Legal News & Tips

Levies on Wages Limited by New Law

October 17, 2022 By Israel Samuels LLP Leave a Comment

Once a money judgment is rendered the judgment creditor must take steps to enforce the judgment if the judgment debtor does not voluntarily pay the judgment.

Prior to September 1, 2022, the law specified that the maximum amount of a judgment debtor’s disposable earnings for any workweek that was subject to levy for enforcement of a money judgment could not exceed the lesser of certain specified percentages, including 50% of the amount by which the disposable earnings for the week exceed 40 times the state minimum hourly wage. Prior law also included certain multipliers to determine the maximum amount of disposable earning subject to levy for any pay period other than a weekly pay period.

Senate Bill 1477, enacted on September 29, 2022, changed these rules to further favor the judgment debtor retroactively to September 1, 2022. Now, the maximum amount of disposable earnings of a judgment debtor for any workweek that is subject to levy must not exceed the lesser of 20% of the individual’s disposable earnings for that week or 40% of the amount by which the individual’s disposable earnings for that week exceed 48 times the state minimum hourly wage. The law also reduced the multipliers used to determine the maximum amount of earnings subject to levy for any pay period other than a weekly pay period.

If you have a money judgment and the judgment debtor is employed now is the time to assure you obtain a levy against the judgment debtor’s wages. Due to this new law, it will take judgment creditors much longer to get paid in full from wage levies so contact your attorney and get them started as soon as possible.

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 Limits on Renewal of Certain Types of Money Judgments

October 10, 2022 By Israel Samuels LLP Leave a Comment

Senate Bill (SB) 1200 was approved by the Governor and became effective on September 30, 2022. SB 1200 made significant changes in the rights of judgment creditors when they renew money judgments in California.

The new law increases from 30 to 60 days the amount of time after service of a notice of renewal that a judgment debtor may make a motion to vacate or modify a renewal. The law now limits a judgment creditor to renew the period of
enforceability in cases of a money judgment of under $200,000 that remains unsatisfied for a claim relating to medical expenses and for a money judgment of under $50,000 that remains unsatisfied for a claim related to personal debt only once and for a period of 5 years from the date the application is filed. The law now prohibits a judgment creditor from bringing an action on those types of money judgments.

The law also prohibits an application for another renewal of these types of judgments from being filed if the judgment was renewed on or before December 31, 2022. The new law does not apply to judgments for debts incurred due to, orobtained by tortious or fraudulent conduct,or judgments for unpaid wages, damages, or penalties owed to an employee.

Interest accrues on money judgments at the rate of ten percent (10%) per annum. For judgments entered on or after January 1, 2023, or where an application for renewal of judgment is filed on or after January 1, 2023, the new law creates an exception from that interest rate. Interest now accrues at the rate of 5% per annum for a money judgment of under $200,000 that remains unsatisfied for a claim related to medical expenses and for a money judgment of under $50,000 that remains unsatisfied for a claim related to personal debt.

Once a judgment creditor obtains a money judgment, the creditor’s work is not over. Now, for personal debt money judgments under $50,000.00 and medical expense money judgments under $200,000.00, the time to enforce the judgments is limited and the interest rate has been cut. Therefore, now prompt action and relentless attention to collection of the judgment once entered is more important than ever. If you are a judgment creditor with one of these types of money judgments immediately contact legal counsel and commence collection and enforcement proceedings.

Are You the Next EDD Audit Contestant?

October 3, 2022 By Israel Samuels LLP Leave a Comment

The EDD has stepped up unemployment tax audits to police independent contractor misclassification. Many believe the EDD is pursuing these investigations to bolster its balance sheets due to its tax losses during the pandemic.

The EDD investigations are directed at companies that paid “independent contractors” on a 1099 basis in the last three years. The EDD commences these investigations by sending targeted businesses a “Inquiry Regarding Records” letter and/or a “Preaudit Questionnaire” and an “Information Sheet: Employment Tax Audit Process.” The investigation is focused on whether a company misclassified an employee as an independent contractor in a manner that the company owes contributions and taxes for the misclassified employees. If you receive one of the above-mentioned communications immediately contact your business legal counsel and your accountant.

