BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1855
                                                                  Page  1

          ASSEMBLY THIRD READING
          AB 1855 (Torres) 
          As Amended  May 25, 2012
          Majority vote 

           LABOR & EMPLOYMENT     5-2                                      
           
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          |Ayes:|Swanson, Alejo, Allen,    |     |                          |
          |     |Torres, Yamada            |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Morrell, Gorell           |     |                          |
          |     |                          |     |                          |
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           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)Defines "warehouse" to mean a facility whose primary operation 
            is the storage or distribution of general merchandise, 
            refrigerated goods, or other products.

          3)Provides that, upon request of the Labor Commissioner, any 
            person or entity who enters into a contract or labor or 
            services shall provide the relevant provisions of the contract 
            or other documentation to the Labor Commissioner, as 
            specified.

           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 








                                                                  AB 1855
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            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 
            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, 








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          "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" 
          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.

           
          Analysis Prepared by  :    Ben Ebbink / L. & E. / (916) 319-2091 


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