Israel Samuels LLP - Israel Samuels LLP

General Contractor To Be Jointly Liable For Subcontractors’ Employees Wages and Benefits

November 20, 2017 By Israel Samuels LLP Leave a Comment

For contracts entered into on or after January 1, 2018, general contractors will be held jointly liable for their subcontractors’ unpaid employee wages, fringe benefit or other benefit payments or contributions based on an Assembly Bill signed by Governor Brown. Such joint liability is now codified in California Labor Code section 218.7.

The law is limited. It does not apply to individuals performing work for the State or other governmental subdivisions. It also does not provide for a private right of action. Only the Labor Commissioner is given authority to enforce the law.

The Commissioner may seek unpaid wages and benefits from the general contractor through an administrative hearing, a citation or a civil suit, while joint labor-management cooperation committees and labor unions may recover damages solely through civil suits and only they may recover attorney’s fees and costs. The statute of limitations for bringing a claim is one year, which begins to run when the completion of the direct contract is recorded, when cessation of work on the direct contract is recorded or when the actual work covered by the direct contract is completed, whichever is earlier.

The new law also implements record-production requirements to assist in the auditing of subcontractors’ wage and benefits compliance. At the request of a direct contractor, a subcontractor must produce payroll records with sufficient information to determine whether the subcontractor is fulfilling its obligation to pay employee wages, fringe benefits and other benefits. Also upon request, the subcontractor must provide contract-specific information, such as the project name; the subcontractor’s name and address; identification of the entity for whom the subcontractor is directly working; the anticipated start date, duration and estimated journeymen and apprentice hours of the subcontract; and contact information for its own subcontractors on the project. A subcontractor’s failure to provide the requested information does not eliminate the direct contractor’s joint liability but does entitle the direct contractor to withhold payment of sums owed to the subcontractor as “disputed” until the requested information is provided.

What does this mean? General contractors will, in essence, become guarantors of payments by subcontractors to their employees. Therefore, it is essential that general contractors meet with their legal counsel to draft and institute procedures to assure all subcontractors’ employees are fully paid and receive all benefits to which they are entitled from the subcontractors in order to avoid double payment, penalties and Labor Code violations.

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.

Does OSHA Preempt California Unfair Competition Law?

November 13, 2017 By Israel Samuels LLP Leave a Comment

California civil lawyers and prosecutors thought they found an easy way to piggy back Unfair Competition Claims on Cal OSHA’s liability findings. Instead of relying on Cal OSHA, they filed civil actions under the California Unfair Competition law against employers when Cal OSHA assessed liability, fines and penalties for employee safety and health violations. Ordinarily, Cal OSHA’s jurisdiction would preclude direct civil actions by anyone other than Cal OSHA for these violations. However, to avoid Cal OSHA jurisdiction, these suits argued that when workplace safety corners are cut in violation of the law, the liable employer is at an illegal advantage over competing companies that did not violate the safety and health laws. Thus, in these civil suits lawyers and prosecutors sought damages unavailable from Cal OSHA, including punitive damages.

In Solus Industrial Innovations, LLC v. The Superior Court of Orange County, a case now pending before the California Supreme Court, the Orange County District used the Unfair Competition Law to seek large civil penalties against Solus after an investigation by Cal OSHA resulted in criminal charges from a water heater explosion that killed two individuals.

The trial judge was prepared to let the case go to trial, however, Solus obtained a writ of mandate from the Court of Appeals that directed that the case be dismissed on the grounds that federal OSHA law preempted, and did not allow an exception for, claims under the state UCL. The Orange County District Attorney appealed to the California Supreme Court Oral argument is scheduled for November 7, 2017.Thus, whether the Unfair Competition law can be used where Cal OSHA assesses liability is still unresolved.

OSHA compliance is incredibly important as the lives, health and safety of employees and the public are at risk. It is imperative that your company comply with these health and safety requirements. If you or your company is unsure if it is in compliance and/or if you have any questions regarding compliance, you should discuss them with your legal counsel. The consequences of failing to comply are stiff.

LLC Members May Be Fiduciaries

November 6, 2017 By Israel Samuels LLP Leave a Comment

Are you a Member of a limited liability company but do not manage the day to day operations of the company? You should be cautious of how “active” you are as a Member.

In Strong v. Cochran 2017 U.S. Dist. LEXIS 170073, a California real estate investment limited liability company filed for liquidation. The trustee sued the Members of the limited liability company for breach of fiduciary duty. The Members demurred to the Complaint claiming that since they were not Managers of the limited liability company they could not be held liable for breach of fiduciary duty as they did not control the LLC.

