With summer construction season in full swing, Oregon’s building industry is taking a hard look at a new law that could reshape how general contractors and property owners manage their projects.

On June 9, Governor Tina Kotek signed Senate Bill 426, creating new legal liability for unpaid wages and fringe benefits owed to workers — even those employed by subcontractors on large construction jobs. The measure, which takes effect January 1, 2026, has big implications for developers, builders, and subcontractors across Oregon.

The law clarifies that if a subcontractor doesn’t pay their employees, property owners and direct contractors — defined as anyone who enters a construction contract with an owner — can now be held directly responsible for making those payments.

The broad new definition of “owner” includes any individual, company, partnership, or entity with a stake in the property.

“The objective is to allow employees of contractors and subcontractors to seek payment from those who have ultimately benefited from their work when they have not been paid by their direct employer,” the new guidance explains.

Key Provisions and Exemptions

The new law exempts a few categories:

• Homeowners hiring contractors for work on their primary residence.
• Small-scale projects involving five or fewer residential or commercial units on a single tract of land.
• Public agencies, and owners who acquire property through foreclosure and only do minimal work to secure it.

Another major shift: workers who aren’t represented by a union or covered by a collective bargaining agreement can pursue claims under this law. A “rebuttable presumption” means the worker is assumed to be an employee, not an independent contractor — and it’s up to the business to prove otherwise.

How It Will Work

The new law adds teeth to Oregon’s existing wage protections, which already allow workers to file complaints with the Bureau of Labor and Industries (BOLI) or pursue payment bonds, mechanic’s liens, or Construction Contractors Board claims. Under SB 426, if a subcontractor defaults on wages, employees can directly pursue claims against owners and general contractors — even if they’ve already paid the subcontractor in full.

“If an employee has not been paid, the employee can take action against not only their employer, but also the businesses or persons who contract with their employer over the course of a project.”

To protect owners and contractors, the law requires a notice and response process: workers must first notify the owner or general contractor by certified mail, describing the violation. The owner or contractor has 21 days to resolve the issue before a claim can move forward.

Recordkeeping Will Be Key

One important safeguard is a new records disclosure requirement:
Property owners and direct contractors can demand subcontractors share certified payroll records, contact details, a list of other subs hired, and names of all workers on site. This aims to help owners verify that subs are paying workers properly.

Agreements to waive or shift this liability are not valid under SB 426. However, while owners and GCs can’t contract away responsibility, the law does not stop them from suing subcontractors who fail to pay wages to recover those costs afterward.

Next Steps for Owners and Builders

Legal experts, including Hannah LaChance and Xavie Davenport of Barran Liebman LLP, say that while the new law may feel like a burden, it can be managed with careful planning, clear communication, and diligent oversight of subcontractors.

“The new rules imposed by SB 426 may seem daunting for owners and contractors, but with regulation and internal changes, compliance can be achieved and liability minimized,” they note.

As January 2026 approaches, property owners and builders should review contracts, update compliance checklists, and strengthen relationships with reputable subcontractors to minimize risk.

For more details, property owners and contractors are encouraged to consult employment counsel or visit the Oregon BOLI site for additional guidance.

Contact

Hannah LaChance at 503-276-2112 or hlachance@barran.com | Xavie Davenport at 503-276-2130 or xdavenport@barran.com

Originally reported by Hannah LaChance and Xavie Davenport in DJC Oregon.