Israel Samuels LLP

A Law Firm for Businesses

Renters May Get More Notice Before Rents Are Raised

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Assembly Bill 1110 passed out of the Assembly Judiciary Committee by a vote of 9-3 and seeks to amend California Civil Code section 827. If the Bill passes and is signed by the Governor – and these events appear to be highly likely to occur – landlords will be required to give tenants of month-to-month units 90 days’ notice if the rent increases 10%-15%. If the rent goes up more than 15% then landlords would need to give 120-day notice.

Current law requires landlords to give at least 30 days’ notice if the rent will go up less than 10%. If the landlord will raise the rent more than 10%, they’re required to give at least 60 days’ notice.

The notice must be delivered to the tenant in-person or through the mail.

Before landlords raise rents, especially on residential property, they should check with their legal counsel to assure that proper notice is given.

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.

Use Of Fictitious Business Names On Wage Statements

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California Labor Code section 226 lists information that must be included in every employee’s wage statement. Pursuant to subsection (a)(8), one piece of information required is “the name and address of the legal entity that is the employer.” Employers can face substantial penalties if they do not provide accurate information. Litigious employees have claimed that use of a fictitious business name on a wage statement violates this requirement and, in such cases, have sought statutory penalties.

Of course, best practices would dictate that employers use their registered name, not a fictitious business name, on wage statements. However, not all employers do that.

Fortunately, on April 10, 2019, the California Court of Appeals for the First Appellate District in Savea v. YRC Inc. has saved employers who use fictitious business names on wage statements. In Savea, the employer, YRC Inc., listed “YRC Freight” as the employer on its employees’ wage statements and the employee, Savea, claimed YRC Inc. should have been listed as it was a legal entity and YRC Freight was merely a fictitious business name. YRC Inc. was able to show that, at all times during Savea’s employment, YRC Freight was a duly recorded and valid fictitious business name of YRC Inc. The Court of Appeals held, since YRC Freight was an actual, recorded fictitious business name of YRC Inc. in California, YRC Freight was also a valid name for YRC Inc. and thus, YRC Inc. had complied with the requirements of Labor Code section 226.

While Savea v. YRC Inc., provides certainty on this technical requirement and employers, imagine the cost to the employer. Here, YRC Inc. defended the action, prevailed on demurrer, had to respond to an appeal and prevailed on appeal. Just think of the attorneys’ fees incurred because YRC Inc. merely used its valid fictitious business name on its wage statements.

While Savea addressed use of fictitious business names as the listing of the legal entity’s name on wage statement pursuant to Labor Code section 226, Section 226 contains a myriad of other technical legal requirements with regard to wage and employment records that require strict compliance because any error could place your company in YRC Inc.’s position. Therefore, it is essential that companies have their wage, hour and pay policies and documents critically scrutinized by legal counsel to avoid becoming the next YRC Inc.

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.

Arbitration Agreements Signed And Unsigned

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Many employers desire that their employers be subject to mandatory arbitration agreements with class-action waivers on employees although California discourages such agreements. Some employees refuse to sign arbitration agreements. So, what can an employer do with employees who refuse to sign? One solution is to dismiss the employees who don’t sign the arbitration agreement. However, a dismissal for refusal to sign an arbitration agreement could be challenged as a wrongful termination in violation of public policy. Fortunately, there is a case, Lagatree v. Luce, Forward, Hamilton & Scripps, in which the Court of Appeal decided, since public policy favors arbitration, an employer can lawfully dismiss an employee for refusing to sign an arbitration agreement presented as a condition of employment. However, such an approach poses practical problems. An employer may not want to dismiss each such employee, and selective enforcement may generate discrimination claims.

Another option available to employers is to live with the employee’s choice after the employee is educated about the benefits of arbitration. This path is often chosen where the employer seeks to obtain a voluntary arbitration agreement. Even so, California courts are prone to view employer comments about arbitration as inherently coercive. Therefore, to demonstrate the voluntary nature of the agreement, some employers also offer an extra payment or benefit to those employees who do sign the arbitration agreement. The problem with living with the employees’ choice for employers is, should an employee decide not to sign, the employer is left only with the options to terminate the employee or continue the employment.

An alternative to obtaining the employees’ signatures to an arbitration agreement is to create an arbitration program as a condition of employment, which does not require an employee’s signature for proof of consent. Instead, employee consent is proven by distribution of the arbitration program with a notice that employees will accept the arbitration agreement through continued employment. These agreements are generally enforceable as to at-will employees, so long as they are not unreasonably one-sided.

Due to the lack of settled law many employers will choose not to terminate an employee who refuses to sign an arbitration agreement. Instead, as a business decision, the employer may quantify the risk of class-action litigation and that some employees’ claims will not be subject to arbitration.

Whether you are considering an employee arbitration program or are confronted with a potential claim that may involve an arbitration provision, you should promptly contact your legal counsel.

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.

How Revocable Licenses May Become Irrevocable

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It is not unusual for adjoining landowners to grant one or the other a license to use a portion of their property, whether it is for fence placement, ingress and egress, gardens, or for some other purpose in order to be a good neighbor. Ordinarily, such a license – a consent or agreement to permit a use or activity – is revocable. Thus, the person granting the license can ordinarily withdraw consent and the use or activity must cease. However, there are situations where a revocable license and can become irrevocable and cannot be withdrawn.

