BILL ANALYSIS Ó AB 1855 Page 1 ASSEMBLY THIRD READING AB 1855 (Torres) As Amended May 7, 2012 Majority vote LABOR & EMPLOYMENT 5-2 ----------------------------------------------------------------- |Ayes:|Swanson, Alejo, Allen, | | | | |Torres, Yamada | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Morrell, Gorell | | | | | | | | ----------------------------------------------------------------- SUMMARY : Extends existing law related to liability for financially-insufficient contracts to the warehouse industry, and makes other related changes to existing law. Specifically, this bill : 1)Extends provisions of current law related to liability for financially-insufficient contracts to the warehouse industry (in addition to the industries covered under existing law). 2)Provides that, in order to establish a rebuttable presumption under current law, a written contract for labor or services must be made available to an employee upon request. EXISTING LAW : 1 Prohibits a person or entity from entering into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, or security guard contractor where the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with applicable laws governing the labor or service to be provided. 2)Establishes a rebuttable presumption that there has been no violation of the law where the contract or agreement is in writing and meets specified conditions. 3)Authorizes an aggrieved employee to bring an action to recover the greater of his or her actual damages or $250 per employee AB 1855 Page 2 per violation for an initial violation and $1,000 per employee for each subsequent violation, in addition to injunctive relief. FISCAL EFFECT : Unknown COMMENTS : This bill adds the "warehouse" industry to Labor Code Section 2810, existing law which relates to liability for individuals who enter into contracts for labor or services in five specified industries that do not include funds sufficient to comply with labor laws. Senate Bill 179 (Alarcon), Chapter 908, Statutes of 2003, enacted Labor Code Section 2810, which prohibits a person or entity from entering into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, or security guard contractor where the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with applicable laws governing the labor or service to be provided. At the time, the author and supporters of the bill argued that the legislation was necessary to protect workers and law-abiding employers from employers and contractors that knowingly enter into contracts and agreements that are financially inadequate to permit compliance with applicable laws. The purpose of this bill was to establish state policy regarding financially insufficient contracts in industries most associated with the underground economy. In recent years, some workers and worker advocates have noticed an increase in the number of employers who are moving away from a traditional employment model towards a business model that utilizes "subcontracted" or "contingent" workers. Much recent attention has focused on one industry in particular: the warehouse and logistics industry, especially in the Inland Empire region of Southern California. On February 15, 2012, the Assembly Labor and Employment Committee conducted an informational hearing entitled, "Confronting the Challenges of a Subcontracted Economy: The Experience of Warehouse Workers in the Logistics Industry as a Case Study." The hearing explored the overall issue of whether an employment model that relies heavily upon a "subcontracted" AB 1855 Page 3 workforce results in a situation in which workers' rights are adequately protected, and whether enforcement agencies are able to adequately enforce existing law to hold responsible parties accountable. The hearing focused primarily on the warehouse industry as a case study that has garnered recent attention. The hearing also examined whether state policy adequately addresses the situation or whether policymakers should consider additional regulatory or statutory changes. Supporters of this bill argue that this bill is aimed at establishing accountability in the warehouse industry. These can and should be good jobs that help us rebuild a middle class in this state. This bill will help us eliminate the underground economy within this industry by prohibiting financially insufficient contracts. This levels the playing field for the many companies that follow the law and gives hope to these workers of a better life. Opponents object to the portion of the bill that would require a contracted employer to make available the contract with its clients to employees upon request. They state that the contract is proprietary and contains information concerning pricing which, if disclosed, could distort the marketplace for services and create an unfair competitive advantage for competitors. Opponents also contend that the bill does not adequately define the "warehouse" industry and therefore could inadvertently cover many other businesses that store goods or merchandise, such as in a back storage room. Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091 FN: 0003464