Judge Tena Campbell ruled that the Members could be sued for breach of fiduciary duty under a “fiduciary duty in fact” theory. Under this legal theory, an individual, regardless of title, owes a fiduciary duty to a company when the individual “participates in management of the corporation” and “exercis[es] some discretionary authority”. This legal theory works similarly to how liability may be imposed on limited partners in a limited partnership. Therefore, if the Member, or limited partner, participates in the management of the entity, that participant no longer is shielded from liability for acts undertaken by the entity. The realities of how a company is operated govern rather than its formal structure.

Before you decide to become involved in the operation of companies in which you are a passive investor, seek legal counsel. The last thing a passive investor wants is to be liable to the acts and omissions of the company in which he or she passively invested.

One Racial Slur Is All It Takes

October 23, 2017 By Israel Samuels LLP Leave a Comment

To prevail on an employment discrimination claim based on a “hostile work environment” the employee is required to prove that the discrimination was “severe or pervasive.” However, the Third Circuit of the United States Court of Appeals in Castleberry v. STI Group held
that a single instance of untoward behavior could qualify as sufficiently severe or pervasive to prove a hostile work environment.

In Castleberry two African-American pipeline workers on an otherwise all-white crew and were subjected to racial slurs. The Court of Appeals held that one instance of a supervisor using the n-word was sufficient to state a hostile work environment claim.

Now, more than ever, employers must maintain strong anti-discrimination policies, require and encourage employees to report discrimination, and promptly investigate and remediate any alleged discriminatory remark or other conduct, even if the allegation is of a single remark or incident. As Castleberry demonstrates, it only takes one inappropriate remark to find an employer liable.

Laypersons May Represent Parties At Some Administrative Hearings

October 16, 2017 By Israel Samuels LLP Leave a Comment

A question that has perplexed many State administrative boards and agencies, and the persons called before them, is whether the California Administrative Procedure Act (Gov. Code, §§ 11340-11529) authorizes a party to a proceeding conducted by the Office of Administrative Hearings to be represented by a person who is not an active member of the California State Bar. Early this month the California Attorney General issued this opinion:

We conclude that the Administrative Procedure Act does not, in itself, authorize a party to be represented in an administrative hearing by a person who is not an active member of the California State Bar.

The opinion is also supported by this month’s decision by the Third DistrictCourt of Appeal in Davis Test Only Smog Testing v. Dept. of Consumer Affairs. Davis contended its due process rights were violated when it was represented by a non-lawyer at an administrative hearing.

While the Court recognized that representing a party in an administrative hearing constitutes the “practice of law,” it held in some instances in administrative proceedings, “a layperson may represent a party.”

Unless the law or the rules of the administrative agency clearly prohibit a layperson from representing a party at an administrative hearing, in California a party may be represented by whoever it chooses whether they are an attorney or layperson. But really folks, isn’t it like an auto mechanic doing a knee surgery?

Why?

What Goes On With A California Employee Stays In California

October 9, 2017 By Israel Samuels LLP Leave a Comment

California employers are now prohibited from requiring an employee who primarily resides and works in California, as a condition of employment, to agree to a contract provision that would require the employee to adjudicate outside of California a claim arising in California or
deprive the employee of the substantive protection of California law with respect to a controversy arising in California.

Any contract that violates these prohibitions is voidable, upon request of the employee, and any dispute over a voided provision must be adjudicated in California under California law. In such actions Courts are authorized to award reasonable attorney’s fees. Excepted from these provisions is a contract with an employee who was represented by legal counsel in its negotiation. The exception is a recognition that many executives are represented by counsel in their employment contract negotiations and theoretically do not need the protections now provided to lower level workers. Whether this presumption proves valid will be the litmus test for this law.

If you have a form employment agreement it is time to have it legally reviewed and updated to avoid the possibility that the agreement or some of its terms are voidable by your new employees.

Expanded Protections For California Employees

October 2, 2017 By Israel Samuels LLP Leave a Comment

Last month we explained that the Governor had before him a whole litany of employee protections and all he need do is sign them into law. The signing deadline was October 15. 2017. Predictably, many were signed, but not all. Here are thumbnails of the some of the ones that made the cut:

Salary Inquiry Prohibited: It is now unlawful in California for employers, including state and local governments, to ask applicants about their prior salary, compensation, and benefits, although an employee may voluntarily disclose such information and the employer may consider the information. Employers must also provide, upon a job applicant’s reasonable request, the position’s pay scale. This law will have a significant impact on employee hiring practices. We recommend a legal review of those practices to assure compliance with this new prohibition.

