Bill Text: CA AB2614 | 2021-2022 | Regular Session | Amended


Bill Title: Workers’ compensation: labor contractors.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Engrossed) 2022-08-11 - In committee: Held under submission. [AB2614 Detail]

Download: California-2021-AB2614-Amended.html

Amended  IN  Assembly  April 18, 2022
Amended  IN  Assembly  March 28, 2022
Amended  IN  Assembly  March 17, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 2614


Introduced by Assembly Member Rodriguez

February 18, 2022


An act to amend Sections 2810.3 and 3602 of the Labor Code, relating to private employment. An act to add Section 78.5 to the Labor Code, relating to workers’ compensation.


LEGISLATIVE COUNSEL'S DIGEST


AB 2614, as amended, Rodriguez. Labor contracting: client employers: workers’ compensation. Workers’ compensation: labor contractors.
Existing law establishes a workers’ compensation system, administered by the Administrative Director of the Division of Workers’ Compensation, to compensate an employee for injuries sustained in the course of employment. Existing law requires every employer except the state to secure payment of compensation to injured employees, as specified. Existing law establishes within the Department of Industrial Relations the Commission on Health and Safety and Workers’ Compensation to examine the workers’ compensation system and authorizes the commission to conduct or contract for studies.
This bill would require the commission to report to the Legislature, on or before January 1, 2024, any widespread issues or instances of client employers or labor contractors, as defined, being used to shift workers’compensation responsibility away from those employers who control jobsite risk to employees, among other things.

Existing law establishes a workers’ compensation system, administered by the Administrative Director of the Division of Workers’ Compensation, to compensate an employee for injuries sustained in the course of employment. Existing law requires every employer except the state to secure payment of compensation to injured employees, as specified.

Existing law establishes the Industrial Welfare Commission in the Department of Industrial Relations and requires the Industrial Welfare Commission to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees. The commission may, upon its own motion or upon petition, amend or rescind any order or portion of any order or adopt an order covering any occupation, trade, or industry not covered by an existing order, as specified.

The Industrial Welfare Commission, pursuant to constitutionally authorized delegated powers from the Legislature, has established regulations, denominated wage orders, governing wages, hours, and working conditions in various industries. Existing law, Wage Order No. 1-2001 of the Industrial Welfare Commission, applies to the manufacturing industry, as defined, and addresses wages, hours, and working conditions. Existing law, Wage Order No. 7-2001 of the Industrial Welfare Commission, applies to the mercantile industry, and addresses wages, hours, and working conditions. Each wage order exempts specified persons, including a person who is employed in an administrative, executive, or professional capacity, as defined.

Other existing law, relating to the obligations of an employer, requires a client employer to share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for the payment of wages and the failure to obtain valid workers’ compensation coverage. Existing law prohibits a client employer from shifting to the labor contractor legal duties or liabilities under workplace safety provisions with respect to workers provided by the labor contractor. Existing law defines terms for its purposes.

This bill would require that a client employer itself procure, independently of any labor contractor, a valid workers’ compensation insurance policy for contracted workers performing labor within the client employer’s usual course of business, for any worker classified as employed under either Wage Order No. 1-2011 or Wage order No. 7-2001, as specified. The bill would prohibit a labor contractor or the policy, rate, discount, or other aspect of coverage of a labor contractor or another third party from being utilized to secure coverage. The bill would preserve any joint liability of the client employer and labor contractor, as specified.

The bill would also state the intent of the Legislature as to the purposes of this legislation.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 78.5 is added to the Labor Code, to read:

78.5.
 (a) On or before January 1, 2024, the Commission on Health and Safety and Workers’ Compensation shall submit a report to the Legislature containing both of the following:
(1) Any information on widespread issues with or instances of client employers, as defined in paragraph (1) of subdivision (a) of Section 2810, and labor contractors, as defined in paragraph (3) of subdivision (a) of Section 2810, being used to shift workers’ compensation responsibility away from those employers who control jobsite risk to employees.
(2) Whether employers with poor workers’ compensation risk are reclassifiying their employees as temporary staff or employees of labor contractors in order to shift the employee onto the workers’ compensation coverage of the labor contractor.
(b) (1) A report to be submitted pursuant to subdivision (a) shall be submitted in compliance with Section 9795 of the Government Code.
(2) Pursuant to Section 10231.5 of the Government Code, this section is repealed on January 1, 2028.

SECTION 1.

It is the intent of the Legislature in enacting this legislation to ensure that all contracted workers of labor contractors performing labor within a client employer’s usual course of business are covered by a valid workers’ compensation insurance policy of the client employer instead of the policy of the labor contractor. The purpose of this legislation is not intended to apply to employees of contract workers performing labor outside of the employer’s usual course of business and is not indented to remove or modify any joint liability of the client employer and labor contractor.

SEC. 2.Section 2810.3 of the Labor Code is amended to read:
2810.3.

