BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 556| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 : CONTINUED SB 556 Page 2 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) CONTINUED SB 556 Page 3 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 CONTINUED SB 556 Page 4 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 CONTINUED SB 556 Page 5 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. CONTINUED SB 556 Page 6 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 **** END **** CONTINUED SB 556 Page 7 CONTINUED