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New California Law Holds Employers Responsible For The Wages Of Workers Provided By Staffing Agencies And Other "Labor Contractors"

On September 28, 2014, California Governor Jerry Brown signed into law AB 1897 (click here for a copy), adding Section 2810.3 to the California Labor Code. Under the new law, any business entity that obtains workers from a "labor contractor" (such as a staffing agency) shares - along with the staffing agency - all legal responsibility and liability for both (1) payment of those workers' wages, and (2) any failure to obtain valid workers' compensation coverage for those workers. The law defines "workers" as those employees who are not exempt from payment of overtime under California law (such as exempt professional, administrative, or executive employees), and defines "labor contractor" as any individual or entity (such as a staffing agency) that supplies businesses with workers to perform labor for that business's regular and customary work.

The law does not apply to businesses that have less than 25 workers (this number includes both employees hired directly by the business as well as workers provided by the staffing agency). The law also does not apply to businesses with five or fewer workers provided to the business by staffing agencies at any given time.

If a worker intends to sue a hiring business entity for violations of this new law, the worker (or the worker's representative) must notify the business entity of these violations at least 30 days before filing any civil action.

The new law also contains recordkeeping requirements. Upon request by a state enforcement agency or department, the hiring business entity or the staffing agency must provide to the state enforcement agency or department "any information within its possession, custody, or control required to verify compliance with applicable state laws."

The law does state that a hiring business entity can establish and enforce, by contract, "any otherwise lawful remedies against a [staffing agency] for liability created by acts of a [staffing agency]." This means that business entities should make sure that any contracts they have with staffing agencies contain clear, enforceable indemnification provisions stating that the staffing agency will indemnify the business entity for any liability under this new law.

If you have any questions about this new law, about hiring temporary workers, or any other employment and labor law questions your company may be facing, please feel free to contact us.

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