Israel Samuels LLP

A Law Firm for Businesses

This Year California Employers Should Not Ask These Interview Questions

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New California laws introduce prohibitions on questions concerning a job applicant’s salary history and criminal convictions. Employers should avoid these five questions:

1. Have You Ever Been Convicted of a Crime?
It is now illegal in California to ask this question before an employment offer is made. Under the new law California employers with more than five employees cannot include on any job application a question that seeks disclosure of an applicant’s conviction history, or that asks about or considers the conviction history of an applicant until he/she has received a conditional offer. It also prohibits the employer from consideration, distribution, or dissemination of information related to certain prior arrests, diversions, and convictions when conducting a conviction history background check. San Francisco ordinances provide even greater protections to job candidates and include stiff penalties for violations.

2. How Much Do You Currently Make?
California employers cannot ask job applicants for “salary history information” or rely on that information in deciding whether to offer a job or to set salary unless the applicant voluntarily discloses the information. If voluntarily disclosed, the employer may consider or rely on that information in setting salary so long as prior salary is not the only factor that justifies the pay disparity. While employers cannot ask about salary history information they can ask about an applicant’s salary expectations for the position.

3. Where Are You From?
This type of question can be interpreted to be a forbidden inquiry about the applicant’s national origin. Employers must not ask questions about a candidate’s citizenship unless U.S. citizenship is a legal job requirement. Employers may ask whether the applicant has a legal right to work in the United States, so long as the question is not asked on a selective or discriminatory basis.

4. When Did You Graduate High School?
Under California’s FEHA and the Federal Age Discrimination in Employment Act, questions about a candidate’s age are prohibited. Thus, employers should avoid questions that might reveal a candidate’s age, such as “What year did you graduate high school?” An employer may ask a candidate’s age only if the job has a minimum age requirement (for example, a bartender).

5. Are You Married?
Inquiries about parenthood and marital status are prohibited. Therefore, employers should not ask whether an applicant is married, pregnant, or plans to be in the future. Such questions are permissible once the applicant is hired.

We suggest that California employers read the fact sheet developed by California’s Department of Fair Employment and Housing, which offers further guidance on questions employers can ask applicants. However, to assure compliance in your business we recommend that employers thoroughly prepare their interview questions in advance, vet them with the Company’s legal counsel, and assure that during the interview the interviewer remains on script.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

Handling Employee Requests To Inspect Employment Records

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California employer responses to requests by former employees for their personnel file or employment records may have civil and criminal consequences if not properly handled. The appropriate response will, in large part, hinge on what the employee requests to inspect.

California has three principal statutes that govern employee requests to inspect personnel records:

Labor Code § 1198.5
Under Section 1198.5 present and former employees have the right to inspect personnel records maintained by the employer “related to the employee’s performance or to any grievance concerning the employee.” The employers must allow inspection or copying within thirty (30) days of the request. The inspection may be made by the present or former employee or their representative. The thirty (30) day time period can only be extended by five (5) days by mutual agreement. Under this code section performance reviews, commendation letters, disciplinary notices, corrective action plans, and complaints about the employee should be made available for inspection. The Labor Commissioner has issued some guidance on its website on what else might also be included in a “personnel file,” such as an employment application, notices of leaves of absence or vacation, education and training notices, and attendance records.

Section 1198.5 excludes from inspection, for most employers, records about a criminal offense; reference letters, and ratings, reports or records obtained before the employee’s employment, prepared by identifiable examination committee members, or obtained in connection with a promotional examination.Employers are permitted to redact the names of all non-supervisory employees mentioned in the file.

The statute does not apply if an employee (or former employee) files a lawsuit that “relates to a personnel matter” against the employer. In those circumstances the right to inspect or copy the records ceases during the pendency of the lawsuit.

If the employer does not allow a timely inspection or copying of these records, the employee may sue to force the employer to comply with the statute. Employees are entitled to a statutory penalty of $750 and an award of attorneys’ fees and costs for bringing the action. In addition, failure to comply is a criminal infraction under the Code section.

Labor Code § 226
Section 226 requires California employers to furnish employees with itemized wage statements that show nine (9) specific categories of information. These wage statements must be provided by the employer at the time employees are paid or semi-monthly.

In addition to requiring itemized wage statements, Section 226 also requires the employer to produce those wage statements to employees on request or a computer-generated report that shows all nine (9) categories of information required. Employers must make the records available to the employee within twenty-one (21) days of the request.

Failure of the employer to comply with Section 226 allows the employee to sue for a court order requiring the employer to produce the information; for a penalty of $750, and employees can recover their attorneys’ fees. A violation is also a criminal infraction and there is no exception for pending litigation.

