BILL ANALYSIS Ó
AB 1897
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Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1897 (Hernandez) - As Amended: April 10, 2014
Policy Committee: LaborVote:5-2
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill establishes liability for client employers that obtain
workers from third-party labor contractors. Specifically, this
bill:
1)Requires a client employer to 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.
c) Failure to secure valid workers' compensation coverage.
2)Prohibits a client employer from shifting to a labor
contractor any legal duties or responsibilities related to
workplace health and safety.
3)Clarifies that these provisions are in addition to, and shall
be supplemental of, any other liability or requirement
established by statute or common law.
4)Specifies 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
indemnification for liability created by acts of a labor
contractor, and vice versa.
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5)Provides 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 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.
6)Authorizes 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.
7)Defines "client employer" to mean an individual or entity that
obtains or is provided workers to perform labor or services
within the usual course of business of the individual or
entity from a labor contractor. Defines "labor contractor" to
mean an individual or entity that contracts with a client
employer to supply workers to perform labor or services within
the usual course of business or otherwise provides workers to
perform labor or services within the usual course of business
for the client employer. Specifies 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.
FISCAL EFFECT
General Fund costs in the range of $150,000 to $250,000 for the
DIR and EDD to adopt regulations to administer and enforce the
requirements of the bill.
COMMENTS
1)Purpose . In recent years, there has been an increase in the
number of employers who are moving away from a traditional
employment model towards a business model that utilizes
"subcontracted" or "contingent" workers. Worker advocates have
expressed concern that this business model results in
challenges for workers and enforcement agencies in ensuring
that employees' rights are fully protected. This issue was
the topic of informational hearings held by the Assembly
Committee on Labor and Employment in February 2012 and March
2014.
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The sponsors of this bill, California Labor Federation,
AFL-CIO, the California Teamsters Public Affairs Council, and
the United Food and Commercial Workers Union, contend existing
law is insufficient to protect workers' rights in a
subcontracted work environment. 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 and often requires litigation.
According to the sponsor, this bill holds companies
accountable for serious violations of workers' rights
committed by their own labor suppliers to workers on their
premises. The bill is an attempt to protect vulnerable
temporary workers and offer a clear path to accountability for
workplace violations and employer compliance.
2)Opposition . A coalition of employer groups, including the
California Chamber of Commerce, opposes this bill and contend
this bill holds an innocent third-party individual or business
liable for the employment obligations of another employer even
if there is no evidence or proof that the third party exerted
any control over the working conditions of the contractor's
employees.
Opponents also assert this bill jeopardizes employee
confidentiality. The bill requires a client employer or a
labor contractor to comply with any agency or department's
request to inspect records in order to verify compliance with
applicable laws. This means that a third party entity, who is
not the employee's actual employer, will have an obligation to
produce personnel records of an employee, that includes
sensitive information such as hourly rate, social security
numbers, birth date, and potential medical information
regarding any alleged injuries. Opponents argue this is an
impossible requirement as the third party "client employer,"
does not maintain personnel records of individuals who are not
its employees and cannot force the actual employer to comply
with an agency's request. Opponents contend this bill will
create significant litigation and believe there are adequate
protections under existing law for dealing with contracting
problems.
Analysis Prepared by : Misty Feusahrens / APPR. / (916)
319-2081
AB 1897
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