SB 426 Subcontractor Agreement

Parties

Article 1 · Definitions

In this Agreement, the following capitalized terms have the meanings given below:

1. "Project" means the construction project described in Exhibit A, located at the address stated in Exhibit A, and performed for [Owner/Client] under the Prime Contract.
2. "Scope of Work" means the specific work Subcontractor is engaged to perform, as described in Exhibit B.
3. "Contract Price" means the total amount Contractor will pay Subcontractor for the complete and satisfactory performance of the Scope of Work, as set forth in Exhibit C.
4. "Subcontractor's Employees" means every person Subcontractor or a lower-tier subcontractor engages to perform any portion of the Scope of Work, whether classified by Subcontractor as an employee, independent contractor, 1099 worker, or otherwise.
5. "Wages and Benefits" means all forms of compensation owed to Subcontractor's Employees under applicable law, including regular wages, overtime, prevailing wages, fringe benefits, paid leave (including Paid Leave Oregon contributions and sick time accruals), workers' compensation premiums, and related taxes, penalties, damages, interest, and attorney's fees.
6. "SB 426" means Oregon Senate Bill 426 enacted in 2023, codified at ORS 671.900 and related statutes, effective January 1, 2024, imposing joint and several liability on general contractors for subcontractor wage claims.
7. "BOLI" means the Oregon Bureau of Labor and Industries.
8. "Prime Contract" means the agreement between Contractor and Owner for the Project.

Article 2 · Scope of Work & Performance Standards

2.1 Scope of Work

Subcontractor will perform the Scope of Work described in Exhibit B in strict accordance with the plans, specifications, and submittals forming part of the Prime Contract, Oregon building codes, OR-OSHA safety rules, all applicable state and federal employment laws, and Contractor's written jobsite rules as provided at project orientation.

2.2 Oregon licensing

Subcontractor represents that it holds a current and valid Oregon Construction Contractors Board (CCB) license appropriate to the Scope of Work, and that license will remain in good standing for the entire duration of Subcontractor's performance under this Agreement. Any CCB license suspension, revocation, or lapse entitles Contractor to suspend or terminate this Agreement without liability.

2.3 Performance standards

Time is of the essence. Subcontractor will perform the Scope of Work (a) in a good and workmanlike manner consistent with industry standards, (b) using qualified and properly licensed personnel, (c) in compliance with the project schedule, (d) in coordination with other trades, and (e) in strict accordance with Article 4 (Safety) and Article 11 (Jobsite Rules, not shown in this sample).

2.4 Correction of defective work

Subcontractor will promptly correct, at Subcontractor's sole expense, any portion of the Scope of Work that Contractor determines does not conform to this Agreement. If Subcontractor fails to correct within a reasonable time after written notice, Contractor may correct the work itself or through others and deduct the cost plus a 15% administrative mark-up from amounts otherwise owed to Subcontractor.

Article 3 · SB 426 Compliance, Wage Indemnification & Joint-Employer Liability Shield 🔑

3.1 Acknowledgment of ORS 671.900

Subcontractor expressly acknowledges that (a) ORS 671.900 (enacted by Oregon Senate Bill 426, 2023) imposes joint and several liability on Contractor for Subcontractor's unpaid Wages and Benefits owed to Subcontractor's Employees; (b) this statutory liability would otherwise attach to Contractor regardless of Contractor's fault or knowledge of Subcontractor's wage practices; and (c) Contractor is entering into this Agreement in reliance on Subcontractor's representations, warranties, indemnifications, and assurances of compliance set forth below.

