California contractors likely remember AB 1701. It was passed mere months ago, and it increased the burden on contractors to make sure all parties down the chain received payment. In fact, AB 1701 (now simply section 218.7 of the California Labor Code) made contractors liable for the unpaid wages of every subcontractor under their prime contract.
Naturally, there was a lot of backlash. But, eventually, the noise settled down some and AB 1701 went into effect on January 1 of this year. Now, only 3 months later, urgency legislation has been put forward to amend the law. Spoiler alert: contractors aren’t going to like this proposal, either.
Take a look at the proposed changes for yourself – AB 1565.
AB 1701 Changes May Already Be On The Way
For a better look at how exactly AB 1701 operates, check out this article: The Nuts and Bolts of California AB 1701.
One of the most pivotal sections of AB 1701 reads as follows:
“(h) The obligations and remedies provided in this section shall be in addition to any obligations and remedies otherwise provided by law, except that nothing in this section shall be construed to impose liability on a direct contractor for anything other than unpaid wages and fringe or other benefit payments or contributions including interest owed.” (emphasis added)
You’ll notice that the bolded second half of that quote puts an important limitation on contractor liability. Under the proposed AB 1701 changes, that entire section quoted above would be deleted.
It’s still way too early to tell how AB 1701 will alter the landscape of the California construction industry. Obviously, that means it’s also too early too tell how this proposed amendment might shake things up further. However, attempting to delete one of the safeguards built into AB 1701 isn’t a great look. This is especially true considering it went into effect less than 150 days ago.