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FMG Law Blog Line

Outsourced Labor? Temps? – New Statutory Liability for Companies Using Contract Workers

Posted on: December 5th, 2014

By: Sandra McIntyre

On January 1, 2015, California Labor Code section 2810.3 becomes operative.  It imposes civil liability on companies utilizing non-exempt workers provided by contractors to perform the regular and customary work of the company if the contractor fails to pay the worker’s wages or provide workers’ compensation coverage.  Legal responsibility for wages and workers’ compensation coverage is now shared regardless of whether the company had knowledge of the violations.  Moreover, the provisions of the statute cannot be waived and the worker is not required to first seek relief from the contractor.  However, the worker must give the company at least 30 days’ notice of the violations before filing a civil action against it.  The practical effect of this new statute is that a company is no longer able to deny liability for unpaid wages and/or the failure to provide workers’ compensation coverage by asserting it is not the employer of workers provided by a contractor.

Some businesses are exempt – the statute does not apply to: 1) a business with a workforce of less than 25 workers, including those provided by the contractor; 2) a business with five or fewer workers supplied by a contractor at any given time; or 3) the state or any political subdivision of the state, including any city, county, or special district.   Additionally, it does not apply to workers supplied by nonprofit, community-based organizations that provide services to workers, hiring halls, labor organizations or apprenticeship programs that operate pursuant to a collective bargaining agreement, or a motion picture payroll service company.

To address the new legislation, companies utilizing non-exempt contract workers should ensure their agreements specifically require the contractor to properly pay workers in accordance with California law and maintain valid workers’ compensation insurance coverage.  Those agreements should also require the contractor to defend and indemnify the company for any such failure.

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