CWS 3.0: September 10, 2014

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California bill to expand staffing buyers’ liability goes to governor

California legislators approved a bill last week that could make staffing buyers liable for staffing firm wage and hour violations among other things.

The bill, AB 1897, was sent to Gov. Jerry Brown for his signature.

“If signed by Governor Brown, AB 1897 will require employers to share with their staffing agencies all responsibility and liability for the payment of staff wages and the failure to obtain valid workers’ compensation coverage,” said Saba Shatara, an attorney at law firm Drinker Biddle.

“Though the law currently prohibits employers from contracting for services, such as construction or farm labor, without ensuring that the agreement includes sufficient funds to cover these expenses, the bill would expand employers’ liability to all service contracts, including contracts for administrative services,” Shatara said. “AB 1897 will expose employers that use staffing agencies to liability for Labor Code violations committed by the agencies. If Governor Brown signs the bill, aggrieved workers may bring suit against the employer, without first seeking to obtain relief from the staffing agency that engaged in the violations. Therefore, employers must now be especially cautious in selecting a staffing agency — and evaluate the agency before partnering with them — in order to limit their risk of retaining non-compliant contractors. When contracting with staffing agencies, employers should also specify remedies against the agency for liability created by the labor contractor’s acts.”

The American Staffing Association reports the bill requires claimants to provide staffing firm clients with 30 days' notice of an alleged violation prior to filing a civil action. And the requirement will give staffing buyers the opportunity to refer matters to staffing firms for resolution before any lawsuit is filed.

The California Chamber of Commerce urges its members to contact the governor and ask him to veto the bill, which it describes as a “job killer” that imposes unfair liability on contracting entities for wage and hour and workers’ comp coverage violations.

The moral for staffing buyers is to do their due diligence and know who you are dealing with, said Bryan Peña, vice president, contingent workforce strategies and research, at Staffing Industry Analysts.

“If everyone’s complying with the law there’s no risk,” Peña said. “Most contracts have a compliance provision. You really want to be sure you understand how that compliance is supposed to work.”

The law was authored by Assemblymember Roger Hernández, D-West Covina.

“This bill focuses on companies that choose to use labor contractors to supply workers to do the work of their regular course of business,” Hernández said in a statement. “That’s a business decision and under this bill, it would come with certain responsibilities to ensure that workers are not abused. This bill simply clarifies who can be held liable for specified violations. The bill protects workers from exploitation and abuses resulting from a new business model that we are seeing proliferate across all industries as we begin to emerge from the economic recession.”