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April 14, 2014

California Bill Could End Use of Temp Workers

Summary:

This legislation could, effectively, end the staffing agency model by making it difficult for most small businesses to use temporary employees.

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The California legislature is considering a bill that could rewrite the relationship between employers and temporary staffing agencies. Assembly Bill 1897 (Hernandez, D-48) would make employers that hire laborers from temporary agencies liable if those agencies fail to provide workers’ compensation insurance, violate wage and hour laws or fail to withhold proper taxes.

This legislation could, effectively, end the staffing agency model by making it difficult for most small businesses to use the services. (The text of the bill is here.)

Employers hiring temporary staffing agencies would be responsible for performing due diligence by checking into the internal practices of the staffing agencies to determine whether agencies are properly funded to comply with labor laws and regulations. The employer, as a client of the agency, would be held responsible if the staffing agency failed to meet these requirements. Under the current version of the bill, it would be impossible to “contract around” this requirement, as a waiver would be deemed to violate public policy.

Promoters of AB 1897, including the California Labor Federation, claim that the bill is designed to protect employees of staffing agencies from wage theft and lack of workers’ compensation coverage. But the goal seems to run deeper. Proponents also hope to address wage disparity between full-time and temporary workers, benefit differences and impediments to collective bargaining by temporary employees. 

According to the California Chamber of Commerce, which opposes the bill, employers that do not have dedicated human resources or legal departments rely on temporary agencies to prescreen employees, to fill seasonal and short-term positions, to provide cover for employees who are absent and to protect the core group of employees from workforce reductions (the use of temporary workers would be reduced during slack times, instead.)

AB 1897 would make life harder for small businesses by holding them responsible for performing due diligence by seeking agency data outside of their purview and making them financially responsible for factors that are beyond their control, including businesses issues that could drive staffing agencies into bankruptcy. While most staffing agencies are properly insured and funded, this bill will cause small businesses anxiety over increased fines and litigation and create a chilling effect throughout the California labor market.

AB 1897 is currently before the Assembly Committee on Labor and Employment.