Victory for California Staffing Agencies
After years of lobbying, Governor Schwarzenegger has signed a bill (SB 940, effective January 1, 2009) clarifying the wage payment obligations of staffing firms doing business in California. It amends various provisions of the California Labor Code dealing with final payment of wages.
The new law clarifies an issue left open by the California Supreme Court in Smith v. L'Oreal (2006). That ruling was construed by some to mean that temporary employees are discharged from employment, thus triggering the obligation to provide final pay immediately upon the conclusion of the temporary assignment, regardless of whether they remained eligible for reassignment. Given the unpredictable nature of temporary assignments, which are often ended by staffing firm clients without any prior notice to the firm, it was often practically impossible to issue a timely final check. Without this legislative action, California staffing firms faced significant potential liability in wage penalties.
The Labor Code amendment provides that the end of a temporary assignment is not a discharge from employment requiring immediate payment of wages. Instead, such employees may be paid on a weekly basis. There is an exception to the weekly pay requirement--staffing firms need not pay weekly for employees on assignment in excess of 90 consecutive calendar days. Certain day laborers and labor dispute replacements must be paid daily. Temporary employees who are discharged from the staffing agency, or who are not eligible for reassignment, are not affected by this amendment and still must be paid immediately upon such termination, or within 72 hours of a voluntary resignation.