- New California Law Makes `Client Employers¿ Jointly Liable for Wage Violations Even Though Workers Employed by Other Company
- February 17, 2015 | Author: Jeffrey S. Horton Thomas
- Law Firm: Thomas Employment Law Advocates - West Hollywood Office
- Many California businesses, such as hotels or office buildings, may find as of this month that they are now liable for certain damages and penalties on wage-related issues for outside workers, even though the personnel are employed by another company but are assigned to tasks at the hotel or office building.
Under a new section in the California labor code, approved as Assembly Bill 1897, security, valet, temp or landscaping workers could find lucrative legal options for labor violations.
These hourly employees are typically sent to another business’ premises to perform work duties. In one example, if these companies do not provide meal breaks for their employees at an office building where they are assigned, workers could end up suing not only their employer but the owner of the office building.
This is the case despite the fact that the owner/management of an office building has no control over overtime or the outside employees keeping track of their hours. The owners thus become “jointly liable” for the penalties and damages.
“It’s really far-reaching,” Jeffrey Thomas, an attorney with Thomas Employment Law Advocates in West Hollywood, warned in a statement to InsideCounsel, about the new law. “This law will catch an awful lot of employers by surprise.”
He explained it “sailed” through the state legislature and “people are not prepared.” California Gov. Jerry Brown supported the new law as well.
Attorneys representing the employees may likely go after both businesses and will look for the company that has the “deepest pockets,” Thomas confirmed.
Among the business sectors most vulnerable to legal action under the new law are commercial real estate, restaurants, bars, clubs and hotels. Under the new law, they are called “client employers.”
“A lot of my clients obtain a great deal of labor from outside contractors,” Thomas said.
He also points out that employment practices liability insurance (EPLI) will likely not cover these claims, because, as in the case of the office building, the owners are not the actual employer of the workers.
“Companies of all sorts will find themselves uninsured for wage-related claims they thought they had coverage for,” Thomas said.
Other states, such as New York, may see a similar bill in their legislatures.
Meanwhile, there are some options that companies vulnerable to these legal actions may want to consider, according to Thomas.
For instance, a company which now outsources certain functions, such as janitorial services, could end the relationship with the outsourcing company and hire their own employees.
Businesses should try to get the service providers to maintain EPLI insurance and name the client-employer as an additional insured. But be wary of putting pressure on the service providers after the business has hired the labor contractor; it could lead to all sorts of other legal issues.
Before hiring a service provider, have an attorney undertake due diligence on the outside firm’s internal wage practices. Also, look to see if there has been a history of litigation by employees over wage issues.
Make sure, as well, that new written contracts between businesses and labor contractors are entered into which indemnify the business, and ensure the labor contractor will perform its wage-related duties to its employees to the fullest, including those employees sent to the client’s premises.
Make sure that labor contractors are financially secure, too, so there is little risk of them going out of business, Thomas adds.