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  • Companies Will Be Responsible For Wages of Sub-Contractors

    Does your company use workers provided by other companies?  If so, your company may be liable for the other companies’ failure to pay wages or carry state-mandated workers’ compensation insurance.

    Governor Brown signed AB 1897, which adds Labor Code section 2810.3 effective January 1, 2015.  This new law 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.  In other words, if your company receives workers through a contracting agency, and that agency fails to pay the worker or fails to maintain valid workers’ compensation coverage, your company could be responsible for any unpaid wages or workers’ compensation claims.

    A “client employer” is a “business entity that obtains or is provided workers to perform labor within the usual course of business from a labor contractor.” A “client employer” does not include any of the following:

    (i) 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.

    (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.

    A “labor contractor” is an “individual or entity that supplies workers, either with or without a contract, to a client employer to perform labor within the client employer’s usual course of business.”

    A “labor contractor” does not include specified nonprofit, labor, and motion picture payroll services organizations and certain 3rd parties engaged in an employee leasing arrangements.

    A “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.

    The law does not prevent client employers and labor contractors from “mutually contracting for otherwise lawful remedies for violations of its provisions by the other party.”  In other words, the client employer can require the labor contractor to defend and indemnify the client employer in the event a worker sues the client employer, but the client employer can still be sued directly.  Labor contractors, client employers and workers may not waive any of the protections provided by Labor Code section 2810.3.

    There is no “opportunity to cure” provision, but a worker or his or her representative must notify the client employer of violations at least 30 days prior to filing a civil action against a client employer for violations covered by this section.  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.

    The new law does not impose liability on a client employer for the use of an independent contractor other than a labor contractor or change the definition of independent contractor.

    The new law 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.

    If you use or supply sub-contractors, you will want to review and possibly revise your client and/or vendor agreements before the new year.

    The Law Office of Phillip J. Griego
    95 South Market Street, Suite 520
    San Jose, CA 95113
    Tel. 408-293-6341
     
    Original article by Robert E. Nuddleman, former associate of The Law Office of Phillip J. Griego.
     
    Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.
     
    Your use of this blog does not create an attorney-client relationship between you and the Law Office of Phillip J. Griego. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and the Law Office of Phillip J. Griego cannot guarantee the confidentiality of anything posted to this blog.Phillip J. Griego represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

  • Is an Employer Responsible for Paying Overtime When It Does Not Know the Employee is Working Off The Clock?

    Possibly not. An employer is obligated to pay an employee for all hours worked. Most Wage Orders in California define “hours worked” as “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.”

    Several federal court cases have held that “suffered or permitted to work” means only work that is performed “with the knowledge of the employer.” For example, in Forrester v. Roth’s I.G.A. Foodliner, Inc. (9th Cir. 1981) 646 F.2d 413, the court held that “where an employer has no knowledge that an employee is engaging in overtime work and that employee fails to notify the employer or deliberately prevents the employer from acquiring knowledge of the overtime work, the employer’s failure to pay for the overtime hours is not a violation of §207” Id. at 414. “An employer must have an opportunity to comply with the provisions of the FLSA.”

    The courts point out that an employer cannot escape responsibility by negligently maintaining required records or by turning its back on a situation, but if the employee “prevents the employer” from acquiring knowledge of the uncompensated overtime, the employer has not “suffered or permitted” the employee to work in violation of the FLSA.

    In May 2014, a California Court of Appeal applied this rule to claims under the California Labor Code. See, Jong v. Kaiser Foundation Health Plan, Inc. (2014) 171 Cal.Rptr.3d 874. California courts often look to federal law in interpreting state wage and hour claims. Although the California Supreme Court implicitly endorsed the federal interpretation of hours worked in Morillion v. Royal Packing Co. (200) 22 Cal.4th 575, 585, the specific question presented in Jong was not addressed. At least one federal court decision (White v. Starbucks Corp (N.D.Cal. 2007) 497 F.Supp.2d 1080, 1083) applied the “no knowledge” rule to a California wage claim, but California courts are not required to follow federal interpretation of state laws. To my knowledge, Jong represents the first instance in which a California court specifically held that if an employer does not know an employee worked overtime, the employer is not liable for the unpaid overtime compensation.

    There are a number of key facts that allowed the court to conclude the employer had no knowledge of the off-the-clock hours. The plaintiff testified that he was aware that it was Kaiser’s policy to pay for all hours worked and to pay for all overtime hours employees recorded, even if an employee should or could have obtained pre-approval before working the overtime but failed to do so. The plaintiff also testified that he was familiar with the applicable time keeping rules and that he knew how to use the timekeeping system. The plaintiff also signed a document confirming he knew employees were not supposed to work off-the-clock. The nail in the coffin was the fact that the plaintiff testified he did not know whether anyone in Kaiser management was aware he was performing off-the-clock work. The two other named plaintiffs in the case had discussions with supervisors about working off the clock, and the court allowed those cases to proceed to trial.

    Jong emphasizes the importance of having policies that prohibit off-the-clock work and require employees to record all hours worked. The case also confirms the importance of ensuring the employer knows about all hours worked. If an employee is going to bring a claim for unpaid wages, the employee needs to ensure that a management employee knows the employee is working off-the-clock.

    The Law Office of Phillip J. Griego
    95 South Market Street, Suite 520
    San Jose, CA 95113
    Tel. 408-293-6341
     
    Original article by Robert E. Nuddleman, former associate of The Law Office of Phillip J. Griego.
     
    Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.
     
    Your use of this blog does not create an attorney-client relationship between you and the Law Office of Phillip J. Griego. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and the Law Office of Phillip J. Griego cannot guarantee the confidentiality of anything posted to this blog.Phillip J. Griego represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.