AB 1897, signed by the Governor in September, is intended to combat the underground economy, by making a party who hires labor through “labor contractors” also responsible for wages and the purchase of Worker’s Compensation coverage.

1. The bill will take effect January 1, 2015.
2. The bill applies to “client employers”, defined as a business entity that is provided workers to perform labor within its “usual course of business” from a “labor contractor”.

The bill does not apply to “client employers” who:

• Have a workforce of less than 25 workers total, including those hired from a labor contractor.
• Are provided no more than 5 workers from labor contractors at any one time.
• Are homeowners or home based businesses for labor received at the home.
• There are other exceptions regarding motor carriers, motor club, and cable operators.

The bill doesn’t apply where the “labor contractor”:

• Is a bona fide non profit, community based organization.
• Is a bona fide labor organization, apprenticeship program, or hiring hall operating under a Collective Bargaining Agreement.
• A motion picture payroll services company.
• Is party to certain types of employee leasing arrangements. See the part of the bill with new Labor Code Section 2810.3, subsection (a)(3)(D).

“Worker” does not include employees legitimately exempt from overtime as executive, administrative, or professional employees.

The “client employer” shares all civil legal responsibilities and civil liability responsibility with the “labor contractor” for:

• Payment of wages, including amounts due to the state.
• Failure to secure Worker’s Compensation coverage.

CSA members should make sure they are protecting themselves, if such workers are utilized.

1. When providing labor under a subcontract or contract directly with an owner:
   • Review possible new requirements to indemnify the contractor or owner for costs and damages involved with a potential claim by your employee against the contractor or owner. Understand the liabilities imposed upon the contractor or owner can’t be waived by contract, as it is now against public policy.
   • Be prepared to respond within the 30 day notice required by an employee making a claim against the contractor or owner.
   • Be prepared to respond promptly to requests from a state enforcement agency to information relative to a claim under this new law.
   • Clarify that you will not take any adverse action against an employee (or an employee of a subcontractor or labor contractor) for filing a claim under this new law.
2. When being provided workers under a subcontract or other means:
   • Confirm a methodology to review bids and follow up with the labor contractor, to ensure proper wages are being paid. Be especially careful of low bids, outside a reasonable bid spread.
   • Be prepared to respond quickly within the 30 day window, to a claim from an employee of a subcontractor or labor contractor.
   • Confirm your contract or subcontract allows appropriate indemnification for failure of the subcontractor or labor contractor to pay legally required wages, state taxes, and Worker’s Compensation coverage for their employees.

For the full report details, visit this  California Legislature Bill Page

Jeffrey Aran

Sign law expert serving the sign industry and its customers for over 25 years, providing legal and consulting services to sign users, installers and manufacturers. Based in Sacramento, Practice Areas include Zoning; Land Use; Real Estate; Constitutional Law; Employment; & Business. Admitted to the Bar in 1989. Law Offices of Jeffrey L. Aran 1-888-SIGNLAW.

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