By: Brad J. Krupicka, Partner, and Tara M. Mokhtarzadeh, Associate
On June 9, 2025, Governor Tina Kotek signed SB 426 into law, which will create a shift in wage liability for Oregon’s construction industry beginning January 1, 2026. The new law makes an owner and direct contractor jointly and severally liable in a civil action for any unpaid wages owed to the unrepresented employees.
What is the impact of SB 426?
Under SB 426 any owner or direct contractor will be jointly and severally liable for any unpaid wages, including fringe benefits, owed to any “unrepresented employee” of the direct contractor and subcontractor at any tier in the contracting chain, even if that party paid the subcontractor in full for the employee’s work.
A “direct contractor” includes any person, including construction manager or joint venture, the person’s successors, heirs, or assigns that enter a construction contract with an owner.
Ultimately, both property owners and direct contractors will face increased risk of liability for wage violations.
Who may bring a claim under SB 426?
This legislation provides that “unrepresented employees,” their authorized representatives, or the Attorney General on behalf of an unrepresented employee may bring a civil action against an owner, direct contractor, or subcontractor to recover unpaid wages, including interest and penalty wages, damages, attorney fees, and costs.
An “unrepresented employee” is an employee who is not represented by a trade labor organization and is not covered by a collective bargaining agreement that contains (1) a grievance procedure that results in a final and binding decision; and (2) provides a mechanism for recovering unpaid wages and fringe benefits on behalf of the employees covered by the agreement.
What is the notice and cure period?
Prior to commencing a civil action, a person must send notice to the owner and direct contractor.
The notice must:
- Describe the alleged wage violation and nature of their claim.
- Provide 21 calendar days from certified delivery for the parties to correct the alleged violation.
When must a civil action be brought?
A person must commence a civil action within six years from the date on which the wages and fringe benefits become due. A civil action to recover unpaid overtime wages, notwithstanding ORS 12.110, must commence within six years from the date on which the wages were earned.
Who is excluded from SB 426?
The following entities are excluded from SB 426:
- Unionized Employees: SB 426 specifically applies to unrepresented employees.
- Public Agencies: The definition of “owner” under SB 426 explicitly excludes public agencies for the purpose of liability under this legislation.
- Owner’s Principal Residence: Projects involving real property that an owner could claim as the owner’s primary residence as defined by the homestead exemption under ORS 307.286.
- Small Scale Projects: Projects involving five or fewer residential or commercial units on a single tract of land.
How does SB 426 impact indemnification agreements?
The legislation invalidates any agreement to waive, release, or indemnify an owner or direct contractor from liability.
What documentation must a subcontractor provide?
Upon request by the owner or direct contractor, a subcontractor must provide the following records:
- Certified payroll reports that include information that a subcontractor paid in full all wages earned by unrepresented employees.
- The name, address, and phone number of a subcontractor contact.
- The names of all workers, including employees and independent contractors, who performed work on the construction project.
- The name of any subcontractor that the first-tier subcontractor contracts with.
- The anticipated contract start date and scheduled duration of work.
- An affidavit that attests to whether the subcontractor or its principals were involved in any proceeding regarding the violation of any law related to the payment of wages.
If the owner or direct contractor has already paid wages owned on behalf of the subcontractor, the law permits an owner or direct contractor to withhold payment form a subcontractor up to that amount.
Mitigating risk under SB 426
To mitigate liability, stakeholders can take the following actions:
- Audit Payroll: Implement payroll auditing and compliance systems, including routine requests to review certified payroll records, to confirm that unrepresented workers are being paid accurately.
- Update Contracts: Update all contracts to require (1) regular payroll submissions, (2) disclosures regarding any prior wage violations, and (3) the right to withhold payment from contractors for failure to pay unrepresented employees.
- Conduct Due Diligence: Screen all contractors and subcontractors by assessing their financial stability and history of wage compliance.
- Produce Timely Responses: Promptly respond to any wage-related complaints or notices.
Brad J. Krupicka
Brad is the Managing Partner of the O’Hagan Meyer Portland Office and a member of the Labor & Employment Practice. Brad has been a prominent attorney Portland for over a decade. His practice focuses on employment litigation issues, alternative dispute resolution, discrimination and harassment, wage and hour, and issues related to hiring.
Tara Mokhtarzadeh
Tara is an associate in the O’Hagan Meyer Portland Office. Her practice areas include Labor & Employment law and Employee Benefits under ERISA.