New California law creates new liability concerns for 'client employers'

Hotel operators in California may now be liable for damages and penalties on wage-related concerns for outside workers, even if these workers are employed by another company and are assigned to tasks at the property.

According to InsideCounsel, a new section of the California labor code (approved as Assembly Bill 1897) could allow security, valet, temp or landscaping workers to sue not only their employer but the owner of the hotel they are working at if companies are not in full compliance with wage laws (such as offering meal breaks). This holds true even if the owner or manager of the property has no control over overtime or outside employees' ability to keep track of their hours.

The business sectors most vulnerable to the new law include commercial real estate, restaurants, bars, clubs and hotels, and are referred to as "client employers."

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"It’s really far-reaching,” Jeffrey Thomas, an attorney with Thomas Employment Law Advocates in West Hollywood, told InsideCounsel. “This law will catch an awful lot of employers by surprise.”

Thomas also said that, as hotels are not the true employer of many of these workers, standard employment practice liability insurance will likely not cover these claims.

This is not the first wage-based bill to raise questions in California. In December 2014, the American Hotel and Lodging Association and the Asian American Hotel Owners Association sued the city of Los Angeles over its wage increase to $15.37. The lawsuit claims the higher wages tip the scales of power in favor of worker's unions, and both organizations want to avoid setting a national precedent with the increase.

These increases were approved in September 2014, where Los Angeles city council voted 12 to 3 on the decision to impose higher wages on large hotels, despite warnings from business owners that the increase will result in job losses in the hotel sector.