A new California law that imposes joint liability on businesses and their contractors for wage violations and failure to pay workers’ compensation claims for work provided “within the usual course” of a business and on its premises goes into effect on January 1, 2015.
The new law — Assembly Bill 1897 — enables any worker alleging nonpayment of wages or failure to provide workers’ compensation coverage to file a claim against both the contractor and the contractor’s client.
For companies that hire contractors to provide on-site work, this means that businesses can no longer rely on contractors to assume full responsibility for providing workers’ compensation coverage for the contractor’s workforce. If a contractor fails to provide such coverage, the business can be held liable.
In addition, if the contractor relies on an independent contractor workforce rather than its own employees and it is found that the contractor has misclassified employees as independent contractors, both the contractor and the company can be liable for any unpaid overtime or other wages.
The new law, which has been codified as section 2810.3 of the California Labor Code, does not allow companies to “contract around” these provisions in their agreements with contractors, but does permit indemnity provisions.
The law does not apply to businesses with less than 25 workers (including those supplied by a contractor), businesses with five or fewer workers supplied by a contractor or where a contractor’s workers are lawful independent contractors.
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