Employers must withhold certain sums for employee contributions and taxes. However, for a worker classified as an independent contractor, no such contributions or taxes are withheld by the employer. The goal of these investigations, according to the EDD, is “to ensure that employers properly report all workers, wages, and contributions for Unemployment Insurance, State Disability Insurance, Employment Training Tax, and California Personal Income Tax withholding.”

The Preaudit Questionnaire requests a broad scope of data and information to “expedite the examination of [the Company’s] books and records.” It contains inquiries related to whom the company contracts with, what types of services they provide, the types of accounting system maintained, contact information for bookkeepers, etc., and a response to the questionnaire is required no later than 14 days after receipt.

After the EDD’s receipt of the completed Preaudit Questionnaire, it will conduct a telephone investigation of the company and its bookkeepers. The EDD will ask about the operation and organization of the business and accounting records. The EDD auditor will then review the company’s books and records to: (1) verify the business ownership and type of entity (sole proprietorship, partnership, corporation, etc.); (2) verify that all individuals paid for services have been properly classified as either employees or independent contractors in accordance with the provisions of the California Unemployment Insurance Code (“CUIC”) and the common law test as applied by the State Supreme Court; and (3) discuss any questionable payments made for personal services and the nature of the working relationship(s) between the company and the worker(s). With additional input from the company and discussion(s) with the worker(s), the auditor will determine whether the worker(s) are employees or independent contractors.

After review of the company’s records, the EDD will send interview requests to workers paid as independent contractors to assist the EDD investigation to determine whether the company misclassified workers as independent contractors.

If the company is selected for a “complete audit” – something that is presently more likely than not – the following “tests” will be conducted by the EDD: (1) verification that the company’s acknowledged gross wages and taxable wages have been properly reported; and (2) verification that the company has correctly withheld and reported personal income tax for wages paid to employees.

Thereafter, the EDD auditor will arrange for an exit interview to review the audit findings and to attempt to resolve any disputed issues. If a company does not reach an agreement with the auditor, it may then request a pre-assessment conference with the supervisor of the auditor.

The audit can result in no action, a credit paid to the employer, or an “assessment” for underpayments.

A company may appeal an assessment under the Employer’s Bill of Rights. The company may petition the California Unemployment Insurance Appeals Board for a hearing before an Administrative Law Judge.

It is presently uncertain whether the EDD has or will refer investigations to the Labor Commissioner for enforcement action based on employee misclassifications.

If your company receives an “Inquiry Regarding Records,” a “Preaudit Questionnaire,” or an “Information Sheet: Employment Tax Audit” from the EDD, immediately contact your business counsel and come up with a response plan. However, the time to act is before you receive an “Inquiry Regarding Records,” a “Preaudit Questionnaire,” or an “Information Sheet: Employment Tax Audit”. Contact business counsel now to review your records now to determine whether any workers may be at risk of having been misclassified. The company should ensure it has a signed contractor agreement with each independent contractor, and that the independent contractor is a bona fide entity, not an
individual. Work with your legal counsel to calculate and pay any potential withholdings and taxes to avoid penalties in an assessment, in addition to reclassifying as employees those independent contractors who are determined to be misclassified.

The company should periodically conduct a misclassification audit to determine whether independent contractors are misclassified with the assistance of legal counsel, so the audit is subject to the attorney-client and attorney work product privileges. Don’t wait. The EDD has drastically stepped-up enforcement.

When It’s Not White Chocolate

September 26, 2022 By Israel Samuels LLP Leave a Comment

The California Fourth Appellate District has ruled on when a reasonable consumer would expect white baking chips to be white chocolate.

In Salazar v. Walmart, Inc., published September 19, 2022, David Salazar sued Walmart, Inc. in a class action for unfair competition, false advertising, and violation of the Consumer Legal Remedies Act when he discovered the White Baking Chips he purchased contained no white chocolate. The chips were found on a store shelf next to milk chocolate goodies. Walmart demurred to the Complaint claiming no reasonable consumer would believe White Baking Chips contained real white chocolate. The trial court agreed and sustained the demurrer without leave to amend and entered judgment for Walmart. Salazar appealed.

