Recently enacted AB 3075 effective January 1, 2021 provides that a successor entity to a debtor employer with a wage/hour liability is liable for any wages, damages, or penalties owed to the debtor’s former workforce where any of the following conditions are met:
- The successor entity uses substantially the same facilities or substantially the same workforce in order to offer substantially the same services as the former entity;
- The successor entity has substantially the same owners or managers controlling labor relations as the former entity;
- The successor entity employs a managing agent who previously directly controlled the wages, hours, or working conditions of the affected workforce of the former entity; or
- The successor entity operates a business in the same industry and that business has an owner, partner, officer, or director who is an immediate family member of any owner, partner, officer, or director of the judgment debtor.
AB 3075 also provides additional teeth to the imposition of successor liability by amending Labor Code Section 1205 to grant local jurisdictions authority to enforce these provisions. The amended Section 1205 explicitly provides that local jurisdictions may enforce state labor standards—or more stringent local standards—relating to the payment of wages set forth in Division 2 of the Labor Code (commencing with Section 200).
Finally, AB 3075 will require domestic corporations, foreign corporations, and LLCs to report information about pending judgments in their Statements of Information filings with the Secretary of State. These business entities will need to indicate whether any officer or director has an outstanding final judgment issued by the Division of Labor Standards Enforcement (“DLSE”) or any court of law—from which no appeal is pending—for the violation of any California Wage Order or any provision of the Labor Code. This requirement will take effect at the earlier of (i) the completion of the Secretary of State’s California Business Connect online platform or (ii) January 1, 2022.
Employers looking to reorganize or restructure their businesses in an evolving economic landscape need to consider the impact of AB 3075. Given the complicated nature of the legislation, and its interplay with other provisions of California law, employers should work closely with California employment law specialists to navigate these challenges.