On September 28, 2014, California Governor Brown signed into law Section 2810.3 of the Labor Code which effective January 1, 2015, creates new risk for Employers who use Labor Contractors including Temporary Employment Agencies. Under the new law, Employers “shall share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor” for wage and hour violations and failure to secure valid workers compensation coverage. The law exempts certain small Employers (under 25 non-exempt workers including contract workers) and any Employer with five or fewer contract workers. Certain industry-specific exemptions also apply but are very narrow.

Both California state and federal courts in recent years have expanded “joint employer” liability making all Employers liable in certain situations for wage and hour violations by Labor Contractors or Temporary Employment Agencies. This new law is just the latest development in this trend toward joint employer liability.

Employers who use contracted labor should ensure that the Labor Contractor has proper workers compensation coverage for the workers. It is also vital that Employers pay close attention to the terms of the written contract with the Temporary Agency or Labor Contractor. At a minimum, such a contract must include: 1) a representation and warranty by the Labor Contractor that it has secured valid workers compensation coverage for the contracted workers; and 2) that the Labor Contractor will indemnify and hold harmless the Employer from any liability arising from the Labor Contractor’s failure to secure valid workers compensation coverage and/or failure to comply with all applicable wage and hour laws including the payment of all wages due and owing to the contracted workers.