Joint Civil Liability Between Temp Agencies And The Hiring Entities

Written by By Galen T. Shimoda and Erika R. C. Sembrano

It is common for people to go through temporary staffing agencies to find employment.  The California legislature recognizes this.  It is also not uncommon for those employees not to be paid correctly yet to be unsure who is responsible for paying them correctly.  The California legislature also recognizes this.

This used to present grave complications for employees.  Indeed, temporary staffing agencies would be in charge of providing employees their paychecks and paystubs, but the hiring entity (where employees are placed) would determine hours worked and work schedules.  Beginning on January 1, 2015, the California legislature made things a bit easier.

California Labor Code section 2810.3 addresses this specific problem.  It applies to “client employers,” who are the hiring entities who receive employees, and “labor contractors,” who provide client employers employees to work for them.  There are some exceptions, however.  For example, businesses with less than twenty-five (25) workers, business with five (5) or fewer workers supplied by a labor contractor at any given time, and any state or political subdivision of the state do not fall within the definition of “client employer.”  Also, non-profit, community-based organizations, labor organizations pursuant to a collective bargaining agreement, motion picture payroll services organizations, and third parties engaged in an employee leasing arrangement are not considered “labor contractors.”  Otherwise, valid client employers and valid labor contractors are subject to this new law.

What makes section Labor Code section 2810.3 extremely important and influential in the temporary staffing agency context is that Labor Code section 2810.3 makes both client employers and labor contractors liable to workers for the employer’s failure to pay all wages by and the employer’s failure to obtain valid workers’ compensation coverage for the workers supplied to the client employers.  Thus, if a worker was supplied by a labor contractor to a client employer to perform the usual business of the client employer, a client employer must share “all civil legal responsibility and civil liability for all workers supplied by that labor contractor.”  This statute also requires that in order to properly use the protections of Labor Code section 2810.3, workers must provide notice to the client employer of the potential violations at least thirty (30) days prior to filing a civil action against the client employer. 

For example, Employee Eugene used a temporary staffing agency, Lawn Care (“LC”), to obtain his job at a hiring entity, Cloud Enterprise (“CE”).  During his work for CL, Eugene was not paid all overtime wages despite working over eight (8) hours per day and/or forty (40) hours per week.  Prior to the enactment of Labor Code section 2810.3, Eugene would have had to rely on other joint employer principles, such as that contained in Martinez v. Combs, to seek damages from both LC and CE.  Now, given the provisions of Labor Code section 2810.3, Eugene can point to specific statutory language mandating that both LC and CE are liable for the failure to pay him wages, specifically overtime wages – assuming, of course, that Eugene properly provides notice to CE about his potential claims for failure to pay wages.

The intent of Labor Code section 2810.3 is clear – the California legislature seeks to prevent client employers like CE from shifting to another entity the responsibility of paying hard-earned wages to the workers, whereas labor contractors like LC would simply deny any sort of employment relationship or degree of control.  Indeed, the statute at subdivision (m) specifically states that “A waiver of this section is contrary to public policy, and is void and unenforceable.”  Also, although the statute allows for what seems to be potential indemnity or a defense between the two employing entities, this statute was seemingly designed to protect employees being taken advantage of when more than one (1) employing entity is involved. 

At the end of the day, the enactment of this statute demonstrates that employees should get what they worked for – and nothing less.  The hope is that from now on, especially given the shared civil liability for payment of wages, temporary staffing agencies and hiring entities will take more caution to ensure that all workers are paid what they earned.  If not, the workers can rely on this new statute to prevent any further wage-theft.

If you have any questions regarding an employment settlement agreement, please contact the Shimoda Law Corp to speak with an attorney.

The Shimoda Law Corp. legal articles should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents of these articles are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have.

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