Alaska Native Corporations and their construction subsidiaries face significant new legal exposure under Section 3 of House Bill 260, now pending before the House Labor & Commerce Committee. The bill would make project owners and general contractors jointly and severally liable, on a non-waivable basis, for unpaid wages owed by subcontractors at any tier of the contracting chain.

For Alaska Native Corporations, which routinely act as both project owners developing real property and as construction contractors, this creates liability for wage claims by workers they did not hire, on projects they may not directly supervise, involving subcontractors they did not select. The bill further compounds this exposure through a rebuttable presumption that all workers on a construction project are employees, shifting the burden to the employer to prove otherwise under the demanding ten-factor independent contractor test in AS 23.30.230(a)(12), even when the corporation has no information about the worker’s engagement. A pending amendment by Representative Saddler would remove that presumption, and its fate may determine whether the bill represents a manageable compliance adjustment or a fundamental shift in construction risk allocation for Alaska Native Corporations operating in the state.

Specifically, Section 3 of HB 260 creates a new Article 9 (“Payment of Construction Wages”) within AS 23.10, Alaska’s Labor and Workers’ Compensation title. The sponsor statement identifies the bill as addressing a claimed problem in the construction industry: when wages go unpaid, workers are often left without practical recourse because the direct employer has dissolved or lacks sufficient assets. Section 3 attempts to address this problem by extending liability for unpaid wages up the contracting chain to the project owner and general contractor, creating payroll transparency obligations, establishing a rebuttable presumption of employee status, and preserving indemnification rights for parties who pay on behalf of noncompliant subcontractors.

Liability Provision (AS 23.10.700)

Under the proposed AS 23.10.700, a project owner that enters into a construction contract with a contractor is jointly and severally liable with the contractor for unpaid wages owed to an employee of the contractor and an employee of a subcontractor at any tier for work performed within the scope of the construction contract. This liability is non-waivable.

The practical effect is that an employee who is not paid by a third- or fourth-tier subcontractor may bring a claim directly against the project owner and the general contractor, regardless of whether those parties had any knowledge of the wage violation or any contractual relationship with the subcontractor that failed to pay.

Notably, nothing in Section 3 impairs the right of a project owner to bring an action against a contractor, or a project owner or contractor to bring an action against a subcontractor, to seek recovery of actual and liquidated damages for amounts paid for unpaid wages. But, if the subcontractor is insolvent and has not paid its employees as a result, that indemnification right may not be of much assistance.

Exemptions (AS 23.10.700(b))

The legislation provides that the joint and several liability provisions do not apply to:

• Union Employees: Employees covered by a bona fide collective bargaining agreement that provides a grievance procedure resulting in a final and binding decision and a mechanism for recovering unpaid wages and benefits.
• Owner-Occupied Residence: Construction on real property used by the project owner as the owner’s principal residence.
• Small Residential Projects: Real property consisting of five or fewer residential units on a single tract of land.
• Single Commercial Unit: A project owner where the construction contract relates to real property consisting of one commercial unit.
• Public Agencies: The definition of “project owner” in AS 23.10.740(3) excludes a public agency employing a contractor or subcontractor for work under AS 22.05.025 or AS 35. This means state and municipal entities acting as project owners on public construction projects are not subject to the joint-and-several liability regime. However, a private contractor or Alaska Native Corporation subsidiary acting as the general contractor on a public works project would still face joint-and-several liability for unpaid wages owed by its own subcontractors.

Private Right of Action (AS 23.10.710)

The legislation provides that an employee of a contractor or subcontractor, or an authorized representative of the employee, may bring suit against a project owner, contractor, or subcontractor in any court of competent jurisdiction to recover unpaid wages. The employee retains all existing remedies under AS 08.18, AS 23.05, AS 34.35, and AS 23.10.

Before filing suit against a project owner or contractor, the employee must send a written notice of the alleged unpaid wages by certified mail. The notice must describe the nature of the allegation and provide 21 calendar days from the certified delivery date for the project owner and contractor to remit wages owed.