The Appellate Court reversed the judgment. The Appellate Court found that, even though nowhere on the product labeling did it say it included white chocolate, the use and placement of the product and the word “White” in the labeling a reasonable consumer might have been misled. It thus reversed the judgment to allow Salazar to prove to a trier of fact that a reasonable consumer would be misled to believe White Baking Chips contain white chocolate. A sweet interim win for Salazar.

If there is one takeaway for business from this case is avoid the potential for misleading consumers. It would have been easy enough for Walmart to have placed under the name “White Baking Chips” a notice that it does not contain white chocolate to avoid any misunderstanding. If you are unsure about the name of your consumer product, contact your business attorney and vet with them the best way to avoid this type of costly litigation. Maybe meet over a nice hot chocolate.

Proving Employees Are Given Rest Breaks

September 19, 2022 By Israel Samuels LLP Leave a Comment

One of the frequently recurring employee claims against employers is that employers did not provide employees with statutory rest breaks. There are no statutory requirements for proof. Therefore, employers should put into place procedures to mitigate against these types of claims and provide proof that rest breaks were provided.

Employers should start by giving every employee written notice that they are entitled to, and the employer provides, at least 10 full minutes of rest break for every four hours worked (or major fraction thereof); that employees can leave the premises during their rest break, and that they are relieved of all duties during the rest break. Employers should retain written proof that the policy was distributed and have receipt acknowledged in writing by each employee.

Employers should schedule all employee rest breaks. Although this may be an arduous task, if rest breaks are placed on a schedule, and posted, that is proof that the breaks were made available. Employees should not have to ask a manager for permission to leave.

Employers should have a rest premium code on their payroll and should occasionally use it when an employee misses a rest break for work-related reasons. Having and using the code is persuasive evidence that rest breaks are made available.

Employers should also use some form of written attestation by the employee, preferably daily, but at least weekly or per payroll period, whereby the employee acknowledges that all rest breaks were provided, and if not, they let a manager know, so that a Rest Premium could be provided. If not provided the Employer should ensure the Rest Premium is paid (at the regular rate) to the employee.

Employers must train the managers and payroll on these procedures. Frequent managerial errors that can lead to exposure for failing to provide rest breaks can occur where managers ignore posted rest break schedules; tell employees they cannot take breaks despite posted policies, the schedule or training to the contrary; interrupt employees while on break to talk about work; requiring employees to stay on the premises during rest breaks or to check messages; assert unsigned or unpublicized break policies; fail to consistently use an employee attestation process; never use a Rest Premium Code or do not pay missed rest breaks at the regular rate.

If you do not have these policies and procedures in place or are presently subject to employee claims for missed rest breaks, immediately contact your employment counsel to put in place proper policies and procedures, and to attempt to resolve the employee claims without litigation.

End of Tenancy Checklist for Landlords

September 12, 2022 By Israel Samuels LLP Leave a Comment

Ashlee D. Gonzales of the Palo Alto-based law firm, Brewer, Offord & Pedersen, LLP, has published a useful checklist for Landlords upon termination of a tenancy. The full article can be found on the Brewer firm’s Real Estate blog. Here is a useful summary.

Pre-Move-Out Inspection
When a tenant’s occupation of a residential unit is about to expire, the landlord must offer a pre-move-out inspection related to the tenant’s security deposit. Civil Code Section 1950.5 requires specific language to be delivered to the tenant relating to the inspection.

With regard to when the inspection should occur, Section 1950.5 requires it to be at a reasonable time, but no earlier than two weeks before the termination or the end of lease date prior to any final inspection the landlord makes after the tenant has
vacated the premises. The tenant has no obligation to conduct a pre-move-out inspection, and if they fail to do so, they’ll be unable to cure deficiencies that would otherwise result in deductions from the deposit.

After the inspection, the landlord must provide the tenant with an itemized statement of proposed deductions, specifying what repairs and/or cleanings need to be done to avoid such deductions. The statement requires specific statutory language, and it may be helpful to have qualified legal counsel prepare the statement.

