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AB 3075 (Statements of Information, "Successor" Liability)

Updated: Nov 6, 2023

California law requires business entities to file a statement of information ("SOI") every two years (e.g., LLCs, nonprofit corporations) or every year (e.g., corporations). But since January 1, 2022, California law has also required statements of information to contain a specific disclosure related to the violation of any wage order or provision of the Labor Code. In addition, certain "successors" to such judgment debtors are now liable for some judgments against their predecessors.


What will the statement of information say?


The SOI will need to disclosure whether any corporate director, corporate officer, company manager, or company member has a final judgment against them for violation of a wage order or provision of the Labor Code. See Corp. Code section 1502(a)(10), section 2117(a)(8), section 17702.09(a)(8).


So if you check the "no" box, your SOI will read "No Officer or Director of this Corporation has an outstanding final judgment issued by the Division of Labor Standards Enforcement or a court of law, for which no appeal therefrom is pending, for the violation of any wage order or provision of the Labor Code."


If you have to check the "yes" box, your SOI will read "An Officer or Director of this Corporation has an outstanding final judgment issued by the Division of Labor Standards Enforcement or a court of law, for which no appeal therefrom is pending, for the violation of any wage order or provision of the Labor Code."


Who must make this statement?


Every entity required to file a statement of information (e.g., LLCs, LLPs, corporations) must now confirm that there is (or is not) such final judgment issued.


What if I'm appealing the judgment?


If you have an appeal pending, then you can still check the "no" box until the appeal is final. But if the Division of Labor Standards Enforcement has entered an administrative judgment against you, or a judgment of any court, then you have to indicate "yes" on the SOI.


What does AB 3075 say about "successors"?


AB 3075 added Lab. Code section 200.3, which imposes liability on successors to those entities that have a judgment against them. That is, a "...successor to a judgment debtor shall be liable for any wages, damages, and penalties owed to any of the judgment debtor’s former workforce..." Lab. Code section 200.3(a).


Who is a "successor" under AB 3075?


A "successor" is one who meets any of the following criteria:

  1. Uses substantially the same facilities or substantially the same workforce to offer substantially the same services as the judgment debtor (excluding those who maintain the same workforce pursuant to the Displaced Janitor Occupation Act; see Lab. Code section 1060 et seq.);

  2. Has substantially the same owners or managers that control the labor relations as the judgment debtor;

  3. Employs as a managing agent (defined at Civ. Code section 3294(b), California's punitive damages statute) any person who directly controlled the wages, hours, or working conditions of the affected workforce of the judgment debtor;

  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.

Lab. Code section 200.3(a).


I'll note that "managing agent" isn't actually defined at Section 3294(b), but case law does give us an idea. The concept of “managing agent” includes only "those corporate employees who exercise substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy. The scope of a corporate employee’s discretion and authority under our test is therefore a question of fact for decision on a case-by-case basis." White v. Ultramar, Inc. (1999) 21 Cal. 4th 563, 566-567.


Why have this rule?


The goal was to avoid judgment debtors reorganizing as a “new entity,” changing their company name, or hiding their assets to avoid paying fines and workers what they are owed after being caught.


Conclusion


For most California, AB 3075 changed only the information included on statements of information. However, if a predecessor has liability arising from a violation of the Labor Code or other wage issues, the "successor" as defined is also liable for those amounts.

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