Labor Code § 432
Section 432 requires employers to provide any document that an employee or job applicant “signs” that is related to obtaining or holding employment. There is no timeline for production in the statute and the Section does not authorize a private right of action to enforce compliance.

Documents covered by Section 432 are usually also be covered by Section 1198.5. Failure to comply with a request is a misdemeanor.

Employers do not have to produce “every” record about an employee in response to these requests. Only those documents that fall within the categories requested need to be produced. Employers should also consider other important issues when responding to these requests, such as attorney-client privilege, attorney work-product, proprietary information, and privacy issues. Therefore, these requests often require a case specific approach.

If you receive such a request the first thing you should do is pick up your telephone and call your business attorney to help you respond and assure you do not run afoul of the authorities in your response.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

Happy Holidays and Here’s to a Prosperous 2019!

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Everyone here at Israel & Samuels LLP wishes all of our readers, families and friends a joyous and wonderful holiday season and a successful 2019! We truly appreciate all of you and we look forward to providing dedicated legal services to our clients in 2019 and beyond. We also will continue to provide great tips and tools as our publication of Business Briefs rolls on.

Happy New Year to all!

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

New Laws in 2019: Here’s What You May Need To Know

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This year saw seismic shifts in California employee protections, sexual harassment and discrimination laws, state government oversight, consumer protections and business regulations. Here are a few new laws that may affect you after the ball drops on 2018:

  • When medical providers in California are disciplined for ethical violations like gross negligence, substance abuse, inappropriate prescribing or sexual misconduct, they can be placed on probation and they can continue to practice for a period under restricted conditions. However, it was extremely difficult for patients to discover whether their medical provider was on probation as the medical providers were not required to disclose their probation to their patients. Starting in July 2019, your physicians, surgeons, podiatrists, acupuncturists, chiropractors and osteopathic and naturopathic doctors will have to inform you if they are on probation before they can treat you.
  • If you were ever convicted of a marijuana violation it may soon be erased. The Department of Justice has until July 1, 2019, to review records and identify past convictions that may be eligible for recall or dismissal of a sentence.
  • Local governments will be prohibited from banning street vendors. If local government wants to regulate street vendors, it will be required to set up a licensing system. Violations of local rules can only be punished with citations or fines, not criminal charges.
  • All businesses with at least five employees will be required to provide mandated regular workplace sexual harassment training for all workers. Each such employee must also receive at least one hour of instruction on workplace sexual harassment within six months of being and every two years thereafter.
  • You will no longer have to put postage on the envelope when you vote by mail. Your ballot will come with a prepaid envelope.
  • You no longer have to wear a helmet when you ride your electric scooter which you now can operate at speeds up to 35 miles per hour.
  • Building permits will now remain valid despite changes in the Building Code so long as the work is commenced within twelve months after the permit issued.
  • Homeowner association boards will be required to review on a monthly basis the association’s accounts and reserves; will be required to have fidelity bond coverage for directors, officers, and employees equal to three months’ reserves; and will require a manager to obtain written board approval before the manager may transfer association funds of $10,000 or more.
  • Employers will generally be prohibited from requiring the execution of a release or non-disparagement agreement in exchange for any condition of employment.
  • Commercial landlords may serve Notice of Belief of Abandonment after the rent is unpaid for three days (at a minimum, depending on the number of days the lease requires before a landlord may declare a default), and allows delivery of that notice by overnight courier. The notice will expire after 15 days regardless of form of delivery.
  • When counting a three days’ notice to pay rent or quit or a three days’ notice to perform covenant or quit, or in responding to a complaint for unlawful detainer, Saturdays, Sundays and judicial holidays will now be excluded.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

Don’t Ignore The Commissioner of Business Oversight

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The California Residential Mortgage Lending Act (CRMLA), the California Financing Law (CFLL), and the California Franchise Investment Law (CFIL) authorize the Commissioner of Business Oversight to issue citations for violations of the CFLL, CRMLA, and CFIL, and any rule or order issued pursuant to these California laws.

Under both the CFLL and CRMLA, the commissioner may issue citations to compel corrective action. Under the CFIL, if the commissioner has cause to believe that the CFLL or the CRMLA have been violated, the commissioner may issue citations to correct such violations.

Citations must particularize the basis for their issuance and may contain orders to desist and refrain from the illegal conduct the Commissioner believes is involved. The citations may also assess administrative penalties of up to two thousand five hundred dollars ($2,500) per violation. All penalties collected are deposited in the State Corporations Fund.

