New California Law Makes Companies Liable for Wage Violations of Contractors
Yesterday, California’s Governor signed AB 1897 into law, notwithstanding tremendous opposition from business and trade groups. Under AB 1897, which takes effect January 1, 2015, a client employer will share civil legal responsibility and civil liability for all workers supplied by a labor contractor for the payment of wages and the failure to obtain valid workers’ compensation coverage. A “client employer” means a business entity that obtains or is provided workers to perform labor within its usual course of business from a labor contractor. However, it does not include business entities with a workforce of less than 25 workers (including those hired directly by the client employer and those provided by a labor contractor) or businesses with five or fewer workers supplied by a labor contractor at any given time.
The new law makes the client employer jointly liable with the labor contractor for civil liability relating to the payment of wages and/or failure to provide workers’ compensation coverage. However, the statute expressly permits client employers to include indemnification provisions in their service contracts and to enforce those provisions as a remedy against the labor contractor for liability created by acts of the labor contractor. Labor contractors may also contractually agree to indemnity provisions in their favor for acts on the part of the client employer that lead to liability. The statute sets forth one exception to the ability of the parties to shift liabilities by contract – a client employer may not shift to the labor contractor any legal duties or liabilities under Cal-OSHA.
Under the new law, a worker or his representative must notify the client employer of violations at least 30 days prior to filing a civil action against the client employer. Of course, the new law also prohibits client employers or labor contractors from taking adverse action against a worker for providing notifications of violations or filing a claim or civil action.
Looks like Christmas came early for the plaintiffs' bar, which will now have more potential pockets to pick in wage and hour actions filed against California employers.