AB 1701

AB 1701 requires direct contractors to pay twice for their labor if subcontractors fail to pay. Photo by Igor Ovsyannykov on Unsplash

AB 1701, which was strongly opposed by the California Building Industry Association and the Associated General Contractors of California, went into law on Jan. 1, 2018.

This new law requires all California construction contracts to identify a direct contractor, who is liable for all subcontractor debts owed to its employees – including unpaid wages, contributions and/or benefits related to the contract. AB 1701 essentially requires direct contractors to pay double for their labor if the subcontractors fail to pay their workers.

Under Labor Code section 218.7, the new bill also imposes the following requirements:

  • Bill applied to all private construction contracts signed on or after Jan. 1, 2018
  • Third parties who are owed fringe or other benefit payments may bring a civil action against the direct contractor
  • The bill authorizes the attachment of the direct contractor’s property to pay for any judgments
  • The bill allows unions, the Labor Commissioner and Labor-Management Cooperation Committees to bring an action against the direct contractor for unpaid benefit payments or contributions.
  • Subcontractors must provide project awards information and payroll records to the direct contractor upon request. If the subcontractor fails to provide records in a timely manner, the direct contractor may withhold disputed funds owed.

Actions brought pursuant to this section must be filed within one year of the earliest of: (1) recordation of a notice of completion of the direct contract; (2) recordation of a notice of cessation of the work covered by direct contract; or (3) actual completion of work covered by direct contract.

Read the full bill text here.

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