BILL ANALYSIS Ó AB 1897 Page 1 ASSEMBLY THIRD READING AB 1897 (Roger Hernández) As Amended May 28, 2014 Majority vote LABOR & EMPLOYMENT 5-2 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Roger Hernández, Alejo, |Ayes:|Gatto, Bocanegra, | | |Chau, Holden, | |Bradford, | | |Ridley-Thomas | |Ian Calderon, Campos, | | | | |Eggman, Gomez, Holden, | | | | |Pan, Quirk, | | | | |Ridley-Thomas, Weber | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Grove, Gorell |Nays:|Bigelow, Donnelly, Jones, | | | | |Linder, Wagner | | | | | | ----------------------------------------------------------------- SUMMARY : Establishes specified liability for client employers that obtain workers from third-party labor contractors. Specifically, this bill : 1)Defines "client employer" to mean a business entity, regardless of its form, that obtains or is provided workers to perform labor or services within its the usual course of business from a labor contractor. "Client employer" does not include a business entity with a workforce of less than 25 workers, including those hired directly by the client employer and those obtained from, or provided by, a labor contractor. In addition, "client employer" does not include the state, or any political subdivision of the state, including any city, county, city and county, or special district. 2)Defines "labor contractor" to mean an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor or services within the client employer's usual course of business. 3)Specifies that "labor contractor" does not include any of the following: a) A bona fide non-profit, community-based organization that provides services to low-wage workers. AB 1897 Page 2 b) A bona fide labor organization or apprenticeship program or hiring hall operated pursuant to a collective bargaining agreement. c) A motion picture payroll services company as defined under existing law. 4)Specifies that "worker" does not include an employee who is exempt from the payment of overtime wages under existing exemptions for executive, administrative, and professional employees. 5)Defines "usual course of business" to mean the regular and customary work of a business, performed within or upon the premises or worksite of the client employer. 6)Provides that a client employer shall share with a labor contractor all civil legal responsibility and civil liability for the following: a) The payment of wages to workers provided by a labor contractor. b) The failure to report and pay all required employer contributions, worker contributions, and personal income tax withholdings. c) Failure to secure valid workers' compensation coverage. 7)Prohibits a client employer from shifting to a labor contractor any legal duties or responsibilities related to workplace health and safety. 8)Clarifies that these provisions are in addition to, and shall be supplemental of, any other theories of liability or requirement established by statute or common law. 9)Specifies that this bill does not prohibit a client employer from establishing, exercising, or enforcing by contract any otherwise lawful remedies against a labor contractor for liability created by acts of a labor contractor, and vice versa. 10)Provides that, upon request by a state enforcement agency or AB 1897 Page 3 department, a client employer or a labor contractor shall provide to the agency or department any information within its possession, custody or control required to verify compliance with applicable state laws. Upon request, these records shall be made available promptly for inspection, and the state agency or department shall be permitted to copy them. This requirement does not require the disclosure of information that is not otherwise required to be disclosed by employers upon request by a state enforcement agency or department. 11)Authorizes the Labor Commissioner, the Division of Occupational Safety and Health, and the Employment Development Department to adopt regulations and rules of practice and procedure necessary to administer and enforce the provisions of this bill. 12)Makes a waiver of the provisions of this bill contrary to public policy, and void and unenforceable. 13)Provides that this bill shall not be interpreted to impose individual liability on a homeowner for labor or services received at the home, or the owner of a home-based business for labor or services received at the home. 14)Provides that this bill shall not be interpreted to impose liability on a client employer for the use of a bona fide independent contractor or to change the definition of independent contractor. FISCAL EFFECT : According to the Assembly Appropriations Committee, General Fund costs in the range of $150,000 to $250,000 for the Department of Industrial Relations and the Employment Development Department to adopt regulations to administer and enforce the requirements of this bill. COMMENTS : This bill is co-sponsored by the California Labor Federation, AFL-CIO, the California Teamsters Public Affairs Council, and the United Food and Commercial Workers Union. The sponsors argue that the reliance on labor contractors undermines the enforcement of labor laws and erodes working conditions in key industries. Current law is simply insufficient to protect workers' rights in the shadows of the subcontracted economy. Under existing law, a company can only be held responsible if a worker can prove joint employer status. AB 1897 Page 4 This process is costly, slow, and difficult to navigate for most workers. It requires litigation, rather than providing a simple and straightforward rule. It is also easily manipulated by companies that have the labor contractor provide supervision on site to shield them from liability. The sponsors argue that this bill offers a far better approach. It holds companies accountable for serious violations of workers' rights committed by their own labor suppliers to workers on their premises. This simple rule will incentivize the use of responsible contractors, rather than a race to the bottom. It will protect vulnerable temporary workers, as well as businesses that follow the law and don't profit from cheating workers. It offers workers a clear path to accountability for workplace violations and it offers employers a clear path to compliance. A coalition of employer groups, including the California Chamber of Commerce, opposes this bill and argues that it forces one company to essentially insure the wage and hour obligations, workers' compensation coverage, and occupational health and safety duties of a separate employer's employees. Specifically, opponents contend that this bill holds an innocent third-party individual or business liable for the employment obligations of another employer. In addition, opponents contend that this bill will create significant litigation. Finally, opponents contend that there are already adequate protections under existing law for dealing with documented problems that involve contracting. Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091 FN: 0003845