Insights
Publications

New California Law Holds Employers Liable for Labor Contractor’s Wage Violations

10/7/2014 Articles

California Governor Jerry Brown recently signed into law A.B. 1897, significantly expanding the potential liability of employers who use labor contractors, subcontractors, or staffing agencies for workers.  Effective January 11, 2015, A.B. 1897 adds Section 2810.3 to the California Labor Code, proclaiming that an entity hiring a labor contractor or agency is liable for that contractor's or agency’s failure to provide workers with required wages or valid workers’ compensation coverage under Labor Code Section 3700.

What does this mean?

Organizations obtaining “workers to perform labor within its usual course of business from a labor contractor” must assume responsibility for ensuring that the workers are paid and insured in accordance with California law.  Regardless of whether the hiring entity is aware of these violations, workers may bring actions directly against the hiring entity.  Previously, the employee had to demonstrate that the hiring entity employed them jointly with the contractor in order to establish liability.

This law does not apply to hiring organizations with less than 25 workers or with five or fewer workers supplied by a labor contractor at any given time.  The definition of “labor contractor” excludes bona fide nonprofits, labor unions, apprenticeship programs, collectively bargained hiring halls, and motion picture payroll services companies.  “Worker” excludes persons exempt from overtime as executive, administrative, or professional.  The worker must notify the hiring entity of any violations at least 30 days before filing a civil action.

What should employers do?

Organizations using labor contractors or staffing agencies will need to closely monitor those relationships.

First, hiring entities should periodically audit labor contractors to ensure they are properly paying wages and have appropriate workers’ compensation coverage.  Hiring entities need to avoid becoming directly involved in the contractor or agency’s operations, however, as this will expose employers to arguments of being a joint employer for purposes of other liabilities, such as discrimination or wrongful termination actions.  Hiring entities should consult with an employment attorney for more specific guidance based on the individual employer’s operations.

Second, hiring entities should ensure that any agreements with labor contractors include covenants that the contractor will comply with all laws and indemnify the hiring entities for liability caused by their failure to comply.

Finally, depending on a company’s size, number of temporary workers, and other factors, an employer may reconsider the use of labor contractors entirely.  In some cases, the administrative burden of overseeing labor contractors may outweigh the benefits.

Firm Highlights

Publication

California Expands Family and Medical Leave Law to Cover Small Employers

California Governor Gavin Newsom recently signed SB 1383, which expands employees’ leave entitlements under California’s Family Rights Act and New Parent Leave Act. Effective January 1, 2021, these leave provisions will apply to employers with...

Read More
Event

Equal Pay Data Reporting, an Asset for the Strategic Employer

Join Holly Sutton and co-speaker, Erin Hastings, in the discussion on "Equal Pay Data Reporting, an Asset for the Strategic Employer." California’s recently passed SB973 requires certain employers to collect and report the number...

Read More
News

Benchmark Litigation 2021 Ranks Farella Among Top Litigation Firms in California

SAN FRANCISCO, October 12, 2020: Farella Braun + Martel continues to be ranked among the top litigation firms in California in the  Benchmark Litigation  2021 guide. Farella was ranked “Highly Recommended” for Dispute Resolution...

Read More
Publication

The Election Season Is Upon Us: Guidance for Managing Political Expression in the California Workplace

In a year of extraordinary events, this election has been more divisive and controversial than any other in recent history. Many employers are grappling with how they should manage political expression in the workplace...

Read More
Publication

Guidance on Directive to Defer Payroll Tax Obligations Leaves Unanswered Questions

On August 8, 2020, the President directed the Secretary of the Treasury to authorize the deferment of certain payroll tax withholding, depositing, and payment obligations otherwise incurred on wages and compensation paid between September...

Read More
Publication

Employment Law Updates for Nonprofits in the New Normal

Farella's Nonprofit Education Series features Rebecca Stephens and Jaya Bajaj discussing "Employment Law Updates for Nonprofits in the New Normal." Nonprofit organizations are subject to both state and federal employment laws and regulations. The...

Read More
News

Farella Braun + Martel Elevates Five to Partner

Read More
Publication

California Employers Face Various New Laws in January 2021

The California Legislature passed and Governor Newsom signed several new laws covering topics ranging from COVID-19 to leaves of absence to data reporting. Most of these laws take effect January 1, so now is a...

Read More
News

52 Farella Braun + Martel Attorneys Listed in The Best Lawyers in America© 2021

Read More
News

Farella Braun + Martel Ranked Among “Best Law Firms” by U.S. News & World Report and Best Lawyers

SAN FRANCISCO, November 5, 2020: Farella Braun + Martel earned national and regional rankings across a number of practice areas in the U.S. News & World Report and Best Lawyers® release of the “Best...

Read More