California Supreme Court Clarifies Law Regarding “Rest Breaks”

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A recent California Supreme Court decision, Augustus v. ABM Security Services, Inc., has concluded that state law prohibits on-duty and on-call rest periods.  The decision will require California employers to re-examine their rest-break policies and practices.

ABM Security Services required its guard employees to keep their radios and pagers on and respond to needs such as escorting a tenant to the parking lot during their rest period.  The Court concluded the policy violates state law.

Current state law requires employers to offer all employees a rest period that is within the middle of any work period that amounts three and one-half hours or more. Employees must be paid for rest breaks (unlike meal breaks), which must last at least ten minutes per four-hour work period.  Bathroom breaks do not count as rest breaks.

Since employees are paid for their rest breaks, an employer can mandate that employees remain on premises during the breaks. However, the Augustus decision is clear that employers may not require employees to remain on call during their rest break periods. Employers may not require employees to answer calls or respond to customers or vendors during a paid rest break.  Penalties can be significant for failure to comply.

The Court concluded, “During rest periods, employers must relieve their employees of all duties and relinquish any control over how employees spend their break time.”  The 10-minute rest break must be uninterrupted.  “The rest period, in short, must be a period of rest.”

We are available to discuss with you whether your current “rest break” policies and practices comply with current California law.

 

An Ounce of Prevention

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ounce-of-prevention-1As Benjamin Franklin famously said, “an ounce of prevention is worth a pound of cure.”  As we continually emphasize to our clients, the best time to establish written agreements and procedures is before disputes arise. Given the fact that many business owners embark on new business ventures with family members, close friends, and other familiar business associates, it is not surprising that they frequently operate with the attitude of getting the business off the ground while “figuring everything else out later.”

Of course, we understand this perspective, and can appreciate that time and resources may be limited. Yet, succumbing to this trap often leads to significant unintended, negative consequences.  The results frequently include loss of valuable time and money, and the uncertainty of unwanted litigation. The cost of cleaning up mistakes is exponentially higher than hiring a good transactional lawyer from the beginning. Sadly, we have seen the closest of friends and family members end up in court, something that could easily have been avoided through thoughtful, proactive planning.

The following are some common pitfalls that could cause issues or disputes later on: operating without written agreements among business owners; failing to document key business transactions; inadequate corporate governance; disorganized management structure; tardiness in state or federal filings resulting in fines and penalties; and commingling of business and personal funds. To be sure, these are just a sampling: there are an endless array of traps for the unwary, uninformed business owner.

Having appropriate agreements and business structure in place is crucial for many situations:  the onset of catastrophic events; preparation for a business acquisition or merger; or the smooth transition of a business triggered by a founder’s disability, death or retirement.

As experienced business lawyers, we strategize with our clients on how to best resolve issues and disputes when they arise. However, we much prefer working closely with our clients to proactively plan and prevent these types of issues from ever arising. And frankly, it’s easier, less costly, and more effective. Our clients are grateful in either scenario – coming to us before or after a dispute – but the before has much less headache.  

We look forward to speaking with any business owners who feel that they could benefit from this type of proactive approach.   

New Labor Code Section 925 Restricts Employer’s Rights

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It goes without saying that the playing field between corporate employers and employees is not always level.  That disparity of power can result in employers imposing conditions of employment that create enormous hardship for an employee in the event of a dispute with her or his boss.  Among those conditions are terms that mandate where disputes are physically resolved and the law that applies, also known as choice of forum or law terms.

These provisions require a California-based employee to pursue her/his employment claims in another state, often applying non-California law.  The enormous financial burden to the employee, including having to hire out-of-state counsel and incurring large travel costs to attend remote legal proceedings, frequently results in the employee choosing to abandon her/his claims.  This is true even where the claims may have real merit.

Recently enacted Senate Bill 1241, signed by Governor Jerry Brown on September 25, 2016, creates a new Labor Code section that should even the playing field in many instances.

Effective January 1, 2017, Labor Code section 925 bars employers from requiring that an employee who lives and works in California agree, as a condition of employment, to a provision that would: (1) require the employee to litigate or arbitrate outside of California claims that arise in California; or (2) deprive the employee of the protection of California law with respect to a controversy arising in California. A contract that violates these restrictions is voidable at the employee’s request, and the matter would be decided in California under California law.

The law applies to contracts entered into, modified, or extended on or after January 1, 2017. However, it does not apply where the employee is individually represented by legal counsel in negotiating the terms of an agreement with respect to choice of law or forum.

If you are an out-of-state employer with California-based employees, it is critical that you review your employment contracts to ensure enforceability and compliance with Labor Code section 925.  It would also be prudent to require employees to seek attorney review of employment terms relating to forum and choice of law.  In this regard, it may be advisable for the employer to pay for that independent counsel review.

Please contact our office if you require guidance concerning this very significant change in California law.

Tax Reporting Deadline Earlier for Tax Year 2016

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Business owners  with employees or 1099 consultants need be aware of an important change in federal tax reporting law for the 2016 tax year.  Specifically, in an effort to reduce fraud, a provision in the Consolidated Appropriations Act passed by Congress has changed the filing deadlines for employer copies of Forms W-2/1099-MISC.

Starting in tax year 2016, the deadline for filing Forms W-2 to the Social Security Administration and 1099-MISC to the Internal Revenue Service will be January 31 of the following year, rather than February 28 as it was in the past. This new deadline is for all employer W-2/1099-MISC returns, both electronic and paper returns.

The 2016 employer W-2/1099-MISC filing deadline is Tuesday, January 31, 2017.

Please check with your let your CPA or tax advisor to make certain they know about these dates and the additional fees associated with late reporting.

If you have any questions, please contact our office.

