California Governor Jerry Brown has signed into law Bill 1897, which holds businesses liable when their subcontractors violate wage, workplace safety or workers’ compensation rules.
According to the California Pool and Spa Association (CPSA), under the new law, California employers will now share joint liability for wage, hour and work condition violations with any contracting group they do business with, regardless if the work is performed without a contract. Despite a fierce battle waged by the CPSA and many others in the business community, the democratically controlled state Legislature passed this bill after strong lobbying efforts by labor unions.
AB 1897 intends to address liability issues in the temp-hiring industry after studies have indicated that low-wage workers in warehousing and food processing are often victims of labor violations, such as receiving payments below state minimum wage and being uncompensated for working overtime. As a result, businesses operating in California will now share all civil legal responsibility and civil liability with labor contractors for workers supplied by the contractor for wage and hour violations and failure to retain valid workers’ compensation coverage.
According to the CPSA, the principle problem with the bill is that it could potentially cover not only labor contractors but legitimate subcontractors, temporary employment agencies and employee leasing firms. AB 1897 defines a labor contractor as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business. Thus a legitimate subcontractor that plasters pool or lays the decking could be considered a labor contractor. This would mean that the pool contractor or general contractor might well be responsible for wage, hour and working condition violations of his or her subcontractor or for workers compensation coverage if the subcontractor is uninsured.
CPSA and the business community were instrumental in brokering a small employer exemption, thus absolving most pool builders and other industry players from the scope of the bill. The exemption applies to businesses with a workforce of less than 25 workers (including those hired by the business from the labor contractor) and also to businesses who acquire five or fewer workers from a labor contractor. Nonetheless, CPSA believes AB 1897 will have costly impacts upon employers not falling within the parameters of the bill.
