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Gianelli & Associates News Blog

Monday, November 2, 2015

Jerry Brown Signs Legislation That Protects Temp Industry Workers

New law hailed as a victory for organized labor but CalChamber calls it a “job killer”

California governor Jerry Brown announced on September 28, 2014 the signing of Assembly Bill (AB) 1897, which adds section 2810.3 to the Labor Code and targets businesses that use workers provided by temp agencies. AB 1897 takes effect January 1, 2015.

According to AB 1897, “client employers” (i.e. business entities) that obtain or are provided “workers to perform labor within its usual course of business from a labor contractor” (that is, from temp agencies and subcontractors) are required to “share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for the payment of wages and the failure to obtain valid workers’ compensation coverage.”

In other words, private employers that use contract workers will now be unable to deny liability if a labor contractor fails to pay a worker all required wages or secure valid workers’ comp coverage for contract workers.

Under previous laws, companies that outsourced work could deny responsibility when subcontractors violated workplace rules. Now, those same companies could face fines for violations.

The new law was inspired in part by a 2013 ProPublica investigation that found temp workers are more likely than regular workers to be injured on the job and are sometimes charged fees that bring their pay below minimum wage.

Temp worker employment has accounted for around one-fifth of U.S. job growth since 2009, says ProPublica, and according to the National Employment Law Project there are now an all-time record 2.8 million temp workers—2 percent of total employment—in the economy.

Labor Groups Laud AB 1897

The passage of AB 1897, which received strong support from the Teamsters and the California Labor Federation, is seen as a major victory for organized labor.

Art Pulaski, executive secretary-treasurer of the California Labor Federation, in a prepared statement called the legislation, “a historic new law that holds corporations accountable when workers hired using labor contractors are cheated out of wages or forced to work in unsafe conditions. By holding corporations jointly liable with subcontractors and staffing agencies, the governor closed a loophole in the law that many big companies were using to violate the basic rights of workers with impunity.”

Teamsters President Jim Hoffa said in a statement that, “We are one step closer to preventing companies from engaging in a 21st century scam by claiming the men and women who do their work are not really employees, but ‘temporary workers’ for labor contractor or agencies. This corporate shell game allows corporations to deny responsibility for basic worker rights like pay, benefits, and working conditions.”

Business Groups Oppose Legislation

Opponents of AB 1897, including the National Federation of Independent Business and the California Chamber of Commerce, say that the law will increase business costs and harm the state’s business climate. It was deemed by CalChamber to be a “job killer” that unfairly holds liable innocent businesses that have no ability to control or prevent workplace violations.

AB 1897, said chamber policy advocate Jennifer Barrera in a video news release, “will make it harder for California employees to do business in this state. It will discourage further growth in this state, and it will certainly discourage out-of-state companies from relocating here.”

What Businesses Need to Know

AB 1897 does not apply to all client employers. Highly-paid tech workers, homeowners, trucking companies and cable companies are exempt in most cases, as are the following business entities:  

  • Those with fewer than 25 workers;
  • Those with five or fewer workers supplied by a labor contractor or labor contractors at any given time;
  • The state or any political subdivisions thereof (including cities, counties, and special districts).

A business entity may not create a waiver that is contrary to AB 1897, but it can take steps to minimize its exposure under the new law, according to JD Supra Business Advisor, including :

  • Making sure that labor contractors who pay workers on a 1099-basis correctly classify them as genuine independent contractors and are independent contractor compliant.
  • Using a proprietary tool such as IC Diagnostics to measure compliance.

And as the National Law Review notes, employers will want to revise their labor service contracts to protect their interests against staffing agency/subcontractor Labor Code violations.

California businesses concerned about limiting their exposure to labor contractor workplace violations may schedule a free consultation with the Modesto business law lawyers at Gianelli & Associates. 


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