Senate Bill No. 677

(By Senators Ross and Helmick)

____________

[Introduced February 23, 1998; referred to the Committee on Labor; and then to the Committee on the Judiciary.]
____________




A BILL to amend and reenact section seven, article five, chapter twenty-one of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to prime contractors' liability for wages and benefits of the employees of subcontractors; requiring certification from the subcontractor to limit such liability; requiring notification of failure to pay wages and fringe benefits by subcontractors; and permitting termination of a subcontract to continue liability of the primary contractor.

Be it enacted by the Legislature of West Virginia:
That section seven, article five, chapter twenty-one of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted to read as follows:
ARTICLE 5. WAGE PAYMENT AND COLLECTION.

§21-5-7. Prime contractor's responsibility for wages and benefits.

(a) For the purposes of this article, the following applies:
(1) The term "primary contractor" means an employer who subcontracts with other employees for the performance of any work which the primary employer is obligated to perform. The term "subcontractor" means an employer with whom the primary contractor subcontracts.
(2) This section applies only to subcontractors with whom a primary contractor has a contract for any work for a period longer than thirty days, or for consecutive periods of work that total more than thirty days.
(3) This section does not apply to a primary contractor in relation to subcontractors: Provided, That a subcontractor can become a primary contractor with regard to other employers with whom it subcontracts.
(b) Whenever any person, firm or corporation a primary contractor shall contract contracts with another a subcontractor for the performance of any work which the prime contracting person has undertaken primary contractor is obligated, to perform for another the prime primary contractor shall become civilly liable to employees of the subcontractor engaged in the performance of work under such contract the subcontract for the payment of wages and fringe benefits, exclusive of liquidated damages as provided in subsection (e), section four of this article, to the extent that the employer of such employee subcontractor fails to pay such wages and fringe benefits. Provided, That such employees have exhausted all feasible remedies contained in this article against such employer, but if the prime contractor has failed to notify the commissioner as required by section sixteen of this article, then the employee shall not be required to exhaust any remedies against the employer: Provided, however, That such employer shall become civilly liable to such prime contractor for any sum of money paid by him under this section
(c) A primary contractor is not liable for any unpaid wages under subsection (b) of this section if it obtains from the subcontractor, prior to the initial performance of any work by the employees of the subcontractor, a certificate stating that the subcontractor has paid all wages and fringe benefits due and payable. To continue to avoid liability, the primary contractor shall obtain from the subcontractor a new certificate on the first day of each month until the end of the term of the subcontract. The certificate shall be on a form prescribed by the commissioner. Failure to obtain the certificate shall result in the primary contractor being equally liable with the subcontractor for the payment of wages and fringe benefits as set forth in subsection (b) of this section: Provided, That the primary contractor is not liable for any period in which the certificate was obtained: Provided, however, That the employees to whom wages and fringe benefits are due are entitled to collect only once for the amounts due them under the subcontract.
Where a subcontractor fails to provide a primary contractor with a certificate upon request under the provisions of subsection (c), subdivision (1) of this section, the primary contractor has fourteen days to terminate the subcontract in order to continue to avoid liability under subsection (b) of this section. In the event the subcontract is not terminated, the primary contractor is liable to the employees of the subcontractor for wages and fringe benefits accrued during any period in which the primary contractor failed to obtain a certificate from the subcontractor.
(d) In the event of failure by the subcontractor to pay wages and fringe benefits to its employees, the employees have sixty days from the date on which the wages and fringe benefits were due in which to notify the commissioner of the subcontractor's failure to pay. When the commissioner receives notification under subsection (d), subdivision (1) of this section of the subcontractor's failure to pay wages and fringe benefits, the commissioner shall notify the primary contractor of the failure within seven days after receiving the notification from the employees. The commissioner shall notify the primary contractor by mailing the notice by first class United States mail, postage prepaid, and addressed to the primary contractor at the address furnished to the commissioner by the primary contractor. The mailing shall be considered good and sufficient notice to the primary contractor of the subcontractor's failure to pay.
When the primary contractor receives notice from the commissioner as set forth under this section, the primary contractor has fourteen days to terminate the subcontract in order to continue to avoid liability. In the event the subcontract is not terminated, the primary contractor is liable to the subcontractor's employees for wages and fringe benefits accrued during any period in which the primary contractor failed to obtain a certificate from the subcontractor.
(e) When a subcontractor fails to discharge its payment obligations under this article, the failure shall be considered good cause for a primary contractor to hold the subcontractor responsible and to seek reimbursement or indemnification for any amounts paid on behalf of the subcontractor in relation to unpaid wages and fringe benefits, including, but not limited to, reasonable attorneys' fees, and to terminate its subcontract with the subcontractor notwithstanding any provision in the subcontract to the contrary.
(f) This section is applicable only to contracts entered into or extended on or after the first day of July, one thousand nine hundred ninety-nine. Subsections (c) through (e) of this section are applicable only to those employees who have complied with the notification provisions of section sixteen of this article.



NOTE: The purpose of this bill is to clearly delineate the liability of subcontractor for the payment of wages and benefits. It also establishes time lines for the filing of claims so that resolution can be timely.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.