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The Low Down on California AB 1897 and Reducing Your Company’s Risk

March 13, 2015

Claims

Effective Jan. 1, 2015, California’s Assembly Bill 1897 created a shared liability between companies that hire temporary workers and their supplying vendors (as in temp agencies, for example). This shared liability has to do with wage violations and workers’ comp. coverage.

What it means to you, the hiring company, is that you’re potentially responsible should there be an issue with the vendor you contract with. For example, if that vendor does not provide proper pay or workers’ comp. coverage to their workers, you could be on the line when something goes wrong.

Who does this law apply to? AB 1897 applies to all California businesses with 25 or more employees that obtain at least six temporary workers to assist with the usual course of business at any given time.

Usual course of business, according to AB 1897, means “the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.”

The exceptions in the bill are laid out as follows:

A business entity with a workforce of less than 25 workers, including those hired directly by the client employer and those obtained from, or provided by, any labor contractor.

A business entity with five or fewer workers supplied by a labor contractor or labor contractors to the client employer at any given time.

The state or any political subdivision of the state, including any city, county, city and county, or special district.

Also, there are exceptions to what constitutes a labor contractor (aka the contract worker supplier), which you can find in the link to the bill as well.

Basically, it includes nonprofits providing services to workers, motion picture payroll services, labor organizations or apprenticeship programs and certain arrangements under some employee leasing agreements.

What to Do to Mitigate Risk

AB 1897 authorizes the “Labor Commissioner”, the Division of Occupational Safety and Health, and the Employment Development Department to adopt necessary regulations and rules to administer and enforce the bill’s provisions.”

So if the law applies to you, do your due diligence to ensure the supplier you work with is fully compliant in paying the proper California wages, that it carries valid workers’ compensation coverage and is also compliant with OSHA regulations.

Here are a few extra steps you can take to mitigate risk:

  1. The Contract. Consider language in your agreement with every labor supplier that includes indemnification and hold harmless provisions that would require the supplier to protect your company for their failure to comply with requirements under AB 1897.
  2. The Evidence. Require labor contractors to supply evidence of general liability and workers’ comp. insurance.
  3. Monitoring Risk. Monitor the labor contractor’s compliance with insurance requirements through certificates of insurance, and verify that labor contractors are compliant with safety, wage and hour laws.

If you need more information, check out this fact sheet on AB 1897 via CalChamber, or reach out to Woodruff Sawyer. We’re happy to help you navigate the ins and outs of compliance and risk mitigation.

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All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co.

Darren Cartwright

Senior Vice President, Claims Audit and Consulting Group

Editor, Claims

Darren leads our Claims Audit and Consulting Group, offering expertise in the areas of occupational and non-occupational disabilities, leaves of absence, and workers’ compensation. In addition to his work in saving clients time and money on complex litigated claims and by auditing claim programs, he helps clients implement Integrated Disability Management (IDM) programs and come to understand the true cost of absence.

415.402.6542

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Darren Cartwright

Senior Vice President, Claims Audit and Consulting Group

Editor, Claims

Darren leads our Claims Audit and Consulting Group, offering expertise in the areas of occupational and non-occupational disabilities, leaves of absence, and workers’ compensation. In addition to his work in saving clients time and money on complex litigated claims and by auditing claim programs, he helps clients implement Integrated Disability Management (IDM) programs and come to understand the true cost of absence.

415.402.6542

LinkedIn