The California Labor Code section 2810(a) reads:
A person or entity may not enter into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, or security guard contractor, where the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws or regulations governing the labor or services to be provided.
Section 2810 went into effect in 2004 partly to combat problems in the underground economy.
If you hire a California contractor, you might find you are liable to pay that contractor’s employees or subcontractors if that contractor fails to fulfill their obligations to them under the law.
Compliance could also include other employer obligations or contributions due its employees and subcontractors by law, such as workers’ compensation, contractual or legal benefits, or other payroll deductions. This is partly because California broadly defines the terms “knows” and “should know.” If you do not check their bona-fides, including their reputation, length of time in business, business, professional or other licensing agencies status, you could find yourself on the hook for more than the agreed price for services rendered by a California construction, farm labor, garment, janitorial, or security guard contractor.
If your agreement is in writing – and written contractor agreements are generally best – be sure to read the contract for language that holds you harmless if the contractor defaults on her obligations to her employees and subcontractors. If you don’t see it in there, insist that it be clearly spelled out in the additional terms and conditions section. Otherwise, find a new contractor that will protect you in writing!
You may find it is best to insist on an insurance policy or performance bond to cover you in such situations.
Whatever the case, be aware of this situation, and do your due diligence. Consult with an attorney or other competent professionals for advice and assistance before you sign on.
Caveat emptor!