Liability Laws Affecting Employers Hiring Independent Contractors

The California legislature enacted several new laws this past year affecting employees and independent contractors.  Under AB 1897, which went into effect on January 1, 2015, employers may become jointly liable with independent contractors it hires to provide labor for wage violations and workers compensation defaults of the independent contractor for services that are within the course of the employer’s business or performed at the employer’s work site. Accordingly, employers benefiting from labor services will share with the labor contractor all civil legal responsibility and civil liability for all workers supplied to the company.

In the past, these rules applied only to those engaging an independent contractor to provide labor services in the construction, farm labor, garment, janitorial, security, and warehouse contexts.  However, the new law expands the reach of these rules to virtually all industries.

The law mandates that an employer who engages an independent contractor to supply workers, including staffing agencies, will bear responsibility for providing worker’s compensation or required wages for laborers hired by the contractor if the contractor fails to do so. Liability may be imposed whether or not the employer had knowledge of the violations. A waiver exempting the employer from shared liability is unenforceable according to the statute.

Liability-Laws-Affecting-Employers-Hiring-Independent-Contractors-Article-32-300x198Certain entities are exempt from this bill including: (i) businesses with fewer than 25 employees, which includes those engaged directly by the employer and those provided by a labor contractor, and (ii) businesses with five or fewer workers obtained from a labor contractor at any given time.  It also exempts motion picture payroll services companies and non-profit, community-based organizations.

This new legislation places an additional burden on employers to investigate the solvency of contractors and be vigilant about ascertaining the contractor’s conformity with applicable labor laws. Diligent investigation should be undertaken when employers select agencies for contractors. In addition to carefully selecting independent contractors, employers can execute an indemnification agreement to cover the contractor’s failure to pay wages or obtain workmen’s compensation. Employers should make sure to review their labor contracts to provide protection in such circumstances.

When a business utilizes independent contractors to obtain labor services, it is advisable under this new legislation to research the contractor or agency and execute appropriate legal documentation to shield itself from liability. The experienced team of attorneys at Chase Law Group, P.C. can advise you on how to comply with this statute. Contact Chase Law Group, P.C. at (310) 545-7700 or for more information on how Chase Law Group, P.C. can assist your business.