Proposed legislation introduced in California, AB 2741, would add significant requirements to the staffing industry from restricting conversion fees to disclosing to workers their bill rate as well as wage rate. Staffing leaders in the state are concerned about damage the bill could cause. The California bill would cover all types of temporary workers — from industrial to professional — unlike get-tough-on-staffing bills in Illinois and New Jersey that focused only on industrial staffing. Recently, the bill’s author proposed amendments to reduce onerous measures included in the original text, but no official language has yet been seen.

The industry is moving to stop it from becoming law, and the California Staffing Professionals Association has even released a video to highlight concerns.

“It’s definitely one of the most overreaching bills we’ve ever seen,” said Toby Malara, VP of government relations at the American Staffing Association.

The bill is also vague, Malara said. It’s unclear how some of its provisions would be put in place. The ASA has adopted an “all-hands” approach to defeating it, which could come before the committee next month.

The bill was introduced on Feb. 15 by Rep. Matt Haney, D-San Francisco. Haney offered to make several changes to the legislation; however, Malara said no official language has come out. Right now, the ASA is treating the bill as is.

Even if the offer from Haney’s office holds, there are still many issues with the legislation, Malara said in a note to SIA.

SIA will continue to follow this bill as the situation develops.

Paul Sorensen, CEO at Partners Personnel, said CalChamber presented an update on the bill on March 15, where it reported the legislation was being amended to remove some provisions. The proposed changes include removing requirements that staffing firms report their bill rates to workers and that client firms with more than 100 temporary workers publicly report the number of temporary workers they have hired.

Another change: A proposed total prohibition on conversion fees would be updated so that conversion fees can still be charged up until two or three months into an assignment, Sorensen said. The amendments also change section 1522(a) of the bill, which states a temporary worker at a client long term would get the opportunity to become a directly hired employee of the client firm. The change would give workers the right to apply but not require client companies to hire them.

“We are glad to see this bill is being cut back significantly,” Sorensen said in a note to SIA. “But remaining language in the bill — e.g., 1522(a) — remains unworkable.”

The requirement that temporary workers performing services for client companies on a long-term, continuing basis is one concerning provision.

“This undermines the entire premise of the temporary staffing value proposition: flexibility,” Sorensen said. “It’s not about how long someone has or has not been on the payroll; it is the lack of visibility towards future demand. That is why companies often cannot offer the long-term position. Restricting this will inevitably cause structural damage to the employment market, dramatically reduce or eliminate the staffing industry, and lower total employment.”

The definition of “long-term” and “continuous” within the bill is also vague.

Among the original provisions in AB 2741 before the recently proposed amendments:

• Wage statements sent to temporary workers would be required to include not only their wage information but also the bill rate that client companies pay.
• Conversion fees would be banned.
• Every temporary worker at a client long-term would get the opportunity to become a directly hired employee of the client firm. "Long-term" is not defined.
• Temporary workers would get first offer for permanent positions.
• Staffing firms would need to notify temporary workers when sending them to locations where there is a strike, lockout or other labor difficulties. The workers would be able to refuse the assignment without prejudice.
• Client companies with 100 or more employees hired through staffing firms would have to annually post the number of temporary workers they have hired.

“It’s like they are trying to bully the staffing industry,” Jose DeLuna, managing director at Omni Resources Solutions LLC in Orange County and a consultant to staffing firms, said in a phone call with SIA. “It’s not good for the clients and it’s not good for staffing.”

The prohibition against conversion fees means the all the hard work finding the employees will be out the door if the bill passes, DeLuna said. And by disclosing bill rates, everybody in the contingent staffing industry will know one another’s markup.

Clients would be affected as well because they would be required to hire temporary workers directly after a period of time and they would have to give temps first shot at permanent jobs, he said.

Fortino Rivera, chair of the California Staffing Professionals’ Political Action Committee, appeared on a video arguing against the bill. Rivera is also CEO of Staffing Solutions with offices in Santa Ana and Montebello, California.

“I volunteered to do the video because I am sick and tired of California lawmakers meddling in our business when this bill is not even needed,” Rivera said in a note to SIA.

The California Staffing Professionals’ PAC is also working to get the message out about the industry and to stop draconian legislation such as this, he said.

“Many representatives/candidates do not understand our industry and the great services we provide workers and businesses,” Rivera said. “Keep in mind, bills that pass in California tend to then pass in other states, so let’s defeat this bill now so it does not spread to the rest of the nation.”

The ASA’s Malara said the bill appears to be based on recommendations from a group called the Tech Equity Collaborative, which published a report on which the bill appears to be based. The report is from a contract IT worker survey conducted in 2022 by the Tech Equity Collaborative.

SIA has reached out to the Tech Equity Collaborative as well as Rep. Haney for comment.

In a letter to the chair of California’s Assembly Labor and Employment Committee, the ASA argued the legislation would unnecessarily add extraordinary costs and burdens on the industry. It also pointed out the vital role staffing plays in the economy.

In addition, the ASA letter also questioned validity of the TEC survey.

“TEC acknowledged that data relating to contract IT workers is ‘limited,’ yet conducted its survey with no input from a professional third-party market research firm to ensure that the data that was available was representative and that the conclusions were statistically valid,” the ASA wrote in its letter.

Without knowing who was surveyed or what questions were asked, the report cannot be considered a fair picture of the experiences of the more than 70,000 people in California who work in contract IT jobs each year, the ASA said. In fact, the ASA’s own surveys show job satisfaction to be positive.

“The California legislature should not make far-reaching policy decisions affecting significant sectors of the state’s economy based on anecdotal reports,” the ASA wrote.

Partners Personnel’s Sorensen said staffing firms’ effectiveness in widening the net of legitimate employment is well documented. Partners Personnel and similar firms have 100% W-2 employees and are among the largest remitters of payroll-deduction taxes to California city, county and state governments.

“The fact is when staffing agencies are not a viable option — especially for small and medium-sized businesses — much of that work goes unreported and untaxed,” Sorensen said. “We sincerely hope we can help our legislators in Sacramento better understand how staffing agencies are strategic partners of the government in the employment sector and that this proposed bill is removed.”