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Over the weekend, California Governor Jerry Brown signed Assembly Bill 1897, which imposes new joint liability for companies whose labor subcontractors violate wage and workplace safety laws. The bill was hotly contested. While labor groups are calling it a major victory for California workers, business groups argue that the bill is a “job killer” that threatens the state’s economy.

Instead of letting the commentary shape the public’s perception of the new legislation, though, the public would be better served to consider the text contained in the actual bill.

After all, the bill is a mere three-and-a-half pages long, and the actual law contained in the bill accounts for just over two. As the non-partisan Office of Legislative Counsel noted in the bill’s preamble, the purpose of AB 1897 is to do the following:

[To] require a client employer 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 the failure to obtain valid workers compensation coverage…[as well as]…prohibit a client employer from shifting to the labor contractor legal duties or liabilities under workplace safety provisions with respect to workers provided by the subcontractor.

Anti-Retaliation Provision

In addition to shared liability for the foregoing violations, Section 2810.3(e) of the bill includes joint liability for client employers who retaliate against workers who either report violations or file civil actions for violations of the law’s provisions. In other words, companies who hire staffing agencies to supply cheap labor are legally prohibited from retaliating against those workers when they report workplace safety violations or complain that the agency is not paying them overtime. Subsection (m) also categorizes any attempted waiver of the laws new provision as “contrary to public policy” and therefore “void and unenforceable.”

30-Day Notice Required Prior to Legal Action

That said, claimants under the new law are required under subsection (d) to notify the client employer of any violation at least thirty (30) days prior to filing any civil action. Requiring such notice should serve to placate the seemingly exaggerated fears on the side that decries the bill as the enemy of business and economic growth. By requiring such a thirty-day notice, client employers are provided with the opportunity to remedy the situation without being haled into court.

While forthcoming regulations from Cal-OSHA and the Labor Commissioner are certain to shed additional light on the law’s scope, the notice provision appears to effect two key purposes.

First, the notice requirement gives the client employer the choice to either remedy the situation or actively ignore the situation. One key concern that this bill sought to remedy was the increasingly popular trend of outsourcing labor to staffing firms known for paying low wages. With the wave of a pen, companies were able to cut labor costs and avoid liability for failure to pay minimum wage and overtime. By holding these companies jointly liable for such wage violations, the new law creates an incentive for client employers only to do business with contractors that comply with existing labor law.

The policy justification for this is simple. If a client employer is benefiting financially from outsourcing its labor to a staffing company that it now knows is not complying with wage laws, the client employer who chooses to ignore the problem should bear a proportionate burden for the unpaid wages and penalties. After all, the labor contractor may well have only offered its services at such a low cost to the client employer precisely because it was not adequately compensating its employees.

Second, the employees supplied by labor contractors and staffing companies still work in the workplaces under the control of the client employer. Thus, if there is a hazardous situation in the workplace, the client employer is in the best position to fix it. In fact, if the client employer has any direct employees of its own, the company is already required to uphold workplace safety standards and is legally liable for any harm that befalls those employees as a result of noncompliance.

Once again, the notice requirement provides the client employer with the opportunity to remedy the hazardous situation prior to being held liable. This not only places the employer in a position to actively choose whether it is going to comply with workplace safety issues under its direct control. It also affords subcontracted laborer the same level of protection from hazards in the workplace as the full-time employees that are often working right alongside them.

While the new law undoubtedly holds client employers to a higher standard, the important comparison to bear in mind is how this new standard compares to the old regime. If prohibiting companies from knowingly benefiting from the subversion of wage and workplace safety laws is considered a business killer, one can not help but wonder whether that’s the type of business the public should have been encouraging in the first place.