3.2 Representations and warranties regarding wage compliance

Subcontractor represents and warrants to Contractor on the effective date and continuously during Subcontractor's performance under this Agreement that:

1. Subcontractor pays all Wages and Benefits owed to each of Subcontractor's Employees in full, on or before the legally required payday, in compliance with ORS Chapter 652 and Chapter 653 and all other applicable Oregon and federal wage and hour laws.
2. Subcontractor properly classifies each worker as an employee or independent contractor under the Oregon common-law test and ORS 670.600; no worker performing any portion of the Scope of Work is misclassified.
3. Subcontractor maintains workers' compensation coverage for every Employee in full compliance with ORS Chapter 656, either through SAIF or a licensed private carrier, without lapse.
4. Subcontractor accurately calculates and timely remits all Paid Leave Oregon contributions (employer and employee share) to the Oregon Employment Department.
5. Subcontractor accurately accrues, tracks, and pays Oregon sick time under ORS 653.601.
6. If the Project is a public works project, Subcontractor pays no less than the applicable BOLI prevailing wage and properly classifies each Employee in the correct apprentice/journeyman category.
7. No wage claim, BOLI investigation, BOLI wage order, or civil action by an Employee or former Employee for unpaid wages is pending against Subcontractor at the effective date, except as fully disclosed in writing to Contractor.

Each representation and warranty in this Section 3.2 is a material inducement to Contractor's execution of this Agreement. Any breach of a representation or warranty in this Section entitles Contractor to exercise every remedy in this Agreement — including the right to withhold payment under Section 3.5 — and constitutes a material breach for purposes of termination under Article 15.

3.3 Full indemnification for wage claims

3.4 Certified payroll submission requirement

As a condition to every progress payment (and final payment), Subcontractor will submit to Contractor, not later than the fifth (5th) business day of each month during Subcontractor's performance under this Agreement and with the final invoice:

1. A complete certified payroll report for each of Subcontractor's Employees who performed any portion of the Scope of Work in the reporting period, in the form of Exhibit D to this Agreement (or in the BOLI WH-38 format for public works projects), showing for each Employee: name, last four digits of social security number, job classification, hours worked by day and project, regular and overtime hourly rates, gross wages, itemized deductions, net wages, and fringe benefit contributions;
2. A signed Statement of Compliance under penalty of perjury stating that all Wages and Benefits owed to Subcontractor's Employees for the reporting period have been paid in full and in compliance with Oregon and federal law;
3. Evidence of current workers' compensation coverage (certificate of insurance issued by SAIF or a licensed private carrier, or a valid ORS 656.029 exemption);
4. Evidence of current Paid Leave Oregon contribution remittance (most recent OED confirmation or payroll service report); and
5. A list of all lower-tier subcontractors Subcontractor has engaged on the Project, with each lower-tier subcontractor's CCB number and scope of work — as Subcontractor's wage-compliance obligations in this Agreement flow through to lower-tier subcontractors under Section 3.9.

3.5 Right to withhold payment

Contractor may withhold all or any portion of any payment otherwise due to Subcontractor, without becoming liable for breach of this Agreement and without incurring interest charges, if Contractor in good faith determines any one or more of the following:

• Subcontractor has not timely submitted a complete certified payroll report under Section 3.4;
• Subcontractor's Statement of Compliance is inaccurate in any material respect;
• Contractor has received credible information (from an Employee, BOLI, a court filing, or otherwise) that Subcontractor has unpaid Wages and Benefits;
• Subcontractor has lost workers' compensation coverage, has failed to remit Paid Leave Oregon contributions, or has lost its CCB license; or
• Any representation or warranty in Section 3.2 is or becomes materially untrue.

The amount Contractor may withhold includes the full amount reasonably necessary to cover the estimated wage exposure plus a reasonable estimate of associated penalties, interest, and attorney's fees. Contractor will notify Subcontractor in writing of any withholding within five business days and will release any amount not reasonably required to cover the exposure once the underlying compliance issue is cured to Contractor's reasonable satisfaction.

3.6 Insurance and bonding

Subcontractor will maintain throughout the term of this Agreement and for two years thereafter: (a) commercial general liability insurance of not less than $2,000,000 per occurrence/$4,000,000 aggregate, naming Contractor and Owner as additional insureds; (b) workers' compensation coverage meeting Oregon statutory requirements; (c) employer's liability of not less than $1,000,000; (d) automobile liability of not less than $1,000,000 combined single limit; and (e) if the Contract Price equals or exceeds $50,000 or the Project is a public works project, a labor and materials payment bond in the full amount of the Contract Price naming Contractor and each of Subcontractor's Employees as obligees. Subcontractor will deliver a certificate of insurance evidencing each of the foregoing before commencing work and at each renewal.

