Introduction.
Oregon Senate Bill 426 (“SB 426”), which became effective January 1, 2026, aims to address the legislature’s longstanding concern about wage theft on construction projects by expanding who can be held financially responsible when certain workers are not properly paid. This blog post provides a basic background of what SB 426 accomplishes and how property owners and contractors can prepare for construction projects covered by SB 426.
Key Definitions.
Owner: An owner includes any person or entity who has an ownership interest in property “that causes a building, structure or improvement, new or existing, to be constructed, reconstructed, erected, altered, remodeled, repaired, maintained, moved or demolished; or land to be excavated or otherwise developed or improved.”
Public agencies, as defined in ORS 279C.800, are not considered owners. Additionally, financial institutions that acquire ownership of property through foreclosure or a deed in lieu of foreclosure are not considered owners, as long as the financial institution “does not undertake, contract for or direct construction work beyond activities necessary to preserve or secure the property.”
Unrepresented Employee: Unrepresented employees are workers who are not (1) represented by a construction trade labor organization that serves as a collective bargaining representative or (2) covered by a collective bargaining agreement with a mechanism for wage recovery.
How Does the Bill Operate?
SB 426 makes property owners and direct contractors jointly and severally liable for wages, including fringe benefits, interest, penalties, and attorney fees, that direct contractors and subcontractors, at any tier, have not paid to unrepresented employees, even if the employer of the unrepresented employee was paid in full.
An unrepresented employee, their authorized representative, or the Oregon Attorney General may bring a civil action to recover unpaid wages, etc. Prior to commencing an action, the claimant must send notice to an owner or direct contractor that describes the alleged wage violation and the nature of the claim. Thereafter, recipients have 21 days to correct the alleged violation before the action may proceed.
What Types of Projects are covered by Senate Bill 426?
SB 426 only applies to certain construction projects. Projects performed on an owner’s principal residence and residential or commercial projects involving five or fewer units on a single tract (defined by ORS 215.010 as “one or more contiguous lots or parcels under the same ownership”) are not subject to SB 426.
How can Owners and Direct Contractors Prepare?
SB 426 presents new challenges and increased exposure for owners and general contractors. Ordinarily, some exposure can be managed through using risk allocation mechanisms in contracts between direct contractors and subcontractors. However, SB 426 expressly prohibits “[a]ny agreement to waive or release an owner or direct contractor or to indemnify an owner or direct contractor for liability assigned” under the legislation. Owners and direct contractors must therefore consider other measures to mitigate their exposure to wage liability claims.
First, owners and direct contractors should vet all contractors that will perform work on a project to ensure they have a history of financial stability. Under SB 426, owners and direct contractors have the ability to request an affidavit from first-tier subcontractors attesting to whether the subcontractor or its current principals have been subject to any wage-payment-related enforcement proceedings in the last five years. While requesting such information does not ensure complete protection from wage liability, it can provide helpful information to direct contractors and owners in selecting subcontractors.
SB 426 also entitles owners and direct contractors to additional records from first-tier subcontractors including: (1) certified payroll reports; (2) names of workers who performed work on a project and whether such workers are classified as an employee or independent contractor; (3) the names of any second-tier subcontractors; and (4) the anticipated contract start date and scheduled duration of work. Owners and direct contractors should establish procedures for regularly requesting and reviewing certified payroll reports at the beginning of a construction project.
Contractually, direct contractors should consider allowing for the potential of making direct payment to a subcontractor’s covered employees in the event of a failure to pay and provide the ability to withhold such amounts from the subcontractor. Withholding records that a subcontractor is obligated to produce should be a basis for contract default. Finally, owners and direct contractors might also consider requiring payment and performance bonds that cover payments to covered employees.
Owners and direct contractors that perform work on covered projects should acquaint themselves with SB 426 and, given the complexities of this legislation, consult with an attorney to fully understand and mitigate their exposure to wage liability.
This blog post is not an exhaustive discussion of SB 426 and should not be relied upon as legal advice. If you are interested in understating more about SB 426 and its implications or would like help drafting a construction contract that accounts for the changes brought about by SB 426, you are encouraged to contact BLJ for legal assistance.