Leave it to the Illinois General Assembly to find ways to make life more expensive and difficult for employers.
Suppose you’re a contractor and you subcontract out work for part of the project. That’s routine for many elements in most construction and manufacturing projects. A bill pending in the Illinois General Assembly, House Bill 5412, would make you liable if your subcontractor failed to pay a wage claim by the subcontractor’s employees. The bill would let a worker with a grievance against the subcontractor sue the general contractor directly.
That’s crazy because contractors typically have no control over subcontractor’s payroll, or even any information about it. Subcontractors would therefore often likely have to pay for bonds to assure their wage payment. That cost would fall most heavily on small subcontractors, which are often minority owned.
For that reason, minority contractor trade groups oppose the bill. As reported by Capitol News Illinois, opponents include the Hispanic American Construction Industry Association, the Black Contractors Owners and Executives, and the Federation of Women Contractors. And those small subcontractors may well get less work.”By adding to the risk a primary contractor takes in hiring a subcontractor, blanket liability incentivizes the primary contractor to use in-house labor and avoid hiring outside help, the advocacy groups argued.”
Manufacturers, too, oppose the bill and say it would ultimately drive up costs to consumers. Dennis LaComb of the Technology and Manufacturing Association, says the “bill incentivizes large contractors to offer a full umbrella of in-house services which means small business sub-contractors are left holding the bag. In the end, it’s the customers and end users who will be asked to pay more. This is yet another tax on small businesses and Illinois consumers.”
But wait, there’s an exception for what the bill would cover, and it’s no surprise what would be exempt: projects funded by the government and union projects.
“The hypocrisy of Illinois politicians isn’t even surprising anymore,” LaComb said. “So not only are these politicians exempting themselves from this bill, it’s yet another effort to support their union benefactors and punish non-union labor. They don’t even care they’re hurting small businesses, family manufacturers, and consumers in the process.”
An earlier attempt at similar legislation failed in 2019. At the time, a JD Supra column listed the following issues it raised:
- Would Direct Contractors require all subcontractors to furnish payment bonds to guarantee wages are paid?
- Would smaller and newer subcontractors who cannot provide bonds be unable to compete on most private commercial projects?
- How much additional administrative work would be required to track whether subcontractors were paying all employees?
- Would the payment process be slowed for all subcontractors, while proof of payment by lower tiers is gathered, putting further pressure on cash flow?
- What role would politics play in whether a labor management cooperation committee would bring suit against one of its large contractor members?
- Does the word “subcontractors” include material suppliers, as it does under the Illinois Mechanics Lien Act, or does it only include subcontractors covered by the prevailing wage act?
- Are jobs paid for by public funds on private property or projects on public property using private funds included as “private” projects?
- If attorneys’ fees are awarded to a prevailing wage claimant, should they also be available to a successful Direct Contractor?
- Does the provision permitting the attachment of a Direct Contractor’s property to collect a judgment differ from existing law and if so, in what way?
Let’s hope this bill dies as the last attempt at it did.