BILL ANALYSIS                                                                                                                                                                                                    



                                                                            



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                                    THIRD READING


          Bill No:  SB 556
          Author:   Corbett (D)
          Amended:  5/9/13
          Vote:     21


           SENATE JUDICIARY COMMITTEE  :  5-1, 5/7/13
          AYES:  Evans, Corbett, Jackson, Leno, Monning
          NOES:  Anderson
          NO VOTE RECORDED:  Walters

           SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE  :  4-0, 5/8/13
          AYES: Lieu, Leno, Padilla, Yee
          NO VOTE RECORDED:  Wyland


           SUBJECT  :    Agency:  ostensible

           SOURCE  :     California Labor Federation
                      California Professional Firefighters
                      Consumer Federation of California


           DIGEST  :    This bill provides that a person or entity that  
          enters into a contract or agreement for labor or services with a  
          contractor is liable for any damages caused by that contractor  
          or his/her employee for work performed under the contract if  
          certain circumstances exist that causes a member of the public  
          to believe that the contractor or his/her employee was an agent  
          of the person or entity.

           ANALYSIS  :    

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          Existing law:
           
           1.Provides numerous comprehensive requirements, rights, and  
            remedies relating to the employer-employee relationship,  
            including, but not limited to, wages and other compensation,  
            hours, workers' compensation, labor code violation actions,  
            employment contracts, and standards for working conditions.

          2.Defines "employee" to mean every person in the service of an  
            employer under any appointment or contract of hire or  
            apprenticeship, express or implied, oral or written, whether  
            lawfully or unlawfully employed, as specified.  (Labor Code  
            Sec. 3351)  But excludes specified individuals such as someone  
            who is employed by his/her parent, spouse or child.  (Labor  
            Code Sec. 3352)

          3.Defines "independent contractor" to mean any person who  
            renders service for a specified recompense for a specified  
            result, under the control of his principal as to the result of  
            his work only and not as to the means by which such result is  
            accomplished.  (Labor code Sec.3353) The contract of  
            employment is a contract by which one, who is called the  
            employer, engages another, who is called the employee, to do  
            something for the benefit of the employer or a third person.   
            (Labor Code Sec. 2750)

          4.Specifies that no person shall state, in an advertisement that  
            they are a producer, manufacturer, processor, wholesaler, or  
            importer, or that they own or control a factory or other  
            source of supply goods when such is not the fact.  No person  
            shall in any other manner misrepresent the character, extent,  
            volume, or type of his/her business.  (BPC Sec. 17505)

          5.Specifies that it is unlawful for any person doing business in  
            California and advertising to consumers to make any false or  
            misleading advertising claims.  Includes claims that purport  
            to be based on factual, objective, or clinical evidence;  
            compare the product's effectiveness or safety to that of other  
            brands; or, purport to be based on any fact.  (BPC Sec. 17508)

          6.Authorizes an employer to prescribe the weight, color,  
            quality, texture, style, form and make of uniforms required to  
            be worn by his/her employees.  (Labor Code Sec. 452)
           

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           This bill:

          1.Provides that a person or entity that enters into a contract  
            or agreement for labor or services with a contractor is liable  
            for any damages caused by that contractor or his/her employee  
            for work performed under the contract if certain circumstances  
            exist that causes a member of the public to believe that the  
            contractor or his/her employee was an agent of the person or  
            entity.  Specifically, a person or entity that enters into a  
            contract for labor or services is held liable if either of the  
            following occurred:

             A.   The contractor or contractor's employee wore a uniform  
               that is substantially similar to the uniform of the person  
               or entity so as to cause a member of the public to believe  
               that the contractor or contractor's employee was an agent  
               of the person or entity.

             B.   The contractor or contractor's employee operated a  
               vehicle with the logo of the person or entity and the  
               vehicle had an appearance that would cause a member of the  
               public to believe that the contractor or contractor's  
               employee was an agent of the person or entity.

          1.Conforms the liability provided in this bill to other immunity  
            exceptions.

          2.Applies only to contracts entered into on or after January 1,  
            2014.

           Background

           Under existing law, a contract of employment is a contract by  
          which one, who is called the employer, engages another, who is  
          called the employee, to do something for the benefit of the  
          employer or a third person.  Existing law and regulations set  
          forth the conditions under which a person may be classified as  
          an independent contractor, and thus not subject to many wage,  
          overtime, working conditions, and various other labor standards.  
           The Employment Development Department (EDD), the Franchise Tax  
          Board, and the federal government are the primary entities that  
          have established criteria for making a determination as to  
          whether a person may be classified as an independent contractor.  
           EDD has developed a guide, worksheets, and forms to assist  

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          businesses in determining whether a worker is an employee or  
          independent contractor.

