BILL ANALYSIS ” AB 1897 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1897 (Roger HernŠndez) As Amended August 22, 2014 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |51-23|(May 29, 2014) |SENATE: |22-12|(August 27, | | | | | | |2014) | ----------------------------------------------------------------- Original Committee Reference: L. & E. SUMMARY : Establishes specified liability for client employers that obtain workers from third-party labor contractors. The Senate amendments : 1)Delete the term "services" from the bill and provide that the existing Labor Code definition of "labor" shall apply to this bill. 2)Provide that "client employer" does not include a business entity with five or less workers supplied by a labor contractor at any given time. 3)Provide that "labor contractor" does not include specified third parties defined as "labor contractors" under a special rule related to workers' compensation experience rating (except specified excluded entities), if the arrangement contractually obligates the client employer to assume all civil legal responsibility and civil liability under this bill. 4)Clarify that client employer liability shall only apply with respect to workers supplied by that labor contractor. 5)Delete client employer liability for failure to pay specified employer contributions, worker contributions, and personal income tax withholdings. 6)Require, at least 30 days prior to filing a civil action against a client employer, a worker or his or her representative to notify the client employer of specified violations. AB 1897 Page 2 7)Provide that neither the client employer nor the labor contractor may take any adverse action against a worker for providing such notice or filing a claim or civil action. 8)Delete the term "bona fide" regarding the use of independent contractors and provide that the bill shall not impose liability on a client employer for the use of an independent contractor, other than a labor contractor as defined in the bill. 9)Provide that the bill shall not be interpreted to impose liability on the following: a) A client employer that is not a motor carrier of property based solely on the employer's use of a third-party motor carrier of property with interstate or intrastate operating authority to ship or receive freight. b) A client employer that is a motor carrier of property subcontracting with, or otherwise engaging, another motor carrier of property to provide transportation services using its own employees and commercial motor vehicles, as defined. c) A client employer that is a cable operator (as defined), a direct-to-home satellite service provider, or a telephone corporation (as defined), based upon its contracting with a company to build, install, maintain or perform repair work utilizing the employees and vehicles of the contractor if the name of the contractor is visible on employee uniforms and vehicles. d) Specified motor clubs when they contract with third parties to provide motor club services utilizing the employees and vehicles of the third-party contractor if the name of the contractor is visible on the contractor's vehicles.
10)Make other minor changes. AS PASSED BY THE ASSEMBLY , this bill: 1)Defined "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 AB 1897 Page 3 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)Defined "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)Specified 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. 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)Specified 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)Defined "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)Provided 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. AB 1897 Page 4 c) Failure to secure valid workers' compensation coverage. 7)Prohibited a client employer from shifting to a labor contractor any legal duties or responsibilities related to workplace health and safety. 8)Clarified 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)Specified 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)Provided that, upon request by a state enforcement agency or 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)Authorized 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)Made a waiver of the provisions of this bill contrary to public policy, and void and unenforceable. 13)Provided 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)Provided 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 AB 1897 Page 5 independent contractor. FISCAL EFFECT : According to the Senate Appropriations Committee, the Department of Industrial Relations estimates one-time expenses of $250,000 (special fund) and the Employment Development Department estimates costs of $150,000 (General Fund). 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. 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 AB 1897 Page 6 for dealing with documented problems that involve contracting. Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091 FN: 0005382