California Enacts AB 1897 Which Means Greater Liability For Employers Who Use Labor Contractors

By Gerald Hartman, Mark Terman, Ryan Fife and Saba Shatara

On September 28, 2014, California Governor Jerry Brown announced the signing of Assembly Bill 1897, which amends California Labor Code section 2810 by creating a new Labor Code section 2810.3.

The new law targets businesses that obtain or are provided “workers to perform labor within its usual course of business from a labor contractor.” The statute’s definition of “labor contractor” excludes bona fide nonprofits, bona fide labor organizations, apprenticeship programs, hiring halls operated pursuant to a collective bargaining agreement, and motion picture payroll services companies.

Once AB 1897 becomes effective, private employers will be unable to deny liability for labor contractor’s failure to pay all required wages[1] or to secure valid workers’ compensation coverage for contract workers. Employers using the labor services will now “share with the labor contractor all civil legal responsibility and civil liability for all workers supplied” to the company. This liability is imposed without consideration for whether the business had knowledge about the purported violations and irrespective of whether the client employer and labor contractor are joint employers. The statute expressly provides that it does not limit any other theories of liability or requirements established by other statutes or common law.

As a result, employers should be especially cautious in selecting a staffing agency. Companies intending to use labor contractors should evaluate the agency before partnering with it to determine whether the contractor complies with all relevant labor laws. Contracts for labor services should now be entered in with an eye towards limiting the risk of retaining non-compliant contractors.

Aside from performing careful due diligence prior to retaining labor services, there are some practical steps a business can take to minimize its exposure under the new law. While the statute provides that any waiver is contrary to public policy and is unenforceable, a company may contract with a staffing agency for indemnification for the agency’s failure to pay required wages or secure valid workers’ compensation coverage. Thus, it will be important for employers to revise labor service contracts to protect their interests against failures of staffing agencies to comply with the Labor Code.

Current law already prohibits employers from entering into a contract for labor or services with a construction, farm labor, garment, janitorial, security guard, or warehouse contractor, if the employer knows or should know that the agreement does not include sufficient funds. However, the new law is designed to extend liability to employers in nearly all industries for a labor contractor’s failure to pay wages or provide adequate workers compensation. The statute exempts the following from coverage:

  • A business with fewer than 25 workers (which includes “those hired directly by the client employer and those obtained from, or provided by, any labor contractor”);
  • A business with five or fewer workers supplied by a labor contractor or labor contractors at any given time; and
  • The state or any political subdivision of the state, including any city, county, city and county, or special district.[2]

AB 1897 goes into effect on January 1, 2015.

If you have any questions concerning this alert, please contact one of the authors listed above or any other member of Drinker Biddle’s Labor &Employment Group.

 


[1] The statute provides that the term “wages” shall have the same meaning provided by Section 200 and “and all sums payable to an employee or the state based upon any failure to pay wages, as provided by law.” Labor Code section 200 in turn defines “wages” as including “all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.

[2] AB 1897 was revised significantly from when it was originally proposed. All these exemptions were added through revisions. Also, the enacted version removed language that would have created shared liability for “[t]he failure to report and pay all required employer contributions, worker contributions, and personal income tax withholdings as required by the Unemployment Insurance Code.”

“BAN-THE-BOX” Signed Into Law in New Jersey

By: Helen E. Tuttle and DeMaris E. Trapp

On August 11, 2014, New Jersey Governor Chris Cristie signed into law “The Opportunity to Compete Act”, commonly referred to as New Jersey’s “ban-the-box” law, which prohibits employers from asking about the applicant’s criminal history prior to the completion of the first interview. New Jersey is the 6th state, in a growing trend, to pass some form of the “ban-the box” law which is intended to remove obstacles to employment for people with criminal records. New Jersey will join Hawaii, Illinois, Massachusetts, Minnesota, and Rhode Island, all of which have similar laws covering private employers.

New Jersey’s law will become effective on March 1, 2015 and covers both public and private employers operating in New Jersey who employ 15 or more employees. After the first interview, New Jersey employers are free to inquire into the applicant’s criminal background and may ultimately refuse to hire the applicant based on his or her background, so long as the refusal is not based on expunged of pardoned records.  In addition to the restrictions on inquiries pre-first interview, the law prohibits employers from publishing job postings or ads stating that it automatically excludes applicants with arrest or conviction records.

The Usual Exemptions

Not unlike other laws, New Jersey’s law provides for several exceptions. The law does not apply to those positions that require criminal background checks by law or regulation, including positions in law enforcement, corrections, the judiciary, homeland security, and emergency management. Also excluded are positions where certain convictions would, by law, either automatically disqualify the applicant or restrict the employer from engaging in certain business activities based on its employees’ criminal records.

