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CPSA Joins Coalition Opposed to Bill Penalizing Contractors

The California Pool & Spa Association (CPSA) has joined the California Building Industry Association and others to fight AB 1701, which unfairly imposes liability onto a direct contractor for the wage and hour violations of a subcontractor that the direct contractor did not cause.

AB 1701, by Assembly Member Tony Thurmond (Dem-Richmond), creates a new private right of action against general contractors for liabilities they did not cause and without providing any notice or ability to prevent the harm. CPSA believes that every worker should be paid promptly. However, we believe that amendments are necessary to make the bill accomplish its purposes – ultimately holding out the possibility that the direct contractor would be liable for unpaid workers who are not the direct contractor’s employee – while ensuring that bad actors are held accountable.

Rather than creating an ability to avoid the harm of unpaid workers, AB 1701 would make the worker go through a lengthy process of litigation – beginning one year after the work is complete, delaying payment for years. If general contractors could obtain information about the status of worker compensation prior to making a progress payment to the subcontractor, they could ensure that workers are promptly paid.

There are several problematic issues and provisions that need to be addressed, including:

  1. Innocent parties are subject to penalties: Direct contractors have already paid their subcontractors for the labor provided by those workers, yet the bill exposes the direct contractor to penalties and liquidated damages;
  2. AB 1701 proposes to allow plaintiffs to immediately sue the direct contractor while skipping over the subcontractor who failed to pay its employees and other parties in the contractual chain between the violator and the direct contractor;
  3. If a subcontractor employer fails to pay fringe benefits that are owned on behalf of a worker, they should be subject to disciplinary action by the Contractors State License Board;
  4. If the bill is going to make direct contractors liable for unpaid workers of a subcontractor, it needs to be clear that the direct contractor’s potential liability – along with steps to make sure the subcontractor pays its employees – does not create a joint employer relationship;
  5. It is inappropriate to allow attorney’s fees for plaintiffs only – this provision should be stricken from the bill.

While there has been no evidence presented that the problem that AB 1701 seeks to remedy exists in the private residential construction industry, the bill would result in general contractors paying twice for labor. This can only result in unnecessary higher housing costs for Californians, only 31% of whom can afford the state’s median priced home.

AB 1701 is pending a potential Senate Floor vote as soon as today. If passed, this is the last step in the legislative process before Governor Jerry Brown’s desk.