The California Chamber of Commerce is urging all businesses to send a letter to Governor Edmund G. Brown, Jr. asking that he veto AB 1897, a "job killer" bill that imposes new liabilities on innocent businesses. "AB 1897 would expose virtually every employer in the state of California to liability and frivolous litigation for any wage and hour violations that a subcontractor may incur through negligence, through not understanding our complex labor laws in California," CalChamber President and CEO Allan Zaremberg says.

This bill unfairly forces one company to essentially ensure the wage and hour obligations and workers’ compensation coverage for the employees of another. It will create a significant threat of litigation and liability for California employers who legitimately utilize contracted labor, which will ultimately result in fewer contracts for small, minority-owned businesses as well as their employees.

Despite various exemptions to the bill, the overwhelming majority of employers in California will still be unfairly held liable for the wage and hour violations of another that they could neither control nor prevent. These innocent third parties did not contribute to the violations, control the working conditions, control the manner of payment, dictate the employees’ schedules, or even control the work environment, and yet under AB 1897 they will be held liable.

"The consequence of this legislation is that employers will no longer hire small businesses that are most likely to incur wage and hour violations, merely because they don’t understand our complex laws," says Zaremberg. "Those employees and those small businesses will no longer have the opportunity to provide augmentation to an employer’s workforce."

Given the complexity of California’s existing wage and hour laws, violations generally are due to lack of understanding as to how the laws should be interpreted or implemented. Zaremberg explains that the answer is to educate businesses, not punish every legitimate employer in the state.

"The solution is to provide a campaign to make sure that small business understands our complex laws," he says. "It is not a solution to expose every employer in the state of California to frivolous litigation and liability for mistakes made by an unknowing small business."

As noted in the May 2013 Division of Labor Standards Enforcement annual report, small businesses that are undercapitalized are typically the entities that engage in labor law violations. In an effort to combat this statistic, Labor Commissioner Julie Su launched a statewide wage theft campaign on April 30, 2014, to educate minority-owned businesses as well as employees about existing labor laws and how to comply with the law.

CalChamber supports this effort by the Labor Commissioner as it prioritizes education for small businesses, who want to be compliant yet lack the understanding as to how to comply with the law. It also targets the identified problem of wage and hour violations, instead of shifting the liability for a noncompliant business’s wage and hour violations to a compliant business, as AB 1897 proposes. 

The CalChamber is urging businesses to write Governor Brown and ask him to veto AB 1897. An easy-to-edit sample letter is available from the CalChamber.