(a)As used in this section:

(1)(A)“Client employer” means a business entity, regardless of its form, that obtains or is provided workers to perform labor within its usual course of business from a labor contractor.

(B)“Client employer” does not include any of the following:

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

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

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

(2)“Labor” has the same meaning provided by Section 200.

(3)“Labor contractor” means an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business. “Labor contractor” does not include any of the following:

(A)A bona fide nonprofit, community-based organization that provides services to workers.

(B)A bona fide labor organization or apprenticeship program or hiring hall operated pursuant to a collective bargaining agreement.

(C)A motion picture payroll services company, as defined in subparagraph (A) of paragraph (4) of subdivision (f) of Section 679 of the Unemployment Insurance Code.

(D)A third party who is a party to an employee leasing arrangement, as defined by Rule 4 of Section V of the California Workers’ Compensation Experience Rating Plan-1995 (Section 2353.1 of Article 7 of Subchapter 3 of Chapter 5 of Title 10 of the California Code of Regulations), as it read on January 1, 2014, except those arrangements described in subrule d of Rule 4 of Section V, if the employee leasing arrangement contractually obligates the client employer to assume all civil legal responsibility and civil liability under this act.

(4)“Wages” has the same meaning provided by Section 200 and all sums payable to an employee or the state based upon any failure to pay wages, as provided by law.

(5)“Worker” does not include an employee who is exempt from the payment of an overtime rate of compensation for executive, administrative, and professional employees pursuant to wage orders by the Industrial Welfare Commission described in Section 515.

(6)“Usual course of business” means the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.

(b)A client employer shall share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for both of the following:

(1)The payment of wages.

(2)Failure to secure valid workers’ compensation coverage as required by Section 3700.

(c)A client employer shall not shift to the labor contractor any legal duties or liabilities under Division 5 (commencing with Section 6300) with respect to workers supplied by the labor contractor.

(d)(1)(A)Notwithstanding subdivision (b), a client employer shall itself procure, independently of any labor contractor, a valid workers’ compensation insurance policy for any contracted workers performing labor within the client employer’s usual course of business for any worker classified as employed under either of the following classifications:

(i)Wage Order No. 1-2001 of the Industrial Welfare Commission (or as such equivalent wage orders may be renumbered, renamed, or reclassified in the future), regulating wages, hours, and working conditions in the Manufacturing Industry.

(ii)Wage Order No. 7-2001 of the Industrial Welfare Commission (or as such equivalent wage orders may be renumbered, renamed, or reclassified in the future), regulating wages, hours, and working conditions in the Mercantile Industry.

(B)A labor contractor, or the policy, rate, discount, or other aspect of coverage of a labor contractor or other third party, shall not be utilized to secure coverage.

(C)The policy may be an existing or new policy and may cover both contracted workers and noncontracted workers of the client employer.

(2)This subdivision does not remove or modify any joint liability of the client employer and labor contractor.

(e)At least 30 days prior to filing a civil action against a client employer for violations covered by this section, a worker or the worker’s representative shall notify the client employer of violations under subdivision (b).

(f)Neither the client employer nor the labor contractor may take any adverse action against any worker for providing notification of violations or filing a claim or civil action.

(g)The provisions of subdivisions (b) and (c) are in addition to, and shall be supplemental of, any other theories of liability or requirement established by statute or common law.

(h)This section does not prohibit a client employer from establishing, exercising, or enforcing by contract any otherwise lawful remedies against a labor contractor for liability created by acts of a labor contractor.

(i)This section does not prohibit a labor contractor from establishing, exercising, or enforcing by contract any otherwise lawful remedies against a client employer for liability created by acts of a client employer.

(j)Upon request by a state enforcement agency or department, a client employer or a labor contractor shall provide to the agency or department any information within its possession, custody, or control required to verify compliance with applicable state laws. Upon request, these records shall be made available promptly for inspection, and the state agency or department shall be permitted to copy them. This subdivision does not require the disclosure of information that is not otherwise required to be disclosed by employers upon request by a state enforcement agency or department.

(k)The Labor Commissioner may adopt regulations and rules of practice and procedure necessary to administer and enforce the provisions of subdivisions (b) and (j) that are under the Labor Commissioner’s jurisdiction.

(l)The Division of Occupational Safety and Health may adopt regulations and rules of practice and procedure necessary to administer and enforce the provisions of subdivisions (d) and (j) that are under its jurisdiction.

(m)The Employment Development Department may adopt regulations and rules of practice and procedure necessary to administer and enforce the provisions of subdivisions (b) and (j) that are under its jurisdiction.

(n)A waiver of this section is contrary to public policy, and is void and unenforceable.

(o)This section does not impose individual liability on a homeowner for labor or services received at the home or the owner of a home-based business for labor or services received at the home.

(p)This section does not impose liability on a client employer for the use of an independent contractor other than a labor contractor or to change the definition of independent contractor.