3.7 Personal guaranty

Each individual owning 25% or more of Subcontractor's equity, as listed in Exhibit E, will execute a personal guaranty in the form of Exhibit E guaranteeing Subcontractor's obligations under Section 3.3 (indemnification). This personal guaranty will survive termination of this Agreement and continue until the longer of (a) five years from completion of Subcontractor's work on the Project or (b) the expiration of the longest applicable statute of limitations for wage claims under Oregon law.

3.8 Audit rights

Contractor may, on not less than ten business days' written notice, audit Subcontractor's payroll records, time records, workers' compensation records, tax filings, and Paid Leave Oregon remittance records relating to the Scope of Work, for the duration of Subcontractor's performance and for three years thereafter. Subcontractor will provide reasonable cooperation and access. Audits under this Section are at Contractor's expense unless the audit reveals a material wage compliance issue, in which case Subcontractor will reimburse Contractor's reasonable audit costs.

3.9 Flow-down to lower-tier subcontractors

Subcontractor will include in each agreement with every lower-tier subcontractor contract clauses substantially identical to Sections 3.2 through 3.8 of this Agreement, such that the wage-compliance obligations, indemnifications, and audit rights flow through to each lower-tier subcontractor and its employees. Subcontractor remains directly liable to Contractor for lower-tier subcontractor wage compliance issues regardless of whether those clauses are present or enforced.

Article 4 · Safety & OR-OSHA Compliance

4.1 Safety is mandatory

Subcontractor will comply with the Oregon Safe Employment Act (ORS Chapter 654), all OR-OSHA regulations (OAR Chapter 437, Divisions 1, 2, and 3 as applicable), and Contractor's jobsite safety rules and Accident Prevention Program. At Contractor's request, Subcontractor will provide a copy of Subcontractor's own written Accident Prevention Program before beginning work on the Project.

4.2 Heat illness prevention

Subcontractor acknowledges that OAR 437-002-0156 (Oregon's heat illness prevention rule) applies whenever ambient temperature is at or above 80°F, with additional high-heat procedures triggered at 90°F. Subcontractor will independently comply with all shade, water, acclimatization, training, and emergency-response requirements, and will provide proof of heat illness training records for each of Subcontractor's Employees on demand.

4.3 Safety indemnification

Subcontractor will defend, indemnify, and hold harmless Contractor and Owner from any and all OR-OSHA citations, civil penalties, third-party claims, and injury claims arising out of Subcontractor's or its lower-tier subcontractors' acts, omissions, or violations of safety rules.

4.4 Stop-work authority

Contractor's site superintendent has unilateral authority to stop any portion of Subcontractor's work that, in Contractor's reasonable judgment, presents an imminent danger of serious injury or death, or that violates applicable safety rules. A stop-work order under this Section is not a breach by Contractor and does not entitle Subcontractor to an extension of time or additional compensation.

Article 5 · Insurance (Summary)

The insurance requirements in Section 3.6 are supplemented by the following: all policies must be issued by carriers with an A.M. Best rating of not less than A-/VII; Contractor and Owner must be named as additional insureds on a primary and non-contributory basis on the general liability policy using endorsement CG 20 10 (ongoing operations) and CG 20 37 (completed operations); waivers of subrogation in favor of Contractor and Owner are required on general liability, auto, and workers' compensation policies; and policies must provide 30 days' advance written notice of cancellation or material change to Contractor.

Article 6 · Contractual Representations & Warranties

Each Party represents and warrants to the other as of the effective date that (a) it has full authority to enter into this Agreement; (b) this Agreement is legally binding and enforceable against it; (c) its execution and performance of this Agreement does not violate any other agreement to which it is bound; (d) it holds all required governmental permits and licenses; and (e) (for Subcontractor only) it is not currently the subject of any pending BOLI proceeding, CCB enforcement action, wage claim, stop-work order, or debarment (except as disclosed in writing).