Confirm Relinquishment of Possession
Whether or not there is a signed move-out agreement, valid cause to terminate the tenancy, or some other kind of mechanism terminating the tenant’s right to possession, the landlord must confirm that the tenant has given up possession. In lieu of written confirmation, a full return of the keys is another way that a tenant can affirmatively relinquish possession. If uncertain whether the tenant has actually relinquished the premises, it is best to consult with an attorney.

Return of Security Deposit and Itemized Statement
Landlords must send their tenants an itemized statement and a return of the security deposit within 21 days after the tenants vacate the subject property. Landlords must itemize any deductions allowed under Section 1950.5., make those deductions, and send the itemized statement with a refund of any remaining deposit to the tenant at their forwarding address. If an address is not provided to the landlord by the tenant, landlord is allowed to mail the statement and deposit to the subject property. If a landlord makes deductions from the deposit, the landlord must provide invoices, receipts, documentation, etc., to the tenant supporting the deductions. Failure to do so will result in non-compliance with the statute. If documentation cannot be provided within 21 days, a landlord may send them after the itemized statement, typically required within 14 days after the statement was delivered. If this is the case, the landlord must make a good faith estimate of the deductions and follow up with the documentation within the time provided.

Failure to comply with Civil Code Section 1950.5 may result in the landlord being required to return the full deposit to their tenant. If deemed the landlord retained the deposit in bad faith, the tenant may claim damages in the amount of two times the deposit (in addition to return of the deposit).

Abandoned Personal Property
If tenants leave items of personal property behind there is a specific procedure that landlords must go through to comply with California law as it relates to abandoned personal property belonging to a tenant.

Pursuant to Civil Code sections 1980 through 1991 landlords must inventory the items left behind by the tenant and the inventory included on a notice that outlines the specific timeline the tenant must recover the property. Depending on how notice is served, the tenant has anywhere from 15 to 18 days to then recover the property. If the tenant doesn’t recover the property within 2 days after they vacate, the landlord can thereafter charge the tenant the reasonable cost of storage for the items.

If the tenant fails to respond and/or recover the items within the statutory time, the landlord can dispose of the items depending on the value of the abandoned property as follows: If the property is worth $700 or more, the property must be sold in
a public auction that requires very specific notice and actions to comply with the Code. If the items are worth less than $700, the landlord can dispose of the items in any way the landlord chooses.

Termination of tenancies are strictly regulated. Should the time arise to terminate a tenancy we recommend that property owners, property managers and landlords contact qualified legal counsel to assist. Landlords and their agents face significant liability to tenants even if the landlord’s statutory violation is inadvertent.

CA Corporations May Ratify and Validate Noncompliant Corporate Actions

September 6, 2022 By Israel Samuels LLP Leave a Comment

Newly enacted California SB 218 adds Section 119 to the California Corporations Code that provides for corporate ratification and judicial validation of non-compliant corporate actions. Pursuant to Section 119, a California corporation may ratify, or a California Superior Court may validate otherwise lawful corporate actions not in compliance, or purportedly not in compliance, with the Corporation Code, the Articles, Bylaws, or a plan or agreement to which the corporation is a party in effect at the time of the corporate action.

Ratification generally requires the Board of Directors to adopt resolutions setting forth the corporate action to be ratified, the nature of the noncompliance, and related information. Shareholders must also approve the ratification if their approval would have been required at the time of the ratification to take the type of corporate action proposed to be ratified. Ratification is also subject to any higher approvals that were required for such a corporate action at the time of the original taking of the corporate action. Notice of ratification must be given promptly after ratification to all shareholders as of the time of ratification. Notice of the ratification is not required to be given to the shareholders as of the time of the defective act who are no longer shareholders as of the ratification. The ratification of any corporate action that would have required the filing of an instrument with the California Secretary of State also requires the corporation to file a certificate of ratification to make, amend, or correct any such instrument.

