In People ex rel. Harris v. Sunset Car Wash, LLC, the Court held that that a successor company was liable for unpaid wages and penalties for violations by the predecessor car wash company.  Auto Spa operated a car wash on Sunset Boulevard in Los Angeles.  Sunset Alvarado Investors, which held a note secured by a trust deed on the Sunset Boulevard property, foreclosed on the property, evicted Auto Spa, and leased the same premises to Sunset Car Wash. Auto Spa had failed to pay minimum wage and overtime to its employees and denied paid rest breaks.  The government sought to hold Sunset Car Wash liable for the wages and penalties owed by Auto Spa.  The Court held Sunset Car Wash was liable.

In 2003, a statutory scheme concerning car washes was enacted. It was motivated by a legislative concern that car wash employees were not being paid in accordance with law.  One part of the statutory scheme was section 2066, which imposes liability upon a “successor” to a car wash employer for unpaid wages and penalties owed by a predecessor employer in four circumstances: if the successor (a) uses substantially the same facilities or workforce to offer substantially the same services as the predecessor employer; (b) shares in the ownership, management, control of the labor relations, or interrelations of business operations with the predecessor employer; (c) employs in a managerial capacity any person who directly or indirectly controlled the wages, hours, or working conditions of the affected employees of the predecessor employer; (d) is an immediate family member of any owner, partner, officer, or director of the predecessor employer of any person who had a financial interest in the predecessor employer.

The Court held that the four circumstances of liability determine the meaning of “successor,” and there is no need to look to other statutes and case law to further define the term.  It then held that the imposition of liability against a successor who operates at the same location as a predecessor car wash employer does not constitute a violation of due process. The successor had argued that it had no notice of potential liability and thus it would be unfair. The Court rejected that argument and stated that in the car washing industry, section 2066 provides the necessary notice of the potential for successor liability for labor law violations.

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