With the advent of 2016, several new California laws will impact employers. These include, but are not limited to:

Prohibition On Use Of E-Verify: E-Verify is an internet-based system that allows employers to determine the eligibility of their employees to work in the United States. The E-Verify system is administered by the United States Citizenship and Immigration Services, the United States Department of Homeland Security (DHS), and the United States Social Security Administration (SSA). New Labor Code section 2814 prohibits employers from using the E-Verify system to check the employment authorization status of existing employees or applicants who have not received an offer of employment, except as required by federal law or as a condition of receiving federal funds. Violation of this new law may subject an employer to a civil penalty not to exceed $10,000 for each prohibited use of the E-Verify system.

Expanded Labor Commissioner Powers: The Labor Commissioner is now able to enforce local laws regarding overtime hours or minimum wage provisions and to issue citations and penalties for violations, except when the local entity has already issued a citation for the same violation. Labor Code Section 2802 pertains to indemnification of employees by employers for expenses or losses incurred by the employee in direct consequence of the discharge of the employee’s duties or as a result of obeying the employer’s directions. In 2016 it also provides a private right of action by the employee to recover these expenditures and authorizes the Labor Commissioner to issue citations and penalties against employers who fail to properly indemnify employees.

Employee Accommodation Requests: It will be an unlawful employment practice for an employer to retaliate or otherwise discriminate against an employee for “requesting” an accommodation for a disability or religious belief or observance, regardless of whether the request was granted.

Discrimination Against Employee Family Members: New Labor Code sections prohibit retaliation against an employee because the employee is a family member of a person who has, or is perceived to have, engaged in any acts protected by law.

Piece-Rate Compensation: Employers will be required to compensate piece-rate employees for rest and recovery periods and “other nonproductive time separate from any piece-rate compensation. Employers must compensate employees for rest and recovery periods at a regular hourly rate that is no less than the higher
of:
(i) An “average hourly rate” determined by dividing the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the workweek, exclusive of rest and recovery periods;
or
(ii) The “applicable minimum wage,” which is defined as “the highest of the federal, state or local minimum wage applicable to the employment.”

Employers also must compensate their employees for other nonproductive time at an hourly rate that is no less than the applicable minimum wage. “Other nonproductive time” may be determined either through actual records or the employer’s reasonable estimates, whether for a group of employees or for a particular employee, of other nonproductive time worked during the pay period.

The new law also legislates specific requirements for itemized wage statements and provides a “safe harbor” “affirmative defense” provision for employers for violations prior to the end of 2015 provided the employer complies with certain specified requirements by no later than December 15, 2016, which include:
(a) making payments to each of its employees, for previously uncompensated or under-compensated rest and recovery periods and other nonproductive time from July 1, 2012, to December 31, 2015; (b) paying accrued interest; and (c) providing written notice to the Department of Industrial Relations of the employer’s election to make payments to its current and former employees by no later than July 1, 2016.

Equal Pay Act: The new California Fair Pay Act is intended to increase requirements for wage equality and transparency. Generally, comparable employment will require comparable pay, irrespective of gender.

Judgment Enforcement: New law authorizes the Labor Commissioner to use any of the existing remedies available to a judgment creditor and to act as a levying officer when enforcing a judgment pursuant to a writ of execution. It also permits the Labor Commissioner to issue a notice of levy if the levy is for a deposit, credits, money, or property in the possession or under the control of a bank or savings and loan association or for an account receivable or other general intangible owed to the judgment debtor by an account debtor. Thus, should a final judgment against an employer remain unsatisfied after a period of 30 days after the time to appeal the judgment has expired and no appeal of the judgment is pending, the employer cannot continue to conduct business unless the employer has obtained a bond up to $150,000 (depending on the unsatisfied portion of the judgment) and has filed a copy of that bond with the Labor Commissioner. The
bond shall be effective and maintained until satisfaction of all judgments for nonpayment of wages.

These are just a few of the labor laws that will effect employers in 2016. It is therefore essential that employers, as soon as possible, consult legal counsel to ensure their policies are compliant and their employee handbooks are up to date in order to accurately reflect these new laws and protect employers from potential liability for noncompliance.

On January 1, 2016, amendments to the California Franchise Relationship Act go into effect that broaden California franchisees’ rights against termination and penalize franchisors for improper termination or nonrenewal of a franchise.