Section 119 also allows the corporation, any successor entity, directors, shareholders, and any other person who claims to be substantially and adversely affected by the ratification to petition the California Superior Court to determine or declare the validity or effectiveness of any corporate action (including a ratification or a ratified corporate action) or security of the corporation, and to declare the date of such validity or effectiveness. The Superior Court may consider facts, circumstances,
and remedies appropriate for such a proceeding. If the Superior Court were to order the validation of a corporate action that would have required the filing of an instrument with the Secretary of State, then the corporation must file a certificate of validation making, amending, or correcting any such instrument.

Section 119 expressly does not limit the authority of the Board, the shareholders, or the corporation to effect any other lawful means of ratification or validation of a corporate action or correction. Unless otherwise stated in the applicable ratification resolutions or determined by the Superior Court ordering validation, a corporate action or security ratified or validated under Section 119 relates back to the date of the original corporate action.

Certain corporate actions are excluded from the scope of Section 119. Dissolved and foreign corporations may not ratify corporate actions, nor may a judicial petition be filed under Section 119 in respect of a corporate action or security of such a corporation. Section 119 also provides, in subdivision (a)(5), that no corporate action may be ratified or validated under that statute “in respect of” noncompliance with Corporations Code provisions for statutory fiduciary duties, void or voidable interested transactions, and prohibited distributions, repurchases, redemptions, and loans. A ratification or validation petition is also subject to judicial scrutiny under Section 119 where the Superior Court may consider all legal and equitable facts, circumstances, and remedies as it deems appropriate.

Section 119 requires that corporations retain records related to a ratification or validation in accordance with Section 1500 of the Corporations Code. The Section also contains notice requirements with respect to legal proceedings where the validity, ratification, or validation of a corporate action would have a meaningful impact.

Section 119 provides corporations and their shareholders a remedy to resolve void and voidable corporate issues that was not previously available to California corporations. If in the past your corporation failed to properly follow the Corporations
Code, or its own articles, bylaws, plans or agreements, consult with your corporate counsel. There now might just be a remedy to avoid issues before they arise as shareholder and creditor claims.

Even Without an Attorneys’ Fees Contractual Provision, Fees and Treble Damages May Be Available

August 29, 2022 By Israel Samuels LLP Leave a Comment

In Siry Investment, L.P. v. Farkhondehpour, opinion issued on July 21, 2022, the California Supreme Court held that California Penal Code section 496 can apply to a business dispute.

Penal Code section 496(a) provides for criminal punishment for knowingly receiving stolen property. It states: “Every person who … receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained,” is subject to incarceration.

Penal Code section 496(c) provides civil remedies for anyone injured by a violation of section 496(a), including bringing “an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney’s fees.”

The availability of “treble damages” and attorney fees can be significant in business cases where the partnership agreement or LLC operating agreement does not contain a “prevailing party” attorney fee clause.

In Siry the Supreme Court held that Penal Code section 496(c) can apply to a business dispute featuring misappropriation. The Court concluded the law was unambiguous – a plaintiff “may recover treble damages and attorney’s fees under section 496(c) when property has been obtained in any manner constituting theft. … The unambiguous relevant language covers fraudulent diversion of partnership funds.”

The Court cautioned, that “not all commercial or consumer disputes alleging that a defendant obtained money or property through fraud, misrepresentation, or breach of a contractual promise will amount to a theft. To prove theft, a plaintiff must establish criminal intent on the part of the defendant beyond mere proof of nonperformance or actual falsity. … This requirement prevents ordinary commercial defaults from being transformed into a theft.”

Consequently, “innocent” or “inadvertent” misrepresentations or unfulfilled promises would not qualify as theft under Section 496. In Sirv the Court noted, that the evidence showed “defendants acted not innocently or inadvertently, but with careful planning and deliberation reflecting the requisite criminal intent.”

Under the California Supreme Court’s holding in the Siry Investment opinion, the substantial remedies for theft set forth in Penal Code section 496(c) can apply to business disputes. Thus, if you believe a party to a transaction planned to steal from you and did so, you now have authority to recover attorneys’ fees, costs, and treble damages. However, by invoking Section 496 in your dispute, contact your attorney as claims of criminal conduct, if unproven, may subject you to liability for defamation.

