Maryland General Contractors Must Pay Up When Their Subcontractors Don’t: Law Takes New Aim at Wage and Hour Violations

Maryland will enact a new law this year making construction general contractors liable for subcontractors’ violations of wage and hour laws. There is both good news and bad news for GCs, however. The law provides that a subcontractor must indemnify a general contractor for “any wages, damages, interest, penalties, or attorney’s fees owed as a result of the subcontractor’s violation,” unless indemnification is provided for in a contract between the GC and the subcontractor, or if the subcontractor was unable to pay its employees because the GC failed to pay the subcontractor pursuant to the terms of their contract. However, this mandatory indemnification provision may be worth nothing if a subcontractor is not able to pay these damages and costs. The Act also gives employees the opportunity to sue both the GC and their direct employer.

Get ready. The “General Contractor Liability for Unpaid Wages Act” becomes effective on October 1, 2018. Baker Donelson has prepared an update on the law, along with a discussion of steps GCs can take to minimize their legal exposure.