New Calif. Law Imposes Shared Liability on Employers and Labor Contractors for Assigned Temp Workers

On Sept. 28, 2014, California Governor Jerry Brown signed into law a bill that will hold employers liable for certain California Labor Code violations committed by their labor contractors, regardless of the employer’s control over or direct participation in such violations.

New Shared Liability Standard

Effective Jan. 1, 2015, under Labor Code § 2810.3 (Section 2810.3), each affected California employer will:

• “Share” responsibility and liability with its labor contractors with respect to the “payment of wages” to contracted temporary (temp) workers assigned to the employer, regardless of the employer’s control of or participation in the payment of wages to assigned temps (who are typically employed and paid by labor contractors).
• “Share” liability for its labor contractor’s unlawful failure to secure valid workers’ compensation coverage for assigned temps.

The stated basis for the law is to prohibit employers from shifting to their labor contractors legal duties or liabilities under workplace safety provisions with respect to assigned workers provided by the contractor.

Departure From Joint-Employer Liability Rule

The new law is a significant departure from California’s common law joint-employer theory of liability. Under that approach, an employer could be liable for claims for unpaid wages of contracted workers only if a worker established that an actual employment relationship existed both with the labor contractor that employed the temp worker and with the company to which the worker was assigned to perform contracted services. This typically was accomplished through, among other things, a showing that the company to which the worker was assigned exercised significant, direct control over the worker’s hours, wages or working conditions.

• Now, because of Section 2810.3, a company will be deemed jointly liable for certain violations along with its third-party labor contractor, regardless of the amount of actual control that the company exerts over contracted, leased or temp workers assigned to it.
• The new law also provides that an employer or labor contractor must comply with a request by a state enforcement agency or department to inspect or copy “any information … required to verify compliance with state laws.” The scope of “information” and the “state laws” are wholly undefined under the statute, leaving open the possibility that state agencies may use this authority to broadly seek information from employers.

While the new law purports to nullify any attempt to waive the provisions of the statute, it does provide that employers and labor contractors may still contract for any “otherwise lawful remedies” against each other for their acts.

Although the use of temp workers and other contracted labor can be appealing to many businesses, employers in California should be wary of the state-specific consequences and potential liability associated with such practices. For questions regarding this new law or assistance in reviewing the use or potential use of contracted labor in California or elsewhere, please reach out to your McGuireWoods contact, the authors or any other members of the McGuireWoods labor and employment group.