New Law Imposes Wage and Workers Comp. Liability on Companies That Use Temp Agencies or Subcontractors

Many companies in California use temporary staffing agencies or subcontractors to meet some of their labor needs. One of the many advantages of hiring workers this way is that the agency or subcontractor is responsible for paying the workers’ wages and providing workers’ compensation insurance rather than the client employer.

Assembly Bill 1897

Under a new California law, however, many companies that hire those agencies or subcontractors will now also be liable if those labor contractors fail to meet those obligations. Assembly Bill 1897, signed into law by Governor Brown in September, requires a client employer to share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for the payment of wages and the failure to obtain valid workers’ compensation coverage. The law also prevents companies from shifting to the labor contractor legal duties or liabilities under workplace safety provisions with respect to workers provided by the labor contractor. Companies can face fines and penalties if their temp agency fails to pay their workers properly or provide required workers’ compensation insurance.

Exemptions and Indemnification

The new law does not apply to many smaller companies and specific types of labor. Specifically, the law exempts homeowners, highly-paid tech workers, trucking and cable companies in most circumstances, businesses with fewer than 25 employees and companies that don’t employ more than five temp workers at a time.


Additionally, for companies subject to the law, it “does not prohibit a client employer from establishing, exercising, or enforcing by contract any otherwise lawful remedies against a labor contractor for liability created by acts of a labor contractor.” This means that companies can include indemnification provisions or other protections in their agreements with subcontractors or temp agencies to insulate them from ultimate liability for the failures of those that provide them with labor.


Of course, such indemnification assurances are worth little if the subcontractor or staffing agency is of questionable stability. Employers subject to the act need to ensure that they are outsourcing their labor needs through companies that can be trusted to meet their wage and insurance obligations and have the wherewithal to back that up.

California Employment Lawyers

At Lucas & Haverkamp, we stand for honesty and fairness. We incorporate these qualities into everything we do. Our employment law practice is multifaceted – and with good reason. By representing both employers and employees, we bring twice the knowledge and experience to the serious issues that challenge business owners and the people they employ. Contact us today at (858) 535-4000 to discuss your case.


This website has been prepared by Lucas & Haverkamp Law Firm, APC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

22 October 2014 Comments Off on New Law Imposes Wage and Workers Comp. Liability on Companies That Use Temp Agencies or Subcontractors

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