The concept of statutory joint liability has been around for years, but recent trends in the California Legislature show that its popularity is growing.
Current law recognizes joint liability where a third party exerts control over the working conditions of another person’s employees. In addition to this control doctrine, the Legislature has imposed statutory joint liability in limited circumstances. For example, industries where wage theft has historically been more prevalent, such as the construction or garment industry, and industries where the Legislature believes that a business should always have a higher burden to oversee its contractors, like property services or long-term services.
Statutory joint liability must be used sparingly because it imposes liability even where a third party has little to no control over another employer’s actions. Many of these laws implement what is essentially strict liability: it is irrelevant whether the employer knew or even had reason to know that the other employer violated the law. While it is laudable to ask companies to only contract with other reputable, lawful companies, it must be recognized that there are inherent limitations on one employer’s ability to audit another. An employer cannot subpoena another’s records or monitor another’s employee interactions day in and day out. Even if the other employer is compliant, given the complexity and vagueness of California’s labor laws, good faith mistakes are easy to make. These strict statutes therefore make companies hesitant to conduct business in California because the level of risk is high.
Unfortunately, we’ve seen a trend in the expansion of statutory joint liability over the past few legislative sessions. SB 727 (Leyva) (2021) expanded joint liability for general contractors to include penalties and SB 62 (Durazo) (2021) expanded liability for wages owed to garment workers to apply to anyone in the supply chain. Most troubling was SB 62’s imposition of liability to pay for wages owed to a worker for work performed under someone else’s contract. No other statutory joint liability law has gone that far. In fact, prior similar laws made it very clear that liability in those other industries extends only to work performed under that company’s specific contract.
In January, the Legislature will have the opportunity to reverse this harmful trend by defeating AB 257 (Gonzalez) when it comes up for a reconsideration vote on the Assembly Floor. Last summer the Legislature made the right decision when it stopped the bill on the Assembly Floor. AB 257 would hold a franchisor jointly liable for any penalties imposed on a franchisee for violations of any worker and health and safety laws and regulations. Franchisees are essentially small business owners that have been granted permission to operate under the name of a larger, well known brand. That is the extent of their relationship. The franchisor has little to no control over the day-to-day operations of the franchisee. For those that do have control over working conditions, they are already jointly liable under the control doctrine discussed above. Automatically imposing liability on franchisors that have no involvement in their franchisees’ daily operations is a perfect example of how this troubling joint liability trend is spiraling out of control. In considering AB 257, the Legislature must think critically about the precedent this bill would set and its effects on California’s business climate.