JC Master Information | How to Accurately Determine the Prior Payment Liability of the General Contractor

　　The advance payment liability of the general construction contractor refers to the obligation set forth in Article 30 of the Regulations on Ensuring Payment of Wages to Rural Migrant Workers (hereinafter referred to as the “Regulations”) to make advance payments when wage arrears to rural migrant workers occur. Since the Regulations came into effect, judicial practice has revealed a trend toward the “joint and several” and “no-fault” application of this advance payment liability; however, significant disagreements persist regarding its nature and the conditions for its applicability. To accurately determine the scope of the general construction contractor’s advance payment liability and to balance the interests of both rural migrant workers and the contractor, it is necessary to analyze and clarify the nature of this liability and the prerequisites for its imposition.

　 　I. Clarifying the Nature of Liability: The Obligation to Make Prior Payment Constitutes a Supplementary Liability

　　Article 30, Paragraph 1 of the Regulations stipulates: “Subcontractors shall bear direct responsibility for the real-name management and wage payment of the migrant workers they employ.” The rationale behind this provision is that a subcontractor establishes an employment relationship with the migrant workers it hires; pursuant to Article 30, Paragraph 1 of the Labor Contract Law, as the employer, the subcontractor is obligated to assume direct liability for the wages of the migrant workers it employs. There is little dispute regarding the subcontractor’s direct liability. By contrast, the general contractor’s obligation to make advance payment gives rise to considerable controversy, with the central issue being whether such liability constitutes supplementary or joint and several liability. In the author’s view, the general contractor’s obligation to make advance payment should be characterized as supplementary liability.

　　1. The construction general contractor’s liability for prior payment does not meet the characteristics of joint and several liability. Under joint and several liability, all liable parties are on an equal footing as primary obligors. However, examining the sequence of provisions in Article 30 of the Regulations, paragraph 1 first establishes the direct liability of the subcontractor, while paragraphs 3 and 4 only then address the construction general contractor’s liability for prior payment. Accordingly, it is reasonable to conclude that Article 30 of the Regulations favors having the subcontractor make payment first; only when the subcontractor cannot be identified or lacks sufficient solvency does the construction general contractor assume responsibility for prior payment. Thus, the subcontractor and the construction general contractor do not occupy the same hierarchical position. Consequently, the construction general contractor’s liability for prior payment does not conform to the attributes of joint and several liability.

　　2. The Regulations lack the authority to impose joint and several liability on general contractors. Article 178, paragraph 3, of the Civil Code provides: “Joint and several liability shall be prescribed by law or agreed upon by the parties.” The term “law” in this provision is generally understood to refer to laws in the narrow sense—namely, normative documents enacted by the National People’s Congress and its Standing Committee. By contrast, the Regulations are a normative document issued by the State Council, not a “law” within the meaning of the aforementioned provision; accordingly, they do not have the authority to establish joint and several liability for civil subjects. Therefore, if the liability of the general contractor to make advance payment is construed as joint and several liability, such an interpretation would be inconsistent with Article 178, paragraph 3, of the Civil Code.

　　3. Interpreting the general contractor’s prior liability for payment as a supplementary obligation better promotes the coherence of the legal system. On the one hand, as noted above, Article 30 of the Regulations, by setting forth its provisions in a sequential four‑paragraph structure, tends to assign subcontractors and the general contractor different priorities in the order of payment; accordingly, characterizing the general contractor’s prior liability as supplementary is more consistent with the hierarchical arrangement of the provisions in Article 30.

　　On the other hand, the general contractor shares a certain degree of homogeneity with other entities legally designated to bear supplementary liability. For example, under Articles 1198 and 1201 of the Civil Code, operators, managers, organizers, kindergartens, schools, or other educational institutions are subject to supplementary liability. Such liable parties exercise substantial actual control over their premises and activities, thereby incurring an obligation to ensure safety. Similarly, the general contractor exercises significant practical control over the construction project it has undertaken and bears managerial duties toward its subcontractors, which in turn helps ensure that subcontractors pay migrant workers’ wages promptly and in full.

　　In this regard, the operators, managers, organizers, kindergartens, schools, or other educational institutions referred to in Articles 1198 and 1201 of the Civil Code share a certain degree of homogeneity with the general construction contractors specified in Article 30 of the Regulations. Accordingly, interpreting the general construction contractor’s obligation to make advance payment as a supplementary liability is consistent with the coherence of legal‑systemic evaluation and facilitates the integration and seamless application of the legal framework.

　　 II. Clarification of the Prerequisite for Liability: The obligation to make prior payment is contingent upon the failure to perform a statutory duty.

