February 8, 2023

Volume XIII, Number 39

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February 07, 2023

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February 06, 2023

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California Governor Signs "Wacky" Successor Liability Bill Into Law

Suppose you had a ne'er-do-well family member with whom you have not spoken in years.  Suppose further that your family member has a minority interest in a restaurant and that you happen to be a vice president of an unrelated restaurant company.  Imagine your surprise (and that of your company) to learn that your company could be liable as a successor for wages, damages and penalties owed by your estranged family member's restaurant.  Amazingly, the Governor recently signed a bill, AB 3075 (Gonzalez), into law that will impose successor liability on businesses based solely on family relations of the partners, owners, officers, directors of the businesses.  

As enacted, a successor to a judgment debtor is liable for any wages, damages, and penalties owed to any of the judgment debtor’s former workforce pursuant to a final judgment, after the time to appeal therefrom has expired and for which no appeal therefrom is pending.  Successorship can be established in several different ways, including by operating "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".  Cal. Lab. Code § 200.3(a)(4) (new).  The term does not define "immediate family" and it is therefore unclear what relations will qualify as "immediate family".

When I wrote about this bill in late August, I called it "wacky".  I don't like to use pejorative terms for legislation, especially legislation seeking to address a serious problem - employers who don't pay their employees.  However, I believe that the terminology was apt and that it was important to call attention to how bizarre and unfair this bill was.  

The Corporations Committee of the Business Law Section of the California Lawyers Association of which I was then Co-Chair prepared a letter urging a veto of the bill.  Unfortunately, the Executive Committee of the Business Law Section refused to approve the letter and so it was never sent.  Clearly, something is out of whack when the Corporations Committee is not permitted to urge a veto of such an arbitrary and unfair bill.

© 2010-2023 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume X, Number 279
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

949-851-5428
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