Subcontractors Should Bear Responsibility For their Own Wage Theft

By Mike Elmendorf | April 21, 2021

The Associated General Contractors of New York State (AGC NYS) is the leading statewide association representing general contractors and construction managers (GCs/CMs) who perform the lion’s share private and public commercial, industrial, institutional and transportation construction throughout New York State. We represent the whole of the industry, both union and open shop employers.

AGC takes great offense to the suggestion in Al Catalano’s April 17 OpEd of rampant theft of workers’ wages and benefits. We also take umbrage at the notion that GCs/CMs should bear responsibility for such theft perpetrated by subcontractors (often many tiers removed from the general contractor) when there was no knowledge or notice of the violation. In short, subcontractors, as with any business, who violate the law should bear responsibility for their own violations and there should be no expectation for another business–in this case a GC/CM–to cover the cost.

When a GC/CM pays a subcontractor, it has a reasonable expectation that the subcontractor will pay its workers as required by the contract. In turn, there is a reasonable expectations that the subcontractors and suppliers of the subcontractor pay their workers.

It is important to note here that the legislation Mr. Catalano promotes would hold the GC/CM liable for such violations by others for up to 6 years after the completion of the contract–long past any ability on the part of the general contractor to ensure those responsible pay has passed. If the GC/CM has been provided notice of the violations while the contract is still active, it will have tools at his disposal to be the best collection agent in the world on behalf of ill-treated workers. Once the contract is done, those tools are removed and this becomes a punitive–indeed unmanageable–risk placed on a business that had neither knowledge of nor benefitted from the violation.

This legislation would hold the GC/CM responsible for failures by union signatory subcontractors to pay into benefit funds as required by the collective bargaining agreement. While the unions have the ability to enforce the terms of the collective bargaining agreements with their signatory subcontractors, they would apparently prefer to let the responsible parties slide and, instead, go after the GC/CM sometime later.

As currently written, this bill will increase the cost of construction due to GC/CM reasonable efforts to minimize risk as much as possible–limited as that may be. Such efforts may also well mean that opportunities for minority and women owned contractors will be diminished in favor of larger, more established firms. It is worth noting that the Minority & Women Contractors and Developers Association of New York stands with AGC NYS and dozens of industry groups in opposition to the current legislation for that very reason.

Such increases to costs and limitations on opportunity will certainly hurt the ability of our State to attract and keep businesses who might seek to build in New York. Those businesses, we fear, will seek other more reasonable states. Interestingly, one such state is California. The California law to deal with wage theft, while not perfect from our viewpoint, is much more reasonable and realistic. We have proposed an alternative to the Legislature that follows the California approach, which we might add was supported both by labor and the construction industry when it was enacted in the Golden State.

President Biden and Governor Cuomo are both calling on our industry to drive economic recovery and “build back better.” We’re ready, but let’s not place additional barriers in the way of that recovery before it has even started.

Mike Elmendorf is President and CEO Associated General Contractors New York State.