Oregon’s New Construction Wage Law Expands Liability to Owners and Contractors
A new statute makes property owners and direct contractors jointly and severally liable for wages owed by contractors at any tier of the contracting chain.
What is SB 426’s New Expansion of Liability for Construction Worker Wages?
Oregon has now expanded the categories of people who may be responsible for payment of wages on construction projects. Senate Bill 426, now codified at ORS 652.197 and 652.198, makes property owners and direct contractors jointly and severally liable for unpaid wages owed to unrepresented employees of contractors performing work on the project, including employees of subcontractors “at any tier.”
The law took effect at the beginning of 2026 and stands to have a substantial impact on Oregon’s construction industry. The law comes largely as a response to widespread wage theft in the construction industry. Ordinarily, the Oregon Bureau of Labor and Industries is responsible for handling unpaid wage claims in this context, but the new law gives qualifying employees an additional channel for recovering wages—through a civil action against a property owner or direct contractor.
Notably, the law does not apply to construction contracts that relate to property being used by the owner as a primary residence. Nor does the law apply to construction contracts that relate to property consisting of five or less residential or commercial units on a single tract. Instead, it is owners and direct contractors engaged in construction projects on properties such as vacation homes and large multi-family or commercial structures who should be aware of the risk of a worker going unpaid.
What is the Key Function of SB 246?
Senate Bill 426 gives unrepresented employees the right to bring a civil action against an owner or direct contractor to recover unpaid wages, fringe benefit contributions, and various other damages. The law makes owners and direct contractors jointly and severally liable, regardless of whether they had a part in, or knew about, the nonpayment of the construction employee’s wages.
How Does SB 246 Apply to the Law in Oregon?
The cause of action is created specifically against “owners” and “direct contractors” engaged in a construction contract.
An “owner” is defined to include a fee owner, contract purchaser, or lessee who causes construction, repair, maintenance, demolition, excavation, or other development work to be performed. The term excludes public agencies and financial institutions under certain conditions.
A “direct contractor” is any person or business entity that enters a construction contract with an owner.
To qualify to bring suit, an employee must be “unrepresented.” An employee is “unrepresented” if they are not represented by a construction trade labor organization or not covered by a collective bargaining agreement containing certain procedures and dispute resolution mechanisms. The definition of “unrepresented employee” is expansive—an employee will be considered unrepresented unless they are both represented by a trade labor organization and covered under a collective bargaining agreement that contains all the relevant procedures and mechanisms.
The law’s scope expands further through a rebuttable presumption that a person performing labor within the scope of a construction contract is an employee, as opposed to an independent contractor. Independent contractors would not be covered by the law, but this presumption shifts the burden of rebutting a worker’s status as an employee to the owners and direct contractors. The rebuttable presumption is especially relevant for projects with various layers of contractors. In cases where supervision is low and the line between employee and independent contractor is blurred, the presumption causes the law to err towards imposing liability on the owner or direct contractor.
Notice Period and Time to Bring a Lawsuit
Before the employee can sue, they must send a written notice to the owner and direct contractor setting forth the alleged violation and the nature of the claim. Then, the owner and direct contractor have 21 days to correct the alleged violation. Only in the absence of timely corrective action can the employee sue.
As to a statute of limitations, an employee must bring suit under this law within two years from the date the wages and benefits became due.
Contractual Relationships and Risk Management
Senate Bill 426 prevents parties from contracting around the newly imposed liability. Specifically, the law invalidates any agreements that would indemnify an owner or direct contractor for liability assigned by the law. The law also invalidates any agreement to waive or release an owner or direct contractor from the new liability.
Although owners and direct contractors cannot rely on conventional contracting options to avoid liability, they are not entirely without recourse. First, owners and direct contractors can sue subcontractors for actual and liquidated damages for the amounts claimed by the employee or paid by the owner or direct contractor on behalf of the subcontractor.
Also, owners and direct contractors can withhold payments to subcontractors to the extent that they have paid wages to employees on behalf of the subcontractor. Importantly, this provision operates even where a civil action has not been filed. For example, if an unrepresented employee gives notice of the alleged violation, the direct contractor may choose to pay the unpaid wages immediately and then withhold an equivalent sum from the employing subcontractor.
Lastly, the law provides owners and direct contractors with monitoring tools. Once under contract, they can require a subcontractor to provide certain payroll and employment information. Some key information that can be requested includes payroll reports, the names and classifications of all workers performing under the subcontractor on the project, and an affidavit describing any history of civil, administrative, or criminal proceedings involving wage payment violations.
What are the Implications of SB 246?
For unrepresented employees, the new law creates a reliable safety net for recovering unpaid wages.
For owners and direct contractors, the new law is a source of heightened risk. To address the risk, they may need to exert greater oversight and caution when subcontractors will be used on a project. Owners and direct contractors should consider actions such as updating subcontractor vetting processes, regularly monitoring subcontractor payroll, and revising contracts to require the disclosures permitted by the law.
Given the substantial change in law, owners, direct contractors, subcontractors, and employees alike should consult legal counsel to understand their rights and risk exposure.
For further information and expert advice, book a consultation with one of Hutchinson Cox’s construction law attorneys today.
The information provided here does not constitute legal advice. Hutchinson Cox makes neither express nor implied warranties regarding the use of this material. The reader should always seek competent legal advice as the facts of every case vary.