Lorena Gonzalez Bill to Hold Companies Accountable When They Steal Workers’ Wages Passes Assembly Banking Committee

Tuesday, May 19, 2020

AB 3075 Closes Loophole that Allows Employers Who Commit Wage Theft to Re-open as a New Business

SACRAMENTO – (Tuesday, May 19, 2020) – Legislation authored by California State Assemblywoman Lorena Gonzalez (D-San Diego) to hold bad employers accountable if they cheat their workers out of the wages they are due passed the Assembly Committee on Banking and Finance today on a 7-3 vote.  

Assembly Bill 3075 would ensure employers who have committed wage theft of their workers cannot reorganize as a “new entity,” change their company name, or hide their assets to avoid paying fines and workers what they are owed after being caught. 

“Businesses shouldn’t be allowed to cheat workers out of hard-earned wages, and then simply re-open under a new name,” Assemblywoman Gonzalez said. “Even during this pandemic, we're hearing stories of wage theft where workers who have been laid off still haven't received the last paycheck they're owed. And when workers aren't able to collect their unpaid wages, they aren't able to pay their rent or cover their bills. This is about basic fairness.”

“We are struggling in my community and barely surviving,” said Rosa Lopez, who works as a janitor in San Diego. “Anytime a boss steals money from a low-wage worker, it’s hard—but now, in this pandemic, it is a catastrophe. Anyone who has stolen from workers should not be allowed to reopen under a new name.”

Employers in California are often not held accountable for failing to pay their workers. A 2013 report by the UCLA Labor Center found that even after legally binding judgments have been issued ordering employers to pay, only 17 percent of workers from 2008 to 2011 were able to recover any wage payment at all. Of the more than $282 million in unpaid wages issued by the Labor Commissioner’s office during that period, workers were able to collect only $42 million (or 15 percent). 

“Since March, workers across California—low-wage workers, workers of color, and immigrant workers—have been laid off and are still owed back pay; they must be paid every cent that is owed them,” said David Huerta, President of SEIU-USWW and Executive Board Member of SEIU California. “As our economy reopens, we must make sure to close the loopholes that allow the minority of unscrupulous employers to cheat workers.”

 

When workers try to enforce judgments for unpaid wages, they often find that their employer has disappeared, hidden assets, or shut down operations and reorganized as a new entity. In 60 percent of cases where Labor Commissioner judgements were issued against business entities, the 2013 UCLA report found those employers who owed their workers unpaid wages were found to be “non-active” business entities by the California Franchise Tax Board and the Secretary of State.

“The pandemic has made wage theft even more devastating for workers and their families. California’s economy is the fifth largest in the world, with the best employment laws in the country. Yet Los Angeles is the nation’s wage theft capital, and if we account for cost of living, California has the nation’s highest poverty rate. Our wealth and income gaps are widening,” Koreatown Immigrant Workers Alliance (KIWA) Executive Director Alexandra Suh said. “One way dishonest employers cheat is by closing down and opening under a new name—to get away with not paying workers. To close a crucial loophole that allows bad employers to cheat workers and families and creates unfair competition for honest businesses, we need AB 3075.”

These lawbreaking employers should not be able to use loopholes to avoid paying hard working individuals the wages they are owed. AB 3075 will add a provision to require individuals to attest that they do not have outstanding wage judgements against them before incorporating a new business. It will also clarify in existing law that local wage enforcement agencies may also enforce state wage theft laws, allowing a worker who files a claim in a local office to recover everything they are owed without having to file simultaneously with the state.

Following today’s passage from the Assembly Committee on Banking and Finance, AB 3075 now heads to the Assembly Appropriations Committee.  

For questions on AB 3075 or to schedule an interview with Assemblywoman Gonzalez, contact Sami Gallegos: samantha.gallegos@asm.ca.gov