Prior Conviction History: Employers with five or more employees are now prohibited from (1) including on any employment application a question seeking disclosure of a job applicant’s conviction history, (2) inquiring into or considering an applicant’s conviction history until after extending a conditional offer of employment, and (3) while conducting a conviction history background check in connection with an employment application, considering, distributing, or disseminating information related to (a) certain arrests not followed by a conviction, (b) referral to or participation in a pretrial or post trial diversion program, and (c) convictions that have been sealed, dismissed, expunged, or statutorily eradicated.

There is an extensive analytical and procedural process required by this law. Undertake a legal review of your hiring practices and decide if you need to ask the question. If you do, seek qualified legal counsel on how to comply with this new law.

Expanded Parental Leave: The protections of the California Family Rights Act have been extended to employees of small employers, those with at least 20 employees within 75 miles. These employers are now prohibited from refusing to allow employees — with more than 12 months and at least 1,250 hours of service — to take up to 12 weeks of parental leave to bond with a new child within one year of the child’s birth, adoption, or foster care placement. An employer employing both parents who both are entitled to leave for the same child does need not give more than 12 weeks of leave total to the employees (which may be granted simultaneously if the employer chooses). An employer may now recover the costs of maintaining the health plan for employees that do not to return to work after their leave exhausts because of a reason other than a serious health condition or other circumstances beyond the employee’s control.

Commencing on January 1, 2018 and ending January 1, 2020, the Department of Fair Employment and Housing will create a parental leave mediation pilot program. An employer may request all parties to participate in mediation within 60 days of receiving a right-to-sue notice. The employee cannot sue and the statute of limitations is tolled until the mediation is complete.

The landscape for parental leave has changed and so must the way employers approach such leave. Consult with qualified legal counsel to assure your business does it properly.

Immigrant Worker Protection Act: California employers are now prohibited from providing immigration enforcement agents with access to non-public areas of a workplace, absent a judicial warrant, and access to, or review or receipt of, employee records without a subpoena or court order. Employers must provide current employees with notices of an immigration agency’s inspection of I-9 Employment Eligibility Verification forms or other employment records within 72 hours of receiving the federal notice of inspection and provide affected
employees a copy of the Notice of Inspection of I-9 Employment Eligibility Verification forms, upon reasonable request. The law imposes substantial penalties to be paid to the State for violation of its provisions.

Whether this law will withstand a Federal Constitutional challenge is uncertain. However, the penalties and liabilities created for noncompliance do not permit employers to ignore it.

Gender Harassment Training: Employers with 50 or more employees must add items to their biennial supervisory training to prevent sexual harassment. The additional content includes practical examples to address harassment based on gender identity, gender expression, and sexual orientation. Employers are now required to post a DFEH-developed poster regarding transgender rights.

Usury Claims Unwaivable

September 25, 2017 By Israel Samuels LLP Leave a Comment

Even a general release does not result in a waiver of a claim of usury, according to the California Court of Appeals in Hardwick v. Wilcox (2017) 11 Cal.App.5th 975. Usury is the illegal action or practice of lending money at unreasonably high rates of interest.

In this case Hardwick received several loans at an interest rate of approximately 12% from Albert Wilcox who was not licensed as a lender and had no other exemption from usury under California law. The loans were secured by deeds of trust on Hardwick’s commercial properties. Hardwick defaulted and Wilcox commenced foreclosure proceedings. The parties entered into a forbearance agreement that included a general release of all claims and a waiver of future unknown claims under California Civil Code section 1152.

Nine months after entering into the forbearance agreement Hardwick sued Wilcox to recover the usurious interest he had already paid. The general release did not specifically mention a waiver of usury claims. Thus, the Court ruled Hardwick’s usury claim against Wilcox had not been waived and, even if the general release purported to release usury claims, to do so would be against public policy and therefore, such waiver would be invalid.

Wilcox appealed. The Court of Appeals affirmed and Hardwick was awarded over $200,000 in damages based on usuriously paid interest.

A lender is required to be licensed or must procure another type of exemption from usury to charge usurious rates of interest.

Generally, usury in California is any rate over 10% simple interest per annum or, if the loan is for home improvements, a home purchase, or for other than personal, family or household purposes, the higher of 5% or 10%, respectively, over the amount charged by the Federal Reserve Bank of San Francisco on advances to member banks on the 25th day of the month before the loan.

