Employers Now Share Liability with Staffing Companies and Labor Contractors for Wage Violations

October 8, 2014

New provisions of the Labor Code (AB 1897) provide that employers now share liability with labor contractors or staffing companies for failure to pay wages, certain workplace safety issues, and failure to secure valid workers’ compensation coverage.  Employers with more than 25 employees who use at least five employees obtained from labor contractors or staffing companies are subject to the law.  The contracted employees are included when determining whether the 25-employee threshold is met.  The law does not apply to certain non-profits, entities operated pursuant to collective bargaining agreements, certain motor carriers, and homeowners who have services performed in their homes.

The new law protects workers who complain about violations or enforce the law from retaliation by the labor contractor or the client employer.  Employees must notify the employer of specified violations thirty days prior to filing a civil action.  The law cannot be waived and a client employer may not shift liability for certain workplace safety obligations to the labor contractor or staffing agency.

Employers using staffing agencies or labor contractors must be careful when selecting labor contractors.  Be sure to review wage payment policies and ensure that there is clear communication with the contractor regarding the employees’ wages and hours of work if the employees are paid through the contractor.  When contracting, employers and staffing agencies should include provisions requiring proof of workers’ compensation insurance, proper payment of wages and indemnification as appropriate.