Oregon Senate Bill 426, signed into law on June 9, 2025, and effective January 1, 2026, represents one of the most significant expansions of wage liability in Oregon's construction industry in decades. The law imposes strict joint and several liability on both property owners and direct contractors for unpaid wages owed to unrepresented employees of subcontractors at any tier. While the law’s reach is deliberately broad, it is not boundless; a careful parsing of the statutory definition of “Owner” reveals a meaningful textual argument that a commercial landlord may fall outside the statute’s liability framework when a tenant, not the landlord, causes and directs tenant improvement work.
The Causation Requirement Is the Central Defense
The most important argument begins with the statute’s own language. SB 426 defines “Owner” to include any person with an ownership interest, "whether the interest or estate is in fee, as vendee under a contract to purchase, as lessee, or another interest or estate less than fee that causes: (i) A building, structure or improvement, new or existing, to be constructed, reconstructed, erected, altered, remodeled, repaired, maintained, moved or demolished.” SB 426 § 2(g)(A)(i)(emphasis added). The operative word is “causes.” The definition does not sweep in every person holding an ownership interest in real property; it sweeps in only those who “cause” the construction or improvement activity in question.
In the typical commercial tenant improvement scenario, the landlord does none of this. The tenant identifies the need for improvement, selects and contracts directly with a general contractor, supervises the work, and pays for it, often using a tenant improvement allowance negotiated in the lease. By contrast, the landlord is passive. The landlord does not sign the construction contract, does not issue construction directives, and does not select or manage subcontractors.
Under ordinary principles of statutory construction, a court should give the word “causes” its plain meaning: to bring about, to make happen, to be the initiating force behind the construction activity. State v. Murray, 343 Or 48, 52 (2007) (“The dictionary defines the verb ‘cause’ as follows: ‘1: to serve as a cause or occasion of: bring into existence: MAKE (careless driving accidents) * * * 2: to effect by command, authority or force.’”) (quoting Webster's Third New Int'l Dictionary 356 (unabridged ed. 2002)). A landlord who simply owns the building and permits a tenant, by lease, to make improvements is not “causing” that work in the ordinary sense of the term.
This is not a strained reading. The legislature’s use of the causation requirement appears deliberate and functional: it limits the statute’s reach to parties who actually set improvement projects in motion. Without this limitation, every fee owner of commercial real estate in Oregon could face strict liability for construction work initiated by tenants, transforming landlords into insurers of wage compliance for projects they never authorized, directed, or even necessarily knew the details of.
The Lessee Is the Owner Who Causes the Work
Critically, the statute itself identifies the lessee as potentially an “Owner” for purposes of SB 426. The definition explicitly includes lessees within the class of persons who may have an ownership interest that, combined with causation, triggers liability. This is a structural tell. The legislature recognized that in tenant improvement scenarios, it is the lessee who causes the work. By naming lessees within the “Owner” definition and tying liability to causation, the statute effectively shifts exposure onto the tenant when the tenant is the party contracting with and directing the general contractor. The landlord, as the fee owner who does not cause the work, falls outside the definition's operative reach even though it holds a superior ownership interest.
The Direct Contractor Relationship
SB 426 also imposes liability specifically on “direct contractors,” defined as those who enter a construction contract with an owner. In a tenant improvement scenario, the general contractor contracts with the tenant, not the landlord. Under the statute, a “direct contractor” includes any person that enters a construction contract with an owner. SB 426 §2(d). The landlord has no construction contract with the general contractor and no privity in the construction chain. This further confirms that the landlord occupies no role in the liability framework the statute creates, neither as the party who causes the work nor as the party who engages the direct contractor.
Consent Provisions in Leases Should Not Create Causation
A potential counterargument deserves attention: commercial leases typically require the landlord’s consent before a tenant may undertake improvements. Could a landlord’s consent to tenant improvement work be recharacterized as “causing” the construction? The answer should be no. Consent is not causation.
A landlord who reviews and approves a tenant’s improvement plan exercises a contractual right of approval, it does not initiate, direct, or control (i.e., “cause”) the work. Under ordinary agency principles, granting permission for another party's unilateral undertaking does not make the grantor a cause of that undertaking. Vaughn v. First Transit, Inc., 346 Or 128, 139 (2009) (“[A] principal that ‘authorizes’ a nonemployee agent to act on the principal's behalf is not, for that reason alone, liable when the agent injures a third party because the agent was negligent in carrying out its authorized activities.”). Courts routinely distinguish between consent and causation. Eads v. Borman, 351 Or 729, 739, (2012) (“The fact that a nonemployee is actually or apparently authorized in some general way to act on a principal’s behalf is not a sufficient basis to impose vicarious liability on the principal for the actual or apparent agent's tortious conduct”).
SB 426’s Limits for Commercial Landlords
Oregon SB 426 is a sweeping statute, but it is not limitless. The causation requirement embedded in the “Owner” definition provides a landlord with a strong argument that it does not fall under SB 426: if the tenant causes the improvement work by contracting with and directing the general contractor, the landlord may not fall under the statutory definition of “Owner” regardless of the fee interest it holds. The statute’s own inclusion of lessees within the “Owner” category reinforces that the legislature understood tenant-caused improvements as the tenant's liability event, not the landlord’s consent to such improvements.
Combined with the absence of a direct contractor relationship between the landlord and the construction chain, these arguments present a textually grounded case that a passive commercial landlord should not be subject to SB 426 wage theft liability arising out of tenant improvement work. Landlords would nonetheless be wise to consult experienced construction and real estate counsel, document the tenant's independent contractor relationships carefully, and structure lease consent provisions to make clear the landlord’s passive role.
For questions about SB 426 compliance, please contact our construction team. A recording of the firm’s prior webinar is also available for additional background on the law and its practical implications.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
