SB 415 was just signed into law by Hawaii's governor, and creates risk of new liability for general contractors working on private projects in the State of Hawaii. Here are some answers to basic questions on the law:
1. When does the law go into effect?
Now. The governor signed the bill on June 1, 2023, and it is applicable to all debts incurred from the date of the statute forward. In other words, it is written to apply to existing projects on a go-forward basis.
2. Whose wages will the general contractor be responsible for?
Under the new law, general contractors will be responsible for their own employees (of course), but also their subcontractors' wages, AND also wages of sub-subcontractors.. The language of the statute refers to subcontractors "of any tier"
3. What are "wages" and what kind of liability will the general contractor face?
Wages is just wages. Not fringe benefits, not consequential damages, not bonuses. The general will be responsible for wages plus interest if due. The general can be sued for attorneys' fees and costs (including expert witness fees) but only for its own direct employees.
4. Who can sue?
The unpaid employees will not have a direct right of action against generals. "A joint labor—management cooperation committee established pursuant to section 175a of the federal
Labor Management Cooperation Act of 1978 (29 U.S.C. 19 175a) may bring an action in any court of competent jurisdiction." So it appears the unpaid worker must take up a complaint with this management cooperation committee, which must then provide notice to the contractor as a prerequisite to suit. Other than that, the Director of Labor and Industrial Relations may take action against the general contractor, but it does not appear the penalties of Chapter 104 will apply to such actions.
5. How long is the general exposed?
The entities described above have either one year from the last date an unpaid employee worked on a job to bring a claim against a general contractor, or 45 days from the filing of a notice of completion date under Hawaii's mechanics lien statutes.
6. What can a general contractor do to protect itself?
The statute allows generals to demand effectively certified payroll from their subs and sub-subs. Unfortunately, this is not the greatest prophylactic, because it requires the general to have to monitor payment to employees to a degree never before required on private jobs. Also, the law specifically states that a subcontractor's failure to provide these records will not have any effect on the general contractor's liability. Probably a combination of (1) insisting upon certified payroll; (2) monitoring workers actually onsite; and (3) maintaining retention sufficient to cover the increased risk caused by this new law, will be the best practicable response to this new law. It would be impracticable for general contractors to seek and obtain releases from employees at every tier, especially on large projects. The end result will probably hurt subcontractors and increase the cost of construction by increasing risk on jobs.