Citations issued under CFIL are deemed final if, within 60 days from the receipt of the citation, the person cited does not notify the Commissioner and express the intention to request a hearing. Citations issued under the CFLL and CRMLA only allow 30 days for the person cited to request a hearing.

Any citations issued and fines assessed under the CFLL and CRMLA are in lieu of other administrative discipline by the Commissioner for the offense or offenses cited. The citations against, and fine payments made by, a licensee are not reported as disciplinary action taken by the Commissioner. However, sanctions authorized under CFIL are separate from, and in addition to, all other administrative, civil, or criminal remedies.

Under the CRMLA and CFLL the Commissioner must give due consideration to the appropriateness of the amount of the fine and will consider the gravity of the violation, the good faith of the person or licensees cited, and the history of any previous violations.
The Commissioner may apply to the superior court for a judgment in the amount of the administrative penalty and an order compelling the cited person to comply with the order of the Commissioner.

If you are involved in residential mortgage lending, finance lending or franchise investments, should you receive an inquiry or citation from the Commissioner of Business Oversight do not ignore it. Immediately contact your legal counsel as there are very short timeframes in which to take action should you dispute the claims made by the Commissioner.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

A Procedural Defense To Subrogation Claims

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When an insurer expends sums to defend and indemnify its insured it may “step into the shoes” of its insured and sue parties responsible for the insured’s loss for reimbursement. This is called “subrogation.” Ordinarily, there are very few defenses to a subrogation action as the amount paid is certain and the defendants rarely can question the amount of the loss. Defendant’s responsibility for the loss may have already been determined in a prior proceeding. Therefore, Defendants in subrogation rarely are able to effectively defend a subrogation action. However, a recent decision by the Third District of the California Court of Appeals in Travelers Property Casualty Company of America v. Engel Insulation, Inc. provides a possible way to procedurally dispose of some subrogation cases in favor of the Defendant.

In Travelers, the insurer defended and indemnified its insureds, the Westlake entities, developers sued by a homeowners association for construction defects. After that litigation was concluded, the insurer sued the sub-contractors it claimed responsible for the defects seeking reimbursement of the sums the insurer paid to resolve and defend the construction defect action on behalf of the Westlake entities. Engel Insulation, Inc. moved for judgment on the pleadings claiming, all of the Westlake entities were suspended corporations and, thus, by law, the insurer could not file its own action to assert claims solely as a subrogee of the suspended corporations.

The trial court granted the Motion and the Appellate Court affirmed. Since the Westlake entities would be barred from bringing the claim directly due to the suspension of their corporate status, the insurer could not prosecute the claims on the Westlake entities or its own behalf.

If you are sued by an insurer in a subrogation action you may not have many defenses. However, have your legal counsel check to see if the insurer’s insureds, if they are business entities, are in good standing with their state’s regulatory agency and have not been suspended. If they are suspended, you have a viable defense to the subrogation action.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

A Crack In California’s Refusal To Enforce Non-Competition Agreements?

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Generally, California courts will not enforce non-competition agreements that prohibit former employees from competing with their former employer unless the employee was also an owner of the business or upon transfer of an ownership interest in a business. Even if this threshold for enforcement is met, California courts have not, in the past, enforced non-competition agreements that are not narrowly tailored in an objectively reasonable manner as to time, place and subject matter. Recent cases indicate that California courts may be moving toward finding all non-competition agreements unenforceable as “restraints on trade” and as limits on California’s public policy of freedom of employment.

A narrow exception to California’s refusal to enforce non-competitions may have been crafted by a Delaware Court for those Delaware companies with California employees who affirmatively choose application of Delaware law in their employment agreements.
In NuVasiv, Inc. v. Miles, Miles, a director, officer and California employee of NuVasiv, terminated his employment immediately and went to work for a competitor. Miles’ employment agreement contained a non-competition clause and a Delaware choice of law provision. In entering into the employment agreement, the Court assumed Miles had been represented by legal counsel.

After Miles signed the agreement, but before he terminated his employment, California enacted Labor Code section 925 that, for the first time, created an exception to California’s requirement that employment matters with California employees be adjudicated in California pursuant to California law as a matter of public policy. Under Section 925(e), California employees, who are represented by legal counsel in the negotiation of their employment contracts, may contract to adjudicate in a different forum and therefore, choose the law that will apply to their employment agreement.

