Expanded Liabilities for General Contractors

May 14, 2018

The construction business can be a risky one for many reasons, and in the state of Maryland the cost of doing business is about to get a little tougher. Beginning October 1, 2018, general contractors will face increased exposure when performing any work in Maryland due to a new law. Maryland’s legislators recently passed a law making general contractors responsible for any wages their subcontractors fail to pay its employees during a project. Additionally, the law expands the liability of wages to the general contractor’s subcontractors, as well in a tiered construction project.

To avoid steep penalties, your company should keep these important changes in mind:

  • Violators of the law are subject to steep penalties, including three times the amount of the actual damages awarded.
  • General contractors should review their processes around selecting and hiring subcontractors.
  • General contractors bear the responsibility for subcontractors whether or not they have a direct contractual relationship with them.
  • General contractors should work with their surety agents to ensure adequate bonding coverage in light of the new provisions.
  • Subcontractors are required to repay a general contractor any fees that result from a violation they are responsible for, except in situations where prompt payment terms in the original contract were violated.
  • Subcontractors are not required to provide their general contractor with employee information, making it incredibly hard for general contractors to know their risk.
  • Both general contractors and subcontractors should keep detailed employee records in a safe place in case legal action is brought against them.

While the exact impact on general contractors and subcontractors alike is not clear, proactively planning for the changes ahead should lessen the impact of the new law. Not sure where to start? For more information or questions, contact our construction and real estate specialists at 301.231.6200.