New California Statute: SB 940 - Temporary Services Employees

Contrary to what you may think, not all California employment laws are passed on the final day of the legislative session. The legislature not only passed SB 940 in July, but also the Governor signed it. The text of the new law is here.

This new law will change payroll practices applicable to "temporary service" workers as defined in the statute. New Labor Code section 201.3 defines "Temporary services employer" as follows:

an employing unit that contracts with clients or customers to supply workers to perform services for the clients or customers and that performs all of the following functions:
(A) Negotiates with clients and customers for matters such as the time and place where the services are to be provided, the type of work, the working conditions, and the quality and price of the services.
(B) Determines assignments or reassignments of workers, even if workers retain the right to refuse specific assignments.
(C) Retains the authority to assign or reassign a worker to another client or customer when the worker is determined unacceptable by a specific client or customer.
(D) Assigns or reassigns workers to perform services for clients or customers.
(E) Sets the rate of pay of workers, whether or not through negotiation.
(F) Pays workers from its own account or accounts. [and]
(G) Retains the right to hire and terminate workers.

However, "Temporary services employer" does not include any of the following: (A) A bona fide nonprofit organization that provides temporary service employees to clients. (B) A farm labor contractor, as defined in subdivision (b) of Section 1682. (C) A garment manufacturing employer, which, for purposes of this section, has the same meaning as "contractor," as defined in subdivision (d) of Section 2671.

So, if you're a "temporary services employer," or if you use one, read on:

- Unless an exception applies below, covered temporary workers must be paid weekly. Wages for the current week's work are due on the pay day of the following calendar week.

- When an assignment is completed, the final wages for the assignment may be paid on the regular pay day in the week following the completion of the assignment (not the final day).

- If a temp is assigned to work "day to day," from a centralized pool, employees' wages are due AT THE END OF EACH DAY, but only if (A) The employee reports to or assembles at the office of the temporary services employer or other location. (B) The employee is dispatched to a client's worksite each day and returns to or reports to the office of the temporary services employer or other location upon completion of the assignment. (C) The employee's work is not executive, administrative, or professional, as defined in the wage orders of the Industrial Welfare Commission, and is not clerical.

- Striker replacements - Temporary services employees used for strike replacements must be paid AT THE END OF EACH DAY.

- Except as stated above, temporary services employees who are fired by the agency or who quit are paid final pay in the regular way (Lab. Code sections 201, 202).

- None of these rules apply if the employee is assigned to a client for more than 90 days, unless the agency pays weekly in accordance with this new provision.

Employers who use temporary agencies should ensure their vendors comply with these sections, as employees have been known to assert "joint employer" wage claims against the client and the agency.

Those of you who hire striker replacements from temporary agencies should ensure that the agency is capable of paying employees daily.