On January 4, 2022, Labor Law §198-e – known as New York’s Wage Theft Law – went into effect. The Wage Theft Law, which applies to private construction projects, makes the prime/general contractor responsible for unpaid wages and benefits owed to workers on the project, including workers employed by subcontractors “at any tier.” The Wage Theft Law thus dramatically changed the legal landscape for prime contractors and greatly expanded their liability and risk, making them jointly liable with the workers’ direct employer for underpayments of wages and benefits.
A recent decision of the Southern District of New York, however, reigned in some of the Wage Theft Law’s reach. Finkel v. Structure Tone, 23-CV-1269 (S.D.N.Y., Apr. 29, 2025).
In its decision, the Southern District dismissed a claim against a general contractor which sought to hold it liable for its subcontractor’s failure to pay union benefit contributions. The Court held that claims for unpaid benefit contributions are governed by the federal Employee Retirement Income Security Act of 1974 (ERISA) – not the Wage Theft Law – and that ERISA did not authorize a suit against the general contractor for a subcontractor’s unpaid benefit contributions on behalf of the subcontractor’s workers. As a result, the claims against the general contractor were dismissed.
The facts of Finkel are fairly straight-forward. The plaintiff, Chairman of the Joint Industry Board of the Electrical Industry, sued on behalf of various multiemployer benefit funds to collect alleged unpaid contributions to the benefit funds by an electrical subcontractor. The subcontractor was a signatory to a collective bargaining agreement with the union, and was alleged to have failed to pay benefit contributions on behalf of its employees. Plaintiff did not sue the subcontractor, however, but instead sued the general contractor, who was not a party to a collective bargaining agreement with the union. Relying on the Wage Theft Law, plaintiff asserted that the general contractor was liable for its subcontractor’s non-payment of benefit contributions.
The Court disagreed, holding that ERISA “preempts” or overrides claims for union benefit contributions under the Wage Theft Law. As such ERISA, not the Wage Theft Law, govern claims for non-payment of union benefits. And ERISA only authorizes a claim for delinquent contributions against “the employer, or another fiduciary of the plan.” As the general contractor was neither the workers’ employer nor a plan fiduciary, the general contractor could not be held liable for the subcontractor’s non-payment of union benefits. As a result, the claims against the general contractor were dismissed.
It is important to note that the Southern District did not address wage payments. The Wage Theft Law continues to make general contractors liable for non-payment of wages to its subcontractors’ workers. And while the Southern District limited a contractor’s liability for delinquent union contributions on private contracts, there are numerous situations where a general contractor may nevertheless remain liable for its subcontractor’s failure to pay union benefits on private jobs. This includes situations where a contractor has agreed to make good on its subcontractor’s failure to pay benefits pursuant to contract, such as in its contract with the project owner, or in the contractor’s own collective bargaining agreement, if it is a union shop. Further, Finkel only pertains to private jobs – different rules apply in the context of publicly-owned projects.
Ultimately, given recent changes in the law and what may prove to be an evolving legal landscape, contractors should seek legal advice concerning the facts and circumstances specific to them and their projects before making any determinations as to the scope of their liability under the Wage Theft Law, ERISA, and to determine the applicability of other rules or statutes that may apply to their projects.
