We’ve written several posts about the importance of classifying workers as employees or independent contractors. Whether a worker is classified as an employee or independent contractor can have significant tax implications for a business. What is more, improper classification can expose a business to unexpected civil liability for an employee’s conduct.
The issue is an important one for the state of California because classifying workers as contractors can cause the state to lose millions of dollars of income and other tax revenues. Further, California also wants to protect the rights of workers to ensure that businesses do not take advantage. In this regard, California has recently enacted a new law imposing additional liability on any company that employs temporary workers.
California Imposes New Obligations On Companies Using Temporary Workers
California Governor Jerry Brown recently signed a new law, known as Assembly Bill 1897, that will hold companies liable for labor violations when a company uses subcontracted work obtained through a temporary agency. Specifically, a company can now be held liable for failing to pay wages to a temporary worker who was obtained through a temporary agency.
The new law is aimed at industries where temporary workers are commonly used, such as in warehousing and food processing. Temporary workers are often employed because they are cheaper. Under California’s prior law, the company that used the temporary worker would not be held responsible for labor violations, such as failing to pay wages. Instead, the temporary agency would be held responsible.
California’s new law has changed this situation and has increased liability for companies. Under the new law, a client employer is required “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.”
Mixed Reviews To The New Legislation
The new law has been met with praise, as well as criticism. Teamsters President Jim Hoffa said that, “[n]o longer can employers hide behind unscrupulous labor contractors,” and companies will be held accountable for their labor violations.
Conversely, the California Chamber of Commerce has criticized the law because “it would punish some businesses for violations they didn’t know about and had no ability to prevent.” What is more, the Chamber believes the new law will make it harder for businesses and prevent out-of-state companies from doing business in the state.
Contact Janathan L. Allen’s Corporate Law Attorneys
Companies using temporary workers should be cognizant of the liability imposed on companies under the new law. The failure of a temporary worker to receive wages, whether from the company or the temporary agency, can result in the company being fined.
If you have any questions regarding the use of temporary agency workers or independent contractors, Janathan L. Allen’s Corporate Law Attorneys can help advise your business. Contact our attorneys today or visit one of our Southern California offices.
