The year 2021 is being heralded as the year of new beginnings, and it appears that 2021 also marks a new beginning in California for expanded successor liability for wage and hour judgments against and obligations of a prior owner.  Newly enacted AB3075 brings with it some far-reaching implications for an employer considered a successor entity to a predecessor employer.

Current and former employees are looking for ways to collect “wages,” especially during this time of furloughs and layoffs, even if it means looking to successor employer liability for unpaid wages.  Read on to explore a California employer wage and hour attorney’s explanation of the changed scenery surrounding a successor’s potential liability for a wage and hour judgment.

Impact 1:  Expansion of Successor Liability for Wage and Hour Judgments

An employer’s “successor” normally acquires the assets of the predecessor but not necessarily the liabilities of that predecessor, absent express agreement to assume those liabilities.

Successor entities, however, should not rely on that general rule when it comes to wage and hour considerations.  On January 1, 2021, AB3075 added California Labor Code Section 200.3, with the purpose of preventing employers from escaping wage and hour obligations by transferring assets to a successor.

Labor Code Section 200.3 provides that the presence of just one of four factors can trigger successor liability for a predecessor’s wage and hour obligations, and penalties:

• Using “substantially the same” facilities or employees as the predecessor for “substantially the same” services.
• Keeping “substantially the same” people in charge of labor relations.
• Using the same agent that the predecessor used to control wages, hours, or working conditions.
• Operating a business in the same industry and using an owner, partner, officer, or director who is an immediate family member of any owner, partner, officer, or director of the judgment debtor.

Courts will be looking closely at relationships between predecessors and successors, especially during this era of a pandemic that has affected the payment of wages.  An experienced California employer wage and hour attorney can help successor entities with their decision making so that they do not unwittingly trigger successor liability for wage and hour violations of a prior owner.

Impact 2:  Expansion of Local Jurisdictional Authority in Enforcement of AB3075

Successor employers can’t stop there.  They should also be aware of how AB 3075 also amended California Labor Code Section 1205 empowers local jurisdictions to enforce state labor standards requirements regarding the wage payments covered by Labor Code Section 200.3. This means that local jurisdictions now have increased enforcement authority.

COVID-19 added to an already-burdened court system, and the resulting California wage and hour cases and litigation related to potential successor liability can now play out in local jurisdictions because of Labor Code Section 1205.  It is important to engage a California employer wage and hour attorney who is well versed in the matter to ensure that successor entities take prudent action to anticipate potential liability for wage and hour judgments.

Impact 3:  Expansion of Reporting Requirements Imposed on Corporations and LLCs

Transparency was also a focus of AB3075, which also added California Corporations Code Section 1502(a)(10), requiring disclosure about whether any officer or director has an outstanding Division of Labor Standards Enforcement or court final judgment issued, not on appeal, for the violation of any Labor Code provision or wage order.

The California Corporations Code ensures the same compliance by foreign corporations and limited liability entities through Sections 2117 and 17702.09.

Stay Informed About Your Potential Liability for Wage and Hour Judgments

New laws bring with them new obligations, new opportunities, and new predicaments.  An experienced California employer wage and hour attorney can help employers anticipate and react to the changes and help employers reduce their exposure.  Experience and knowledge are key to navigate the waters of the new laws surrounding successor employer liability for unpaid wages.

The Law Offices of Susan A. Rodriguez, APC, is equipped to immediately help employers understand the implications of AB3075 and the resulting liability for wage and hour judgments, especially when employees are most eager to find avenues to be paid the obligations created by a predecessor entity.  For more information or a consultation, call Susan at (213) 943-1323 or view her website at caemployerattorney.com.

Posted by Susan A. Rodriguez, Esq.

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