Oregon SB 426: What General Contractors Need to Know About the New Wage Liability Law

Oregon Senate Bill 426 took effect January 1, 2026, and it changes how wage liability works on public works projects in a way that directly affects general contractors.

Under the new law, if a subcontractor at any tier of your project fails to pay its workers the wages they’re owed, those workers — or the Oregon Bureau of Labor and Industries — can come after you to collect.

That exposure exists even if you already paid the subcontractor in full. Paying your sub does not transfer the liability away from you.

Here’s what changed, what your exposure looks like, and what you can do about it.

What SB 426 Actually Changed

Oregon already has a prevailing wage rate law requiring contractors on certain public projects to pay wages set by BOLI based on trade and region. Those requirements generally apply to publicly funded projects valued at $50,000 or more.

SB 426 operates alongside that framework but addresses a different issue: who is responsible when those wages aren’t paid.

The law applies broadly to construction projects — both public and private — and focuses specifically on unpaid wages owed to non-union workers.

Before SB 426, when a subcontractor failed to pay its workers, liability typically stopped with that subcontractor.

SB 426 expands liability across the contracting chain, increasing contractor risk and shifting responsibility for unpaid wages upstream.

Under the new law, property owners, general contractors and higher-tier subcontractors can all be held jointly liable for unpaid wages owed to workers at any lower tier of the project. “Joint and several liability” means any one party in that chain can be responsible for the full amount owed — regardless of where the violation occurred.

A worker also does not need to pursue the subcontractor who failed to pay before bringing a claim against an upstream party.

What This Looks Like in Practice

Say you’re the general contractor on a public school renovation. You hire a mechanical subcontractor for pipe insulation. The mechanical sub underpays their workers on the job.

Under SB 426, those workers — or BOLI on their behalf — can file a claim directly against you, even though you did not manage that mechanical sub’s team.

What Can Be Claimed Against You

A claim under SB 426 can include:

• Unpaid prevailing wages — any wage deficiency between what workers were paid and what BOLI’s rates required
• Unpaid fringe benefits — health, pension, and other benefit contributions required under the applicable wage classification
• Civil penalties — BOLI can assess penalties for prevailing wage violations on top of back wages

Individual workers, third-party worker advocates, and the Oregon Attorney General can all bring claims — workers don’t need BOLI to act on their behalf. That said, BOLI’s Prevailing Wage Rate unit handles enforcement and can be reached at PWR.Email@boli.oregon.gov or (971) 245-3844.

Are There Any Defenses?

SB 426 is a relatively new law and the case law around it will develop over time. That said, there are a few things worth understanding now:

Contractual Indemnification

The law makes you jointly liable to workers, and SB 426 goes further than most wage laws by explicitly invalidating contractual indemnification clauses for these wage claims.

You cannot contract your way out of this liability. Any provision in a subcontract that attempts to waive or transfer it is unenforceable under the statute.

What the law does allow: if you end up paying a subcontractor’s workers directly, you can pursue recovery from that subcontractor and withhold payments up to the amount you’ve covered.

That recovery, however, depends on the subcontractor’s ability to pay, which is why prevention matters more than recourse under this law.

Compliance Documentation

While SB 426 does not create an explicit safe harbor for general contractors who take steps to verify subcontractor compliance, documenting your compliance efforts — including prequalification questions, contract certifications and certified payroll submissions from all tiers — can help demonstrate good faith and put you in a stronger position if a dispute arises.

Understanding the Limits of Your Defenses

Even contractors who run tight, compliant operations can still face exposure under SB 426 because liability is based on outcomes, not intent or oversight.

In practice, that means some commonly relied-on safeguards don’t fully insulate you from risk:

• Paying the subcontractor in full: Even when you’ve met your payment obligations, the law does not treat payment to the subcontractor as fulfillment of wage obligations downstream. If workers remain unpaid, liability can still flow upward.
• Limited visibility into subcontractor payroll practices: It’s common for general contractors to rely on subcontractors to manage their own workforce. However, SB 426 does not require direct knowledge or involvement for liability to attach.
• No direct contractual relationship with lower-tier subcontractors: On multi-tiered projects, issues often arise beyond your immediate contractual reach. The statute still extends liability across tiers, regardless of whether you had a direct agreement with the responsible party.

How to Protect Yourself Going Forward

Contractors reduce SB 426 liability risk by strengthening compliance processes, subcontract agreements and certified payroll oversight.

Because SB 426 applies to all construction projects — not just public works — and because liability cannot be transferred away through contract language, your best protection is building compliance into your procurement and project management processes from the start.

Update Your Subcontract Agreements

Your subcontract agreements are now one of the first lines of defense against wage-related claims.

Every subcontract on a public works project should include a prevailing wage compliance certification stating that the subcontractor is — and will remain — compliant with Oregon’s prevailing wage rate law, including obligations to lower-tier subcontractors.

You should also include indemnification language covering wage claims arising from the subcontractor’s failure to comply at any tier below them.

While this does not eliminate your exposure to workers, it creates a clear contractual path to recover costs from the responsible party.

One procedural point worth noting: Before a worker or the Attorney General can file a civil action under SB 426, they must provide written notice by certified mail describing the alleged violation.

You then have 21 days to resolve the issue before a claim can proceed.

Having a defined process to respond to these notices quickly can make a meaningful difference.

Require Flow-Down Certified Payroll

Oregon public works contracts already require certified payroll reporting using BOLI’s WH-38 form.

Under SB 426’s expanded liability structure, it’s worth requiring subcontractors to flow that obligation down to all lower tiers — and to actively review submissions.

Gaps or delays in certified payroll reporting can be an early indicator of compliance issues worth addressing before they escalate.

Add Wage Compliance to Prequalification

Before awarding work, ask subcontractors about their prevailing wage compliance history. Have they had BOLI claims filed against them? Do they use systems designed for certified payroll reporting?

While this won’t eliminate risk, it helps establish a documented screening process and signals that compliance expectations are being actively monitored.

A Note on Property Owner Liability

SB 426 extends joint liability to property owners as well as general contractors.

If you work with owners on public works projects, make sure your prime contract includes language requiring the owner to flow down prevailing wage obligations and giving you indemnification rights if a claim traces back to a subcontractor the owner directed or approved.

Owners who are unfamiliar with SB 426 may not yet have these protections in place, making this an important point to address early in project negotiations.

Don’t Let Wage Compliance Become a Liability

Oregon’s prevailing wage rules are more complex than they were a year ago. SB 426 means wage violations anywhere in your subcontract chain are now your problem too — and the cost of a claim includes not just back wages but penalties and the administrative burden of defending it.

Payroll4Construction is built for construction companies, with tools specifically designed for prevailing wage payroll, certified reporting, and compliance tracking across public works projects. Learn more about how Payroll4Construction helps Oregon contractors stay compliant.