A good illustration of the principles that can potentially lead to a revocable license becoming irrevocable is set forth in the recent case of Shoen v. Zacarias, a decision by the California Court of Appeals for the Second Appellate District. Zacarias and Shoen were adjoining landowners on hillside property with a flat patch of land between the properties that was partially on Zacarias’ property and partially on Shoen’s property. When Zacarias bought her property she believed the flat patch was hers and, over the first two years of her ownership she:

. . . brought in contractors to grade the patch to make it flatter, (2) removed stacks of bamboo and cleared overgrown brush from the patch, (3) installed new ornamental gravel, (4) planted a low, 18-inch-tall hedge and built a foot-tall wooden fence around the perimeter of the patch, (5) populated the patch with a 10 foot-by-10 foot cloth cabana, a chaise lounge, a table and chairs, none of which is affixed to the ground and each of which remains movable, (6) installed underground electrical conduit from her house to the patch, and (7) installed sprinklers and then replaced them with a drip system in order to water the hedges on the patch.

In October 2005, the prior owner of Shoen’s land did a survey of his property line and discovered that 490 square feet of the flat patch belonged to him. The prior owner shared this discovery with Zacarias, but told her she could continue to use the entire flat patch. The prior owner told Zacarias that his willingness to let her keep her furniture in the disputed area lasted only as long as he owned the property.

In 2011-2012 Shoen acquired the land from the prior owner and in May 2012 asked Zacarias to vacate the disputed area. Zacarias ignored Shoen’s request.

Shoen sued Zacarias for damages, injunctive and declaratory relief on theories of (1) trespass, (2) nuisance, (3) ejectment, and (4) negligence. Zacarias answered and counter-sued for damages and injunctive relief on theories of (1) prescriptive easement, (2) equitable easement and (3) nuisance. The matter went to trial (twice). The trial court’s primary ruling was that Zacarias should be awarded an exclusive irrevocable license to use the disputed area and that this license would last forever, even after Zacarias sold the property. Zacarias appealed and the Appellate Court reversed finding the trial court had abused its perpetual irrevocable license.

The Appellate Court acknowledged that when a landowner grants someone permission to use her land, she generally retains the right to revoke that license at any time, but, may be stopped from revoking that license—and the license will accordingly become irrevocable for “so long a time as the nature of it calls for”—if the person using the land has expended money or its equivalent in labor improving the land “in the execution of the license.” The Appellate Court further noted the expenditure of money or labor can make a license irrevocable only if that expenditure is “‘substantial,’” “considerable” or “great” and found that the expenditures and labor Zacarias expended under the license granted by Shoen’s predecessor was not so great as to be “substantial,” “considerable” or “great.” In addition, the Appellate Court declined to hold that a licensee’s annual cost of upkeep, without more, warrants a perpetual license to recover the investment in upkeep. Thus, the Appellate Court determined Shoen was fully within his rights to revoke the license that had been granted Zacarias by Shoen’s predecessor.

If you are asked to permit, or are permitting, someone else to use your property, it is imperative that you seek legal advice on the potential consequences of such explicit or tacit permission. Failure to exercise your property rights may cause you to lose your property rights without a properly drafted agreement and vigilance against improvements to, and encroachments upon, the property.

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.

Subsequent Tax Liens Can Wipe Out Your Security

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The holding in the recent case of SE Prop. Holdings, LLC v. Unified Recovery Grp., LLC, No. from the Federal District Court for Eastern District of Louisiana illustrates how security interests can be wiped out by subsequent tax liens. The District Court held that an IRS tax lien had priority over a security interest in accounts taken and perfected years before the tax lien arose, based on the judicially created “choateness” doctrine.

Under the choatness doctrine, an otherwise perfected security interest loses its priority to a subsequently filed tax lien in respect of property to which the debtor has not acquired rights at the time of filing of the tax lien, notwithstanding the inclusion of an after acquired property clause.

The existence and precise nature of an interest is determined according to state law. However, the issue of priority between conflicting interests is settled according to federal law. Under state law, a security interest in an account does not require performance of the obligation giving rise to the account. Instead, an account is defined in the Commercial Code as “a right to payment of a monetary obligation, whether or not earned by performance…for services rendered or to be rendered.” However, Under the definitions section of the Code of Federal Regulations (“CFR”) relating to tax liens and their effect on security interests, “[a]n account receivable is in existence when, and to the extent, a right to payment is earned by performance.”

Under the choateness doctrine, a security interest that has otherwise attached and been perfected under state law prior to the filing of the tax lien only “attaches” relative to that tax lien when it becomes choate. To become choate, three elements must be established: (i) the identity of the secured party, (ii) the property subject to the lien, and (iii) the amount of the lien. A security interest in an account does not become choate until the account comes into existence, and this is not until the services giving rise to the account are performed.

