Effective July 1, 2026, Virginia construction contractors have clear and explicit wage payment compliance requirements applicable to every tier of their contract chain. The VA General Assembly expanded Virginia's wage enforcement laws and created new exposure for construction contractors, especially general contractors. The new law increases the remedies available for wage-related violations. More importantly for the construction industry, the new law makes it easier for unpaid subcontractor employees to pursue recovery directly from the general contractor or higher tier subcontractors. For construction contractors, the central point is this: for certain construction contracts, wage violations by a subcontractor can readily become the general contractor's problem too.

When Does The New Law Apply?

The new law applies to construction contracts entered into on or after July 1, 2026. It is aimed at projects other than single-family residential projects and applies where the value of the project, or aggregate projects under one construction contract, exceeds $500,000. That means many commercial, institutional, multifamily, industrial, public, and large private projects are likely to fall within its reach.

What the New Law Changes

The new law amends several Virginia wage laws, including provisions dealing with wage payment, minimum wage, overtime, worker misclassification, and prevailing wage obligations. It expands the remedies available to employees for violations by tying those claims to the enhanced civil remedies available under Virginia's wage payment statute, which can include unpaid wages, liquidated damages, prejudgment interest, attorneys' fees, costs, and, in some cases, treble damages.

For construction companies, the most significant change is the treatment of subcontractor wage obligations. Construction contracts covered by the law are statutorily deemed to include a provision making the general contractor and subcontractor jointly and severally liable for wages owed to the subcontractor's employees. This applies at every downstream tier. The wages owed may include the greater of the wages due under the employee's agreement with the subcontractor or the wages required by applicable law, including the Virginia Wage Payment Act, the Virginia Minimum Wage Act, Virginia's worker misclassification statute, and the federal Fair Labor Standards Act. In plain English, the law shifts wage-payment risks upstream. A construction contractor will not be able to say, "That was the subcontractor's payroll problem," and assume the issue ends there.

What Joint and Several Liability Means

"Joint and several liability" means that more than one party can be equally and independently responsible for the same obligation. The claimant may seek recovery from any one of them. If a covered subcontractor fails to pay wages owed to its employees, those employees have direct recourse against the subcontractor, the general contractor, both or either. Because the higher tier contractor is usually the better capitalized and viable target, general and higher tier contractors can expect to become the payment guarantor of the first instance.

The new law does not make a construction contractor automatically liable for every subcontractor’s payroll omission. Rather the liability provision becomes applicable where it can be demonstrated that the construction contractor knew or should have known from the circumstance, that the subcontractor was not paying all wages due. That limitation is important, but it is not a safe harbor. Whether a construction contractor "should have known" about wage problems may turn on emails, worker complaints, certified payrolls, pay applications, field reports, prior disputes, suspiciously low labor pricing, or other project records.

Construction Contractors May Be Treated as Employers for Wage-Payment Purposes

The new law also provides that a construction contractor may be deemed the employer of a lower tier subcontractor's employees for purposes of Virginia's wage payment statute. This does not mean every subcontractor employee becomes the construction contractor's employee for all legal purposes. However, it does mean that, for wage payment liability, general contractors may face exposure that goes beyond ordinary contract damages.

That distinction matters. A construction contractor generally has no role in hiring, firing, supervising, or paying the subcontractor's employees day to day, yet still may face wage-payment liability if the statutory requirements are met. This is the core business concern created by the new law: the construction contractor's project controls, subcontract forms, payment procedures, and field-level reporting may all become relevant to manage the risks of wage compliance under the new law.

Indemnity Helps, But It Is Not a Complete Answer

The new law includes an indemnity provision applicable to construction contractors. Unless the construction contract states otherwise, the subcontractor must indemnify the higher tier contractor for wages, damages, interest, penalties, or attorneys' fees owed because of the subcontractor's failure to pay wages, unless the failure resulted from the contractor's own failure to pay amounts due to the subcontractor under the construction contract.

That is useful protection; it is not the same thing as avoiding liability. A contractor may still have to respond to a lower tier employee’s claim, defend the case, participate in an investigation, or pay a settlement or judgment and then pursue reimbursement from the subcontractor. However, that reimbursement right may be worth little if the subcontractor is insolvent, uninsured, undercapitalized, or no longer in business. For that reason, indemnity should be treated as one part of a broader risk-control strategy, but not the whole strategy.

Worker Classification Remains a Key Risk Area

The new law also reinforces the importance of proper worker classification. Virginia law now presumes that a worker paid for services is an employee unless the worker qualifies as an independent contractor under applicable IRS standards. That presumption is especially important in construction, where companies often rely on independent contractors, labor brokers, staffing arrangements, or lower-tier subcontractors. Labels will not control the analysis. A contract labeling someone as an independent contractor, or a Form 1099 issued at year-end, will not fix a relationship that functions like employment. Virginia general contractors and subcontractors should expect classification decisions to receive closer scrutiny when wage claims arise.

What Construction Companies Should Do Now

Construction company executives should move to tighten wage-compliance controls. General and higher tier contractors should review and revise subcontract forms to address wage compliance, payroll record access, audit rights, prompt notice of wage complaints, cooperation with investigations, indemnity, insurance, termination rights, and flow-down requirements for lower-tier subcontractors.

Payment practices also should be reviewed. General and higher tier contractors should consider whether their current pay applications, lien waivers, closeout documents, and payroll certifications provide enough visibility into wage compliance under the new law. Payroll Certifications still have value, but they should not be treated as a complete defense if other facts suggest workers are not being paid properly.

Project managers, superintendents, contract administrators, and accounting personnel should be trained to recognize wage red flags, Including repeated worker complaints, inconsistent payroll records, rumors of cash payments, unusually low labor pricing, off-the-clock work, unexplained payroll delays, or heavy reliance on purported independent contractors.

The Bottom Line

The new Virginia law turns subcontractor wage payment compliance into a far more direct risk for Virginia construction contractors. It does not require construction contractors to run payroll for every subcontractor, but it does require them to pay close attention to whether workers on covered projects are being paid lawfully. The best response is planning, not panic. Construction contractors who update their subcontract terms, improve payroll oversight, train project personnel, and document their response to wage concerns will be in a stronger position when the law takes effect. Those who continue to treat subcontractor wage compliance as someone else's problem may find that, under Virginia's new law, turns into their problem too.

If you have questions about Virginia HB 238 or any DMV construction issues, please feel free to reach out Timothy Hughes at Bean, Kinney & Korman, P.C. at (703) 526-5582, thughes@beankinney.com. Please reach out to Doug Taylor if you have questions about employee classification, wage, payment or best payroll practices, (703) 526-5586, rdougtaylor@beankinney.com. Our firm practices in Virginia, Maryland, and the District of Columbia in addition to various other jurisdictions.

This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.