Lanak & Hanna secured a judgment against a subcontractor’s surety for the full amount of the bond for its subcontractor’s failure to pay proper and legally correct prevailing wages.
Under California law, a general contractor can be held liable for the labor violations of its subcontractors in public works jobs. Unaddressed civil wage and penalty assessments can lead to entered judgments against both the subcontractor and general contractor. Unpaid judgments can, in turn, lead to an immediate suspension of the general contractor’s license. Due to this risk, we recommend that all general contractors “bond-back” their subcontractors, and require they post their own payment and performance bonds to guarantee the subcontract work.
In this case, the subcontractor failed to pay the proper and legally correct prevailing wages on a public works project. Unfortunately, the subcontractor failed to handle the assessment despite promises otherwise and caused an over $800,000 judgment to be entered against both it and the general contractor. The subcontractor subsequently closed its doors, leaving the general contractor directly liable for the total judgment. Fortunately, the general contractor had “bonded back” the subcontractor and was able to pursue the subcontractor’s surety for the penal sum of the bond which if awarded, could be used as payment toward the labor violations judgment.
Despite the surety’s defenses and challenge to the assessment itself, the Los Angeles County Superior Court awarded the general contractor summary judgment holding the subcontractor’s surety liable for the full penal sum of the bond together with pre-judgment interest. The general contractor was able to utilize those awarded funds to pay a structured settlement with the Department of Labor and avoid any further liability on the subcontractor’s violations.
This case serves as a reminder of the importance of the general contractor bonding back their subcontractors on public works projects.
Pursu Agency