Contractors will soon find themselves on the frontline of wage disputes on projects if laborers working on behalf of their subcontractors or vendors are unpaid.  On October 14, 2017, Governor Jerry Brown signed into law AB 1701, which will allow laborers to seek direct compensation from the general contractors on private projects, if their wages remain unpaid.

The legislative mandate requires direct contractors—defined as contractors who have a direct contractual relationship with an owner—to assume liability for any debt incurred by a subcontractor, at any tier, for a wage claimant’s performance of labor included in the subject of the original contract between the general contractor and the owner.  The California bill will apply to all private construction contracts entered into on or after January 1, 2018.  Previously, all laborers could maintain a mechanic’s lien claim against private property, without needing to serve a 20-day preliminary notice, but there was no statutory obligation on the “direct contractors” to reimburse the laborers their unpaid wages.