There are a variety of reasons for sky-rocketing home prices in recent years. Prior to COVID-19, we were selling 1,300SF single story homes, with 3-BD and 2-BA on a 5,000SF lot for roughly $300,000. However, COVID-19 introduced a period of hyperinflation in our materials markets, supply chain shortages, increased energy prices, and rapidly rising mortgage and commercial borrowing rates. While our supply chains have stabilized and materials prices are no longer rising daily, we could not build and sell the same 1,300SF house for any less than $415,000. These increased housing prices, coupled with higher mortgage rates, has priced many would be buyers out of the housing market. And while Governor Kotek has acknowledged both a housing production and affordability crisis, and has pushed for legislation to help with both, there are bills like SB426 that at the core are well meaning but will likely have unintended consequences.
Senate Bill 426, if passed, “makes an owner and a direct contractor jointly and severally liable in a civil action for any unpaid wages owed to the unrepresented employees of the direct contractor and subcontractors at any tier.” This means that if a developer/builder, hires a subcontractor with employees and that subcontractor does not pay his employees, then the developer/builder is liable for the subcontractor’s employee’s wages, even if the subcontractor has been paid in full for all material and labor. Additionally, if an owner of a second home, investment property or commercial building hires subcontractors and that subcontractor’s employee files an unpaid wage claim, then the owner can be held liable for the unpaid wages.
One might say an owner and/or general contractor does not have an employment contract with a subcontractor’s employees, but this bill would treat a subcontractor’s employees as though they were direct employees of an owner and/or general contractor. I think we can all agree that wage theft is reprehensible, but this bill creates a nexus between an owner and/or a general contractor, when link between the two is broken by the subcontractor who directly hired the employee. Furthermore, if an employee does not get paid by his direct employee, he can seek to be made whole filing a claim with the Oregon Bureau of Labor & Industries (“BOLI”), meaning there is an existing legal process by which an employee can seek resolution. The employee may also file a complaint with the Oregon Construction Contractors Board (“CCB”), and the CCB may suspend the subcontractor’s license.
Those that argue on behalf of this bill, such as the Western Region Carpenter’s Union, provide examples of unscrupulous labor brokers and subcontractors not paying laborers or employees thereby putting laborer or employee at risk of not being able to pay the cartel that smuggled them into the United States. Complaining might also result in a worker’s family outside of the United States being hurt by the cartel. Proponents also argue this bill will make owners and general contractors perform due diligence on the subcontractors they hire.
Opponents of the bill argue this bill unreasonably shifts responsibility of the subcontractor, with whom there is an employment contract with an employee for labor, to the owner and general contractor who only have a contract with the subcontractor to provide labor and/or material. Further the bill would likely stifle the growth of smaller subcontractors who cannot manage the additional paperwork and reporting that would be required to prove payment of employees. Many general contractors will not hire new subcontractors without a proven track record of paying its employees thereby discouraging small business.
Those in opposition to the bill also question why it only targets the construction industry. SB426 does not include agriculture and the service industry where wage theft is also likely to occur. Finally, Oregon has existing laws and processes that protect workers from wage theft, and lawmakers should look to undergird and resource the agencies created to deter and remedy wage theft, not shift the responsibility. The result of SB426 on the construction and housing industry would be decreased housing production and increased housing costs.
Again, it is important to reiterate that wage theft is wrong, morally reprehensible and it has no place in a functioning economy. The examples of wage theft provided by the proponents all related to illegal immigration and the exploitation of human labor tied to smuggling illegal aliens into the United States. One must wonder if shifting the responsibility of an employee’s wages from the direct subcontractor to an owner or general contractor is really the fix for wage theft. Considering the victims, maybe wage theft is just a symptom of a much bigger problem, that SB426 does not begin to solve.
This is a redundancy of efforts, if an employee does not get paid by his/her employer, there are existing laws through which an employee can seek resolution, to include filing a complaint with Oregon Bureau of Labor & Industries (BOLI).