6/24/25 Practical Guidance for Understanding Senate Bill 426

June 24, 2025

By Hannah LaChance & Xavie Davenport 

Governor Tina Kotek signed Senate Bill 426 into law on June 9, 2025. The new law effectively makes  property “Owners” and “Direct Contractors” liable for unpaid wages of the employees who work under them or on their projects. This liability extends to the employees of subcontractors, even if the Owner or Direct Contractor has no direct supervision or control over their work or wages. The law takes effect on January 1, 2026. 

The law defines an “Owner” as “any person, firm, partnership, corporation, association, company, organization or other entity, or any combination thereof, with an ownership interest […]” in property. A “Direct Contractor means any person, including a construction manager, joint venture or any combination thereof, the person’s successors, heirs or assigns, that enters into a construction contract with an Owner.” 

The obligations of the new law do not apply to property owners who are hiring contractors to work on their principal residence, to public agencies as defined under Oregon law, or to a financial institution who acquires ownership of a property by foreclosure and do not undertake more than the work necessary to preserve or secure the property. It also only applies to “unrepresented employees” who are not represented by a construction trade labor organization or those who are not covered by a collective bargaining agreement that contains specific provisions. The new law includes a “rebuttable presumption” of employment, meaning the worker is assumed to be an employee rather than an independent contractor, and it is the Owner or Direct Contractor’s burden to prove otherwise.

For employees, the bill provides extra protection in addition to existing wage and hour laws. For example, if an employee has not been paid by their primary employer, the employee can take action against not only their employer, but also the businesses or persons who contract with their employer. This provides the opportunity for employees of contractors and subcontractors to seek payment from those who have ultimately benefitted from their work when they have not been paid by their direct employer.  

For Owners and Direct Contractors, this creates another layer of liability. If subcontractors and specialist companies working on the project have not paid their workers, the workers can recover wages from the Owner or Direct Contractor, even if they have already paid the subcontractor for its work.

 
The new law specifically includes a provision that Owners and Direct Contractors cannot contract out of this liability, but it does provide some safeguards that can minimize exposure. There is a complaint and recovery process that must be followed before legal proceedings can begin and the employee seeking to recover wages from an Owner or Direct Contractor must send notice of the alleged violation via first-class certified mail. The notice must include a description of the violation, the nature of the claim and must state that the Owner and Direct Contractor have 21 days from the delivery date to correct the violation. The new law limits the timeframe within which an employee can bring a claim to two years from the date the wages became due. 

Another protection for Owners and Direct Contractors that is built into the new law is with respect to its records and disclosure requirements. Upon request, subcontractors are required to provide information including but not limited to certified payroll reports, contact information, any subcontractors the Direct Contractor has hired, and names of all workers who have performed work on the project. 

We are here to help. Please contact Hannah LaChance, at hlachance@barran.com or 503-276-2112, or your regular Barran Liebman attorney for more information and guidance on how to comply with the new order.