NuVasiv sued Miles to enforce the non-competition agreement in Delaware. Miles claimed the non-competition agreement was not enforceable since he was a California employee and California law, at the time he contracted, made the non-competition provision and choice of law provision unenforceable as a matter of public policy. The Delaware Court disagreed and decided the California Labor Code section 925(e) exception reflected that California’s public interest in prohibiting covenants not to compete where the employee is represented by counsel as being weak, in contrast with Delaware’s policy in favor of freedom of contract as being strong. The court then concluded that it would apply Delaware law in ruling on the covenant not to compete.

The result is highly questionable. It is not certain that the Delaware court made a correct assumption about California law. The invalidity in California of covenants not to compete is intended to protect the public as a whole, not just employees per se. It provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” Nothing in Business & Professions Code section 16600 (or in the statutory exceptions at section 16601 et seq.) refers to employees or employers as such or depends on an employment relationship; it applies regardless of the nature of the parties.

Section 16600 prohibits all agreements in restraint of trade (except as statutorily permitted), not simply employee non-competition agreements. Statutes prohibiting restraints of trade are not intended to protect the parties to anti-competitive agreements; they are intended to protect the public by prohibiting such agreements. Nothing in Labor Code section 925 states that agreements specifically covered by it can override statutes such as Business & Professions Code section 16600 designed to protect the public.
It is unclear whether the Delaware court took Business & Professions Code section 16600 into consideration in reaching its decision.

While, for now, California employees who are represented by legal counsel in the negotiation of their employment agreement may choose applicable law and adjudicatory forums other than California. Foreign businesses with California employees who were represented by legal counsel when they negotiated their employment agreements prior to enactment of Labor Code section 925 may have a way to enforce their non-competition agreements, at least if the foreign business is domiciled in Delaware. Employers and employees may have to await further judicial developments to advise whether the NuVasive case would have had a different result had the Delaware court considered Business & Professions Code § 16600.

The law surrounding Non-competition agreements in California is intricate. Employers should consult their legal counsel before they include non-competitive covenants in their employment agreements with their California employees.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

Paper Plates, Entering Vehicles, Points For Using Your Phone

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Two California laws will take effect January 1, 2019 that are applicable to motorists:

  • Any car bought or leased and driven off a car dealership lot must have temporary license plates. Dealers will be required to place temporary tags on cars, instead of paper advertisements. Drivers caught using temporary tags assigned to other cars, or who manufacture a temporary license plate, will face felony charges.
  • Entering a vehicle with the intent to commit a theft, whether or not the vehicle was locked or unlocked, becomes a crime punishable by imprisonment in a county jail for a period not to exceed one year or imprisonment in a county jail for 16 months, or 2 or 3 years. Prior law required the vehicle to be locked before the entering was considered a misdemeanor.
  • Motorists should also be aware of Assembly Bill 47 that is presently under consideration by the California Legislature. If passed, motorists caught using their telephones after January 1, 2021 will get one point assessed against their licenses.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

It’s That Time of Year Again: Ways to Mitigate Risks at Your Company Holiday Party

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It’s the end of the year and that means its company holiday party time. We all know the drill: Have fun, but not too much. Keep in mind the party — whether it includes staff, spouses or clients — is a professional work event. What happens reflects on not only the individual but the company itself.

You have no doubt heard the same old warnings as each holiday season approaches. And as you should; everyone attending a company party should keep those in mind. But what about those hosting the party? Is there is a separate set of guidelines for the company and management to make the night a professional — and social — success?

If you’ve attended more than a couple of years’ worth of parties, you know it as a source of lucid folklore. Everyone remembers the year Jim did this, or Jenna did that, or what Jim and Jenna did together. Blowing off steam after a rugged journey to reach economic and business goals at year’s end is implicitly expected to generate juicy gossip or myths of scandal and embarrassment. Anything less is seen as boring.

A company’s legal liability for its holiday party can extend to physical harm, harassment, discrimination, workers’ compensation and a host of other legal theories.

According to studies, more than 10 percent of attendees at holiday parties act out in some manner that compromises their professional standing. They do so under the watchful eye of countless phones and cameras, waiting to be tomorrow’s Instagram post.

As defenses fall with each drink, co-workers might act out on their yearlong peer or subordinate crush. They may drink too much just to relax, even if they are not typically problematic drinkers (often a more destructive scenario than with the seasoned drinker). Others may decide to vent their frustration or anger about the company, often when impaired and exhausted, or even attempt to drive home while legally incapacitated.

But on a Positive Note …

Although it might seem as if holiday parties are littered with landmines, the reality is they serve a positive and necessary purpose. In fact, because company culture often is more impersonal and businesslike these days, hosting such events is critical to boosting spirits. The end of the year is a milestone and a reckoning, good or bad. Management, professionals and staff have been in the trenches together for a year attempting to reach personal and professional goals. The holiday party is essentially an opportunity to bond, celebrate, find inspiration, build camaraderie, blow off steam, laugh, enjoy one another outside of the office, and give a nod to the holiday season. It is both a recognition of the sacrifices and achievements of the past year as well as a pep talk for the upcoming year.

