BROWN SIGNS AB 1897

In a move sure to please many worker advocates, Governor Brown has signed AB 1897 (Hernandez).

This bill provides that many employers who hire labor contractors will be liable for the sins of those labor contractors where there are wage claims or failure to secure valid workers’ comp coverage.

Specifically, the bill provides that

A client employer shall share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for both of the following:

(1) The payment of wages.

(2) Failure to secure valid workers’ compensation coverage as required by Section 3700.

(c) A client employer shall not shift to the labor contractor any legal duties or liabilities under the provisions of Division 5 (commencing with Section 6300) with respect to workers supplied by the labor contractor.

Business interests had lined up in opposition to AB 1897, while labor interests and employee advocates pushed the bill.

Subcontracted employment has been increasing. As a result, many workers have found it difficult to identify the applicable workers’ comp coverage or to pursue wage and hour claims .

The rationale for AB 1897 is stated in the Assembly floor analysis as follows:

“The sponsors argue that the reliance on labor contractors undermines the enforcement of labor laws and erodes working conditions in key industries. Current law is simply insufficient to protect workers’ rights in the shadows of the subcontracted economy. Under existing law, a company can only be held responsible if a worker can prove joint employer status. This process is costly, slow, and difficult to navigate for most workers. It requires litigation, rather than providing a simple and straightforward rule. It is also easily manipulated by companies that have the labor contractor provide supervision on site to shield them from liability.

The sponsors argue that this bill offers a far better approach. It holds companies accountable for serious violations of workers’ rights committed by their own labor suppliers to workers on their premises. This simple rule will incentivize the use of responsible contractors, rather than a race to the bottom. It will protect vulnerable temporary workers, as well as businesses that follow the law and don’t profit from cheating workers. It offers workers a clear path to accountability for workplace violations and it offers employers a clear path to compliance. ”

Exempted from the bill are:

1. Businesses with a workforce of less than 25 workers

2. Businesses with five or fewer workers supplied by a labor contractor or labor contractors to the client employer at any given time.

3. The state and cities, counties & political subdivisions

4. Motion picture patrol companies, certain motor carriers, and certain cable TV operations

5. Certain non-profits and bona fide labor organizations and apprenticeship programs

6. Services provided to home-based businesses

Additionally, the bill provides that

At least 30 days prior to filing a civil action against a client employer for violations covered by this section, a worker or his or her representative shall notify the client employer of violations under subdivision (b).

Congratulations are in order to the many groups that came together to make this bill a reality.

AB 1897 will likely have a salutary effect in piercing the veil of many of the shell subcontracting arrangements that have resulted in workers getting less than their due.

When employers retain liability in a subcontracting situation, they will likely be more vigilant in requiring subcontractors to follow California labor and workers’ comp laws.

This is another example of a bill that while not strictly speaking a “workers comp bill” has potential wide effect in the workers’ comp system.

Julius Young