On September 28, 2014, Governor Jerry Brown signed A.B. 1897 into law. The new law provides that companies who utilize the services of workers supplied by a labor contractor shall share with the labor contractor all civil legal liability and responsibility for payment of wages, and potential income tax withholdings, and failure to secure valid workers’ compensation coverage. The law also prohibits the company from shifting to the labor contractor any legal duties or responsibilities related to workplace health and safety.

The law is designed to supplement other liabilities and requirements established by statute or common law, and specifies that any waiver of its provisions will be considered contrary to public policy and deemed void and unenforceable. The law does not apply, however, to employees who are properly classified as exempt under the administrative, executive or professional exemptions.

Accordingly, non-exempt workers provided by a staffing company no longer have to prove joint employer liability in order to collect from the contracting company who uses the workers. Such temporary or leased non-exempt workers must simply provide notice to the company where they were assigned at least 30 days prior to filing a civil action naming the company as co-liable.

The law does not prohibit contractual indemnification provisions with staffing companies for indemnification of liability created by the staffing company’s acts. The law also does not apply to companies with a workforce of less than 25 employees, including those supplied by the staffing companies, or companies with 5 or fewer workers supplied by a staffing company at any given time.

ACTION ITEM

Companies that use temporary or leased workers in California are now open to liability that they used to shift to the staffing agencies, and as such, this law takes away some of the legal benefits of such arrangements.

Companies that use temporary or leased non-exempt workers in California should verify that the staffing companies are complying with state laws by paying workers their wages, making appropriate tax withholdings and have workers’ compensation coverage.

Companies should also review their contracts with staffing companies to ensure they contain appropriate and limited indemnification provisions if the labor contractor fails to meet state law requirements.