The Rebuttable Presumption (AS 23.10.710(b))

As drafted, Section 3 creates a rebuttable presumption that a person performing work on a project within the scope of a construction contract is an employee. A party claiming otherwise may rebut the presumption only by establishing that the person is an independent contractor under AS 23.30.230(a)(12).

This presumption is significant because it shifts the burden of proof to the defendant, the project owner, contractor, or subcontractor being sued, to demonstrate independent contractor status. In practice, this means that a project owner with no direct knowledge of how a lower-tier subcontractor structured its workforce arrangements bears the burden of proving that a claimant was not an employee.

This is problematic because AS 23.30.230(a)(12) is a multi-factor test. Under that statute, to establish independent contractor status, the defending party must prove all of the following mandatory elements:

1. Express Contract: The person has an express contract stating that the person is an independent contractor for the services to be performed.
2. Freedom from Direction and Control: The person is free from direction and control over the means and manner of performing the services, except for the right to specify the desired result, the completion schedule, range of work hours, and standards of work necessary to ensure compliance with applicable law.
3. Bears Operating Costs: The person obtains or provides all or substantially all of the tools, materials, labor, and other costs necessary to provide the services.
4. Profit and Loss Opportunity: The person has the opportunity for profit and loss as a result of performing the services.
5. Hiring Authority: The person has the authority to hire and fire employees to assist in performing the services.
6. Required Licenses: The person holds all licenses required by federal, state, or local law to perform the services.
7. Tax Compliance: The person complies with IRS requirements, including obtaining an employer identification number if required and filing business or self-employment tax returns as applicable.

In addition to all seven mandatory elements, the person must also satisfy at least two of the following three criteria:

1. Completion Responsibility and Liability: The person is responsible for satisfactory completion of the contracted services and is subject to liability for failure to complete the work, or maintains liability insurance or other policies necessary to protect employees, financial interests, and customers of the person’s business.
2. Separate Business Location: The person maintains a business location or business mailing address separate from the location of the individual or entity for which the services are performed.
3. Multiple Customers or Marketing: The person provides contracted services for two or more different customers within a 12-month period, or engages in advertising, solicitation, or other marketing efforts reasonably calculated to obtain new contracts to provide similar services.

Practical Challenges of the Test in the HB 260 Context

The AS 23.30.230(a)(12) test was designed for the workers’ compensation context, where the parties typically have direct knowledge of the working relationship. HB 260 transplants this test into a joint-and-several liability framework where the defendant may be a project owner or general contractor, several contracting tiers removed from the worker in question. This creates several practical difficulties:

• Evidentiary Burden on Remote Parties: A project owner being sued for unpaid wages of a fourth-tier subcontractor’s worker bears the burden of proving that the worker satisfied all seven mandatory elements and at least two supplemental criteria—information the project owner is unlikely to possess. The subcontractor who engaged the worker may have dissolved or be uncooperative.
• Mandatory Element Sensitivity: Failure on any single mandatory element defeats the independent contractor defense entirely. For example, if the worker lacked a required state or local license, the entire defense fails regardless of how clearly the other six factors establish independent contractor status.
• Construction Industry Workforce Realities: Alaska’s construction industry—particularly in remote locations—frequently involves informal working arrangements, seasonal labor, and workforce structures that may not satisfy the strict documentation requirements of the test (express contracts, IRS compliance, separate business locations).
• Discovery and Litigation Cost: Even where the defense can ultimately be established, the multi-factor inquiry creates significant discovery and litigation expense. Each worker’s status must be individually evaluated against all ten criteria.

Amendment N.5: Removal of the Rebuttable Presumption

Amendment N.5, offered by Representative Saddler (34-LS1242\N.5, dated 3/6/26), proposed to delete AS 23.10.710(b) in its entirety. Specifically, it strikes Page 4, lines 8 through 15, which contain the rebuttable presumption that workers are employees and the provision allowing rebuttal through the AS 23.30.230(a)(12) independent contractor test.

