On September 28, 2014, Governor Jerry Brown of California signed a bill that puts a potentially enormous liability risk on companies that use workers supplied by “labor contractors” that fail to pay all wages due the workers. Assembly Bill 1897 requires client employers to “share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for . . . the payment of wages and failure to secure workers’ compensation coverage . . . .”
There are three important exclusions: First, the new law covers “workers provided to perform labor within [the client company’s] usual course of business from a labor contractor.” Businesses with a workforce of less than 25 workers (including the number of workers provided by labor contractors) and businesses with five or fewer workers supplied by labor contractors are not covered.
Second, the law defines “worker” to exclude those who are exempt from payment of overtime as executive, administrative, or professional employees.
Third, the statute also specifically excludes bona fide “independent contractors” supplied by a labor contractor. However, non-exempt employees who are found to have been misclassified by the labor contractor as independent contractors are covered by the new law when provided to a client company….
- Misclassification of Workers: An Attempt to Save Could Cost Your Business A … – JD Supra (press release) (jdsupra.com)
- Employee Misclassification Is an Easy, and Costly, Mistake – JD Supra (press release) (jdsupra.com)
- Why is worker misclassification a problem? (star-telegram.com)