Virginia Contractors Can Now be Liable for Wages of Subcontractors’ Employees

By Doug K. Nickerson, CPA, Partner

Virginia Contractors Can Now be Liable for Wages of Subcontractors’ Employees

What Virginia Construction Contractors Need to Know About New Statute §11-4.6

Earlier this year, the Virginia General Assembly enacted a law that can make contractors liable to the subcontractors’ employees for unpaid or unfair wages. These changes come from the passage of Senate Bill 838 and House Bill 123 which amends §40.1-29 to add the new statute at §11-4.6.

The new statute applies only if:

  1. It can be demonstrated that the general contractor knew or should have known that the subcontractor was not paying his employees all wages due;
  2. The construction contract is related to a project other than a single family residential project; and
  3. The value of the project, or an aggregate of the projects under a single construction contracts entered into after July 1, 2020, exceeds 500,000 dollars (§11-4.6(E)).

The new legislation holds contractors liable for payment of wages of the subcontractors’ employees under §11-4.6(B). It states that any construction contract entered into on or after July 1, 2020, shall be deemed to include a provision under which the general contractor and the subcontractor are jointly and severally liable to pay any subcontractors’ employees’ unpaid or unfair wages, in accordance the provisions of the Virginia Minimum Wage Act and the Fair Labor Standards Act.

To enforce this, through §11-4.6(C), the new legislation states that a general contractor shall be deemed to be the employer of a subcontractor’s employees for the purposes of §40.1-29.

Impact of New new statute §11-4.6 on construction contracts

Finally, if the contractor or subcontractor knowingly and willfully failed to pay the appropriate wages, in addition to awarding the wages owed, an additional amount as liquidated damages, and reasonable attorney fees and costs, the court can award an employee an amount equal to three times the amount of wages due and reasonable attorney fees and costs.

This new legislation is likely to increase the costs and efforts in the administration of construction contracts as contractors will need to be more diligent in their selection and monitoring of subcontractors.

Questions on this or other construction industry accounting topics? Contact your Opportunity Advisor or Email | Call: 804.747.0000

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About the Author

Doug K. Nickerson

Doug K. Nickerson, CPA, Partner

Doug shares his real estate and construction accounting insights with his clients to help them achieve their financial goals. Doug is the leader of Keiter’s Construction Industry team and is a member of Keiter’s Real Estate, Healthcare & Medical Services, and Manufacturing Industry teams. Doug has over 18 years of experience in corporate accounting and public accounting providing audit and consulting services.

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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


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