On September 30, Governor Newsom signed AB 3075, which imposes liability on successor employers for unpaid wages, specifies criteria to establish successorship, and adds information that employers must include in statements of information filed with the California Secretary of State. The bill also gives local jurisdictions the authorization to enforce state labor standards requirements with respect to imposing minimum penalties for noncompliance with wage-related statutes and regulations. Learn more about how AB 3075 affects California businesses and workers below.

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Brief Background of AB 3075

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According to the Economic Policy Institute, California workers lose almost $2 billion per year as a result of employers’ wage theft violations.^[1] Assembly Bill (AB) 3075 was created to provide workers with an avenue to recover lost wages from their employer’s successor. Under the new bill, when an employer is obligated by a judgement in court to pay wages, damages, and/or penalties to their workforce and these debts are left unpaid, the successor employer is liable to pay those debts. These provisions take effect January 1, 2021.

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What is a Successor Employer?

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Broadly, a successor employer is a business that acquires (through merger, reorganization, consolidation, transfer of stock or assets, or otherwise) all or substantially all of another business or its assets. Under AB 3075, successorship is established if a business meets any of the following criteria:

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• 1. Uses substantially the same facilities or substantially the same workforce to offer substantially the same services as the judgment debtor. This factor does not apply to employers who maintain the same workforce pursuant to Chapter 4.5 (commencing with Section 1060) of Part 3 of the California Labor Code.
• 2. Has substantially the same owners or managers that control the labor relations as the judgment debtor.
• 3. Employs as a managing agent any person who directly controlled the wages, hours, or working conditions of the affected workforce of the judgment debtor. The term managing agent has the same meaning as in subdivision (b) of Section 3294 of the Civil Code.
• 4. Operates a business in the same industry and the 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.

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New Requirements for Successor Employers

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Significantly, AB 3075 stipulates that, pursuant to a final judgement, a successor to any judgement debtor is liable for any unpaid wages, damages, and penalties owed to the judgement debtor’s former workforce.

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The bill also requires corporations to document whether any officer, director, or in the case of a limited liability company, a member or manager, has an outstanding final judgment issued by the DLSE or a court of law for a violation of any wage order or provision of the Labor Code. This information should be included within corporations’ statements of information filed with the Secretary of State starting on the earlier of either the date of certification by the Secretary of State that California Business Connect is implemented or January 1, 2022.

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The bill also amends Section 1205 of the Labor Code to authorize local jurisdictions to enforce state labor standards requirements with respect to imposing minimum penalties for noncompliance with wage-related statutes.

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Resources for California Employers

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View the full text of AB 3075 here.

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View the full text of Chapter 4.5 (commencing with Section 1060) of Part 3 of the California Labor Code here.

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View the full text of Section 3294 of the Civil Code here.

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View the full text of Section 1205 of the Labor Code here.

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If you have questions regarding the application of AB 3075 to your business, please contact one of the following attorneys in The Maloney Firm’s Employment Law Department: Patrick Maloney, Lisa Von Eschen, Samantha Botros, or Nicholas Grether.

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^[1] https://www.epi.org/publication/employers-steal-billions-from-workers-paychecks-each-year/

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