In other words, a holiday party can and should be a wonderful experience filled with relatively sober and relaxed conversations, a toast or speech from company leadership, and perhaps a fun activity.

In order to mitigate the risks inherent in throwing a holiday party, taking a few discrete actions, including the below, can minimize predictable problems:

  • Send invitations and emails outlining the company’s expectations for the holiday party;
  • The importance of respectful physical and verbal behavior;
  • The notion that the party is an extension of the workplace;
  • A heads-up on the enhanced scrutiny of workplace behavior and a gentle warning to behave accordingly;
  • Limit opportunities to become intoxicated;
  • Provide a certain number of tickets for alcohol for attendees;
  • Make the length of the party shorter rather than longer;
  • Don’t permit shots;
  • Offer good food and non-alcoholic alternatives (and include low-alcohol punch);
  • Give a relatively early “last call”;
  • Designate a member or two of management (not HR) to be sober observers to monitor potential problems; and
  • Provide Uber or another ride-share service for every attendee to and from the party. It is impossible to identify every person who may be impaired, so the money will be worth it. Our recommendation is that Uber be paid for even when the attendees go to an after-party or meet at a bar. These post-party gatherings are common and it’s often when the attendee has that one drink too many. This policy also protects attendees who choose to have a “pre-party,” a not uncommon tradition for nervous associates who may be socializing with senior partners for the first time.

At the end of the day, a party is still a party, with all the fun and risks attendant to a gathering with alcohol, music, food, and scores of different personalities and skills. As host, your company can certainly put some boundaries and practical tools in place to avoid potential damage to guests and to the company.
DISCL

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

Get Your Tax Breaks Before They Expire

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Certain tax breaks are only available for a limited time. Most of the changes in the Tax Cuts and Jobs Act for individuals, unless subsequent legislation extends them, are only through 2025. Other tax provisions have earlier expiration dates, so it behooves business owners to take advantage of these tax while they can.

Here are just a few that might apply to your business:

Credit for Paid Family and Medical Leave
Federal law does not require business owners to provide paid leave to employees, however if they do, they may qualify for a tax credit. So long as the business has a written policy that offers at least two weeks of paid family and medical leave and business pays at least 50% of wages normally paid to the employee, the business can take a tax credit. The credit amount ranges from 12.5% to 25% of wages, depending on what was paid. The credit only applies in 2018 to employees who earned no more than $72,000 in 2018. The earning amount may increase in 2019, and the law is set to expire on December 31, 2019. Note, businesses cannot take this credit to the extent paid leave was paid by a state or local government or required by state or local law.

Work Opportunity Credit
If a business expands its workforce, it may be eligible for a special tax credit if the employee(s) that were hired are in a targeted group. It is estimated 10% to 20% of employees could fall within these groups:

  • Long-term family assistance recipient
  • Qualified recipient of Temporary Assistance for Needy Families (TANF)
  • Qualified veteran
  • Qualified ex-felon
  • Designated community resident
  • Vocational rehabilitation referral
  • Summer youth employee
  • Supplemental Nutrition Assistance Program (SNAP) benefits (food stamps) recipient
  • SSI recipient
  • Qualified long-term unemployment recipient

The amount of the credit varies with the targeted category. It ranges from $2,400 for most categories (less for summer youth) to $9,600 for a veteran with a service-connected disability.

To qualify for the credit, the business must submit Form 8850, Pre-Screening Notice and Certification Request to the state workforce agency no later than 28 days after a new employee begins work. If the business fails to do this, it cannot take the credit even if the new employee would otherwise fall into a targeted group. This law is also set to expire on December 31, 2019.

Credit for Electric-powered Vehicles
If a business owner buys an electric-powered vehicle, he or she may be eligible for a tax credit of up to $7,500. If the vehicle is for business, the credit is part of the general business credit.

This credit phases out when a manufacturer sells more than 200,000 vehicles. Tesla achieved this landmark in sales in July 2018. As a result, the full credit amount will only apply to vehicles purchased through December 31, 2018.

For purchases from January 1, through June 30, 2019, the credit limit will be only $3,750. The limit will fall to $1,875 for vehicles bought from July 1 through December 31, 2019. And no credit for an electric-powered vehicle will be available after 2019.
Contact your accountant and attorney to make sure you can qualify for, and claim, these credits.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

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