The Minnesota Legislature had a busy first half of 2023 that included passing several major new employment-related bills. One of these is a new statute designed to protect the wages of construction workers: Minnesota Statute § 181.165. In its simplest form, the new statute will make general contractors and project owners equally liable for any unpaid wages, fringe benefits and other damages for employees of any subcontractors on certain construction projects.
With the new law going into effect on August 1, 2023, it is important for contractors, subcontractors and construction workers to understand the basic and specific provisions regarding construction worker wage protection.
Overview of the Law
Overall, the new law can be broken into three main parts establishing liability for contractors.
First, a contractor entering into a construction contract is liable for any unpaid wages, fringe benefits, penalties and resulting liquidated damages owed to a construction worker by a subcontractor at any tier by, or for the contractor or its subcontractors for labor performed. Simply put, a contractor is now equally liable for unpaid wages and benefits owed by their subcontractors.
Second, a contractor may not enter into an agreement with an employee or subcontractor that will indemnify them or otherwise release or transfer their liability under the new law. However, if a contractor ends up paying a wage claim for an employee of a subcontractor, the contractor may then pursue actual and liquidated damages from the subcontractor who was ultimately responsible.
Third, a contractor cannot escape liability by claiming that a worker is an independent contractor rather than an employee of a subcontractor, unless that persons meets the required criteria set forth in Minn. Stat. § 181.723, subd. 4.
Exceptions to the Law
There are three primary exemptions under the law for certain construction work.
First, the law does not apply to any work subject to prevailing wage rates.
Second, the law does not apply to most union projects where the contractor or subcontractor is signatory to a collective bargaining agreement that contains a grievance procedure for recovering unpaid wages and provides for collection of unpaid fringe benefit contributions to the fringe benefit trust funds.
Third, the law does not apply to construction contracts for the performance of a home improvement between a home improvement contractor and the owner of an owner-occupied dwelling, or a home construction contract for one- or two-family dwelling units except where such contract or contracts results in the construction of more than ten one- or two-family owner-occupied dwellings at one project site annually.
Who Qualifies as a Contractor
Under the new law, a contractor can be any of the following, so long as there is a “construction contract” with an “owner,” as those terms are defined in the statute:
- A construction manager;
- General or prime contractor;
- Join venture; and
- An owner who has entered into a construction contract with more than one contractor or subcontractor on any construction site.
A Contractor’s Right to Transparency
As a way of increasing transparency, a contractor has the right to request the subcontractor’s payroll records. Within 15 days of a contractor’s request, the subcontractor and any other subcontractors hired under contract must provide the contractor with payroll records. These payroll records must contain all lawfully required information for all workers providing labor on the project. The payroll records must also contain sufficient information to put the contractor or subcontractor on notice of such payment of wages, and fringe benefit contributions to a third party on the workers’ behalf.
A subcontractor may only mark or redact these payroll records to prevent the disclosure of an employee’s Social Security number.
A contractor may also request from any subcontractor performing work within the scope of the contract the following additional information:
- The names of all employees and independent contractors of the subcontractor on the project, including the names of all those designated as independent contractors and, when applicable, the name of the contractor’s subcontractor with whom the subcontractor is under contract;
- The anticipated contract start date;
- The scheduled duration of work;
- When applicable, local unions with which such subcontractor is a signatory contractor; and
- The name and telephone number of a contact for the subcontractor.
Despite the passing of a strict 2019 wage theft law, the authors of this new law believed that wage theft in the construction industry remained an issue, affecting approximately 23 percent of construction workers. Starting August 1, 2023, contractors must be cognizant of the pay practices of their subcontractors, should use their right to request and monitor their subcontractors’ pay records, and be careful about who they do business with on projects. Otherwise, Minnesota contractors could find themselves footing the bill for paying their sub’s employees.
- General Contractors Beware: New Wage Protections for Minnesota Construction Employees
- Supreme Court Significantly Contracts Scope of Clean Water Act Jurisdiction Over Wetlands
- The Rise in Audited Construction Projects: What You Need to Know
- Construction Manager at Risk Project Delivery Method Now Permitted for Iowa Public Projects
- Iowa Supreme Court Issues Opinion RE: Subcontractor Preliminary Notices
- NDAs: What to Consider Before Signing on the Dotted Line
- Where Will It Rain? Project Opportunities Created by the 2021 Infrastructure Investment and Jobs Act
- Check Yourself, Before You Wreck Your Claim
- Breaking the Covenants? A Way to Restrict Lakeshore Development
- Would You Like the Implied Warranty? A Look at Disclaimers of the Home Construction Warranties
- EventOctober 24 & 26, 2023Fredrikson's 39th Annual Employment & Labor Law Seminar
- EventUnderstanding and Complying with New U.S. Requirements When Doing Business in China
- EventHealth Law Webinar—HIPAA and Health Privacy FAQ Session
- EventHealthcare Immigration Prescriptions – Immigration Strategies for Physicians and Allied Health Staff in both Clinical and Academic Healthcare Practices