BILL ANALYSIS                                                                                                                                                                                                    ”



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          CONCURRENCE IN SENATE AMENDMENTS
          AB 1897 (Roger HernŠndez)
          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 


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