Labor judgments are a unique type of judgment involving employers and their employees. They can be just as difficult to collect as any other kind of judgment. But in California, a new law just implemented at the first of the year helps. It allows creditors to continue collection efforts against successor companies who take over for existing debtors.
The new law takes away one of the tools employers had to avoid paying extensive labor judgments. They can no longer walk away by selling the business or employ sleight of hand by transferring ownership to another legal entity. Any outstanding labor judgments are transferred to new ownership.
One of the more interesting things about collecting judgments in California is that so many of its laws are different from what you find in other jurisdictions. But the Golden State’s legal environment is also one of the biggest traps for creditors who attempt to collect their own judgments without knowing their rights and responsibilities. That’s why we encourage creditors to let Judgment Collectors handle their judgments.
California’s governor signed a bill in September 2020 adding new language to the state’s labor code. That language essentially created a law that states successors to companies that owe labor judgments not only take ownership of those companies, but also the judgments as well. The law was fully implemented at the start of 2022.
AB 3075, section 200.3 of the California Labor Code now states that “a successor to any judgment debtor shall be liable for any wages, damages, and penalties owed to any of the judgment debtor’s former workforce pursuant to a final judgment”.
For purposes of illustration, let us say you won a judgment against your employer for unpaid overtime. The judgment covers not only you, but also dozens of your fellow employees. Your employer cannot pay the debt. So instead, the company is sold to a competitor.
Prior to the new law, selling the company would make it all but impossible to collect. That is no longer the case. Now, if your employer tries to sell the company or transfer ownership to another entity, the judgment against the company is automatically transferred to the new owner.
This particular change to California’s labor law may never impact you personally. We bring it up as an illustration of how important it is to know the law before you attempt to win a judgment against a debtor. Judgments are useful tools for collecting bad debts and settling certain types of civil disputes. But if you don’t know the law, you could find yourself unable to collect after the fact.
Judgment Collectors practices in multiple states, including California. We make it our business to understand California law as it pertains to how we can go about collecting on bad debts. We know California judgments inside and out. We need to because we offer our services on a contingency basis.
When you hire Judgment Collectors to secure payment on a California judgment, you pay us nothing until we successfully collect. You do not invest another dime in your own collection efforts, either. Why? Because we cover all the costs of collection ourselves. That means you risk nothing.
California labor law now makes it more difficult for employers to avoid paying labor judgments by selling their companies or transferring ownership. That also means it is now easier for creditors to continue collection efforts against employers who might otherwise avoid paying. The new law is yet another tool we can use to successfully collect.
Published June 20, 2022