Companies could be liable for independent contractor damages

By CMTA Staff

Capitol Update, May 9, 2013

SB 556 by Senate Majority Leader Ellen Corbett (D-San Leandro) would make companies engaging independent contractors (IC) liable for damages caused by the IC if the public has reason to believe the IC is an employee or agent of the company, including wage-and-hour violations, penalties, fines, and willful misconduct. This belief could arise from the fact that the IC or their employee was driving a vehicle with a company logo or wearing a uniform that is similar to a company uniform. CMTA opposes the bill because it greatly expands the risks of doing business in the state and overturns settled law related to agency liability.

Sponsored by the California Labor Federation, the argument is that companies are routinely hiring through third party intermediaries, such as labor contractors or temporary staffing agencies, and thus shielding the companies from liability. Under current law, a company would not be liable for personal injuries or property damages caused by an IC except where the company exercised control over the acts of the IC. Of course, the IC itself is responsible for the acts of its employees and agents over which they exercise control.

SB 556 is a way to impose a new risk or penalty on contracting for services, thereby pushing companies to hire employees rather than engage ICs. But in fact, the bill will simply make it more expensive and onerous to do business in the state, leading to less employment and investment.  

SB 556 was approved by both the Senate Judiciary and Senate Labor and Industrial Relations Committees this week with strong Democrat support. It is headed to the Floor for consideration by the entire State Senate.

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