Oregon SB 426: Your Sub Didn't Pay a Worker. Now It's Your Problem.

Oregon Senate Bill 426 (SB 426) — passed in 2025 and made effective January 1, 2026 — makes general contractors ("GCs") jointly and severally liable for unpaid wages owed by any subcontractor at any tier on their construction projects. Workers can now sue you directly — and recover their attorney fees — for wage violations committed by a sub you've never met.

That's not a hypothetical. That's the law — effective now on Oregon construction projects.

What Changed — and Why It Matters

Oregon already had strict prevailing wage requirements for public works projects under ORS 279C. Those haven't gone away. But SB 426 does something different and, frankly, much bigger: it creates a new wage liability framework that applies to all Oregon construction projects — public or private — under ORS chapter 652.

The core provision is straightforward. As the general contractor (what the bill calls the "direct contractor"), you are jointly and severally liable for any unpaid wages — including fringe benefit contributions and penalties — owed to workers employed by your subcontractors at every tier on your project.

Note that the project owner is also on the hook alongside you. Both of you — for the full amount.

"Jointly and Severally Liable" — In Plain English

If two parties are jointly and severally liable for a debt, each owes the full amount. Not a proportional share, not "their part" — the full amount.

Here's what that looks like in practice:

Your concrete sub hires a finishing crew. The finishing crew — without your knowledge — pays three workers below the legal rate for four months. Those workers are owed $18,000 in back wages, penalties, and interest.

Under SB 426, those workers don't have to chase the finishing crew. They send a certified letter to you specifying the alleged violation. You have 21 days to make it right. If you don't — or can't — they take you directly to court. If they win, you owe the full $18,000 — plus their attorney fees.

You can then sue the finishing crew to get your money back. But that's your fight, not the workers'. They get paid first.

It Goes All the Way Down

The law defines "subcontractor" as any person performing work within the scope of your construction contract — whether or not they have a direct contract with you — at any tier.

Your prime subs; their subs; their subs' subs — everyone.

This is the part that tends to land like a gut punch. You don't have to have hired them. You don't have to have paid them. You don't have to have known they existed. If they performed work on your project, their workers can come after you for unpaid wages.

You Can't Contractually Escape This

Some GCs have started wondering if an indemnification clause in their sub agreements solves the problem. It doesn't. The bill says so explicitly:

"Any agreement to waive or release an owner or direct contractor or to indemnify an owner or direct contractor for liability assigned under this section is invalid."

Full stop. You cannot write your way out of this. The liability is statutory; it attaches to your role as GC on the project. That boilerplate indemnification language you've been relying on? Under SB 426, it's worth nothing.

The Independent Contractor "Workaround" Won't Work Either

Classifying workers as independent contractors to sidestep liability is a nonstarter under this law. SB 426 establishes a rebuttable presumption that anyone performing labor on your project is an employee. The burden falls on whoever claims otherwise to prove the worker qualifies as an independent contractor under Oregon's independent contractor test (ORS 670.600).

Most construction workers performing ongoing work on a specific jobsite won't qualify. Don't count on this as a defense.

What You CAN Do: Your Tools Under SB 426

The law isn't entirely one-sided. It gives you real tools, but you have to use them proactively.

Request certified payroll records. Section 3 of the bill requires your subs, upon request, to provide certified payroll reports; a list of their workers and how each is classified (employee or independent contractor); the names of their own sub-tier contractors; and, an affidavit disclosing any wage violations in the past five years (this one is especially useful). You have the statutory right to ask for all of this. You should be asking for all of this.

Withhold payment. If a sub refuses to comply with a records request, you're authorized to withhold their payment. You can also withhold in the amount of any wages you've had to pay on their behalf.

You have a 21-day cure window. Before a lawsuit can be filed against you, the worker must send written notice by certified mail specifying the alleged violation. You have 21 calendar days to correct it. A good compliance system means you'll know about problems before that letter arrives, but if one does, that window is your chance to act.

Recover what you pay. If you end up covering a sub's unpaid wages, SB 426 preserves your right to sue that sub for everything: back wages, penalties, attorney fees — the works. The indemnification clause is invalid; your right to sue for actual damages is not.

