Oregon’s Senate Bill 426: New Risks for Construction Businesses

As of January 1, 2026, project sponsors and construction company owners operating in Oregon can be held personally liable for unpaid wages of workers they’ve never met, hired or supervised. This is the impact of Senate Bill 426, a new act signed into law to address unpaid wages owed to unrepresented employees of the direct contractor or subcontractors at any tier.

In this article, we’ll explore what Senate Bill 426 means for contractors and owners and how construction businesses can safeguard their assets against this new exposure.

FAQs about Senate Bill 426 for Oregon Construction Businesses

Oregon Senate Bill 426 was signed into law on June 9, 2025, by Governor Tina Kotek to address wage theft. However, this legislative measure introduces significant financial liability for construction businesses. Read this list of commonly asked questions to learn more about this regulation and its impact on the construction industry.

What is Oregon’s Senate Bill 426?

Under Senate Bill 426, if any subcontractor at any tier fails to pay their employees properly, those workers can sue owners and general contractors directly, even if they paid their downstream contractor in full and on time.

This increased exposure means that construction businesses may face liability for:

• Fringe benefits
• Interest
• Penalty wages up to 30 days per employee
• Damages
• Attorney fees

This means businesses may pay twice for the same work: once to the contractor and again to unpaid workers down the chain. H3: Who is exempted from Senate Bill 426, and who isn’t?

The law exempts the following parties and projects:

• Primary residence projects and developments with five or fewer residential or commercial units on a single tract.
• Union workers with collective bargaining agreements that include wage recovery mechanisms.

All other construction project owners and contractors fall under this new strict liability standard. If your business is developing a six-unit apartment building or larger, a commercial project or managing multiple private construction projects, you need to take strategic risk management steps now to cover your exposures.

What is the impact of Senate Bill 426 on Indemnification?

Senate Bill 426 explicitly invalidates any contractual provision that attempts to indemnify sponsors or owners or waive this liability. The traditional safety net businesses have relied on—having subcontractors agree to hold you harmless—is now legally unenforceable for these wage claims.

This means construction businesses cannot contractually transfer this risk away; rather, it must be managed directly.

Five Steps to Protect Your Construction Business from Liability for Wage Violations

With Senate Bill 426 enacting in 2026, your construction business faces increased risk of liability for wage violations, which can significantly impact your profitability. Use these strategies to safeguard your assets and avoid paying twice for labor.

1. Vet Every Contractor Relationship

Before signing any new contract, request documentation of past wage compliance. Ask for disclosures of any civil, administrative or criminal proceedings involving unpaid wages within the last five years. For contractors you don't know well, this due diligence could save you hundreds of thousands of dollars.

2. Implement Mandatory Payroll Reporting

Require certified payroll records from all first-tier subcontractors, and verify they're obtaining the same from lower-tier subs. While this creates additional  administrative work, it is a critical step that will protect your business from costly expenses down the road. Review these records regularly—don't just collect and file them.

3. Monitor Your Job Sites Actively

Consider implementing check-in systems to track who's actually working on your sites. This helps you identify potential "implied subcontractors," meaning workers who are performing services without formal contracts who still create liability under the law.

4. Revise Your Contracts Immediately

Update all owner-contractor and general contractor agreements to include mandatory payroll submission requirements, affidavits regarding wage violation history and provisions allowing you to withhold payment if records aren't provided. Build in the right to pay workers directly if necessary.

5. Consider Payment Bonds

For larger projects, requiring payment bonds from contractors provides an additional layer of financial protection. While bonds can cost up to 3% of contract price and increase overall project costs, they may prove invaluable if wage claims arise.

How Alliant Construction Can Help Your Business Enhance Resilience Following Senate Bill 426

This law shifts significant financial risk onto owners and developers. Hoping your contractors pay their workers isn't a strategy—it's a gamble with your business assets.

As this is only one example of the evolving risk management landscape in construction, it is critical to regularly evaluate and continually improve your systems and contracts in place. We're here to help you navigate these changes and protect what you've built.

At Alliant Construction, our specialists are closely following the changing risk landscape resulting from Senate Bill 426 and developing insurance offerings that can provide coverage for this new exposure, such as a new policy that offers “Contractors’ Wage Theft Defense.” While traditional policies weren't designed with Senate Bill 426 in mind, we're working with carriers to understand and implement available protections as the law takes effect.

In addition to providing insurance solutions that address emerging risks, we help our clients assess and address their own unique risks based on their project, region and current subcontractor utilization with dedicated risk management and loss control services.

Contact Alliant Construction today to learn more about our insurance solutions and schedule a comprehensive review of your current projects and risk management posture.