A California state law that became effective January 1, 2015, substantially undermines the business decision to utilize temporary workers. A significant number of California employers who use temporary workers must now share responsibility and liability with the staffing agencies that provided these workers when claims arise under any of the following:

  • The payment of wages
  • Failure to secure valid workers’ compensation coverage, or
  • Failure to comply with occupational safety and health requirements

Employers with fewer than 25 workers (including independent contractors) and nonprofit organizations, labor organizations, apprenticeship programs, motion picture payroll services companies, and hiring halls operated pursuant to a collective bargaining agreement are exempt from the law. All remaining private employers are susceptible to the law’s new dictates and cannot shift their legal liabilities to the staffing agency or waive them by contract.

The new law does not prohibit employers and staffing agencies from contracting and enforcing any “otherwise lawful remedies” for liability created by the other party. In addition, the law provides that it should not be interpreted to impose liability on an employer for the use of an independent contractor, or to change the definition of independent contractor.

Employee Notification Requirements
Prior to raising a claim under this new law, an individual must give at least 30 days’ prior notice. As this requirement is vaguely worded, employers are advised to include notification procedures in their policies that identify designated supervisors or HR personnel eligible to receive such notice.

Anti-Retaliation Provision
Not surprisingly, the statute provides that neither the employer nor the staffing agency may take any adverse action against any individual who gives notification of violations or files a claim or civil action.

Agency/Department Inspections
Employers and staffing agencies can also expect and must promptly respond to requests by state enforcement agencies or departments seeking to inspect records to verify compliance.

With the potential for increased liability, employers should carefully review their policies and determine whether using staffing agencies is still a viable business model. Employers are also encouraged to seek legal counsel to discuss any questions regarding the new law.