Penalties and Preemption of Local Ordinances

A positive for employers is that the law will not spur more employment litigation, because it does not create a private right of action for alleged violations. However, employers who violate the law will be met with increasing fines –$1,000 for the first violation, $5,000 for second violations, and $10,000 for each subsequent violation.

Finally, the law will preempt existing or future local laws – including Newark’s local “ban-the-box” law – that regulate private employers’ use of criminal background checks.

Next Steps for New Jersey Employers

Employers operating in New Jersey should begin working with their Labor & Employment counsel now to review their employment applications, job postings, policies, and employee handbooks to ensure compliance prior to March 1, 2015. Employers should also ensure that training is provided to those individuals involved in hiring and interviewing of potential job applicants. Additionally, employers who operate in jurisdictions within and outside of New Jersey should continue to closely monitor the “ban-the-box” legislations in other jurisdictions as these laws remain a growing trend.

Finally, employers should keep in mind that under guidance issued by the EEOC and a number of state laws, an employer may be required to demonstrate the relevance of a given conviction as a basis for excluding an applicant from employment.

Defending and Preventing Employment Litigation – 2014 Edition

Drinker Biddle proudly announces the release of the 2014 edition of Defending and Preventing Employment Litigation. Written and updated for 2014 by Labor & Employment Group partners Gerald S. Hartman and Gregory W. Homer, Defending and Preventing Employment Litigation is a must have reference for employment lawyers, in-house employment counsel, general counsels, and human resources professionals.  The one-volume annually updated manual provides insight on preventing, preparing for, and managing employment litigation in discussing all types of discrimination, harassment, wage, leave and wrongful discharge claims.

The 2014 edition of Defending and Preventing Employment Litigation retails for $385.  Drinker Biddle has arranged a special discount rate of 20% off the retail price for friends of the firm. To purchase your copy of Defending and Preventing Employment Litigation click here.

Passing AB 1897 Means Greater Liability for Employers Who Use Labor Contractors

Editor’s Note: The following post by Saba Shatara, Associate in the Los Angeles office, appears in the latest issue of the California HR Newsletter. To sign-up to receive the California HR Newsletter click here.

Passing AB 1897 Means Greater Liability for Employers Who Use Labor Contractors

The Issue:  Today, many employers rely on labor contractors or temporary employment agencies to sustain their operations.  Occasionally, however, labor contractors fail to comply with labor laws and regulations by failing to (1) pay wages; (2) report and/or pay all required contributions and personal income tax withholdings; and (3) secure workers compensation for subcontractors.  In such cases, are employers liable to subcontractors for these types of violations of their labor contractors?

The Solution:  Historically, for the most part, no.  However, California Assembly Bill (“AB”) 1897, a proposed law currently before the Assembly, would impose joint liability on employers for the violations of their labor contractors.

Analysis:  On April 24, 2014, AB 1897 was passed by the state Assembly’s Labor and Employment Committee and will soon be considered by the Assembly’s Committee on Appropriations.  The bill would greatly expand an employer’s duties by requiring employers to share with their labor contractors all responsibility and liability for the following: the payment of wages, the failure to report and pay all required employer contributions, worker contributions, and personal income tax withholdings, and the failure to obtain valid workers’ compensation coverage.  This could have a significant impact on employers who depend on labor contractors for any number of functions, e.g., to fill seasonal or short-term work schedules, cover for employee absences, avoid layoffs, and pre-screen employees.

While the law currently prohibits employers from entering into a contract for labor or services with a construction, farm labor, garment, janitorial, security guard, or warehouse contractor, if the employer knows or should know that the agreement does not include sufficient funds for the contractor to comply with laws or regulations governing the labor or services to be provided, AB 1897 would expand liability for the above mentioned violations to all industries and all individuals who contract for labor or services.  This bill would impose seemingly strict liability on any individual or entity that obtains or uses subcontractors from a labor contractor to perform work “within the usual course of business of the individual or entity.”  As such, if AB 1897 were to pass, it would particularly burden small businesses, those without dedicated human resource or legal departments, due to their heavy reliance on contract and temporary employees.

The silver lining is that AB 1897 would not prohibit employers from agreeing to any otherwise lawful remedies against labor contractors for indemnification from liability created by acts of the labor contractor. Employers cannot, however, shift to labor contractors any of their responsibilities under the California Occupational Safety and Health Act.  Labor contractors will also have the same opportunity to contract with employers for indemnification. Furthermore, the bill will provide that any waiver of its provisions is contrary to public policy and unenforceable.  If AB 1897 becomes law, employers should be especially cautious in selecting a labor contractor and determine what level of contractor evaluation may limit their risk for non-compliant contractors.  Unwary employers face the danger of liability for a labor contractor’s failure to meet these requirements.

