Surety Case Law Note: A Staffing Company Is Not A Laborer Under California Law
March 5, 2024
In this Surety Today: The Blog post, we consider a Case Law Note addressing the issue of whether a staffing company is a laborer under California law. The case is:
K & S Staffing Sols., Inc. v. W. Sur. Co., 98 Cal. App. 5th 647, 650–53, 316 Cal. Rptr. 3d 834, 835–38 (2024), as modified on denial of reh’g (Jan. 19, 2024)
The facts in the case are these: California’s Department of Transportation (CDOT) awarded VSS International, Inc. (VSS) two contracts for road maintenance work and VSS obtained bonds from the Western Surety Company (Western). Titan DVBE Inc. (Titan) was a subcontractor for both projects. Titan turned to K&S Staffing Solutions, Inc. (K&S) to fulfill its labor needs. After entering into an agreement with K&S, Titan supervised the workers, but K&S paid the workers’ wages, payroll taxes, vacation pay, sick pay, and unemployment insurance. Ultimately, Titan failed to pay K&S the amounts it was owed on projects.
K&S sued VSS and Western asserting that it was a “laborer” within the meaning of California law. The trial court disagreed, noting that the term “laborer” was defined in the law to mean “a person who, acting as an employee, performs labor upon, or bestows skill or other necessary services on, a work of improvement.” The trial court concluded that K&S was not a “laborer” because it failed to show that it hired, trained, or supervised the workers.
On appeal, K&S asserted that it was a “laborer” because it took on the legal responsibilities of an employer for those who worked for Titan. California law describes the persons who are entitled to assert a claim against a payment bond and one of those persons is a “laborer.” As noted above the law defines a laborer as a person who, acting as an employee, performs labor upon, or bestows skill or other necessary services on, a work of improvement.
The appellate court stated that K&S was not a “laborer” under the definition. K&S incorrectly equated a “laborer” with an employer, arguing that it “was readily entitled to payment for the labor it provided” because “any ‘laborer,’ i.e., employer, is entitled to collect on the payment bonds.” However, the court noted that the plain text of the law provides that a laborer is not a person who, acting as an employer, bestows labor on a work of improvement, rather, it provides “a person who, acting as an employee, performs labor upon, or bestows skill or other necessary services on, a work of improvement.” The court held that K&S was not a person who was “acting as an employee” in any capacity. The court noted that its decision was a narrow one focused on the arguments tendered and the language of the current law.
If you have questions regarding the issues discussed in this post, please do not hesitate to contact Michael A. Stover, Esq. (410-659-1321/mstover@wcslaw.com) or any member of the Surety and Fidelity Practice Group.