In Oregon’s construction industry, wage theft is a real and persistent issue. While workers have the right to sue employers or file complaints with the U.S. Department of Labor or Oregon’s Bureau of Labor and Industries (BOLI), the state’s enforcement resources are stretched dangerously thin. Workers often turn to BOLI, which offers stronger protections than federal law and can pay out claims using Oregon’s Wage Security Fund. But enforcement is hampered by a lack of staffing.

Currently, only about 10 labor standards investigators are responsible for reviewing all wage-related complaints statewide. Since 2020, those complaints have surged by 208%, totaling roughly 3,500 annually. The result is a massive and growing backlog of unresolved claims. In response, Governor Tina Kotek recently proposed a $20 million funding boost for BOLI so the agency can hire additional investigators and better fulfill its responsibilities.

Wage theft isn’t unique to construction, but the industry is especially vulnerable due to its complex subcontracting chains. A 2023 investigation revealed that between 2015 and 2022, BOLI failed to recover around $700,000 in unpaid wages and penalties tied to Oregon’s residential construction sector.

Fortunately, construction already has built-in safeguards to protect workers. Payment bonds and mechanic’s liens offer legal remedies if wages go unpaid. Payment bonds, often issued by sureties, allow subcontractors, suppliers, and laborers to recover wages directly if a contractor fails to pay. Mechanic’s liens give workers a security interest in the property they’re building on, allowing them to recover wages through the sale of that property, assuming they meet the necessary legal notice requirements.

Oregon also mandates that contractors hold valid licenses with the Oregon Construction Contractors Board (CCB) and maintain a financial safeguard—typically a bond, letter of credit, or cash deposit ranging from $15,000 to $80,000. If a contractor fails to meet wage obligations, the CCB can suspend their license. Workers may also file wage claims against those financial instruments.

Despite these mechanisms, some lawmakers have pushed for more sweeping changes. For the third consecutive session, the Oregon Legislature is considering a controversial proposal: making owners and general contractors strictly liable for unpaid wages owed to lower-tier subcontractors’ employees on private construction projects.

These so-called “wage theft” bills, including the latest version—Senate Bill 426—have sparked heated debate. Union contractors and subcontractors have largely supported the proposals, citing rising concerns over wage theft. On the other hand, many nonunion contractors, subcontractors, and business associations have opposed the legislation, arguing that the bills are overly broad and could unintentionally harm smaller and newer businesses.

“Wage theft was a growing concern in construction,” noted union representatives during testimony on the bill.

Critics worry that owners and contractors would minimize their risk under the proposed law by only working with familiar and well-established subcontractors, potentially sidelining newer firms—particularly those owned by minorities. “The ‘wage theft’ bills were not targeted and would have substantial unintended consequences,” many business groups warned.

SB 426 includes exceptions for union employees and workers covered by project labor agreements (PLAs), but the financial implications are still significant. Strict liability would force owners and general contractors to price in the risk of potential wage violations—especially “penalty wages,” which can total up to 30 days of full pay per employee. That’s on top of existing costs for payment bonds, which can already run as high as 5% of the contract price.

How these penalty wages will be priced remains uncertain. Since penalties are assessed after violations occur, contractors can’t accurately estimate those costs upfront. Furthermore, relying solely on union labor as a workaround may not be viable. “Oregon does not have enough union contractors to construct all private projects,” the authors note, adding that union labor tends to be more expensive. A 2022 cost-risk assessment by the Oregon Department of Transportation found that PLAs were “strongly correlated” with public project costs rising by 10–20%.

SB 426 could also reshape the construction market by increasing concentration. If passed, general contractors may be reluctant to hire newer or smaller subcontractors without proven records, limiting opportunities for underrepresented businesses and reducing competition. This would likely push construction costs even higher over time.

Additionally, the bill mandates certified payroll reporting from all subcontractors, regardless of size or the presence of a formal contract. But there’s no clear enforcement mechanism if subcontractors fail to provide these records. That could leave owners and general contractors on the hook for unpaid wages even if they lack the documentation to confirm liability.

The intent behind SB 426 is to protect workers—a goal that everyone agrees is important. However, the authors argue that the solution should not come at the cost of rising expenses, fewer job opportunities for small businesses, and increased project risk.

“Without legislative and executive action, wage theft will likely continue to harm construction workers. However, the solution is not to increase costs and market concentration,” the authors write. “Instead, the Legislature should adequately fund BOLI to fulfill its mandate. The CCB is also well-positioned to ensure construction workers are familiar with their rights.”

There is broad consensus that BOLI needs more resources, and that better education for construction workers about their rights could help deter wage theft. These steps would strengthen enforcement without discouraging participation from small and minority-owned businesses or driving up project costs.

Originally reported by Matt Berry And Nick Lauren in DJC Oregon.