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What Happens to My Wage and Hour Judgment When a New Business Takes Over for My Old Employer? Successor Liability for Wage and Hour Judgments under California Labor Code 200.3

Wages

In California, workers are protected by both state and federal wage and hour regulations. Among other things, these laws guarantee a minimum wage, mandate meal breaks and rest breaks, and provide overtime benefits to non-exempt workers. When employers violate wage and hour regulations, they can be held liable and ordered to pay damages to the affected workers.

In some cases, wage and hour violations persist for years – sometimes even beyond the company’s existence. This raises a potential challenge for some employees: What can be done if my employer has been taken over by another company but I’m still owed money for wage and hour violations? Fortunately, a new California law assists employees in these situations.

Understanding the Concept of Successor Liability

In most cases, one party is not responsible for the debts of another party. However, a concept known as ‘successor liability’ creates an exception to this rule when certain criteria are met. Successor liability is a legal doctrine that allows a creditor to recover for an outstanding obligation from the party who purchased assets—even if those liabilities were not expressly part of the purchase.

The term “creditor” can apply to an employee who has already obtained a judgment for wage and hour compensation. When a judgment has been entered, an affected worker becomes a creditor in the eyes of the law; but not just any creditor: one of the privileged creditors. If that employer is purchased by another business, the new company may be responsible for the debt owed to employees.

California Law: Expansive Liability for Labor Code Violations

Recently, California took action to codify and expand successor liability protections for employees who are owed money or damages by an employer that has been acquired or merged with another company. Under California law (California Labor Code § 200.3), a successor to a judgment debtor will be legally responsible for any and all “wages, damage, and penalties” that are owed to former employees, pursuant to a legal judgment. Even if you and your coworkers have not yet initiated a claim for wage and hour violations, there may still be a path to recover financial damages through a successor liability claim.

Contact a California Employment Lawyer for Help With Your Case  

Wage and hour law is complicated. It is especially complex if you are dealing with a case involving the issue of successor liability. If you have any questions or concerns regarding your wage and hour judgment when your former employer has been taken over by another company, an experienced California employment attorney can help.

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* Cathleen Scott is licensed to practice in Florida only.

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