Recently enacted AB 3075 (effective January 1, 2021) amends the California Labor Code to impose successor liability for unpaid wages owed to any of the predecessor/judgment debtor’s former employees. The following assembly bill analysis provides insight into the reason for enacting this law: “Assembly Bill 3075 will ensure employers cannot reorganize as a ‘new entity,’ change their company name, or hide their assets to avoid paying fines and workers what they are owed after being caught. It will also enable local enforcement agencies to issue citations for wage violations that may appear available only to the state. Lawbreaking employers should not be able to use loopholes to avoid paying hard working individuals the wages they are owed, especially during an economic and public health crisis.”
Specifically, the Labor Code is amended to add a new section 200.3 that provides:
A successor employer is liable for any wages, damages, and penalties its predecessor employer owes pursuant to a final judgment after the time to appeal therefrom has expired and no appeal therefrom is pending, to any of the predecessor employer’s former workforce if the successor employer meets any of the following criteria:
(a) Uses substantially the same facilities or substantially the same workforce to offer substantially the same services as the predecessor employer. This factor does not apply to employers who maintain the same workforce pursuant to Chapter 4.5 (commencing with Section 1060) of Part 3.
(b) Has substantially the same owners or managers that control the labor relations as the predecessor employer.
(c) Employs as a managing agent any person who directly controlled the wages, hours, or working conditions of the affected workforce of the predecessor employer. The term managing agent has the same meaning as in subdivision (b) of Section 3294 of the Civil Code.
(d) A business in the same industry that has an owner, partner, officer, or director who is an immediate family member of any owner, partner, officer, or director of the predecessor employer.
AB 3075 also amends the Corporations Code to expand the information corporations and limited liability companies doing business in California must include in the statement of information filed with the California Secretary of State. Specifically, AB 3075 requires a corporation to state whether any officer or any director (or in the case of a limited liability company, a member or manager) has an outstanding final judgment issued by the Division of Labor Standards Enforcement (“DLSE”) or court of law for a violation of any wage order or labor code violation. This new law requires the Secretary of State to implement these changes by January 1, 2022.