NEW CALIFORNIA LAW ADDRESSES PAY FOR TEMPORARY SERVICE EMPLOYEES – EFFECTIVE JANUARY 1, 2009

California law governing pay for temporary employees will change on January 1, 2009. The new law will end the uncertainty regarding the potential application of the California Supreme Court decision in Smith v. L’Oreal to the temporary services industry. Smith held that the end of a temporary assignment or project constituted a "discharge," requiring the immediate payment of all wages. Compliance with this requirement is difficult where the client company, and not the temp agency, terminates a temporary assignment.

Under SB 940, signed into law by Governor Schwarzenegger on July 22, 2008, temporary service employers must pay their temporary workers on a weekly basis. Accordingly, the wages for the current week must be paid on the regular payday in the following calendar week. When an assignment is completed during Week 1, the worker may be paid the final wages for the assignment on the regular payday in Week 2, rather than on the final day of the assignment. If, however, the temporary employee quits or is terminated by the temporary service agency (rather than by a client company), the regular rules regarding the final payment of wages apply. The new rules do not apply to employees who are assigned to a client for more than 90 days, unless the temp agency pays such employees on a weekly basis.

Under the new law, daily payment of wages is required for strike replacement employees, as well as for those temporary workers who are assigned to work on a day-to-day basis from a centralized pool.

Employers who use temporary service agencies should ensure that both they and their vendors are aware of the new law, as employees can assert wage claims against both the temporary agency and its client company on a joint employer theory of liability.