractors and receive the records within 15 days. The payroll records should show accurate information on wages and fringe benefit contributions. Redactions on the records are permissible for the sole purpose of preventing disclosure of Social Security numbers.

Data request by a contractor or its subcontractor: Within 15 days of a request from a contractor or its subcontractor, a subcontractor must provide the following information: 

•    Names of employees and independent contractors working on the project;
•    Names of local unions the subcontractor has agreements with (if applicable);
•    Expected start date of the contract;
•    Scheduled duration of work; and
•    Name and telephone number of contact for the subcontractor.

Exemptions: The new law exempts contractors and subcontractors who have signed collective bargaining agreements with building and construction unions, so long as those agreements establish a procedure for recovering unpaid wages and ensure unpaid benefits are collected for the workers.

Practical Considerations

Employers should conduct due diligence before entering into a construction contract with a subcontractor by researching their reputation, track record and financial viability. Throughout the project, employers should keep a close eye on subcontractors’ payment practices and regularly review payroll records to ensure compliance with wage and benefit obligations and require subcontractors to promptly provide notice of any wage claims by any employee or independent contractor of the subcontractor.

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