Before hiring a temp or directly employed worker, California companies would have to offer additional hours to existing staff under a state bill proposed in December. Opponents say it would limit employers’ ability to manage their workforces and open them up for further litigation.

The California Chamber of Commerce called it a “jobs killer,” and is joined in opposing it by a number of other business groups and organizations.

“This proposal presents a number of problems for employers,” says Fiona Coombe, director of legal and regulatory research for Staffing Industry Analysts.

“It makes sense that an employer would want to use his own existing employees to carry out additional work if they have the skills and experience and are willing to do the work, and it does not incur additional costs in overtime payments,” Coombe said. “However, this interferes with an employer’s right to decide how to manage their business.”

Assemblywoman Lorena Gonzalez, D-San Diego, introduced the bill, saying it was aimed at fighting underemployment among California’s 3.5 million part-time employees. It’s known as the “Opportunity to Work” act, or Assembly Bill 5. The bill is presently in committee.

Nuts and bolts. Assembly Bill 5 would impact companies with more than 10 employees. It would require them to use a transparent, nondiscriminatory process to allocate additional work to existing nonexempt employees who have the skills and responsibility to do the job — before bringing in another worker.

It would also allow for employees to sue for violations. It wouldn’t require employers to use existing workers if doing so would result in overtime.

The bill aims to combat a perceived practice of companies holding employees to below 30 hours per week so they won’t be subject to penalties under the Affordable Care Act, or to avoid coverage under the law altogether said Richard Leasia, shareholder at employment law firm Littler Mendelson. And while there are many questions over how such a law will be implemented if passed by the legislature, it will impact the contingent workforce ecosystem if it is.

The staffing effect. “Staffing agencies are going to be indirectly affected because their customers are going to have certain duties under AB5 that will impact them,” Leasia said.

In addition, staffing firms are employers themselves and will be subject to the law, if passed, he said. One possible impact: if a staffing firm has temporary workers at one client company, will it have to offer those workers extra hours before bringing in new temps at another client company? That’s just one of the questions.

The bill is a double whammy for the staffing industry, said James A. Essey, president and CEO of the TemPositions Group of Companies.

“First off, from a sales perspective, if a client needs to justify that they have first contacted all their own part-timers before they can approach a staffing firm, and are required to document such contacts, it is possible that clients will reduce their use of temporaries because they will get the work done with part-timers, or decide to change their staffing model to have more full-timers on the payroll for last-minute needs to avoid this burdensome process,” according to Essey.

Secondly, staffing firms are employers as well, and it would likely require them to contact all their employees on assignment who are not working a full schedule and offer them any new jobs before offering the jobs to new recruits. “The administrative burden of checking with all these people and documenting it will be very time consuming and the order may go unfilled because the checks took so long to be performed there wasn’t time remaining to find a new candidate,” according to Essey.

Stephen Dwyer, general counsel of the American Staffing Association, also said the bill would decrease companies’ flexibility to meet changing work conditions or demand. One example, if an administrative assistant calls in sick, a company would have to put out a call to all its nonexempt workers. It could be the end of the day before the company finds a person to fill in after contacting all eligible workers — leaving work undone.

Banding together. “I think the concern over this legislation is reflected by the fact that the entire business community is opposed to AB5,” Dwyer said. “Almost all of the major business groups in California are opposed to it. The California Chamber of Commerce has designated the bill as a jobs killer.”

Dwyer said the ASA has sent an opposition letter to assembly members and engaged its membership in a grass-roots effort against the bill. It’s also working with other business groups.

The California Chamber of Commerce listed several problems for employers in a letter on Feb. 13 to the bill’s sponsors. Among the concerns:

  • Employers must contact employees — even if some workers have indicated they are not interested in the work.
  • Employers with offices around the state would have to contact employees who may not be near the workplace. Would a Southern California employee take extra hours provided at a location on the other side of the state? Although such a scenario is unlikely, but firms would still have to undergo the process of contacting workers.
  • Questions over what an employer must to do satisfy the law that they have offered the hours to existing, nonexempt employees. Is a mass email sufficient?
  • The process of choosing which workers to offer extra hours could lead to increased litigation against employers.
  • In addition, the bill sets no time limit on documentation, and employers would have to keep documents indefinitely.

Voters in San Jose, Calif., passed a similar measure last November that will take effect in March. San Francisco addressed the issue. However, the chamber argues the cities’ efforts differ from the statewide proposal.

“AB 5 appears to be modeled after San Jose and San Francisco ordinances requiring larger employers to provide part-time employees with additional hours of work,” according to the chamber. “However, San Francisco is only applicable to national employers with multiple locations and San Jose has a specific small employer exemption. Moreover, both ordinances only require an employer to offer additional hours of work to part-time employees, not full-time employees.”

San Jose’s law, which was approved by voters in November, and is scheduled to take effect March 13, is raising questions there. Littler Mendelson’s Leasia, who is based in San Jose, said the city’s law is very similar to AB5, but uncertainty remains over how the municipal law will be implemented.