General Contractor

  • 1.  Wage garnishment of a subcontractor's employee

    Posted 03-02-2016 14:52

    Hello all,  I'd like a little advice/feedback.  

    We have a 2nd tier subcontractor that didn’t pay their employees properly (underpaid per prime contract/subcontract).  Normally, we would just pay the employee the wage difference, and deduct that from the amount paid to the subcontractor.  We were getting ready to do that, but then we were just told that they received a wage garnishment letter from the IRS for one of the employees. 

    They have been unable to provide the letter (it’s ‘lost’), and they said that they received the letter after they last paid the employee, so none of his paychecks have been garnished. 

    It seems a bit dubious, but I’ve never been given reason to question the honesty of this subcontractor. 

    What’s your advice?  Since we haven’t seen the garnishment letter, and we were never sent one, does it apply to us since we are paying the employees directly?

    Thanks!

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    James Easton
    Watterson Construction
    Anchorage AK
    (907) 382-5735
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  • 2.  RE: Wage garnishment of a subcontractor's employee

    Posted 03-03-2016 08:29

    James:

    We would never pay a sub or sub-sub's employees directly.  If you are paying them a wage, they become your employee and we wouldn't take on that responsibility.  Not sure how the lien laws are on the project that you refer to, but if there is evidence that a subcontractor's relationship with a sub-sub or sub supplier has resulted in non-payment, I'd probably hold back payment until there is proof of satisfaction of the appropriate payment, which could be through certified payrolls or possibly waivers of lien.  Again, there may be details that surround this situation that impact your options, but unless we hire someone, we aren't paying them as an employee.

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    Steve Tenney
    C.F.O.
    Story Construction Co.
    Ames IA
    (515) 817-2606

    Original Message


  • 3.  RE: Wage garnishment of a subcontractor's employee

    Posted 03-04-2016 07:32

    James,

    I agree with Steve.  It's not your 'problem' to resolve, outside of holding enough from the subcontractor to make it THEIR problem to resolve, with THEIR SUBCONTRACTOR, and hopefully they have enough to hold to make it THE SUB-SUB's responsibility.

    Joe B.

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    Joe Burkett CCIFP
    CFO
    Cafco Construction Management, Inc.
    Boston MA
    (857) 254-1767
    jburkett@cafcoconstruction.comJoseph

    Original Message


  • 4.  RE: Wage garnishment of a subcontractor's employee

    Posted 03-04-2016 12:50

    Thanks for the input.   I agree, I'd rather not have to pay them directly, but we aren't left with many other alternatives by the sub, and we're more concerned about a DOL Wage complaint at this point.  

    Should any of you encounter a similar situation, I did speak to an attorney, and was advised the risk was pretty low since we hadn't received anything.  However, the IRS could come back and say we were on 'constructive notice' since we had been told that there was a garnishment letter.  On the other hand, we've spoken directly with the employee, and he said that his employer told him there was a garnishment letter, but 'lost' it and couldn't provide it, so that's why he wasn't paid.  Based on what we know about the particular sub, it's a completely plausible story.  Regardless, the risk of a state DOL inquiry and penalty to ensure timely payment of wages was much greater than failing to withhold a garnishment. 

    At any rate, we're working with the attorney to draft a waiver for the employee to sign before the gets his check, including that to his knowledge, there are no outstanding levies, etc.  

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    James Easton
    Watterson Construction
    Anchorage AK
    (907) 382-5735

    Original Message