that Labor Release Form Valid?
By Diane Dennis © 2004 (printable
copy of this article)
I was contacted
recently by a reader inquiring on labor release forms...
took over the construction funding position for a
general contractor. Procedures haven't been updated
in a long time and I'm trying to find out what forms
are still legally accepted and advisable. I know
about the four releases but my boss who has been
in the business for years requires an additional
release for labor, from subs under contract on a
job, prior to payment. I have subs tell me that currently
the only legally recognized forms are the four releases.
They also say no one asks for labor releases any
can you tell me about labor releases?
Thank you for writing Linda! :)
I continue, first I have to say that because I'm not an
attorney this article does not constitute legal advice.
questions please consult an attorney. This
article contains general information about labor release
start with the info I read in the California Labor
State Labor Code
§ 206.5 - Wages
employer shall require the execution of any release of
any claim or right on account of wages due, or to become
due, or made as an advance on wages to be earned, unless
payment of such wages has been made. Any release required
or executed in violation of the provisions of this section
shall be null and void as between the employer and the
employee and the violation of the provisions of this
section shall be a misdemeanor."
the above labor code applies to all California employers,
this next rule is straight from Section VI of The
(California) Contractor's State License Board; License
Law and Rules and Regulations...
12 Contractors License Law
§ 7110.1 - Violation of Labor
Code; Requiring Release of Claim for Wages
requiring of an execution of release of any claim or
the causing of the execution of any such release in violation
of Section 206.5 of the (California) Labor Code is cause
for disciplinary action."
12 Contractors License Law
§ 7110.5 - Violations; Disciplinary
receipt of a certified copy of the Labor Commissioner's
finding of a willful or deliberate violation of the Labor
Code by a licensee, pursuant to Section 98.9 of the Labor
Code, the registrar shall initiate formal disciplinary
action against any such licensee within 30 days of notification."
Penalty: 60 day suspension, stayed, 1
Actual suspension of 5 days or more.
Standard terms and conditions in cases of probation.
If not taken within the past 5 years, take and pass the
CSLB law and business examination
Take and pass a course in Contractors License Law or
a course related to construction law at an accredited
community college. All courses must be approved in advance
by the Registrar.
Pay CSLB investigation and enforcement costs.
reason General Contractors want a labor release form from
their Subcontractors is to make sure that all the laborers
on the job have been paid properly and that no one can
come back and make claims against him or his customer.
When a labor release is used properly everything is "hunky-dorey"...
General Contractors sometimes don't realize though is that
a Subcontractor will have his employee(s) sign the form even
though the employee has not been paid what he is due.
know this to be fact because we've experienced it. Many
times in the past, my husband Curtis was required to sign
past employers without being paid his full wage and we
know other construction workers who have had to sign the
forms for their employers even when they had not been paid
their full wage.
prevailing wage jobs (there are union
and non-union shops that do this) when
the employer does not want to pay the prevailing wage rate
but, for obvious
reasons, wants it to appear that he is paying
prevailing wage, he'll manipulate his employee and the
paperwork to do just that.
yes, these same employers also "knowingly provide
false statements" on the prevailing wage/certified
payroll report that they submit that states that they
paid all of their employees properly.]
there's the contractor who has employees work overtime
but doesn't want to pay those employees more than their
normal straight time pay. He tells his employees that he's
not paying them the overtime rate but he placates them
by paying them in cash, as opposed to paying on a paycheck
with taxes taken out.
then has the employee sign a labor release form stating
that he's been paid in full. The Subcontractor now has
a signed labor release form that, unknown by the General
Contractor, is not valid.
I should also mention that there are times when this happens
and the General Contractor is fully aware of it but chooses
to keep his mouth shut. Usually that's because the Subcontractor's
allotted time to do the job has been cut short by the General
Contractor, without compensation to the Sub for the overtime
he has to pay to get the job done on the new shorter schedule.
those who wonder, "But why would the employee
sign the labor release form if he wasn't really paid
his full wages?" the answer is simple really,
he needs his job and he knows that if he doesn't do
what his employer is demanding then he won't have that
job for much longer. Less-than-full-wage is better
Subcontractor "doctors" his labor report to indicate
that his guys were on the job less than they truly were
and he then submits that doctored paperwork along with
the labor release form to the Superintendent.
at this point you'd think that the Subcontractor would
be caught in his tracks right? Well sure, as long as the
Superintendent on the job is up on his own paperwork. Unfortunately
though, many Superintendents are not.
the Super realizes that he hasn't kept his own paperwork
up-to-date, and that he cannot remember after the fact
who was on the job when, he just copies onto his own paperwork
whatever labor info the Subcontractor has submitted. He
does this because he doesn't want to admit to his boss
that he wasn't doing his job.
the General Contractor gets a labor release form from his
Subcontractor and goes on about his business. Little does
he know that:
- A) his Subcontractor has just committed a
misdemeanor on his job and
- B) the labor release form
he has is null and void
Then, sometime down the road the employee who signed the
release form gets upset with his employer (probably because
he's been canned) and decides he's gonna get back
at him by placing a complaint against him with the Labor
wonder how many General Contractors know that if a Sub
cannot pay his employees then the Labor Board will look
to the General to make those wage payments, even though
he's already paid the Subcontractor in full.
General may be able to use his copy of the Subcontractor's
invalid labor release form to show that he had been misled
to avoid being penalized by the Labor Board and the Contractors
License Board, but
the wages still have to be paid.
the Subcontractor is in trouble with the Labor Board (and
the License Board) and he'll be penalized and maybe even
lose his license but no matter what, the employee still
has to be paid. If the Sub doesn't have the funds,
the Labor Board looks to the General Contractor as being
next in line to "pay the bill".
General Contractors can take along the way to try to protect
educate your Superintendent about how important it is
that he keep his paperwork accurate and up-to-date, as
well as why it's so important. If he knows what
to look for he has a better chance of catching it if
that the labor release form include a phone number for
every laborer listed on the form. Call the laborers and
verify with them that they've been paid. Although this
may not protect you from future claims, there's
always the possibility that someone
speak up if you give 'em a chance.
your Subcontractors. Ask them for references and then
follow through by verifying those references.
Requiring the Sub to have the employee signatures
on the release form notarized won't help. All the
notary does is verify that the person signing the form is
he says he is. The notary has absolutely nothing to
do with the validity of the form itself, it simply verifies
the signatures that appear on the form.
no matter how vigilant you are in trying to protect
yourself and your company from this kind of trouble, you
become the victim of an unscrupulous Contractor.
Keep good records so that, at the very least, you can show
you weren't in on the deception.
Dennis is the Webmistress of www.TheContractorsGroup.com,
a website designed to help contractors through the myriad of
pitfalls that they can fall into. She's a graduate of "The
School Of Hard Knocks" and she's always willing to share
her experiences, even when no one wants to listen... ;)
note that this article is not to be taken as legal advice. For
questions of a legal nature please
contact an attorney.
This article can be reprinted provided
it is done so in its entirety including this bio. If you do
use this article, please let Diane know by sending an email her.
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