Provides that subcontractors on public works projects provide a surety bond for the underpayment of the prevailing wage

Title of bill

An act to amend the labor law, in relation to the payment of the prevailing wage by subcontractors on public works projects

Purpose or general idea of bill

This bill requires all sub-contractors on a public works project to deposit a surety bond, in the sum of five percent of each sub-contractor's payroll for the project, with the appropriate fiscal officer. Funds from the surety bond will be used for compensating employees if there is an underpayment of prevailing wages.

Summary of specific provisions

Section 1 of the bill adds subdivision 10 to Section 220 of the Labor Law. The new subdivision requires all sub-contractors on a public works project to deposit a surety bond, in the sum of five percent of the sub-contractor's payroll on the project, with the appropriate fiscal officer. The surety bond will be retained by the fiscal officer for a period of two years and will be refunded to the sub-contractor, with interest at a rate of five percent annually, at the end of two years. The subdivision also stipulates that the surety bond will be dispersed only for the purposes of compensating workers who are underpaid the prevailing wage or for repayment to the sub-contractor after two years.

Section 2 of the bill amends Section 223 of the Labor Law to stipulate that general contractors will be liable for the underpayment of prevailing wages by sub-contractors only after the proceeds from the surety bond have been exhausted.

Justification

Section 223 of the Labor Law presently states that if a sub-contractor is guilty of non-compliance or evasion of the Public Work Article of the Labor Law, "the contractor shall be responsible for such non-compliance or evasion."

Because Section 223 of the Labor Law holds contractors liable for the non-compliance or evasion of sub-contractors, very often contractors pay for the underpayment of prevailing wages on the part of sub-contractors. For example, a sub-contractor may underpay the prevailing wages on a given project and declare bankruptcy shortly after the completion of the project, leaving the general contractor to pay all the underpaid wages. Clearly, this is an unfair practice.

Requiring sub-contractors to deposit a surety bond for the payment of prevailing wages will, at the very least, ease the underpayment burden placed on contractors. If it is determined that a sub-contractor has underpaid the prevailing wage and the sub-contractor either does not have the financial resources to pay the underpaid sum or the business ceases to exist, there will be funds available to properly compensate underpaid workers while protecting contractors from unfair monetary liabilities.

Prior legislative history

1999-00: Remained in Committee 2001-02: Remained in Committee 2002-03: Remained in Committee 2003-04: Remained in Committee 2005-06: Remained in Committee 2007-08: Remained in Committee

Fiscal implications for state and local governments

Slight increases in the administrative expenses for the State and municipalities.

Effective date

This act shall take effect immediately.