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Legislature sends wage-protection bill to Walz

A far-ranging labor bill that increases wage protections for Minnesota construction workers but faces strong pushback from contractors was heading to the governor’s desk Thursday, where it was expected to be signed into law.

Tucked inside the bill is a measure called the “Construction Worker’s Protection Act,” which includes “joint and several” liability language that makes general contractors share responsibility for their subcontractors’ wage violations.

Labor unions hail the measure as a big win for workers, but critics say it will have unintended consequences for general contractors and emerging subcontractors trying to get a foothold in the industry.

The worker protection provisions are part of the omnibus jobs and labor bill, which includes nearly $1.4 billion in spending for workforce development, economic competitiveness, communities affected by civil unrest and more.

Approved in both bodies of the DFL-controlled Legislature on Wednesday, the bill also offers policy language ranging from prevailing wage requirements for recipients of economic development assistance to increased penalties for OSHA violations.

But for the construction industry, one of the most talked-about and controversial elements of the bill is the worker protection measure, which puts general contractors on the hook for their subcontractors’ wage violations.

The legislation builds on a 4-year-old wage-theft law that requires all employers, at the start of employment, to provide each new employee a written notice with details about the employee’s status, rate of pay, benefits and other work-related information.

That law says employers may be fined up to $5,000 for each repeated failure to maintain the required records. It also includes criminal penalties of up to 20 years in prison and up to a $100,000 fine for wage theft in excess of $35,000.

Labor unions and other worker advocates say wage theft continues to be a concern in Minnesota, despite passage of the 2019 law, which was considered among the toughest in the nation.

Advocates point to specific cases, including alleged wage theft violations on the Viking Lakes Development in Eagan.

In October, Minnesota Attorney General Keith Ellison filed a lawsuit alleging that a Viking Lakes subcontractor failed to pay required overtime wages, intimidated workers, and obstructed a state investigation into alleged wage theft.

MV Venture Construction, the Viking Lakes general contractor, didn’t comment specifically on the attorney general’s lawsuit, but has stated that it takes worker abuse allegations seriously.

Adam Duininck, director of Government Affairs for the North Central States Regional Council of Carpenters, said Thursday that he hopes the worker protection law will put general contractors and owners “on notice” that they need to pay closer attention to their subcontractors’ practices.

“Whether it’s economic pressure to try to keep costs low or whether it’s just an opportunity to try to make more money off of a project, wage theft is wrong, and we think that this bill will help to curtail it,” he said.

But others say the new law will have negative impacts for both homebuilders and commercial general contractors.

Tim Worke, CEO of the Associated General Contractors of Minnesota, says it will require general contractors, rather than the state, to police the industry and place additional burdens on small subcontractors, among other issues.

The general contractor, in practicality, is going to require its subs to produce payment bonds or other secured interest tools so that their risk is protected,” which will be burdensome for small subcontractors, Worke said.

Homebuilders are also weighing in.

“In the midst of an unprecedented workforce shortage and one of the nation’s greatest housing affordability challenges, altering contractor liability while dismissing input from general contractors and their trade partners is unfathomable,” Nick Erickson, senior director of Housing Policy for Housing First Minnesota, said in an email. “This will add to our affordability challenges and impede homeownership access in Minnesota.”

Adam Hanson, president of the Associated Builders and Contractors of Minnesota and North Dakota, said the worker’s protection act “for the first time ever shifts the liability of the wrongdoer onto a third party who has done nothing wrong and has no reason to know a wrong might have been committed.”

What’s more, Hanson said, the bill exempts union contractors from the new liability “while sticking it on to their merit shop competition.”

“If a union subcontractor commits wage theft while working for a union general contractor, that general contractor would not be liable for the wage theft. But if that same union subcontractor commits wage theft while on a merit shop general contractor’s project, the new liability applies to that innocent general contractor. Adding this exemption was nothing more than a political favor to a special interest group,” Hanson said in an email.

Richard Kolodziejski, public affairs director for the North Central States Regional Council of Carpenters, pushes back on the exemption issue.

In an email, Kolodziejski said exemptions are appropriate for “areas of the construction industry” because wage theft is “rare or doesn’t occur at all on projects with prevailing wage, or projects with union general contractors.”

“This legislation falls far from being a political favor for any group. It is a bill that supports workers who have long been left without an outlet for the suffering they endure at the hands of unscrupulous contractors,” Kolodziejski added.

RELATED: Ellison’s suit prompts calls for responsible contracting

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