New Law May Hold Your Business Liable For Violations By Temporary Staffing Agencies


California employers beware:  certain companies that hire service and temporary workers are now responsible for labor code violations by the staffing agencies that provide the workers.  Read on for details and potential remedies.  

Signed into law by Governor Jerry Brown on September 28, 2014, AB 1897 (codified at Labor Code section 2810.3) effectively obliterates the line between companies and their temporary staff, even when the temp workers are hired by third party service agencies or “labor contractors.”  For example, if your company uses a third party staffing agency to provide janitors, security guards, warehouse workers and the like, you may be on the hook if the staffing agency violates wage or safety regulations.  

To be clear, companies were always liable to temporary workers who could show in court that their working conditions were set by the company that hired them and not their staffing agency.  AB 1897 is groundbreaking, however, in that it removes any such burden from temp workers.  In essence, the law requires companies to make sure labor contractors are staying on top of their payment of workers, etc.  California is one of the first states to prescribe such far-reaching regulations.

The law provides few exceptions, but if you run a small business (fewer than 25 employees, including full-time and temp positions) or never hire more than five temporary workers at a time, you can stop reading here; the law explicitly states that it does not apply to such companies.  The law also exempts homeowners, highly-paid tech workers, trucking and cable companies.  But to all other “client employers,” the law mandates the following:

  1. Client employers using labor contractors must inform those contractors of all responsibilities and liability regarding wages and workers’ compensation coverage for the labor contractors’ workers.
  2. Should a labor contractor or staffing agency fail to fully pay a temp worker’s wages or fail to provide workers’ compensation, the client employers will be liable to those temporary staffers affected.
  3. Client employers are also prohibited from shifting responsibility for temp workers’ safety to the labor contractor or staffing agency—meaning client employers must guarantee a safe work environment.
  4. State Enforcement Agencies and Departments may request documents from client employers proving compliance with applicable state laws for temp employees.

One helpful caveat?  Section 2810.3(g) states that this law “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.”  This means that you can—and in all likelihood should—contract for indemnity from the labor contractors you employ.  But probably the best advice is to contract only with staffing agencies who comply with the law.

As with most new laws, there were two sides to the passing of AB 1897.  On the one hand, the California legislature displayed good intentions in trying to protect the exploitation of subcontracted workers who, according to some reports, were packed onto overcrowded vans and shuttled to assemble products and unload trucks, regularly facing mandatory fees that pushed their pay below the minimum wage or being subjected to unsafe working conditions.  

On the other hand, the law clearly opens the door to increased litigation as temp workers will now look to deeper pocketed companies for the recovery of their labor code claims.  The California Chamber of Commerce also derided the legislation, calling the bill a “job killer” and claiming it “unfairly forces” one employer to ensure obligations for another employer’s workers. 

Regardless, we encourage all our clients who may fall under the ambit of this new law to remain proactive in reviewing your contracts with temporary staffing agencies and to be vigilant about any potential violations by these labor contractors.  If you need any help reviewing your contracts or in understanding the impact of the law on your company, please contact Ross Schwartz, Dick Semerdjian or Sarah Evans at 619.236.8821.