AB 1897: Liabilities for Outsourcing Labor

On September 28, 2014, Gov. Jerry Brown signed Assembly Bill 1897 (effective January 1, 2015), which amends the Labor Code by creating California Labor Code § 2810.3. This section will hold client employers responsible when their subcontractors violate wage, workplace safety, or workers’ compensation laws. Previously, temporary employees had the burden of proving that the client employers were “joint employers” with the staffing agencies. Now, the client employer will share civil legal responsibility and liability for paying wages to workers. The law also prevents the client employer from shifting legal duties or liabilities when there is a workplace safety violation.

This section is applicable to “client employers,” which are business entities with 25 or more workers that obtain or are provided at least six (6) workers to perform labor within the usual course of business from one or more labor contractors. Additionally, § 2810.3 does not impose liability on a business using an independent contractor “other than a labor contractor.” “Labor contractor” is defined as an individual or entity that supplies workers to perform labor “within the client employer’s usual course of business.” “Usual course of business” is defined as “the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.”

Employers currently subcontracting should be cautious when selecting a staffing agency and ensure that it complies with all relevant labor laws. Appropriate investigation and research should be conducted when developing a relationship with a staffing agency or labor contractor of any sort. Contractual safeguards (such as, indemnification, compliance, right to review, insurance and remedies) should be carefully considered. Competent legal counsel will be able to assist in properly structuring these relationships.