Wage theft isn’t just an issue for the workers it directly impacts—it’s a ripple effect that can touch every corner of a project. From lost wages to mechanics liens, these issues can create costly delays, legal headaches, and reputational risks for businesses. For commercial contractors, who often juggle roles as business owners and skilled tradespeople, the stakes are especially high.
Let’s explore why wage theft happens, how it creates vulnerabilities, and what steps you can take to protect your operations.
In fiscal year 2023, the Department of Labor secured over $35.5 million in back wages for nearly 18,000 construction employees—more than any other U.S. industry. And that’s just what’s on record.
Wage theft can take different forms:
While general contractors often face the highest exposure due to their oversight role on projects, the issue can still impact commercial contractors who subcontract smaller jobs or work directly with labor teams. Even without direct responsibility for paying workers, mechanics liens and other legal actions can drag contractors into disputes they didn’t cause.
Wage theft gives dishonest companies a way to cut costs and gain an unfair advantage in bidding wars.
Misclassification of workers alone can drastically lower expenses for unethical businesses. For contractors who play by the rules, this illegal practice creates an uneven playing field.
Avoiding wage theft issues isn’t just about compliance—it’s about protecting your reputation, your team, and your bottom line. Here’s how to guard your business:
1. Vet Any Subcontractors You Use
If you’re hiring subs for specialized tasks, do your homework. Research their reputation, check their certifications, and make sure they have a clean track record when it comes to worker payments. A little diligence upfront can save you from major headaches later.
2. Use Ironclad Contract Language
If you’re contracting work out, ensure your agreements include clear provisions about wage and benefits compliance. Contracts should outline payment responsibilities, compliance audits, and remedies for violations.
3. Keep Communication Open
Maintain open lines of communication with anyone working on your projects. If workers feel empowered to report concerns, you’re more likely to hear about potential issues before they escalate.
4. Know Your State’s Rules
Labor laws vary widely, and in some places, like Minnesota, lead contractors can be held liable for unpaid wages. Familiarize yourself with your local regulations to avoid surprises.
5. Maintain Thorough Documentation
Clear records of contracts, payment schedules, and worker classifications are your best defense against claims. Keep these documents organized and accessible to avoid disputes.
Wage theft doesn’t always occur within your direct purview, but the ripple effects can still hit hard. A dispute between a subcontractor and their labor force can stall progress on your project or pull you into a legal quagmire. Staying vigilant not only protects your business but ensures your crew and collaborators remain focused on the work that matters.
In construction, guarding against wage theft isn’t just about compliance—it’s about leadership and responsibility. Whether you’re a business owner or managing a crew, the steps you take to safeguard your projects now can save you time, money, and stress later.
Don’t let wage theft jeopardize your hard-earned success. Stay alert, stay informed, and protect the team that keeps your projects moving forward.
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