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New California Law Establishes Shared Liability Between

Employer & Labor Contractor

By W. Rod McClelland, Jr.

 

Effective January 1, 2015, employers may be held civilly liable for a labor contractor's failure to comply with California's wage, workers’ compensation, and worker safety laws. This new law, A.B. 1897, was signed on January 28, 2014, by California Governor Jerry Brown. A.B. 1897 establishes shared liability between employers and labor contractors for certain State labor law violations. Additionally, A.B. 1897 prohibits employers from shifting worker safety obligations onto labor contractors.

 

Expanded Liability

 

Prior to the passage of A.B. 1897, an employer could be held liable for a labor contractor’s violation of California's labor laws only in joint employment situations. Determining the existence of a joint employment situation requires inquiry into the entity's rights to direct and control the manner and means by which the employees perform their work. This type of inquiry can require substantial effort. The most important facts in determining whether there is joint employment is if both entities maintain the right to control the employee’s work schedule and daily assignments.

 

A.B. 1897 allows for shared liability without a determination of joint employment. Pursuant to this new law, shared liability may exist, even for an employer who can show that they were unaware of existing labor violations. Specifically, the law dictates an employer may share in the liability of a labor contractor that fails to:

 

  1. Pay employee wages as required by California law;
  2. Secure ballot or sufficient workers’ compensation coverage; or
  3. Comply with occupational health and safety regulations.

 

Contractual Protection

 

A.B. 1897 explicitly allows employers to include indemnification provisions in their contracts with labor contractors. Employers may establish, exercise, and enforce, by contract, any otherwise lawful remedies against a labor contractor for liability created by actions of the labor contractor.

 

Effected Employers

 

This newly enacted law applies to California employers that:

 

  1. Have 25 or more employees;
  2. Hire more than 5 temporary workers from a labor contractor; and
  3. Use hired temporary workers to perform labor within the usual course of business.

 

A.B. 1897 defines “usual course of business" as the regular and customary work of a business, performed within or upon the premises or worksite of the employer. A.B. 1897 does not apply to employers with a workforce of fewer than 25 employees or employers that use 5 or fewer temporary workers supplied by labor contractors.

 

Labor Contractors Included Within A.B. 1897

 

Pursuant to A.B. 1897, labor contractors are individuals or entities that supply employers with workers to perform labor within the employer’s usual course of business, with or without a contract. However, limited exceptions exist for specified non-profits, labor organizations, apprenticeship programs, motion picture payroll service companies, and certain third-parties engaged in employee leasing agreements.

 

Notice

 

A.B. 1897 requires an employee to notify his/her employer of any labor law violation at least 30 days before filing a lawsuit against the employer.

 

Retaliation

 

The law prohibits employers and labor contractors from retaliating, or taking any type of adverse action, against an employee who reports a violation or initiates a civil lawsuit.

 

Enforcement

 

The California Department of Industrial Relations and the Employment Development Department will be responsible for the implementation and regulation of A.B. 1897. These agencies will also be responsible for enforcing compliance with the law. Employers will be required to provide these agencies with access to any records and information the agencies may require in order to certify compliance with the law.

 

Plan of Action concerning A.B. 1897

 

YRULEGUI & ROBERTS recommends a proactive approach to address the changes created by A.B. 1897.

 

First and foremost, employers and labor contractors should evaluate any existing agreements with labor contractors and determine whether indemnification clauses need to be added or amended to these agreements.

 

Second, employers and labor contractors should confirm, in writing, that the labor contractors are aware of the California wage and hour laws.

 

Third, employers should request and labor contractors should offer written confirmation that the labor contractor possesses sufficient workers’ compensation coverage.

 

Fourth, employers and labor contractors should confirm, in writing, that labor contractors are in compliance with occupational health and safety regulations.

 

Please feel free to contact our office with any additional specific questions concerning A.B. 1897. We would be happy to review any existing farm labor contracts to ensure the proactive steps discussed above are included in those contracts for the protection of employers.

© Copyright 2010 Yrulegui & Roberts

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