Change to Illinois Wage Payment and Collection Law Makes Certain Illinois Prime Contractors Liable for Payment of Unpaid Subcontractor Wages

Illinois’ Wage Payment and Collection Act (the “Act”) was recently amended to include a new section that makes certain prime contractors in the construction industry liable for payment of unpaid wages, benefits or other payments or contributions, including interest due, and reasonable payments. attorneys’ fees of employees of a subcontractor in connection with all contracts entered into on or after July 1, 2022 relating to the erection, construction, alteration or repair of a building, structure or other private works in the State of Illinois.

Under the Amendments, “Prime Contractor” is defined as a contractor who has a direct contractual relationship with an Owner and may have the same meaning as “General Contractor”, “Prime Contractor” or “General construction “. A homeowner who acts as a prime contractor in connection with the erection, construction, alteration or repair of his principal residence is, however, exempt from any liability under the alterations. “Subcontractor” is defined as a contractor who has a contractual relationship with the main contractor or with another subcontractor at any level, who provides goods or services in connection with the contract between the contractor principal and owner, but does not include contractors. who provide only the goods and the transport of these goods related to the contract. “Construction” means the construction, alteration, repair, improvement or demolition of any structure or building or the making of improvements of any kind to any real property.

The modifications do not apply to work performed under a contract by a contractor of the federal government, the state of Illinois, a special district, or any other political subdivision of the state of Illinois. ‘Illinois (as a city or county). In addition, prime contractors who are party to a collective bargaining agreement on the project where the work is performed are “exempted” from any liability under the Amendments.

The amendments give employees the right to bring a civil action against prime contractors 10 calendar days after they first provide detailed written notice of their claim to their employer and the prime contractor. Employees are not required to sue their employers or exhaust their efforts to collect from their employers before suing prime contractors.

Prime contractors are prohibited from circumventing the requirements of the amendments to the Act by seeking to shield themselves from liability. However, the amendments allow prime contractors to include contractual indemnification provisions in their contracts with subcontractors that require subcontractors to indemnify prime contractors for any wages, benefits or other benefits or contributions, damages, interest, penalties, or attorneys’ fees due as a result of Contractor’s non-payment of wages or other benefits or contributions, unless Contractor’s non-payment is due to Contractor’s non-payment. main contractor for sums due to the sub-contractor in accordance with the terms of their contractual relationship. The amendments effectively shift the burden and risk of litigation to prime contractors, who will be virtually obligated to promptly pay employee wage claims and then sue subcontractors to recover the amounts paid. Accordingly, Covered Prime Contractors should pay particular attention to the requirement for performance bonds, letters of credit, personal guarantees, insurance coverage and other security remedies, as well as the strengthened pre-qualification requirements for contractors to mitigate their liability under changes in the law.

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Elaine R. Knight