The BP Blast!: A California Employment Law Blog

Wage & Hour: Companies not liable for subcontractor’s failure to pay correct wages

On April 18, 2006, the California Court of Appeal in Violante v. Communities Southwest Dev. & Constr. Co. held that employees of subcontractors on public works projects may not sue parties other than their direct employer for alleged violations of California prevailing wage laws. There, construction workers alleged thousands of workers “were paid less than prevailing wages as required by California Labor Code section 1770 et seq. for public works projects." The class action complaint alleged violations of Labor Code section 1774, breach of contract and unfair business practices against numerous defendants, including the contractor that hired plaintiffs’ employer, a subcontractor on the project.

The Court found that "Plaintiffs have a right of action against the subcontractor, their direct employer . . . . But the Labor Code nowhere requires the contractor to pay prevailing wages to a subcontractor’s employee or permits a subcontractor’s employee to sue the prime contractor when the subcontractor fails to pay prevailing wages." Also, where there is no violation of the underlying prevailing wage law, the Court ruled plaintiffs could not maintain unfair business practices or unfair competition claims under the Business and Professions Code.

Liability for prevailing wages likely will continue to be a very hot legal issue for developers and contractors. For years, non-union contractors have been under siege with lawsuits initiated by Unions in an attempt to force recognition through settlement, rather than through organization. One unsettled question is how this opinion will affect California Labor Code section 2810, which prohibits contractors from entering into any contract that it knows or should have known does not include sufficient funds to allow the subcontractor to comply with all applicable employment law provisions.

Our attorneys handle numerous wage & hour cases throughout Northern California. While small, our highly skilled attorneys effectively and efficiently defend class actions and invidual claims for wages, meal & rest periods, overtime, etc. We are highly regarded and routinely considered by some of the nation's and region's largest employers to defend against these claims.