A new law signed in Oregon on June 9, 2025, is poised to reshape the construction industry by increasing the responsibility of property owners and contractors when it comes to ensuring workers are paid. Senate Bill 426 (SB 426), which takes effect on January 1, 2026, establishes strict joint and several liability for unpaid wages owed to unrepresented employees of subcontractors—regardless of how far down the contracting chain those subcontractors are.

“This law aims to protect workers at the bottom of the chain who often face the highest risks of wage theft,” labor advocates say.

The measure significantly raises the legal and financial exposure for those involved in construction projects, even if they were unaware of any wage violations committed by their subcontractors. This puts Oregon at the forefront of legislative efforts to improve wage protections for construction workers.

SB 426 amends Oregon Revised Statutes Chapter 652 by making both the “owner” of a construction project and the “direct contractor” legally responsible for unpaid wages and fringe benefits owed to certain employees of subcontractors, including lower-tier ones.

Affected workers or their third-party representatives may take legal action, and the Oregon Attorney General is also authorized to bring civil cases in the name of the state.

The statute includes a two-year window for filing claims.

The law’s scope is wide, encompassing a broad definition of "construction contract" that covers everything from building new structures to maintenance and land excavation. Even lessees can fall under the definition of “owner.” However, public agencies and financial institutions that acquire property through foreclosure are exempt, unless they actively direct construction work.

One of the most notable elements is the focus on “unrepresented employees”—workers not covered by a bona fide labor organization or a collective bargaining agreement that includes a binding arbitration process for wage disputes.

“I crafted the language, so I know it well,” said Matt Mayberry, CEO of the New Hampshire Home Builders Association, during a recent public forum. “Laconia is amazing — they’re on the leading edge.”

Although the Oregon statute is unrelated to Laconia, the quote illustrates a broader push across states to reform how construction labor laws function at the ground level.

Rebuttable Presumption of Employment

In a legal action under the new law, it will be presumed that a person performing labor on a construction site is an employee—not an independent contractor—unless proven otherwise. This clause strengthens worker protections but also increases the documentation and proof burden on employers.

Notice and Opportunity to Cure

Before initiating a lawsuit, claimants must provide written notice via certified mail to both the owner and direct contractor. This notice must outline the alleged wage violation and allow 21 days for correction before legal proceedings can begin.

Invalidation of Indemnity Clauses

The law prohibits contractual clauses that shift liability from owners or direct contractors to subcontractors. However, owners and direct contractors are still permitted to recover funds from subcontractors through separate lawsuits for unpaid wages they had to cover.

Payroll Transparency Requirements

Subcontractors must now supply certified payroll records and other data to owners or direct contractors upon request. They must also disclose prior involvement in any proceedings related to wage law violations.

Failure to provide these documents does not absolve an owner or contractor of liability. The law does permit withholding payments to a subcontractor equal to any unpaid wages that the owner or contractor has already covered.

Implications and Risk Mitigation

SB 426 introduces sweeping changes and potential risks for those in construction project oversight. Experts recommend that owners and contractors:

• Perform enhanced due diligence when selecting contractors and subcontractors.
• Request certified payroll reports and retain comprehensive employment records.
• Consider updating insurance policies and contracts to include relevant risk coverage.
• Train personnel to comply with new legal obligations and respond to wage-related claims.

Legal experts advise reviewing all active construction contracts and employment procedures ahead of the law’s implementation on January 1, 2026.

Originally reported by Paul E. Cirner in Littler News.