Oregon SB 426: Why Owners and General Contractors Need to Watch Their Subcontractors’ Payroll Practices

Starting January 1, 2026, a new Oregon law will significantly reshape how liability works in private construction projects. Under Senate Bill 426 (SB 426), property owners and general contractors can now be held liable for wage theft committed by subcontractors, even those buried deep in the contracting chain.

Oregon Gov. Tina Kotek signed SB 426 into law on June 9, 2025. It’s a landmark move—and one that raises the stakes for compliance. Here’s what Oregon businesses need to know, and how they can start preparing now.

What’s the Big Change Under SB 426?

If you’re a property owner or GC in Oregon, SB 426 brings a shift in risk you can’t afford to ignore. The law says you are jointly and severally liable for unpaid wages, penalties, and benefits owed by any subcontractor working under your contract—even if you weren’t directly involved and had no knowledge of the issue.

In short, it’s no longer enough to say, “That wasn’t us.”

Who Does It Apply To?

SB 426 targets private, non-union construction projects in Oregon. There are a few exceptions worth noting:

• • Owner-occupied residential buildings (up to five units) are exempt.
  • Projects covered by a collective bargaining agreement with dispute resolution processes in place don’t fall under the statute.
  • Public agencies and lenders in foreclosure situations are also off the hook—unless they’re actively directing the work.

What Triggers Liability?

Here’s how it works:

If a subcontractor fails to pay its workers properly, and one of those workers notifies the property owner or direct contractor by certified mail, the recipient has twenty-one (21) days to fix it.

Upon request, subcontractors must also provide certified payroll records and written affidavits disclosing whether they’ve been subject to any wage claims or judgments in the past five years within ten (10) business days of the request.

If they don’t, the subcontractor is presumed to have committed a wage violation and the worker can sue the owner and/or general contractor directly—for wages, penalties, interest, and legal fees.

Courts can then use this presumption to uphold joint and several liability against Owners and GCs who didn’t take action in the face of noncompliance.

What makes this law even stronger: you can’t contract around it. Any clause in a construction contract that tries to waive this liability is automatically void.

Penalties and Enforcement

The consequences for noncompliance are significant. Workers who prevail in court may recover:

• • Unpaid wages and fringe benefits
  • Liquidated damages
  • Statutory penalties
  • Prejudgment interest
  • Attorney’s fees and costs

Unlike some labor claims that languish in administrative backlogs, SB 426 gives workers a direct path to court—meaning faster, more public, and more expensive litigation. However, workers also have the option to assign their claims to the Oregon AG to enforce on their behalf.

Workers (or the Oregon AG via claim assignment) have two years from wage due dates to bring suit, and the AG can now step in directly via SB 426.

What This Means in Practice

For businesses, the message is clear: watch your subs carefully.

This law changes the incentives dramatically. It’s not enough to hire a licensed contractor and assume things are handled. Owners and GCs will now need to actively monitor compliance downstream, or risk ending up in court.

The law doesn’t take effect until January 1, 2026, but the smart move is to prepare now.

Here are just a few steps we recommend taking:

1. 1. Audit/amend existing subcontractors, subcontractor agreements to ensure compliance. Revise contracts to require certified payroll reports and wage affidavits, subcontractor disclosures of wage-violation history, and regular reporting on payroll and labor practices.
   2. Vet new subcontractors thoroughly. Ask about past wage claims, check their BOLI record, and confirm they’re insured and licensed.
   3. Consider requiring payment bonds, especially on larger or higher-risk projects.
   4. Establish internal review protocols—especially for higher-risk trades or large projects.
   5. Train your team to spot red flags—workers complaining about late pay, disorganized site conditions, or missing safety postings.
   6. Be ready for presumption. Courts will presume laborers are employees unless proven otherwise—putting the burden on classification decisions.
   7. Consult legal counsel about indemnification, insurance, and any other risk transfer strategy that is within SB 426’s new restrictions.

 

Why SB 426 Matters Now

The intent behind SB 426 is straightforward: close the wage theft loophole that has allowed bad actors to operate behind layers of subcontracting.

But the law also reflects a larger policy trend across the country: labor enforcement is going upstream, holding those who control the money and the project accountable for wage theft—even if the actual employer is a subcontractor two tiers down.

If you’re involved in real estate development, construction, or property management in Oregon, the time to act is now. Don’t wait until January 2026 to get your compliance house in order.

Need Help?

CMPR helps construction businesses, developers, and real estate professionals stay ahead of legal risks. If you have questions about SB 426 or need help assessing your contracts and practices, contact our Real Estate & Land Use and Employment Law Groups today: Arif Virji, Samantha Pungprakearti, or Justin Hein at 707-526-4200; or Chris Hermann at 971-895-3686.