Oregon Enacts Law Holding Contractors Liable for Subcontractor Wage Theft

Oregon’s New Wage Theft Law Holds Construction Owners and Contractors Accountable

Governor Tina Kotek signed Senate Bill 426 into law on June 9, 2025, introducing sweeping changes to Oregon’s private construction industry. The new law, which takes effect January 1, 2026, imposes strict liability on property owners and general contractors for unpaid wages owed by lower-tier subcontractors.

SB 426 has been under discussion for years, and recent legislative amendments clarify some exemptions, including for small-scale projects and union labor. However, legal experts and industry stakeholders agree the law will likely have wide-reaching consequences for contractors operating in the state.

“Owners and general contractors need to familiarize themselves with SB 426 to properly understand the new risk of liability for unpaid wages on private construction projects,” a recent article from the Daily Journal of Commerce warned.

Under SB 426, an employee of any subcontractor—even those with only an implied contract—may sue a project’s owner or general contractor if they are not paid the full wages owed, regardless of whether the top-tier contractor has paid its subcontractor. This includes not just unpaid wages but also fringe benefits, penalties, and attorney fees. The law specifies that such claims can be brought within two years from the wage due date.

The law defines a “direct contractor” as a general contractor who enters into a construction contract with an owner. The term “owner” includes anyone with a property interest in the project—but applies only if that party “causes” construction to occur.

It also defines “subcontractor” broadly to include any entity entering into a direct or implied agreement with a general contractor or its subcontractors. “An ‘implied contract’ can be ‘inferred from the acts or conduct of the parties,’” the law notes.

Exemptions Under SB 426

Two notable exceptions to strict liability exist:

• Union Labor: If workers are covered by a collective bargaining agreement that includes a wage recovery mechanism, the strict liability clause does not apply.
• Small Projects: Projects involving an owner’s primary residence or consisting of five or fewer residential or commercial units on a single tract are also exempt.

New Reporting Obligations

The law also introduces mandatory reporting requirements for all first-tier subcontractors on non-exempt projects. Subcontractors must provide certified payroll records, a list of workers, contact info for any lower-tier subcontractors, and disclosures related to prior unpaid wage violations.

Crucially, failure by a subcontractor to comply does not absolve owners or direct contractors from liability: “If a subcontractor refuses or otherwise fails to provide such records, owners, and direct contractors remain liable to unpaid employees of subcontractors.”

Limiting Risk: Few Safe Options

Typical risk-mitigation strategies like indemnification clauses are now off the table. “Any agreement to waive or release an owner or direct contractor or to indemnify an owner or direct contractor for liability assigned under [SB 426] is invalid,” the bill states.

Construction attorneys suggest alternative strategies, including:

• Working only with trusted subcontractors with good records.
• Requiring certified payroll reports on large projects.
• Using check-in sheets and on-site monitoring to track who’s working.
• Considering payment bonds—though they are expensive and may not cover penalties.
• Updating contract language to reflect SB 426’s requirements.

With the law taking effect in early 2026, legal and construction professionals are urging firms to act fast. As the Daily Journal of Commerce noted, “The impacts of SB 426 will likely still be felt throughout the industry,” even with the recent amendments.

Originally reported by JD Supra.