If Amendment N.5 is adopted:

• Burden of Proof Shifts to Plaintiffs: Workers bringing claims for unpaid wages against project owners and contractors would bear the standard burden of proving they are employees—not independent contractors—entitled to the protections of the new Article 9. There would be no statutory presumption in their favor.
• AS 23.30.230(a)(12) Reference Removed: The bill would no longer specify which independent contractor test applies. Courts would determine employee versus independent contractor status under generally applicable Alaska law, which could include the relative nature of the work test, the ABC test under AS 23.20.525(a)(8) for unemployment purposes, or other standards depending on the context of the claim.
• Reduced Litigation Exposure for Remote Parties: Project owners and general contractors would no longer be required to affirmatively prove the independent contractor status of every worker in the subcontracting chain. This significantly reduces the evidentiary and litigation cost burden described above.
• Core Liability Framework Preserved: The joint and several liability provisions of AS 23.10.700, the private right of action under AS 23.10.710(a), the pre-suit notice requirement, and the payroll records provisions would all remain intact.

If the amendment is not adopted, the rebuttable presumption and the AS 23.30.230(a)(12) test remain in the bill as drafted. Defendants in unpaid wage actions would bear the burden of proving independent contractor status through the full mandatory-plus-supplemental test, with the practical challenges outlined above.

Impact on Alaska Native Corporations

Many Alaska Native Corporations own commercial real property and commission construction projects for office buildings, cultural facilities, housing developments, resource extraction infrastructure, and community improvements. Under HB 260, any Alaska Native Corporation acting as a “project owner” could be jointly and severally liable for unpaid wages owed by its contractors and subcontractors at every tier. Key considerations include:

• Unlimited Downstream Exposure: An Alaska Native Corporation that contracts with a general contractor could face liability for wage claims arising from sub-subcontractors several tiers removed—entities the corporation may have no contractual relationship with and no ability to monitor.
• Non-Waivable Liability: The joint and several liability under Sec. 23.10.700 expressly cannot be waived by contract, limiting traditional risk allocation through indemnification and hold-harmless provisions. While indemnification recovery rights are preserved under AS 23.10.710(c), the initial exposure remains.
• Employee Presumption Risk (If Amendment N.5 Fails): The presumption that all workers are employees shifts the burden to the Alaska Native Corporation to prove independent contractor status under the demanding AS 23.30.230(a)(12) test—for workers the corporation did not engage and may have no information about.
• Residential and Commercial Exemptions: Alaska Native Corporations developing housing projects of five or fewer units on a single tract, or single-unit commercial projects, would be exempt. However, the scale of most Alaska Native Corporation development projects is likely to exceed these thresholds.

Alaska Native Corporation subsidiaries that perform construction work would be subject to both the new liability framework and the enhanced payroll disclosure obligations:

• Payroll Records Disclosure (AS 23.10.720): Alaska Native Corporation subsidiaries acting as subcontractors must, upon request, provide detailed payroll records to the project owner or contractor, including worker names, classifications (employee or independent contractor), contact information for any sub-subcontractors, anticipated project timelines, and a five-year affidavit regarding any civil, administrative, or criminal proceedings involving violation of wage payment laws.
• Five-Year History Affidavit: For Alaska Native Corporation subsidiaries active across multiple jurisdictions and contract vehicles—particularly those with 8(a) program participation—the requirement to disclose any wage-related proceedings within the preceding five years requires careful tracking and may create discovery exposure in unrelated litigation.
• Withholding Rights: On the positive side, a project owner or contractor may withhold payment to a subcontractor in an amount equal to wages the owner or contractor has paid on the subcontractor’s behalf. This provides a self-help mechanism for Alaska Native Corporations acting higher in the contracting chain.

This article summarizes aspects of the law and opinions that are solely those of the authors. This article does not constitute legal advice. For legal advice regarding your situation, you should contact an attorney.