The California legislature is considering a bill that could rewrite the relationship between employers and temporary staffing agencies. Assembly Bill 1897 (Hernandez, D-48) would make employers that hire laborers from temporary agencies liable if those agencies fail to provide workers’ compensation insurance, violate wage and hour laws or fail to withhold proper taxes.
This legislation could, effectively, end the staffing agency model by making it difficult for most small businesses to use the services. (The text of the bill is here.)
Employers hiring temporary staffing agencies would be responsible for performing due diligence by checking into the internal practices of the staffing agencies to determine whether agencies are properly funded to comply with labor laws and regulations. The employer, as a client of the agency, would be held responsible if the staffing agency failed to meet these requirements. Under the current version of the bill, it would be impossible to “contract around” this requirement, as a waiver would be deemed to violate public policy.
Promoters of AB 1897, including the California Labor Federation, claim that the bill is designed to protect employees of staffing agencies from wage theft and lack of workers’ compensation coverage. But the goal seems to run deeper. Proponents also hope to address wage disparity between full-time and temporary workers, benefit differences and impediments to collective bargaining by temporary employees.
According to the California Chamber of Commerce, which opposes the bill, employers that do not have dedicated human resources or legal departments rely on temporary agencies to prescreen employees, to fill seasonal and short-term positions, to provide cover for employees who are absent and to protect the core group of employees from workforce reductions (the use of temporary workers would be reduced during slack times, instead.)
AB 1897 would make life harder for small businesses by holding them responsible for performing due diligence by seeking agency data outside of their purview and making them financially responsible for factors that are beyond their control, including businesses issues that could drive staffing agencies into bankruptcy. While most staffing agencies are properly insured and funded, this bill will cause small businesses anxiety over increased fines and litigation and create a chilling effect throughout the California labor market.
AB 1897 is currently before the Assembly Committee on Labor and Employment.
Isn't that what the stand fund is for?Every insurance policy pays a surcharge to the state fund to cover employees in the event that an insurance company fails, a company bought bogus insurance, or a company is uninsured.
What do you expect from California?I do not know Hernandez (D-48), and if his leanings are socialist. This may just be an attempt of doing away with temp companies so that companies have to hire ALL employees and provide them with benefits.
I think that the real reason is because SCIF is in financial trouble. They are just trying to pass the cost along to deeper pockets. How do they define "verify the temp company has insurance?" Is asking for a certificate of insurance enough?
How far will the lawyers take this? If a store in a strip mall does not have work comp, is the real estate company then responsible for work comp? If you own your own business and have an office in your home, are you responsible for the plumber's work comp if he doesn't have it?
Problems with this bill:
“Client employer” means an individual or entity that receives obtains or is provided workers to perform labor or services within the usual course of business of the individual or entity from a labor contractor. See the plumber in your house scenario above.
“Labor contractor” means an individual or entity that contracts with a client employer to supply workers to perform labor or services within the usual course of business or otherwise provides workers to perform labor or services within the usual course of business for the client employer. Is maintenance (washing your storefront windows) within the usual course of business?
Where this bill really FAILS:(b) A client employer shall share with a labor contractor all civil legal responsibility and civil liability for the following:
- The payment of wages to workers provided by a labor contractor.
- The failure to report and pay all required employer contributions, worker contributions, and personal income tax withholdings as required by the Unemployment Insurance Code.
- Failure to obtain secure valid workers’ compensation coverage as required by law 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.
(d) The provisions of subdivisions (b) and (c) are in addition to, and shall be supplemental of, any other liability or requirement established by statute or common law. Does that also include FEDERAL IMIGRATION LAW?
Remember Arizona's SB 1070? Does that mean that the Client Employer must check immigration status? Can California enforce Federal Immigration Law?
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