Virginia Construction Alert: New Law Significantly Expands Wage Liability for General Contractors – Effective July 1, 2026

Virginia construction contractors should be aware of a major legal development that will substantially change wage‑payment risk across the industry.

Governor Abigail Spanberger has signed House Bill 238, a sweeping amendment to Virginia’s wage‑payment statutes that dramatically expands employer liability in the construction industry. The new law takes effect July 1, 2026, and shifts wage‑compliance exposure upstream—placing general contractors squarely in the crosshairs for subcontractor pay practices.

Below is an overview of the most significant changes and what contractors should be doing now.

1. General Contractors Become Jointly Liable for Subcontractor Wages

Under HB 238, all construction contracts entered into on or after July 1, 2026 between a general contractor and subcontractor will be legally deemed to include a clause making both parties jointly and severally liable for all wages owed to the subcontractor’s employees under:

• The Virginia Wage Payment Act
• The Virginia Minimum Wage Act
• The federal Fair Labor Standards Act (FLSA)

In practical terms, this means a general contractor may be held fully responsible for unpaid minimum wages, overtime or other wage violations committed by a subcontractor—even if the general contractor had no knowledge of the violation.

The law also expressly classifies general contractors as statutory “employers” of subcontractor employees for wage‑payment purposes, exposing them to the full range of civil and criminal remedies available under state and federal law.

2. Traditional Contractual Defenses Are Significantly Weakened

While indemnification provisions remain permissible, HB 238 eliminates reliance on sworn wage‑payment certifications as a defense. Even if a subcontractor falsely certifies compliance, the general contractor may still face direct liability.

If a subcontractor refuses to indemnify after a wage claim is asserted, the general contractor’s remedy is limited to pursuing a separate breach‑of‑contract action, leaving the GC to defend (and potentially pay) the wage claim itself.

3. Stronger Presumption Against Independent Contractor Classification

HB 238 also tightens worker misclassification rules by creating a presumption that workers are employees, not independent contractors, unless the business satisfies the IRS independent contractor test—a strict, control‑focused standard.

Misclassification claims now tie directly into expanded wage‑payment remedies, including:

• A three‑year statute of limitations
• Liquidated (double) damages
• Mandatory attorneys’ fees and costs
• The ability to proceed as collective or representative actions

For construction companies that rely on independent contractors, this change materially increases litigation exposure.

4. Reminder: Wage Payment Damages Can Multiply Quickly

Contractors should also remember that Virginia’s wage laws impose substantial penalties beyond unpaid wages, including:

• Liquidated damages equal to the unpaid wages
• Prejudgment interest
• Attorneys’ fees and costs
• Triple damages if a court finds the violation was “knowing”

Combined with joint‑and‑several liability, these remedies significantly raise the stakes for wage‑compliance failures anywhere in the contracting chain.

What Contractors Should Do Before July 1, 2026

With compliance risk now shifting decisively upstream, contractors should begin planning well before the effective date. Key steps include:

• Reviewing and revising subcontractor agreements—particularly indemnification provisions
• Implementing stronger subcontractor oversight and documentation practices
• Auditing wage‑payment and overtime compliance across projects
• Reassessing independent‑contractor classifications and labor models

HB 238 represents one of the most consequential shifts in Virginia construction labor law in years. It narrows contractual protections, expands statutory liability, and places heightened compliance obligations on general contractors and first‑tier subcontractors alike.

Our construction and labor & employment teams are actively advising clients on risk mitigation strategies, contract updates and compliance planning in anticipation of the new law. If you have questions about how HB 238 may affect your projects or workforce, please contact your firm attorney.