As amended a franchisee will have at least 75 days to cure non-monetary faults and at least 10 days to cure regulatory violations before a franchisor can terminate the franchise agreement. The franchisor is still permitted to terminate the franchise in the event of certain emergency situations, such as foreclosure, eviction or franchisee misconduct. Repeated violations of the franchise agreement by the franchisee may also form the basis for franchise termination.

Under the new law a franchise agreement terminated at the discretion of the franchisor requires the franchisor to buy back any equipment, fixtures, furnishings, inventory and supplies that were paid for under the terms of the franchise agreement or a subsequent supplier agreement, at the franchisee’s depreciated value.

The franchisee, however, will be permitted to sell or keep the equipment, etc., as well as the commercial lease. The franchisor will not have to repurchase these assets if the franchisor exits the geographical market where the franchise is located.

Franchisees are also granted the right to transfer ownership of the franchise or any portion of the franchise’s equity to anyone who qualifies under the franchisor’s existing standards. There are explicit notice, content and time periods for transfers in the new law.

The franchisee has several remedies, including reinstatement, damages for losses incurred or reimbursement by the franchisor for the fair market value of the franchise, if the franchisor violates the new termination and non-renewal provisions of the Act.

If you are a franchisor who is ready to terminate a franchise the time to do it is now before the new amended law takes effect. If you have any questions or concerns about termination or non-renewal of a franchise, do not hesitate to seek legal counsel from the attorneys at Israel & Samuels, LLP.

The end of the year is an important time to review your company’s business compliance and legal standing to assure that your business is in compliance with all legal requirements and are ready to take on the new year.

A corporation or LLC formalizes your small business and protects your personal assets. However, to obtain these benefits you must maintain the corporation or LLC and it is more involved than a sole proprietorship.

Here is a year-end checklist of things that may need to be done to keep your business entity in “good standing”:

File Your Annual Report: Most jurisdiction’s require filing an Annual Report or Statement of Information.

Pay Your State Franchise Taxes: Some States, including California, levy a franchise tax on corporations and LLCs for the privilege of operating in the state. Check with your state’s Franchise Tax Board (or similar office) if you do not know your franchise tax obligations.

Advise The State Of Major Changes: If you have made, or contemplate making, major changes in the nature, direction or management of your business you need to file an official notification (Amendment to the Articles) Changes that could trigger such filings include: changing your business address, changes to board
members, changing the company name, modifying the manner in which company ownership is represented, changes in the manner of business entity governance, etc.

Assure Your Registered Agent is Current: LLCs and corporations must file an official address for service of papers and process. Some companies use a Registered Agent service as their official address if they don’t have a permanent office location. If you use a Registered Agent service make sure you keep up with your service fees or the Registered Agent will stop representing you, official mail from the state will be returned, and the state will list your company as in bad standing until it receives an updated address of record.

Register DBAs: If you conduct business under a name that’s different than the filed official name of your LLC or corporation, in California you need to file a Fictitious Business Name Statement for each variation in each County where the company does business under such fictitious business name other than the
official name of the company. Failure to do so may prevent the company from defending actions brought against it under such fictitious business name or sue in that name.

Ensure Business and Personal Finances Are Separate: Once you incorporate or become an LLC, you are legally required to separate your business and personal finances. If you have not done so you may lose all of the asset protection provided by having the entity in the first place. Open a business checking account (you’ll need an EIN from the IRS first), apply for a business credit card if needed, keep separate records and resolve to strictly keep your personal and business finances separated.

Obtain And Renew Permits and Licenses: A variety of government permits may apply to your business. It is time to check for, and obtain or renew local business licenses and operation permits. Make sure you have all of the licenses and permits needed to legally conduct your enterprise.

Dissolve Inactive Entities: Inactive LLCs and corporations must still file business taxes and a Statement of Information, pay franchise taxes, etc. until formally dissolved. Until you formally notify the state that you have closed the business the business will continue to incur liabilities to the state for taxes, filings as well as penalties for not filing.

Memorialize, Memorialize, Memorialize: Make sure you have a paper trail with regard to the conduct of your business that memorializes this year’s agreements, elections, changes in voting rights, issuance and transfers of interests, disbursements out of profits, authorized business endeavors, business debts,
income and reserves, changes in operations, employment and consulting agreements, capital expenditures and calls, and virtually every other aspect of your business. Not only will this offer protection, it provides documentation to protect you and the company and, if you are a corporation, is required to maintain the asset protection afforded by the entity.

These tasks may seem formidable. If they do, call us. Israel & Samuels, LLP is here to help you, not just when problems have already arisen, but, also to provide legal services that minimize the possibility that such problems will arise.