What This Means If You're Working Public Projects

If your work includes public works projects, SB 426 doesn't replace Oregon's existing prevailing wage requirements under ORS 279C — it adds to your exposure. On public works projects, the government entity is excluded from the "owner" definition under SB 426, so the owner-level joint liability doesn't apply. But the civil action rights for workers still extend to you as the direct contractor. Combined with the existing enforcement authority of the Bureau of Labor and Industries (BOLI) under ORS 279C, GCs on Oregon public works projects now face liability from two directions.

What GCs Need to Do Right Now

SB 426 applies to labor performed on or after the effective date (January 1, 2026). If you have Oregon projects running, or in the pipeline, here's where to start:

1. Know who's on your project — at every tier. The law covers subcontractors at any level. Use your Section 3 rights: require prime subs to disclose who they're subcontracting to, and flow that requirement down.

   
   

2. Build certified payroll collection into your process. You now have statutory authority to demand it. Make it part of your standard subcontract language from day one.

   
   

3. Collect those five-year affidavits. Before you sign a subcontract, use your right to ask about prior wage violations. That due diligence creates a paper trail.

   
   

4. Revisit your subcontract templates. The indemnification language won't protect you anymore. Your contracts need to reflect the actual risk you're carrying, and include the records-request and payment-withholding provisions the law gives you.

Frequently Asked Questions

Does SB 426 apply to public works projects in Oregon? SB 426 adds to ORS chapter 652 and specifically excludes public agencies from the definition of "owner," so the joint liability between owner and GC doesn't attach on government-owned public works. However, workers' civil action rights still extend to the direct contractor, and Oregon's separate prevailing wage requirements under ORS 279C remain fully in effect. GCs on public projects face exposure from both laws.

Does SB 426 apply to all construction projects, or just large ones? It applies broadly to construction contracts — new construction, reconstruction, alterations, maintenance, demolition, and land development. The only exemptions are an owner's principal residence and projects involving five or fewer residential or commercial units on a single tract.

What wages are covered — just prevailing wages? No, SB 426 covers any unpaid wages, including fringe benefit contributions and penalties. This is broader than prevailing wage compliance alone. It applies any time a sub at any tier fails to pay workers what they're legally owed under Oregon wage law.

What if my sub refuses to hand over certified payroll records? You can withhold their payment. Document the request and their refusal. Be aware: a sub's failure to comply does not relieve you of liability to the workers — but it does create the paper trail you'll need if you end up paying those workers and then pursuing the sub to recover your losses.

Can I use contract language to protect myself? Not from the direct liability. SB 426 voids any indemnification or release for this specific obligation. What you can and should do is draft subcontracts that give you maximum visibility into sub-tier payroll practices and maximum leverage (through payment withholding) if a sub doesn't cooperate. Your right to seek reimbursement from a non-compliant sub for any amounts you pay out is explicitly preserved by the law.

Is there a time limit on how long I can be held liable? Yes. A worker has two years from the date the unpaid wages and/or fringe benefits became due to bring a civil action against you. That clock runs from when the wages were owed, not from when you find out about the problem, so a violation buried a tier or two down still leaves plenty of time for a claim. It's one more reason to catch payroll issues early rather than discover them in a certified letter.

Does SB 426 apply to union workers? The liability covers "unrepresented employees" — those not covered by a collective bargaining agreement (CBA) that includes a final-and-binding grievance process, and a mechanism for recovering unpaid wages. Workers covered by a qualifying CBA are excluded from this section.

To Conclude

Oregon's SB 426 makes one thing clear: What happens three tiers down on your project is your business now. The best protection isn't a contract clause; it's knowing exactly what every tier of your sub chain is doing and building a process that keeps it documented. That's what NCC does — on projects of any size, at every tier. If you're working in Oregon and want to understand your exposure, let's talk.

[Disclaimer: This article is intended for general informational purposes only and does not constitute legal advice. Because the application of SB 426 depends on the specific facts and circumstances of each project, contractors should consult qualified legal counsel regarding their obligations under Oregon law.]