New Wage Payment Liability Risks for Virginia’s General Contractors

Summary — Virginia’s House Bill 238 expands wage protections in the construction industry by making general contractors jointly and severally liable for subcontractors’ wage violations and classifying them as “employers” under state and federal wage laws. The law also strengthens worker misclassification rules by presuming employee status unless strict IRS criteria are met, increasing potential legal and financial exposure. Effective July 1, 2026, the measure shifts significant compliance risk upstream and limits traditional contractual defenses, prompting contractors to tighten oversight and revise agreements.

Virginia Governor Abigail Spanberger recently signed House Bill 238, which amends Virginia’s wage payment laws, significantly expands protections for workers, and imposes wage-payment liability for employers in the construction industry. The law, which will go into effect on July 1, 2026, reinforces a shift of financial and compliance risk upstream to general construction contractors for the actions of their subcontractors.

Expanded Wage Liability 

Any construction contract between a general contractor and its subcontractor entered into after July 1, 2026, shall be legally deemed to include a provision in which the general contractor and its subcontractor agree that they are jointly and severally liable for all wages to be paid to the subcontractor’s employees pursuant to the Virginia Wage Payment Act, the Virginia Minimum Wage Act, and the federal Fair Labor Standards Act. “Jointly and severally” means that the parties are responsible both together and individually for wage liability. The bill further deems general contractors to be legal “employers” of the subcontractor’s employees for wage‑payment purposes, exposing them to the full range of civil and criminal wage remedies regardless of whether they knew or should have known of alleged underpayment of wages. This change in the law will greatly increase the likelihood that general contractors will be brought into litigation for alleged wage payment violations, including minimum wage and overtime pay violations alleged to have been committed by their subcontractors. 

While the contract between the general contractor and subcontractor can include an indemnification provision whereby the subcontractor agrees to indemnify the general contractor to reimburse it for any such liabilities, sworn wage-payment certifications are no longer accepted as a legal defense to a wage payment claim against the general contractor. The general contractor can still be held liable for wage violations committed by the subcontractor. If the subcontractor refuses the demand for indemnification, the general contractor’s only option would be to sue or crossclaim against the subcontractor for indemnification as a claim for breach of contract. 

Stronger Worker Misclassification

House Bill 238 also strengthens worker misclassification enforcement by creating a presumption that workers are employees – not independent contractors – unless the IRS independent contractor test is met. This is a very strict test that relies heavily on the degree of control that the company exerts over its workers. Misclassification claims are tied into expanded wage‑payment remedies, including attorneys’ fees, a three‑year statute of limitations, and the right to bring a claim individually or on behalf of a collective of similarly situated workers. This substantially increases legal and financial exposure to construction businesses that rely on independent contractors.

A Reminder on Wage Payment Damages

In addition, general contractors should remember that under the Virginia Wage Payment Act, in any wage payment liability for non-payment or underpayment of wages due, the “employer” may be held liable for an equal amount of those wages due for liquidated (double) damages, plus prejudgment interest, reasonable attorneys’ fees, and costs. Further, the general contractor also could be held liable for triple the amount of wages due if the court finds that the failure to pay wages was “knowing.” 

What Contractors Can Do Now

Before July 1, 2026, general contractors can protect themselves by doing the following:

• Review and update subcontractor agreements, with particular attention to indemnification provisions.
• Strengthen oversight of subcontractors to ensure proper employee classifications and wage-payment compliance. 
• Reevaluate labor-classification practices to reduce independent contractor misclassification risk.

Overall, HB 238 significantly limits contractual defenses and shifts wage‑compliance risk to the top of the construction contracting chain, increasing statutory exposure for general contractors and first‑tier subcontractors across Virginia’s construction industry.