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Committee backs state bill to increase staffing buyers’ liability

April 29 2014

A proposed California law that would impose joint liability on staffing buyers for such things as wages, employment taxes and workers’ comp was passed by the state’s Assembly Labor and Employment Committee in a 5-2 vote on April 24.

The bill, AB 1897, is aimed at abuses, but opponents say it’s a heavy-handed effort that impacts all staffing users when existing law is adequate to tackle problems.

“AB 1897 expands liability to all industries and all individuals who contract for labor or services, despite the lack of any evidence that there is a need beyond the industries already regulated,” according to the California Chamber of Commerce.

Edward Lenz, senior counsel of the American Staffing Association, says it’s difficult to predict whether AB 1897 will ultimately become law. California lawmakers are typically receptive to labor legislation, but there is strong opposition to the bill — including from the California Chamber of Commerce; ASA; and California Staffing Professionals, the ASA’s California state affiliate.

While the ASA is concerned about any abuse of workers, AB 1897 would impose broad new liability on staffing clients, Lenz says. Instead, existing laws should be used in cases where problems arise.

If AB 1897, becomes law it certainly wouldn’t be the death knell for the staffing industry in California, Lenz says. However, it might have a chilling effect on some businesses.

“It could prove to be a significant impediment and could increase the costs of doing business, which could cost jobs,” Lenz says. “Clients could require further indemnification to address any potential additional liability created by such a law.”

The California Chamber of Commerce also reports the proposed law would create significant amount of litigation. It would also create a “liability trap” by giving third parties that aren’t an employee’s actual employer an obligation to produce personnel records of the employee that include sensitive information such as hourly rate, Social Security numbers, birth date and potential medical information regarding any injuries.

It could also impact homeowners who hire workers for labor or service, according to the chamber.

Backers say the bill simply clarifies who can be held liable for legal violations.

“As California’s economy begins to rebound once again, we must provide protections to workers against employers in the subcontracted economy,” said bill author Assemblymember Roger Hernández, D-West Covina, Calif. “This new economic model is a tool used by some employers to exploit workers, while hiding behind staffing agencies. This bill is needed to protect those small businesses who continue to play by the rules and engage in fair competition.”

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