(q)This section does not impose liability on the following:

(1)A client employer that is not a motor carrier of property based solely on the employer’s use of a third-party motor carrier of property with interstate or intrastate operating authority to ship or receive freight.

(2)A client employer that is a motor carrier of property subcontracting with, or otherwise engaging, another motor carrier of property to provide transportation services using its own employees and commercial motor vehicles, as defined in Section 34601 of the Vehicle Code.

(3)A client employer that is not a household mover based solely on the employer’s use of a third-party household mover permitted by the Bureau of Household Goods and Services pursuant to Chapter 3.1 (commencing with Section 19225) of Division 8 of the Business and Professions Code to move household goods.

(4)A client employer that is a household mover permitted by the Bureau of Household Goods and Services pursuant to Chapter 3.1 (commencing with Section 19225) of Division 8 of the Business and Professions Code subcontracting with, or otherwise engaging, another permitted household mover to provide transportation of household goods using its own employees and motor vehicles, as defined in former Section 5108 of the Public Utilities Code.

(5)A client employer that is a cable operator, as defined by Section 5830 of the Public Utilities Code, a direct-to-home satellite service provider, or a telephone corporation, as defined by Section 234 of the Public Utilities Code, based upon its contracting with a company to build, install, maintain, or perform repair work utilizing the employees and vehicles of the contractor if the name of the contractor is visible on employee uniforms and vehicles.

(6)A motor club holding a certificate of authority issued pursuant to Chapter 2 (commencing with Section 12160) of Part 5 of Division 2 of the Insurance Code when it contracts with third parties to provide motor club services utilizing the employees and vehicles of the third-party contractor if the name of the contractor is visible on the contractor’s vehicles.

SEC. 3.Section 3602 of the Labor Code is amended to read:
3602.

(a)Where the conditions of compensation set forth in Section 3600 concur, the right to recover compensation is, except as specifically provided in this section and Sections 3706 and 4558, the sole and exclusive remedy of the employee or their dependents against the employer. The fact that either the employee or the employer also occupied another or dual capacity prior to, or at the time of, the employee’s industrial injury shall not permit the employee or the employee’s dependents to bring an action at law for damages against the employer.

(b)An employee, or their dependents in the event of the employee’s death, may bring an action at law for damages against the employer, as if this division did not apply, in the following instances:

(1)Where the employee’s injury or death is proximately caused by a willful physical assault by the employer.

(2)Where the employee’s injury is aggravated by the employer’s fraudulent concealment of the existence of the injury and its connection with the employment, in which case the employer’s liability shall be limited to those damages proximately caused by the aggravation. The burden of proof respecting apportionment of damages between the injury and any subsequent aggravation thereof is upon the employer.

(3)Where the employee’s injury or death is proximately caused by a defective product manufactured by the employer and sold, leased, or otherwise transferred for valuable consideration to an independent third person, and that product is thereafter provided for the employee’s use by a third person.

(c)In all cases where the conditions of compensation set forth in Section 3600 do not concur, the liability of the employer shall be the same as if this division had not been enacted.

(d)(1)For the purposes of this division, including Sections 3700 and 3706, an employer may secure the payment of compensation on employees provided to it by agreement by another employer by entering into a valid and enforceable agreement with that other employer under which the other employer agrees to obtain, and has, in fact, obtained workers’ compensation coverage for those employees. In those cases, both employers shall be considered to have secured the payment of compensation within the meaning of this section and Sections 3700 and 3706 if there is a valid and enforceable agreement between the employers to obtain that coverage, and that coverage, as specified in subdivision (a) or (b) of Section 3700, has been in fact obtained, and the coverage remains in effect for the duration of the employment providing legally sufficient coverage to the employee or employees who form the subject matter of the coverage. That agreement shall not be made for the purpose of avoiding an employer’s appropriate experience rating as defined in subdivision (c) of Section 11730 of the Insurance Code.

(2)Employers who have complied with this subdivision shall not be subject to civil, criminal, or other penalties for failure to provide workers’ compensation coverage or tort liability in the event of employee injury, but may, in the absence of compliance, be subject to all three.

(3)This subdivision shall not apply to employers subject to Wage Order No. 1 or Wage Order No. 7 by the department, or as those equivalent wage orders may be renumbered, renamed, or reclassified, in the future. This paragraph does not remove or modify any joint liability of the client employer and labor contractor, as those terms are defined in Section 2810.3, that are subject to Wage Order No. 1 or Wage Order No. 7 by the department.

(e)As provided in paragraph (12) of subdivision (f) of Section 1202.4 of the Penal Code, in cases where an employer is convicted of a crime against an employee, a payment to the employee or the employee’s dependent that is paid by the employer’s workers’ compensation insurance carrier shall not be used to offset the amount of the restitution order unless the court finds that the defendant substantially met the obligation to pay premiums for that insurance coverage.

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