          According to a 2012 UC Berkeley Labor Center report,  
          middle-class long-term jobs are shifting to include more  
          temporary and subcontracted employment.  (Temporary Workers in  
          CA are twice as likely as non-temps to live in poverty: Problems  
          with Temporary and Subcontracted work in CA, August 2012)  This  
          type of contingent work has been growing over the past two  
          decades.  The report notes that, "In California almost  
          one-quarter of a million people worked in the temporary help  
          services industry in 2010; another 37,000 people worked for  
          employee leasing firms totaling 282,000 workers in these two  
          industries."

          According to the report, temporary and subcontracted work  
          present two basic public policy problems, (1) that temporary and  
          subcontracted arrangements erode wages [leading contingent  
          workers to rely more on the state services] and (2) temporary  
          and subcontracted arrangements undermine existing worker  
          protections first by allowing employer to avoid certain worker  
          provisions, and second by making enforcement of the remaining  
          protections difficult.  The report suggests that solutions to  
          this problem range from increasing low wages to mandating the  
          same pay for temporary workers.  In addition, the report  
          suggests that "policies to combat retaliation and hold other  
          actors in the supply chain accountable are promising ways to  
          uphold existing worker protections in the face of workplace  
          changes."

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   Local:  
           No

           SUPPORT  :   (Verified  5/10/13)

          California Labor Federation (co-source)
          California Professional Firefighters (co-source)
          Consumer Federation of California (co-source)
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists
          California Teamsters Public Affairs Council
          Engineers and Scientists of California 
          International Longshore & Warehouse Union 
          Professional & Technical Engineers, Local 21

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          UNITE HERE! 
          United Food and Commercial Workers Union, Western States Council
          Utility Workers Union of America, Local 132

           OPPOSITION  :    (Verified  5/10/13)

          Associated General Contractors
          Building Owners and Managers Association of California
          California Ambulance Association
          California Business Properties Association
          California Chamber of Commerce
          California Chapter of American Fence Association  
          California Employment Law Council 
          California Fence Contractor's Association 
          California Hospital Association
          California Manufacturers and Technology Association
          California Restaurant Association
          California Trucking Association
          Civil Justice Association of California
          CSAC Excess Insurance Authority
          Engineering Contractor's Association
          Flasher Barricade Association
          International Council of Shopping Centers
          International Franchise Association
          International Warehouse Logistics Association 
          Marin Builders Association
          Messenger Courier Association of America
          NAIOP of California, the Commercial Real Estate Development  
          Association
          National Federation of Independent Business
          Personal Insurance Federation of California
          Rural County Representatives of California
          Western Electrical Contractors Association

           ARGUMENTS IN SUPPORT  :    According to the author and proponents,  
          companies are routinely hiring through third party  
          intermediaries, such as labor contractors or temporary staffing  
          agencies.  Arrangements that they argue, separate the company at  
          the top from the workers at the bottom and shielding from  
          liability the company that is calling the shots.  They argue  
          that some workers are not even told who their real employer is;  
          giving them fewer tools to ensure their rights are not violated.  
           For example, hotel workers are sometimes hired by the hotel but  
          paid by a subcontractor who is the employer of record.

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          Proponents argue that subcontracting also has implications for  
          consumers and the public because many times consumers don't even  
          know what entity they are actually doing business with, or who  
          is in charge if something goes wrong.  In addition, they argue  
          that when workers enter a home or have access to personal  
          information the consumer should have the right to know if this  
          is a city employee, a known company employee, a temporary or  
          contracted out employee, or an independent contractor.

           ARGUMENTS IN OPPOSITION  :    Opponents write, "SB 556 would  
          completely ignore the legal significance of the independent  
          contractor relationship, and impose liability against the  
          contracting entity for any damages caused by the contractor or  
          contractor's employees, solely on the basis that the contractor  
          or its employees wore a uniform that was substantially similar  
          to that of the contracting entity or displayed a logo on its  
          vehicle of the contracting entity that made the public believe  
          such individuals were employees of the contracting entity.  To  
          our knowledge, it is unprecedented to extend liability for wage  
          and hour violations or intentional conduct to a third party  
          solely on the basis of appearances."

          "There is no evidence that any member of the public is confused,  
          harmed, or damaged in any way based upon a mistaken belief that  
          the independent contractor is an employee of the company.   
          Specifically, there is no proof that any company has refused to  
          stand behind the services provided or resolve a customer  
          complaint on the basis that the individual performing the  
          services was an independent contractor versus an employee.   
          There is also no evidence that any member of the public was  
          harmed based upon a mistaken belief as to the employment  
          relationship between an individual and the contracting company."


          AL:ej  5/10/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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