Assembly Bill 1897 adds Section 2810.3 to the Labor Code, and imposes liability on companies that contract for labor, including those that use staffing agencies. If a company utilizes a labor contractor, this new law allows for the company to be held liable for the labor contractor’s failure to properly pay wages to, or failure to secure workers’ compensation coverage for, the workers provided by the labor contractor. The law applies (1) to companies that have 25 or more workers, including direct employees and workers provided by labor contractors; and (2) if the company was provided, at any given time, at least six workers to perform labor within the usual course of business from one labor contractor or various labor contractors.

A company can, however, be indemnified by the labor contractor if the parties’ contract includes such a provision.