There are many other exceptions to the usury law including, but limited to, loans by real estate brokers if the loans are secured by real estate, and loans by most lending institutions such as banks, credit unions, finance companies, pawn brokers, etc. State laws place interest rate limitations on some of these loans.

If you charge interest in excess of these amounts you may be inviting a legal action based on usurious interest. If you pay interest in excess of these amounts you may be able to recover all or a portion of your interest payments. Therefore, before you loan money or accept a loan, with an interest rate in excess of 10% per year, check with your business attorney to determine whether the interest rate is usurious. .

In How Many Ways Can We Warn You About Consumption Of Sweet Drinks?

September 18, 2017 By Israel Samuels LLP Leave a Comment

By now we all know sugary, sweet drinks are not a good health choice. But, come on, in how many ways do you have to be told they could be bad for you?

In 2015 San Francisco passed an ordinance that required billboards and other advertisements of “sugar-sweetened beverages” to bear a health warning stating that drinking the product could contribute to diabetes, obesity and tooth decay. The American Beverage Association, the California Retailers Association and the California State Outdoor Advertising Association sued the City and County over the ordinance. They claimed that the warnings violated the advertiser’s free speech rights. The District Court held the Associations’ commercial speech would not be hampered by the warnings. The Associations appealed.

The Ninth Circuit Court of Appeals concluded the San Francisco required warnings overstate the dangers posed by drinking sugar sweetened beverages. Writing for the Court, Judge Ikuta stated:

“Because San Francisco’s warning does not state that overconsumption of sugar-sweetened beverages contributes to obesity, diabetes, and tooth decay, or that consumption of sugar-sweetened beverages may contribute to obesity, diabetes, and tooth decay, the accuracy of the warning is in reasonable dispute.”

A sweet appellate victory for the Associations. However, this high caloric fight may not end any time soon. We could see an appeal or a sugarwatered down version of the ordinance. San Francisco City Attorney’s Office spokesman John Cote stated the decision was disappointing, but the City is undeterred:

We’re analyzing the decision and evaluating all of our options. San Francisco remains committed to being a leader when it comes to protecting the health of our residents, especially our children.

So, crack open a Coke, pop a Pepsi, suck on a 7-Up and watch your tax dollars at work trying to warn people about their drink choices. By the way, a study by McCarthy et al. presented at the 1984 annual meeting of the Proceedings of the Human Factors Society concluded, after a review of more than 400 articles concerning warning labels on products such as seat belts, health products and household chemicals, product warnings, even when on the product packing, had no measurable impact on user behavior or product safety.

If Al Gore Invented The Internet, Who Invented E-mail?

September 11, 2017 By Israel Samuels LLP Leave a Comment

You probably receive Business Briefs via email. The majority of our readers receive an electronic copy. Have you considered who invented e-mail?

The inventor of e-mail was recently the subject of a United States District Court lawsuit in the District of Massachusetts. The Court dismissed the case of Ayyadurai v. TechDirt. Shiva Ayyadurai claimed he invented e-mail and that the blog TechDirt, its founder and one of its writers, defamed him by calling him a “liar” and “charlatan” for making the claim. In the action, TechDirt acknowledged that Ayyadurai had invented an electronic mail system in 1979 at the age of 14 that had been patented. However, it was not the first electronic mail system. Thus, TechDirt concluded Ayyadurai’s claim that he was the inventor of e-mail was “fake”, “fraudulent” and “bogus.”

The Court concluded TechDirt disputed “whether plaintiff should properly be characterized as the inventor of e-mail based on that [1979] creation.” It determined “whether plaintiff’s claim to have invented e-mail is ‘fake’ depends upon the operative definition of ‘e-mail’. Because that definition does not have a single, objectively correct answer, the claim is incapable of being proved true or false.”

Thus, the Court concluded TechDirt’s statements were protected since they were subjective opinion. The claims:

“are not provably false, are subjective statements that do not imply knowledge of objective facts, or are statements involving figurative language or hyperbole…One person may consider a claim to be ‘fake’ if any element of it is not true or if it involves a slight twisting of the facts, while another person may only consider a claim to be ‘fake’ only if no element of it is true.”

Stay tuned, however, this one may not be over, Ayyadurai released the following statement vowing to appeal:
Dr. Shiva Ayyadurai will be appealing today’s ruling. Dr. Ayyadurai has a long history of standing up for free speech. As a strong proponent of free speech, he also believes in truthful speech. False speech is not protected by the Constitution, and TechDirt’s false and malicious speech about Dr. Ayyadurai should receive no legal protection.

So, who invented e-mail? Your guess is as good as ours.