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With the National Labor Relations Board trying to push the envelope in making corporations jointly liable for labor violations of their franchisees, California has quietly pushed the envelope across the desk and into a mailbox. (Is that how that metaphor works?)
Employers Are Just as Liable as Contracting Companies
AB 1897 adds a new Section 2810.3 to the California Labor Code, requiring employers to share liability with contractors for contractors' violations of labor laws. Over the last several years, some employers tried to escape (or so they thought) labor laws either by reclassifying employees as contractors or by using contract workers. The law doesn't apply to businesses with fewer than 25 workers, nonprofit organizations, or union apprenticeships, among others.
AB 1897 may change labor practices, encouraging companies to directly hire rather than use contracting agencies. The fact that employers will be jointly liable for labor violations doesn't obviate the demand for workers performing certain jobs. Ed Silverstein, writing in Inside Counsel, suggests that "a company which now outsources certain functions, such as janitorial services, could end the relationship with the outsourcing company and hire their own employees."
Though business organizations like the California Chamber of Commerce decried AB 1897 as a "job killer," it's uncertain what effect AB 1897 will have on businesses. In making both the employer and the contracting agency jointly liable for labor law violations, the new law encourages employers to be vigilant about contractors' labor practices.
The intent of the law is clearly to make employers check up regularly on the labor practices of contractors; no longer will employers have an escape valve in "I didn't know." While many business advocates decried imposing liability on "innocent" businesses who have no idea what their contacting agency's labor practices are, there's an easy remedy for that: Find out.
This new level of oversight will add some additional responsibility to the legal department, but it's ultimately worth it to make sure the company isn't on the hook for a contracting company's poor labor practices. Or, you could always start hiring directly.