California Passes Law for Successor Liability in Unpaid Wage Claims

California is continuing its protections of employees with the passing of a new law, set to begin in 2022, that enforces successor liability for unpaid wage claims. This new law will protect workers from unscrupulous employers who attempt to hide behind new business entities in order to avoid paying employees what they are owed in unpaid wages. If you or someone you know believes that they have an unpaid wage claim against their employer, talk to a knowledgeable California employment law attorney in your area today to learn more about your legal options.

New Successor Liability Law

AB 3075, also known as the successor liability law, is set to begin either on January 1, 2022 or upon certification by the California Secretary of State, whichever comes first. Under the new law, a business entity is required by law to report whether any officer, director, member, or manager has an outstanding judgment issued by the state DLSE or court of law where there is no appeal pending for any violation of a wage order or labor code. In addition, the law provides that a successor employer is liable for any unpaid wages, damages, or penalties incurred by the predecessor employer if the successor employer meets any of the following criteria. 

• The successor employer substantially uses the same facilities or workforce to offer substantially the same services as the predecessor employer,
• The successor employer has substantially the same managers or owners that control the labor relations as the predecessor employer,
• The successor employer employs a managing agent who directly controls the wages, hours, or working conditions of the affected workforce that also worked for the predecessor employer, or
• The successor employer operates a business in the same industry and the new business has an owner, partner, officer, or director who is an immediate family member of any owner, partner, officer, or director of the predecessor business.

Impacts on Employees

This law is specifically meant to protect employees and prevent employers from avoiding unpaid wage claims by hiding behind a new business entity. In the past, employers accused of wage violations could simply close the business and start a new one in the same industry, sometimes even with mostly the same workforce, in order to avoid liability. The successor liability law prevents employers from operating in this manner within the same industry or having their immediate family members start companies as their proxy for business dealings. This makes it substantially more difficult for employers to avoid paying damages for any unpaid wage claims and easier for employees to collect the wages they are owed for their work.

Call or Contact an Employment Law Attorney

Workers are entitled to the wages they have earned. If you have questions about unpaid wages at your place of employment in California, call or contact an experienced employment law attorney in your area to schedule a consultation of your case and learn more about your legal options.