BILL ANALYSIS Ó
AB 1897
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1897 (Roger Hernández)
As Amended August 22, 2014
Majority vote
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|ASSEMBLY: |51-23|(May 29, 2014) |SENATE: |22-12|(August 27, |
| | | | | |2014) |
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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.
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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
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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.
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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
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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
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for dealing with documented problems that involve contracting.
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
FN: 0005382