Bill Would Restrict Hiring of Temporary Workers in California

Employers, attorneys have lots of questions about the proposal

Roy Maurer By Roy Maurer February 22, 2017
Bill Would Restrict Hiring of Temporary Workers in California

California employers with 10 or more employees would be required to offer additional work hours to existing staff before hiring new employees or contracting with staffing firms under a proposal introduced in the state assembly.

California Assemblywoman Lorena Gonzalez Fletcher, D-San Diego, introduced the Opportunity to Work Act (AB 5) in December 2016. The bill is now before the assembly's committee on labor and employment.

Gonzalez Fletcher aims to curb underemployment among the state's 3.5 million part-time employees by ensuring that employers offer additional work hours to existing part-time employees before hiring part-time, contract or temporary employees to work those hours. Since 2014, the percentage of part-time workers in California has risen to 20 percent, according to Gonzalez Fletcher.

"Even as we've won increases in the minimum wage to help part-time workers, that just won't cut it if you can't get enough hours of work," she said. "The Opportunity to Work Act will provide a boost to the millions of workers in California who want to work more so they can afford the necessities of life and to take care of themselves and their families in a time when housing costs, student debt and surprise expenses are increasingly difficult to manage."

Specifically, the bill would:

  • Require employers to offer additional hours of work to an existing employee if, in the employer's "reasonable judgment," the worker "has the skills and experience to perform the work."
  • Require employers to use a "transparent and nondiscriminatory process" to distribute the additional hours of work among existing employees.
  • Exempt employers from offering additional work hours if doing so would require paying overtime compensation.
  • Authorize employees to file civil actions against employers for violations.

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AB 5 is based on a "first-of-its-kind" law in San Jose, Calif., which was approved by voters in November 2016 and takes effect in March. Other cities, including San Francisco and Seattle, have passed similar but narrower measures. San Francisco's law only affects large chain retailers and restaurants, for example.

Critics of the bill say that it "continues an ongoing trend in California of 'chasing headlines' wherein [state] legislators attempt to enact statewide legislation that has either been recently passed in another state or a California city, but often without meaningful modification to assess what has worked and not worked in those locales," said Michael Kalt, an attorney with Wilson Turner Kosmo in San Diego. "Indeed, this arguably is particularly problematic since the San Jose ordinance this proposed bill is modeled upon has not even taken effect yet, so no one yet knows how this will work in practice or the modifications that are needed."

Kalt noted that AB 5 may be the result of unintended consequences stemming from the Affordable Care Act (ACA). "I believe this bill is intended to address concerns that some employers were keeping employees part time or below certain hours to avoid triggering ACA coverage thresholds," he said. "If the ACA reforms did away with the current 'full time' definition or increased the hours threshold, then arguably some employers might be inclined to provide these additional hours without needing AB 5 to require them to do so."

Industry Opposes Limiting Use of Flexible Hiring

Opponents of the proposal argue that it creates harmful burdens for employers and limits employment opportunities for job seekers.

The American Staffing Association (ASA), California Staffing Professionals—an  ASA-affiliated chapter, the California Chamber of Commerce (CalChamber) and other business groups are mounting an aggressive lobbying campaign to oppose the bill.

"The bill limits employers' ability to effectively manage their workforce to address both consumer and employee requests," said Jennifer Barrera, a CalChamber senior policy advocate based in Sacramento. "The bill will create unnecessary delays and burdens on small employers to accommodate employee and consumer demands, subject employers to costly fines and multiple avenues of litigation for technical violations that do not actually result in any harm to the employee … and reduce job opportunities for the unemployed," she said.

Stephen C. Dwyer, ASA general counsel in Alexandria, Va., noted the disruptive impact to hiring and business operations in California if AB 5 is passed.

"Before hiring any new employee, either directly or through a staffing firm, a business would first have to offer additional hours to its nonexempt part-time employees—and then wait to hear back from each and every one of them before being able to meet its labor demand," he said.

AB 5 would apply to employers with workers located anywhere in the state. 

"An employer with 10 employees spread throughout the state but needing additional hours in Sacramento theoretically would have to offer these hours to employees throughout the state, even if there is no realistic way those employees in other locales could handle those hours," Kalt said.

A similar complication exists when workers who may be qualified for the work have made it clear that they do not want to or can't work the additional hours for personal reasons. "Requiring employers to go through this time-consuming exercise for all employees who have the skills and responsibilities to perform the work, but yet are unlikely to accept those hours for other reasons, such as physical location, creates unnecessary delay and limits an employer's ability to respond to consumer demands and last-minute employee requests for time off," Barrera said.

Kalt added that he would expect future amendments to exempt employers from some of these obvious impracticalities.

There are also questions about how the offer of additional work hours is required to be made. "Is a mass e-mail distribution sufficient? Does the employer have to personally contact each employee? And what happens if the employer cannot reach each employee?" asked Barrera. "How long does the employer have to wait for a response from employees before identifying which ones will receive the additional hours of work?"

The bill simply says the employer must use a "transparent and nondiscriminatory process," Kalt said. That "seems to suggest everyone must be aware of the offer, but then is fraught with potential peril if one employee does not get the hours or is not made aware of their availability before [the hours are] awarded to someone else," he added. "From a litigator's perspective, this could really be a problem since AB 5 provides the employees an option to either contact the Labor Commissioner or immediately file a civil complaint, and since AB 5 would amend the Labor Code, it potentially sets up class-action-type litigation for technical violations."

In addition, critics say that the document retention mandate of the Opportunity to Work Act is unreasonable. AB 5 requires HR to retain documentation of additional hours being offered before hiring new employees, work schedules for all employees, welfare-to-work opt outs and "any other records" to show compliance. "There is no time limit on this document retention, and therefore an employer essentially has to retain such documents indefinitely," Barrera said. "This unlimited time frame will expose employers to constant threats of penalties and litigation for any missing documentation."

Opponents to the legislation also say that it will have the unintended consequence of prolonging unemployment and underemployment.

"Favoring one set of workers—those who work part time—to the detriment of those who may be seeking full-time work makes little sense and is bad public policy," Dwyer said. "New job seekers, those re-entering the workforce, veterans, disabled workers and those seeking a bridge to permanent employment—all will be harmed by this misguided legislation."

Even typical HR scenarios like temporarily backfilling a position for an employee on approved medical leave would be imperiled with potential complications, Kalt said.    

"If the employer needs to offer these hours internally under AB 5, what happens when the other employee returns? Can the employer simply return the employee who saw the bump in hours back to their original hours, or is this now a potential basis for a suit?" 

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