Digital Only Websites are Not Places of Public Accommodation

August 22, 2022 By Israel Samuels LLP Leave a Comment

Plaintiffs in recent years have sued internet-based companies under Title III of the Americans with Disabilities Act (ADA) with allegations that the websites are not accessible (mostly to the visually impaired). Whether Title III of the ADA applies to internet-based companies (as opposed to companies with physical storefronts) has been the subject of an ongoing debate, and inconsistent court rulings.

However, recently in Martinez v. Cot’n Wash, Inc., the Second Appellate District may have set the issue to rest as the Court declined to extend the meaning of “a place of public accommodation” under Title III to digital-only websites. Accordingly, an Unruh Act claim based on a violation of Title III cannot extend to purely digital websites and does not constitute a Title III violation. The Court established that those trying to recover against a digital-only website can only establish an Unruh Act claim under the theory of a “denial of access to a business establishment based on intentional discrimination.”

The Court of Appeal concluded what intentional discrimination requires is that “A claimant may not rely on the effects of a facially neutral policy on a particular group . . . to infer solely from such effects a discriminatory intent.” Rather, the claimant must allege facts that show willful, intentional conduct. Notice of the alleged problem was not sufficient, where a facially neutral website that did not contain explicit discriminatory statements or intent, but which allegedly failed to address known discriminatory effects, does not support an intentional discrimination claim. In addition, the Court of Appeal concluded that a website business is not a place requiring public accommodation.

As for the Unruh Act claims, the Second District observed that Federal courts offer conflicting opinions and California courts have “not reach[ed] the legal issue whether the ADA applies to websites without a nexus to a physical place.” The Appellate Court looked to the plain meaning of the word “place” and determined the term typically involves a physical location. Additionally, the United States Supreme Court has recently declared that “place” refers to a physical space, under a New Jersey law prohibiting discrimination in

While the issue of websites as public accommodations may be clarified further, at least one California court now holds that website-only businesses are not covered under Title III of the ADA which therefore will not support a claim under the Unruh Act premised on a violation of Title III.

Website owners should discuss with their attorneys and web developers what practical steps can be implemented on their websites so that public access for persons with disabilities does not become an issue.

Legislature Considers Protecting Employee Off Hours Marijuana Use

August 8, 2022 By Israel Samuels LLP Leave a Comment

Although California has legalized the recreational use of marijuana, its use remains illegal at the federal level and is considered a Schedule 1 drug. The legalization of recreational marijuana has presented multiple issues for California employers primarily for those who prohibit drug use in the workplace.

Assembly Bill 2188, if passed, may provide employees and applicants protection from being penalized by their employer for off hours cannabis use. This bill would amend California’s Fair Employment and Housing Act to make it an unlawful employment practice for an employer to discriminate against a person in hiring, termination, and any term or condition of employment based on cannabis use outside of work hours and away from the workplace. If an employer violated the proposed law, an employee could file a DFEH charge and a civil lawsuit with the same remedies as any other California discrimination claim.

The bill still allows employers to maintain drug-free work environments, and does not permit “an employee to possess, to be impaired by, or to use, cannabis on the job.”

The bill’s primary focus is to change the way employers test for suspected cannabis use. Most existing tests can determine whether cannabis has been used in the previous weeks. However, there are now some newer tests available that can determine if someone is currently impaired.

The proposed law would not apply to employees who are in “building and construction trades”, nor does it apply to employees or applicants who are in positions that require a federal government background check or security clearance pursuant to the Department of Defense. Significantly, the proposed law would not preempt any federal or state laws that require testing for controlled substances and would not apply to employment decisions based on “scientifically valid” pre-employment drug test methods “that do not screen for psychoactive cannabis metabolites.”

The bill has passed the State Assembly and it is currently before the California Senate. If passed and signed by Governor Newsom in its current form, it will allow an extra year for implementation and go into effect in January 2024.

Employers should consider whether there is a business legal requirement or necessity for them to test for cannabis use. If as an employer you test employees for marijuana use, contact your legal counsel to determine whether such testing is required and should be continued. Without a legal requirement or business necessity, should this bill pass, employers may be subject to discrimination claims especially