Liability bill for subcontracted employees passes another hurdle

By CMTA Staff

Capitol Update, June 26, 2014

A bill to make employers legally liable for the wage and hour violations, workers’ compensation coverage, tax contributions and deductions and workplace injuries of workers obtained through a labor contractor or third-party staffing agency has passed its first house and both policy committees in the Senate. AB 1897 (Roger Hernandez, D-West Covina) applies to workers contracted to perform labor or services within the employer’s "usual course of business," which could capture business-to-business transactions and make this bill especially troubling for California manufacturers.

Currently, a third party employer may be liable for the labor obligations of another employer under two legal theories: (1) joint employer liability or (2) independent contractor misclassification. The key factor for both of these analyses is that the third party exerted such control over the working conditions of the contractor’s employees that essentially the third party acted as the real employer. This bill would hold innocent businesses liable for the employment obligations of another that they can neither control nor prevent.

AB 1897 will create significant litigation as any violation will trigger a potential representative action under the Labor Code Private Attorney General Act (PAGA), Labor Code Section 2699, et seq., thereby expanding the threat of onerous litigation against any company that utilizes contractors as part of its usual course of business.

Recent amendments exclude public employers and those with 25 or less employees, but the vast majority of businesses will still be affected.

AB 1897 has been referred to the Senate Appropriations Committee.

Read more Labor & Employment articles

Capitol updates archive 989898989