Proposed California Paid Sick Leave Law Will Require Employers to Provide Paid Sick Leave to Employees

By: Pascal Benyamini

Are you a California employer currently providing paid sick leave to your employees?  You may soon have to!  California Assemblywoman Lorena Gonzalez (D-San Diego) recently introduced legislation (Bill AB1522) approved by the Assembly Labor and Employment Committee requiring employers in the State of California to provide their employees with paid sick leave.

This bill would enact the Healthy Workplaces, Healthy Families Act of 2014 to provide, among other things, that an employee who works in California for 7 or more days in a calendar year is entitled to paid sick days to be accrued at a rate of no less than one hour for every 30 hours worked.  An employee would be entitled to use accrued sick days beginning on the 90th calendar day of employment.  And employers would be subject to statutory penalties as well as lawsuits, including the recovery of attorneys fees by the aggrieved employee against employers, for alleged violations.

It is important to note that this type of bill is not new in California, as the San Francisco Paid Sick Leave Ordinance became effective on February 5, 2007 and all employers must provide paid sick leave to each employee — including temporary and part-time employees — who performs work in San Francisco.

The California Chamber of Commerce as well as other employer groups are opposed to this bill and view it as a job killer.

Stay tuned….

 

Just Don’t Ask: With The Fair Chance Ordinance, San Francisco Joins A Growing Number Of Jurisdictions That Restrict Employers’ Pre-Hire Inquiries About Applicants’ Criminal Histories

By Cheryl D. Orr and Philippe A. Lebel

In February 2014, San Francisco joined the growing number of jurisdictions that have enacted so-called “ban the box” laws.  Like many of its counterparts, San Francisco’s Fair Chance Ordinance, which will become effective in August 2014, significantly limits employers’ abilities to inquire about and/or consider applicants’ and employees’ criminal records when making employment decisions.

Pursuant to the Ordinance, San Francisco employers are prohibited from asking about applicants’ criminal histories until either (a) after the applicants’ first live interview, or (b) after a conditional offer of employment has been extended.  However, the Ordinance places considerable limits on obtaining and using any information obtained.  Specifically, employers are prohibited from inquiring about or taking any adverse action against applicants or current employees based on:  (a) any arrests not leading to a conviction, except for some unresolved (i.e., pending) arrests; (b) participation in or completion of a diversion or deferral of judgment program; (c) convictions that have been judicially dismissed, expunged, voided, invalidated or otherwise rendered inoperative; (d) convictions or other determinations of the juvenile justice system; (e) convictions older than seven years; and/or (f) information pertaining to any offense other than a felony or misdemeanor (e.g., infractions).  Before making any inquiry about an applicant’s conviction history, the Ordinance requires that the employer provide the applicant in question with a notice promulgated by the San Francisco Office of Labor Standards Enforcement (“OLSE”).

The Ordinance also requires that employers engage in an individualized assessment and consider only directly-related convictions when making decisions about applicants.  Employers also must consider the amount of time that has elapsed since the applicants’ convictions and any evidence of rehabilitation, inaccuracy of the applicants’ records, and/or other mitigating factors.  Before making any adverse decision, employers are required to provide the employee with a written notice of their intention to make such a decision, detailing the reasons for the decision.  In addition, if any background report was considered by the employer, the employer must also provide that to the applicant.  Any affected candidate has seven days following receipt of the employer’s notice to submit evidence regarding:  (i) the inaccuracy of the criminal history information; or (ii) rehabilitation or mitigating factors.  If the employer receives such information from an applicant, it must delay its intended action and consider the additional information.

In addition to the above restrictions, the Ordinance contains strict anti-retaliation/interference provisions.  The Ordinance also requires that employers post a notice of applicants’ and employees’ rights in a conspicuous place at every workplace, job site, or other location in San Francisco that is under the employer’s control and that is frequently visited by employees or applicants.  In addition, any job postings must contain a notice that the employer will comply with the Ordinance’s requirements.

Though San Francisco’s ordinance is particularly stringent, the City is by no means alone in banning employers from inquiries about applicants’ criminal pasts:  dozens of cities and several other states – including Hawaii, Massachusetts, Minnesota, and Rhode Island – have enacted similar “ban the box” legislation.  Moreover, there are a growing number of organizations pushing for the enactment of similar laws and ordinances across the country.

Employers in jurisdictions that have already enacted “ban the box” laws should ensure that they avoid any impermissible inquiries.  Employers in locations that have not yet been affected should closely monitor developments in their jurisdictions to avoid any exposure.