A landmark legislative update in Washington is poised to fundamentally alter the financial and legal responsibilities within the state’s construction industry, shifting the burden of unpaid wages from subcontractors to the general contractors and developers who oversee them. The revised version of House Bill 2191, now designated as HB 2191-S, seeks to create a new accountability framework, ensuring construction workers receive their due wages and benefits even when their direct employers fail to pay. While the updated bill introduces several procedural safeguards and limitations compared to its original, more sweeping proposal, it firmly establishes a new reality where upstream parties can be held liable for violations they did not directly commit. This change signals a significant pivot in risk management, compelling companies to re-evaluate their subcontractor relationships, contractual agreements, and internal oversight processes to navigate an increasingly complex regulatory environment where responsibility extends far beyond the immediate payroll.
1. Defining the New Boundaries of Responsibility
One of the most significant adjustments in the revised bill addresses the liability of private property owners, a major point of contention in the initial draft. Originally, the legislation threatened to hold a wide range of property owners jointly and severally liable for a subcontractor’s wage violations, a provision critics argued would stifle investment and create undue burdens, even on small-scale projects. The substitute bill, HB 2191-S, substantially narrows this exposure by expanding exemptions for owner-occupied principal residences and smaller properties, which are now generally defined as those with five or fewer units on a single parcel. This revision effectively shields individual homeowners and small-scale developers from the bill’s harshest impacts while keeping the liability provisions intact for larger, private commercial projects. Public entities, including state, local, and tribal governments, continue to be exempt. This targeted approach aims to protect workers on major commercial sites without extending liability to those less equipped to manage such complex compliance risks.
The legislation also brings much-needed clarity to the potential domino effect of liability among various tiers of contractors. The initial proposal raised alarms that multiple upstream entities could be held fully responsible for the same unpaid wages, regardless of their direct control or involvement. HB 2191-S refines this by drawing a clearer distinction between the direct contractor and upper-tier subcontractors. Under the new framework, the direct contractor remains the primary party responsible for ensuring wage compliance down the chain. While upper-tier subcontractors may still face liability, they are not jointly and severally liable with one another, a change designed to align responsibility more closely with a party’s actual role and influence on a project. Furthermore, the bill refines the conditions for individual liability, moving away from a model that could have implicated company officers and managers without proof of direct misconduct. The revised language ties personal liability more directly to an individual’s actual authority and control over wage and payroll practices, reducing the risk for passive executives while maintaining accountability for those with meaningful operational or financial oversight.
2. Clarifying Exemptions and Introducing Safeguards
Another area receiving critical updates involves projects governed by collective bargaining agreements (CBAs). Union contractors had expressed significant concern over the ambiguity of the term “qualifying CBA” in the original bill, which left considerable uncertainty about which projects would be exempt from the new liability rules. The substitute version provides a more concrete definition, specifying that an eligible CBA must affirmatively establish wages and fringe benefits for covered workers. Crucially, it must also include a grievance and dispute-resolution process that allows workers to seek unpaid compensation directly. While this clarification makes the exemption far more workable and less speculative, some questions remain regarding how mixed-coverage projects will be treated and whether subcontractor CBAs must independently qualify. Despite these lingering questions, the update provides a much clearer pathway for union employers to manage their risk under the new law, provided their agreements meet the specified criteria.
In a move to balance worker protections with the practicalities of business operations, HB 2191-S introduces new procedural guardrails that were absent from the original text. The bill now includes notice provisions that give upstream parties an opportunity to address and rectify alleged wage violations before they escalate into formal lawsuits. These mechanisms require workers to provide notice to upper-tier contractors, giving them a window to investigate the claim and facilitate payment if wages are indeed owed. While these provisions do not constitute a complete safe harbor that would fully absolve a contractor of liability, they significantly reduce the risk of immediate and unexpected legal action. This change acknowledges that upstream contractors may be unaware of a subcontractor’s non-payment and provides a structured process for resolution. This practical addition is intended to encourage proactive problem-solving and collaboration on job sites, potentially resolving disputes faster and more efficiently than through litigation alone.
3. Recommended Actions for Proactive Compliance
With this evolving liability framework, construction firms are urged to transition from a reactive to a proactive compliance posture. The first step involves a comprehensive re-evaluation of subcontractor due diligence processes. Simply verifying a subcontractor’s license and insurance will no longer suffice. Companies should implement enhanced prequalification protocols that focus specifically on a subcontractor’s payroll practices, financial stability, and history of wage-and-hour compliance. This may include reviewing public records for prior enforcement actions or litigation related to wage theft and requiring potential partners to provide certifications of their wage and benefit payment practices. By thoroughly vetting subcontractors before they are brought onto a project, general contractors can identify potential risks early and make more informed decisions, thereby creating a first line of defense against downstream liability. This heightened level of scrutiny is becoming an essential component of modern risk management in the construction sector.
In parallel with enhanced due diligence, companies must strengthen their contractual protections to reflect the new legal realities. Existing subcontract agreements may be inadequate and require significant updates to mitigate the expanded risk. It is advisable to incorporate explicit representations and warranties where subcontractors affirm their commitment to full compliance with all state wage laws. Contracts should also feature stronger indemnification clauses that clearly obligate the subcontractor to cover all costs, including legal fees, arising from their failure to pay wages. Furthermore, general contractors should secure audit and record-access rights, allowing them to periodically review a subcontractor’s payroll records to verify compliance. Finally, contracts should contain unambiguous termination rights that can be exercised if a subcontractor is found to be in breach of their wage payment obligations. These contractual tools provide both a deterrent against noncompliance and a clear legal recourse if a violation occurs.
4. Navigating the New Era of Oversight
The changes ushered in by HB 2191-S signaled a fundamental shift in the role of a general contractor, expanding it from project manager to compliance gatekeeper. This new expectation demanded that companies prepare for increased documentation and hands-on oversight of their subcontractors’ operations. Firms needed to implement systems for monitoring not just the progress of work but also the timely payment of wages and contributions to fringe benefit funds. This involved developing new internal processes, such as requiring subcontractors to submit periodic certified payroll reports or attestations of payment. It also necessitated a clear protocol for addressing and resolving worker complaints swiftly. Given the provisions for individual liability, companies were also encouraged to review their internal hierarchies to identify which officers and managers held direct control over payroll and contracting decisions. Documenting compliance efforts and providing targeted training to these key individuals became critical strategies for limiting a company’s—and its leaders’—exposure to legal challenges. For union employers, the clarified CBA exemption represented a valuable risk-management tool, prompting them to review their agreements to ensure they met the newly defined criteria for an exemption. This preparation was crucial for managing both legal risks and project costs in a rapidly changing regulatory environment.
