3 AB 1897, recently signed into law by Gov. Jerry Brown, targets companies (referred to as “client employers” in the new statute) that use outside firms (called “labor contractors” in the statute) to provide them with workers. The law adds a new provision to the California Labor Code, Section 2810.3, which states that a company using a third party to supply its workers “shall share … all civil legal responsibility and civil liability” for any unlawful failure to pay “wages” and for failure to secure workers’ compensation insurance for the third party’s workers. As an example, if a company’s third-party staffing agency violates California’s wage or workers’ compensation laws, the company itself may be liable under the new law.
This includes using drivers to deliver products and outside agencies to perform cleaning and other services necessary to maintain operations during the pandemic. This solution impacts wage and hour laws in several ways:Joint Employment - California Labor Code section 2810.3 makes companies that use workers supplied by other companies, like gig economy companies and staffing agencies, jointly liable to the workers for any unpaid wages and failure to provide workers’ compensation insurance. See our blog posts here and here.
The law holds businesses that obtain labor from a subcontractor jointly liable for the owed wages, damages and penalties, and workers’ compensation violations for the subcontracted workers.California Labor Code section 2810.3 applies to businesses with more than five workers supplied by the labor subcontractor and 25 employees total (including those supplied through a labor contractor) that uses “workers” to perform labor “within its usual course of business,” which means “regular and customary work” of the client employer’s business.To read more about this law that took effect in 2015, see our previous advisory here.
Even before Dynamex, courts found many subcontractors to be employees under the Borello standard.Satisfying the “Business-to-Business” Exemption Does Not Immunize a Company from Joint Employer LiabilitySeparate from the question of independent contractor status, the California Labor Code provides that certain business relationships (e.g., temporary employment agencies and their clients) share joint employer liability for the wages and workers’ compensation insurance of workers. See Cal. Labor Code § 2810.3. AB 5 expressly states that the “business-to-business” exemption does nothing to alter or supersede that provision of the Labor Code. In addition, a company can face common law joint employer liability if it shares or codetermines essential terms and conditions of employment for employees of another business.
Instead, California courts focus on whether a business has the right to control the manner and means on various factors deemed indicative of a common law employment relationship. Additionally, California Labor Code section 2810.3 automatically makes most companies who use workers from staffing agencies jointly liable with the staffing agency for the payment of those workers’ wages. Therefore, even if the DOL’s proposed revision to the FLSA’s joint employer rules do become effective, businesses are strongly advised to consult an attorney to understand how broad the changes are for a particular location.
Well, as a reminder, California has a new rule on the books that should make every creative business owner rethink playing that popular game of “not it” as an employer. In California, that game is not usually played with the help of God, but through the assistance of having employees supplied from a professional employer organization or a temporary employee agency.However, as of January 1, 2015, the California Labor Code § 2810.3 states that each affected California employer will jointly be responsible and liable with its labor contractors for the “payment of wages” to and failure to secure workers’ compensation for temporary contracted workers assigned to the employer.In other words, it’s time to know who is the employer under the law.
It does not address state law, which can vary dramatically. California Labor Code § 2810.3, for instance, imposes strict liability on “client employers” for wage payments and workers’ compensation benefits owed to employees of a “labor contractor” who “performs labor within the client employer’s usual course of business.” 331 US 722 (1947).
If the NLRB determines that it should, this would extend the holding of Browning-Ferris by potentially requiring the contracting company to bargain with a successful union, not only with respect to the employees of the staffing company, but also with respect to a bargaining unit consisting of employees of both entities. Presuming the NLRB decides Miller and Anderson this way, as is expected, then if joint employment status is indeed easier to establish following Browning-Ferris, more employers may be compelled to bargain with unions in a multi-employer unit comprised of regular employees and temporary employees.California Labor Code Section 2810.3 California has gone even further in expanding the scope of liability for employers who contract with temporary staffing agencies. On September 28, 2014, Governor Brown signed California’s AB1897 into law, adding section 2810.
In California, that game is not usually played with the help of God, but through the assistance of having employees supplied from a professional employer organization or a temporary employee agency. However, as of January 1, 2015, the California Labor Code § 2810.3 states that each affected California employer will jointly be responsible and liable with its labor contractors for the “payment of wages” to and failure to secure workers’ compensation for temporary contracted workers assigned to the employer. In other words, it’s time to know who is the employer under the law.Or you can just claim we’re all “working for god” and see how that works out for you.
By Laura Maechtlen and Dana HowellsAs of January 1, 2015, new California Labor Code section 2810.3 requires a “client employer” to share civil liability with “labor contractors” (aka payrolling, temporary staffing, or employee leasing agencies) for (1) payment of wages of the contract employees, and (2) failure to procure worker’s compensation coverage. Client employers will also have non-delegable responsibilities for worksite occupational health and safety.