By: Michael S. Fauver, Partner
March 2015
Businesses are increasingly relying on temporary workers from staffing agencies or other labor contractors. This has historically allowed them to address temporary or seasonal operational needs, while shifting the responsibility for compliance with California’s strict labor laws to third party contractors.
Effective January 1, 2015, California Labor Code Section 2810.3 establishes that private employers (referred to as “client employers” under the statute) now share with the labor contractors all civil legal responsibility and potential liability for: (1) payment of wages to the contractor’s employees; (2) the contractor’s failure to secure workers’ compensation coverage; and (3) compliance with all occupational health and safety regulations. This statute applies to all “client employers” that obtain or are provided workers to perform work within their “usual course of business” from companies that provide workers (i.e., “labor contractors”).
Of significance, this new statutory liability is imposed without consideration for whether the client employer had knowledge about the purported violations and irrespective of whether the client employer and labor contractor are considered joint employers. Potential liability exists even if the client employer had no control over the workers’ working conditions, manner of payment, work scheduling, or working environment.
There are practical steps a client employer can take to minimize its exposure under this new law. Care should be taken to evaluate a labor contractor before engaging them and to ensure they comply with all relevant labor laws with respect to their employees. Labor contractors that utilize an “independent contractor” model, rather than an employee model, should be carefully scrutinized. If those supposed independent contractors are later deemed to be misclassified, and, actually employees, both the client employer and the labor contractor will be responsible for failure to pay overtime or a minimum wage. In addition, client employers should consider providing all training needed by the workers, as well as appropriate safety and health programs.
Contracts for labor services in California should immediately be reviewed and carefully negotiated to limit the risk of retaining non-compliant contract employees. While the statute provides that any waiver is contrary to public policy and unenforceable, any such contract should require the labor contractor to defend and indemnify the client employer for the contractor’s potential failure to comply fully with California’s wage and hour laws or occupational health and safety regulations.
There are a few exemptions under the statute to the definition of a covered “client employer”:
There is no doubt that all companies utilizing the services of labor contractors will need to substantially increase their oversight of how their contractors comply with their myriad of legal requirements. In some situations, it may make sense to bring work currently done by contract laborers in-house.
Michael S. Fauver, Partner
MFauver@BFASLaw.com
(Direct) 805.966.7499
© 2015 Buynak, Fauver, Archbald & Spray, LLP
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