Oregon's Newly-Passed Senate Bill: What Contractors and Project Owners Need to Know Now
If you’re an owner or general contractor on a construction project in Oregon, a new law passed just last week may make you liable to pay the wages and benefits of construction workers—twice. Senate Bill 426 significantly changes how liability works when it comes to unpaid wages for subcontractor employees and could have a serious impact on how you manage your projects.
What’s Changed Under SB 426
Starting January 1, 2026, owners and general contractors will be jointly and severally liable for any unpaid wages—including fringe benefits—owed to unrepresented employees of any subcontractor on a construction project—no matter how far down the subcontractor tiers those workers are.
This means if a subcontractor doesn’t pay its workers, those workers can come after you for their wages—even if you never directly hired or supervised them, and even if you already paid for those wages and benefits in your prior progress payments.
Who’s Covered (and Who’s Not)?
This new liability will fall on all open-shop, large commercial construction projects in Oregon, including those already in process at the new year. However, not all workers or projects fall under this new law. Here are the key exclusions:
- Non-union workers: The law only applies to workers who are not covered by a collective bargaining agreement.
- Owner-occupied homes: Projects on the primary residence of the property owner are excluded.
- Small-scale projects: If your project involves five or fewer residential or commercial units on a single tract (i.e., contiguous lots under the same ownership), you’re off the hook.
New Oversight Responsibilities: How to Ensure Subcontractors Pay Their Workers
To help manage this increased liability, the law allows general contractors to request certified payroll records from subcontractors to confirm that employees are being paid properly.
These reports need to provide enough detail to confirm that unrepresented workers have been fully paid.
However, even if a subcontractor refuses to provide those records, you’re still liable for any unpaid wages. Documentation is helpful—but not a shield.
No Waivers Allowed
Want to try to contract around this new liability? That’s not going to work. SB 426 bars clauses in your subcontracts that:
- Waive your liability for unpaid wages, or
- Require subcontractors to indemnify you for any such claims.
That said, if you end up paying out wages to a subcontractor’s workers, the law does allow you to sue the subcontractor to recover that money. You can also withhold payments to the subcontractor in the amount you paid to their employees. This assumes—of course—that the subcontractor is sufficiently solvent to pay the judgment. Owners and general contractors may consider requiring payment bonds from most or all subcontractors to protect against that risk.
What Should You Do Now to Manage Wage Liability Risks
To get ahead of this law, here are a few proactive steps:
- Vet subcontractors more vigorously: Start asking potential subcontractors about prior violations of any law pertaining to the payment of wages which exposed that subcontractor to civil, administrative, or criminal penalties.
- Get it in writing: Require subcontractors to provide certified payrolls as part of their monthly reporting requirements, including proof that the payments were received by the employees.
- Update contracts: Review your subcontracts now to ensure that they comply with the law and provide opportunities to verify laborer payments during the project and maximize the opportunity to recover any labor expenses that you have to pay again.
Bottom Line: Preparing for New Liability Rules in Oregon Construction
SB 426 places a significant new burden on owners and general contractors to ensure subcontractors’ workers are fully paid—even if those workers were hired multiple tiers away. Yes, it’s going to mean more paperwork, due diligence, and expense—but with the right systems in place, you can manage your risk and stay compliant.
The law takes effect for all work performed on or after January 1, 2026. That may feel far off, but savvy contractors and owners will begin to act now to tighten up their processes.
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.