　　As previously noted, the general contractor’s liability for advance payment should be construed as a supplementary obligation, which typically hinges on the obligor’s breach of the corresponding duty. Accordingly, the general contractor’s liability for advance payment likewise presupposes a breach of the relevant obligations. With respect to this liability, Article 30 of the Regulations is divided into two subparagraphs. Subparagraph 3 provides: “If a subcontractor owes wages to migrant workers, the general contractor shall make advance payment and then seek recovery in accordance with the law.” Subparagraph 4 stipulates: “In cases where a construction project has been sub-contracted and wages remain unpaid to migrant workers, the general contractor shall make advance payment and then pursue recovery in accordance with the law.” It follows that the conditions for triggering the advance‑payment liability differ between these two subparagraphs; had the requirements been identical, there would have been no need for the Regulations to set them out separately.

　　1. The advance payment liability stipulated in Paragraph 3 of Article 30 of the Regulations is conditional upon the general contractor’s failure to fulfill its supervisory and management obligations with respect to the subcontractors’ employment practices and wage payments. Paragraph 2 of Article 30 provides: “The general contractor shall supervise the subcontractors’ employment practices and wage payments.” Meanwhile, Paragraph 3 sets forth the general contractor’s advance payment liability. Accordingly, on the one hand, considering the sequence of the provisions, it is reasonable to interpret the advance payment liability under Paragraph 3 as contingent upon the general contractor’s failure to discharge its supervisory and management duties. On the other hand, making such non‑compliance a prerequisite for the advance payment liability in Paragraph 3 also serves to encourage the general contractor to comply with the obligations set forth in Paragraph 2 of Article 28 and Paragraph 2 of Article 30 of the Regulations by introducing additional civil legal consequences.

　　When a subcontractor fails to pay migrant workers’ wages, the general contractor is required to provide sufficient evidence demonstrating that it has fulfilled its duty of supervision over the subcontractor’s employment practices and wage‑payment procedures. Otherwise, the general contractor shall bear liability for advance payment. This approach is consistent with the supplementary liability imposed on operators, managers, organizers, kindergartens, schools, or other educational institutions under Articles 1198 and 1201 of the Civil Code, which likewise presuppose a failure to discharge the obligation to ensure safety. Notably, Paragraph 3 of Article 30 of the Regulations does not limit the general contractor’s liability for advance payment by means of the term “correspondingly”; in other words, the degree of the general contractor’s fault is irrelevant. As long as the general contractor fails to perform its supervisory and management duties, and when the subcontractor cannot be identified or lacks sufficient solvency, the general contractor must make full advance payment.

　　2. The prior liability for payment stipulated in Paragraph 4 of Article 30 of the Regulations is contingent upon the general contractor or its subcontractors having sub‑contracted the construction project in violation of the obligation to prohibit subcontracting.

　　First, in accordance with Article 28 of the Construction Law and other relevant provisions, the subcontracting of a construction project by the general contractor constitutes an illegal act. If the general contractor engages in subcontracting, it will be unable to effectively supervise and manage the subcontractor’s employment practices and wage payments.

　　Second, under Article 30, Paragraph 4 of the Regulations, the “subcontracting” referred to should not be limited to the general contractor; it should also encompass the subcontractors of the general contractor. This is because Article 29, Paragraph 3 of the Construction Law stipulates: “Subcontractors are prohibited from further subcontracting the work they have undertaken.” By analogy, a subcontractor is even less permitted to engage in sub‑subcontracting. Moreover, when a subcontractor engages in sub‑subcontracting, first, it undermines the general contractor’s ability to effectively supervise and manage the subcontractor’s labor practices and wage payments; second, price‑driven sub‑subcontracting may also jeopardize the rights and interests of migrant workers. Accordingly, whether the general contractor undertakes sub‑subcontracting on its own or a subcontractor does so, the general contractor remains liable. When a subcontractor defaults on wages owed to migrant workers, even if the general contractor has furnished sufficient evidence demonstrating that it has fulfilled its supervisory obligations regarding the subcontractor’s employment practices and wage disbursements, the general contractor must nonetheless assume primary liability for settling such arrears.

　　Third, the term “subcontracting” in Article 30, Paragraph 4 of the Regulations should be interpreted expansively to encompass “illegal subcontracting.” Whether the general contractor engages in illegal subcontracting or the subcontractor does so, both scenarios may prevent the general contractor from effectively supervising and managing the subcontractor’s employment practices and wage payments, and may also give rise to multi-tiered subcontracting that undermines the rights and interests of migrant workers. However, the literal scope of “subcontracting” does not extend to “illegal subcontracting.” Accordingly, it is necessary to interpret “subcontracting” in Article 30, Paragraph 4 of the Regulations in a purposive manner, so as to include “illegal subcontracting,” thereby providing comprehensive protection for the rights and interests of migrant workers.

　　(Reposted from: Shandong Higher People’s Court)