An Ounce of Prevention

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ph-programsThe following is a reprint of an article I wrote for the March 2016 edition of the Oakland Metropolitan Chamber of Commerce’s monthly magazine.

Everyone understands the value of lawyers if you are sued or need to sue someone who has damaged your business. Yet far fewer owners appreciate the value of consulting experienced business attorney before problems arise.

Just as in construction, when building a business one’s success depends on the time and energy spent establishing a solid foundation. Moreover, having an awareness of the consequences of the decisions one makes regarding one’s business is critical to the preservation and enduring stability of that business.

Having spent decades as a trial lawyer, I have the experience and insight to predict the kinds of mistakes most business owners are likely to make. I also know with relative certainty what the impact will be on a company when a particular mistake is made. This is not to say I’m clairvoyant; I’ve simply witnessed patterns in the hundreds of lawsuits I’ve analyzed and litigated.

I also know that the cost of cleaning up these types of mistakes is exponentially higher hiring a good transactional lawyer in the first place. Given the opportunity, such an attorney can craft the appropriate types of business structure, agreements, policies and procedures to reduce the possibility of catastrophic risks occurring. And such planning will also mitigate and reduce the effects of these occurrences. Stated otherwise, proactive planning is always cheaper and more effective than reactive crisis management.

Unfortunately, an increasing number of business owners choose to “save money” by using legal documents they find on the internet without ever consulting an attorney. Far too often, this type of “citizen lawyering” results in contracts and other documents that are completely unsuited to the particular business, and that lack basic legal protections. I’ve seen California businesses using contracts intended for use in Australia, setting up the wrong type of business entity, and as a host of other horror stories.

The lesson to be learned is that the more thought and time you spend identifying, understanding and planning for the risks your business may face, the more likely the company will survive and thrive. Consulting an experienced business attorney is key to this process.

When assessing any business client, among the questions I always ask are:

(1) What are the potential risks this business may encounter in the industry it inhabits?

(2) What type of entity or structure is best suited for the business, and that will provide the optimal legal protection and financial benefit?

(3) What are the legal requirements and procedures the owners must follow to retain the financial benefits and legal protections the business entity and structure can provide?

(4) Do the contracts and agreements the business uses provide appropriate protection against the types and frequencies of risks the business will face?

(5) Is there a written plan to protect the company and its owners in the event of a catastrophic event?

With these answers, an experienced business lawyer can help the owner proactively plan so as to support the business’ stability, growth and longevity.  Contact our office if you think your business might benefit from such a conversation.

Business Succession Planning Article

Oakland Business Review: Business Succession Planning

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We are proud to announce that the Oakland Metropolitan Chamber of Commerce recently featured us in the September issue of the Oakland Business Review special section entitled, Law Offices of Oakland.

The article highlights how business owners often overlook succession planning when they first start out their businesses.  The reality is you can’t plan your path without first determining your ultimate destination. Are you building a company to pass down to your children or employees? Are you creating a business to be sold to a stranger? Without understanding your intention, you can’t develop or implement strategies and actions necessary to reach your goals. Nearly 80% of business owners say they want their businesses to survive them. And yet less than 25% have any type of written succession plan or “exit strategy”.  The all too frequent result is that businesses devolve into conflict and chaos when a founder dies, becomes disabled, or when business partners fail to share the same vision. Decades of blood, sweat and sacrifice go quickly down the drain, all for want of a simple plan.

A well crafted succession plan is as important as determining the type of entity best suited for the company; utilizing contracts and agreements that accurately reflect and protect business decisions; and understanding the legal requirements and procedures necessary to retain the financial and legal protections a business entity provides.

By preparing for the ‘What Ifs’ before they happen, business succession planning improves the likelihood of your company weathering the storms and quakes of an uncertain world. […] Click here to read more.

Employers’ Right to Require Arbitration Restricted in 2015

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Effective January 1, 2015, employers will face tighter restrictions on their ability to impose arbitration of employment claims.

Assembly Bill 2617, recently signed by Governor Brown, reverses prevailing legal trends that have expanded the use of arbitration clauses in many types of contracts. Presently, many companies require new employees to sign agreements waiving their rights to file claims in court or with government agencies. Applicants who decline to sign these agreements are frequently denied employment.

The new law prohibits employers from requiring employment candidates to sign such broad arbitration agreements and further prohibits businesses from refusing employment to individuals who refuse to waive their legal rights to file a lawsuit or governmental complaint.

The bill is “prospective” only, meaning it applies to contracts entered into, modified or extended after January 1, 2015.

If you are uncertain whether your current employment contracts comply with the new law, contact our office for a review.

New California Law Defines “Sick Leave” Requirements

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Governor Jerry Brown has just signed a new law passed by the California legislature that expands significantly the obligations of business owners to provide paid sick leave to their employees beginning in mid-2015.

The new law, AB 1522, also called the “Healthy Workplaces, Healthy Families Act of 2014,” requires virtually all California employers to provide at least 3 days of paid sick leave per year.  Unlike many other employee benefit laws, the HWHFA encompasses most small business owners regardless of size.  Limited restrictions are provided for in-home supportive services, some flight attendants and crew, and certain employees working under collective bargaining agreements.

Beginning on July 1, 2015, employees working for 30 or more days within a year are eligible to accrue at least one hour of sick leave for every 30 hours worked.  Part-time employees are also covered.  Use of accrued sick days begins on an employee’s 90th day of employment.

Employees will be permitted to carry over unused sick leave to the following year to a maximum of six days of accrued sick time.  However, employers are not obligated to provide monetary compensation to a terminated employee with unused, accrued sick pay.  In addition, employers may limit the amount of sick time an employee can take in single year to 24 hours (3 days).

To determine what your company should do to ensure its compliance with the new law, and avoid what can be significant penalties, please contact my office to schedule a consultation.