We can all agree that workers should be paid their wages. And the rank and file worker should not suffer if her employer goes under. But when a company fails, should there be any “usual suspects” to make amends to unpaid workers? And how wide a net should be cast?
Maryland passed a new law earlier this month, effective October 1, 2018, that makes general contractors jointly and severally liable for the failure of their subs – at any tier below them! – to pay workers. Hat tip to Ronald Taylor of Venable LLP for reporting the development.
The concern from a general contractor perspective is simply this: how easy is it to find out, before it’s too late, whether a lower-tier sub is failing and not paying its workers? And what steps can the GC take, if it suspects a sub is about to go belly-up, to ensure the workers will be paid?
The Maryland legislature has decided on a simple “solution” that will complicate project relationships. The legislature may have had a laudable goal of protecting workers, but its approach will create a mess when it comes to subcontract terms and risk allocation on many projects. There aren’t any simple solutions to this problem in real life, and the Maryland law creates the proverbial road paved with good intentions.