Zero hour looms for controversial California warehousing bill

It began with an effort by California lawmakers to curb the alleged abuses of temporary staffing agencies who placed laborers in warehouses and DCs, collected fees from the warehouse operators, and then refused to pay the workers or left them to struggle in unlawful working conditions.

It comes to an end with a bill on the desk of Gov. Jerry Brown that warehousing interests warn will result in California's effectively reregulating their industry and their contractual relationships with customers, thus making it problematic for any business wanting to work with a warehouse operator in the state. If Brown signs the bill or even takes no action as of Sept. 30, it becomes law. Only an outright veto from the governor can torpedo the legislation.

On Aug. 31, the California legislature passed and sent to Gov. Brown Assembly Bill 1855. Introduced earlier this year by Norma Torres, a Democrat representing California's 61st district, which includes Pomona, Montclair, Ontario, and Chino, the bill requires temporary agencies that staff warehouses and DCs in California to produce documentation—such as signed contracts—to prove they comply with state law and have sufficient funds to pay the temporary workers they provide to warehouse operators.

Supporters of the bill said it extends to the warehousing and distribution segment basic protections common for workers in multiple industries. Thousands of warehouse workers subsist on unstable, low-paying work assignments, and are often victimized by unscrupulous staffing agencies who operate within a complex web of contractors that separate the worker from the retailer whose goods the workers are handling, the bill's supporters said. As a result, they have no legal recourse if they are not paid or are forced to work in illegal and sometimes dangerous conditions, they add.

"It's very important that we protect low-wage workers who are a key part of our nation's supply chain," said Torres in a quote appearing on the website of the California Labor Federation, which supports the bill.

About 68,300 third-party warehouse and storage workers are employed statewide, according to data from the International Warehouse Logistics Association (IWLA), a trade group representing third-party operators of warehouses and DCs. About one-fourth of those are employed in the fast-growing region east of Los Angeles known as the "Inland Empire." Most of the alleged abuses being targeted by the Torres bill occur in this region.

The overall worker total could be larger if DCs owned and operated by retailers are included, IWLA said. The group did not have estimates for workers employed at those facilities.

IWLA said it has no problem with the state's cracking down on agencies that skirt the law and leave temporary workers high and dry. However, it argues that the bill goes far beyond addressing those abuses by requiring that all warehouse companies and their customers, upon request or complaint, file copies of their contracts with the state's Labor Commissioner.

By opening previously confidential contracts to public scrutiny and possible legislative or regulatory action, California would be the only state to have reregulated warehouse operations, according to IWLA. Ironically, Gov. Brown deregulated the state's warehousing industry during his first go-round as governor in 1980.

The legislature's objective, according to IWLA, would be to verify that the company contracted by the warehouse operator has the resources to pay workers for their services. But the group maintains that California's quarrel is with the staffing agencies that are supposed to compensate the laborers, not with the contracts between warehousemen and their customers.

IWLA also contends that warehouse contracts with customers are already governed by the Uniform Commercial Code, a rule adopted by every state that allows companies to follow harmonized terms of contract law so they are free to conduct business in states where they are not domiciled. The legislation, if enacted, would put California "out of step with the rest of the United States," said Joel D. Anderson, IWLA's president and CEO.

By placing more legal and administrative burdens on business, actions like the proposed law would make it more economically attractive for businesses to store goods in neighboring states and simply ship them into California, Anderson said. Such a scenario would result in the loss of additional jobs and tax revenue at a time when the state cannot afford to suffer continued economic erosion, said Anderson, who is intimately familiar with the state's political machinations, having served for 13 years as CEO of the California Trucking Association.