What Is California Labor Code §2810 (Labor-Contract Due Diligence)?

(a) A person or entity shall not enter into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, security guard, port drayage motor carrier, or warehouse contractor, if 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.

What does Labor Code 2810 require?

Labor Code 2810 bars a hiring entity from entering a labor contract it knows lacks funds to cover wages, workers' comp premiums, and statutory labor-law costs in seven specific industries.

Labor Code 2810 pushes responsibility upstream. A general contractor cannot ignore an underfunded bid. Workers left unpaid or uninsured have a direct claim against the hiring entity. The hiring entity must do due diligence before signing.

Eman Yazdchi is a Certified Specialist in workers' compensation law, certified by the California Board of Legal Specialization, State Bar of California. Yazdchi Law pursues Labor Code 2810 claims when upstream entities fail their due-diligence duty.

Which California industries does Labor Code 2810 cover?

Labor Code 2810 covers construction, farm labor, garment, janitorial, security guard, port drayage, and warehouse work. These are the seven industries with the most documented patterns of underfunded subcontracting.

The legislature chose these industries for a reason. Each has a history of subcontracted labor and wage or comp violations. A Labor Code 2810 claim arises when an upstream entity enters a contract knowing it cannot cover wage and comp obligations under California law.

How does Labor Code 2810 connect to workers' comp under Labor Code 3700?

Labor Code 3700 requires every employer to carry workers' comp insurance. If a Labor Code 2810 contract is underfunded so the subcontractor cannot carry insurance, the upstream entity faces civil liability for any injury that results.

Labor Code 3700 is the insurance mandate. Labor Code 2810 is the due-diligence rule. When both are violated, the injured worker has two avenues. Under Labor Code 3706, the worker can sue the uninsured contractor in civil court. Under Labor Code 2810, the worker can sue the upstream entity. The grounds are knowingly entering an underfunded contract.

What does a Labor Code 2810 claim look like in practice?

A typical case involves a worker injured at a jobsite where the immediate employer is uninsured. The worker then pursues the upstream general contractor or hiring entity under Labor Code 2810 for the underfunded subcontract.

The pattern is common in construction and farm labor. A general contractor hires a subcontractor at an unusually low bid. The sub lacks funds to carry workers' comp. A worker is injured. The sub is uninsured or insolvent. The general contractor may face Labor Code 2810 liability. The key question is what it knew. If it knew or should have known about the shortfall, liability attaches.

How does Labor Code 2810 connect to Labor Code 2775 misclassification?

Labor Code 2810 and Labor Code 2775 work together. An upstream entity that uses a chain of subcontractors and 1099 labels to avoid comp coverage can face both due-diligence liability and misclassification liability.

Under Labor Code 2775, the ABC test may reclassify workers as employees. Once reclassified, the employer owes comp coverage under Labor Code 3700. A general contractor using a labor middleman may face dual liability. Labor Code 2810 covers the upstream contract. Labor Code 2775 covers the underlying employment relationship. Both can apply when workers are mislabeled as 1099 contractors.

Related: California workers' comp pillar · Labor Code 2775 explainer.

Eman Yazdchi is a Certified Specialist in workers' compensation law, certified by the California Board of Legal Specialization, State Bar of California. Yazdchi Law serves injured workers throughout Greater Los Angeles. We appear at the WCAB in Van Nuys, Los Angeles, Long Beach, Pomona, San Bernardino, Riverside, and Oxnard. Call (661) 273-1780 for a free case review.