In SE Holdings the account at issue was in existence – the applicable services giving rise to the account had been performed – before the filing of the tax lien. Beginning in 2005, St. Bernard Parish entered into three debris removal contracts with United Recovery Group (“URG). In August 2008, Unified Recovery Group (URG) granted SE Property Holdings, LLC (“SEPH”) a security interest in its accounts. SEPH perfected its security interest by filing a financing statement and subsequently filed a continuation statement. By the end of 2012, URG completed the work contemplated under the St. Bernard Parisj contracts. On January 29, 2013, the IRS filed its tax lien. Saint Bernard Parish filed an interpleader as to FEMA funds it held for the contracts. SEPH and the IRS each filed summary judgment motions claiming those funds.

The SE Holdings Court held that, although URG performed the debris removal work required under the contracts well before the IRS filed the tax lien, URG had not fully discharged its duties under such contract because URG also had the “contractual responsibility” to “assist in preparation of documentation for claims submitted for reimbursement.” The SE Holdings Court reasoned that the accounts receivable were not “acquired”, according to the choateness doctrine, until URG completely performed its obligation.” It further held Saint Bernard Parish’s invoice approval, a matter out of URG’s control, was the triggering event marking completion of URG’s performance.

SE Holdings may have been able to avoid losing its security interest if it had given greater consideration in drafting and litigating of its security interests. There was no mention of any kind of a substantial performance argument or exception in the application of the choateness doctrine in SE Holdings, yet the Court admitted that there was a fair argument that the funds were proceeds of contract rights, that came into existence when the contracts were made. However, the Court did not rule on these issues because the secured party failed to raise them.

SE Holdings demonstrates that an otherwise valid and perfected security interest in accounts can lose priority to a subsequently filed tax lien if some arguably minor performance obligation remains. It therefore behooves secured parties to retain attorneys that can carefully draft and litigate their security interests.

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.

Statutory California Partner Buy-Out Rights Do Not Apply to Foreign LLCs and LPs

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On March 7, 2019, in Boschetti v. Pacific Bay Investments Inc., the California Court of Appeal for the First Appellate District held that a partner of a California general partnership, could not enforce California statutory buy-out provisions upon dissolution of foreign limited partnerships and limited liability companies owned by the general partnership.

In the case, Boschetti sued his partner, Sparks, and others for breach of fiduciary duty and other claims. Boschetti and Sparks had invested in real estate together through LLCs and LPs formed in Hawaii, Delaware, and Texas. In response to Boschetti’s complaint, Sparks sought
judicial dissolution of the foreign LPs and LLCs. Sparks then took the position that he and Boschetti were partners in a California general partnership that owned the foreign LLCs and LPs and sought judicial dissolution of the general partnership. Boschetti continued to seek to buy out Sparks’ interest in the foreign LLCs and LPs, but the trial court held that it could not order the buyout mandated under California statute for foreign LLCs and LPs.

Based on the internal affairs doctrine, that requires that the state of organization be applied to a dissolution, the appellate court upheld the trial court’s determination. None of the other states’ laws had a statutory buy-out provision similar to that provided by California law.

The court also looked at the buy-out provisions in California’s statutes (Cal. Corp. Code Sections 17707.03 and 15908.02) and determined that they only apply to domestic LLCs and LPs.

If you are involved in a limited liability company or partnership that is not organized under the laws of the State of California, you may not be able to stop a dissolution of the company or partnership. It will likely depend on whether the state of organization of the entity has a statutory buy-out right upon dissolution. To protect your interests it is imperative to seek legal counsel before you enter into a business relationship or choose a state of organization for your business.

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.

When An LLC Manager Engages In Questionable Conduct

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LLC operating agreements generally contain limits on the LLC manager’s authority. Usually the manager has authority over the LLC’s day to day operations, but approval by the members of the LLC is required for extraordinary transactions, such as a sale of the LLC’s assets, voluntary encumberance of the LLC’s property and dissolving the LLC.

A frequent question asked by non-managing members of an LLC is what happens if it appears the LLC Manager has acted outside his or her authority and engaged in an unauthorized transaction in the name of the LLC?

Revised Uniform Limited Liability Company Act (“RULLCA”), section 17703.01 sets forth proscribes the manager’s as an “agent” for the LLC in the LLC’s dealings with third parties.

For manager-managed LLCs (as opposed to member-managed LLCs), the members are not agents of the LLC, and cannot “bind or execute any instrument on behalf of” the LLC. However, the manager is an agent of the LLC “for the purpose of its business or affairs,” the manager’s signature on any instrument on behalf of the LLC will bind the LLC “unless the manager so acting has, in fact, no authority to act for the limited liability company in the particular matter and the person with whom the manager is dealing has actual knowledge of the fact that the manager had no such authority.”

Unfortunately, a manager’s “unauthorized” acts cannot always be voided. Under the statute, if a manager engages in an “unauthorized” transaction the members cannot automatically invalidate it. Before the members can do so, they need to prove that the third party buyer had “actual
knowledge” that the manager lacked authority to enter into the transaction.

“Actual” knowledge or notice consists of “express information of a fact.” (Civil Code section 18.) It is notice given directly to, or received personally by, a party. Imputed knowledge is constructive, not actual knowledge.” However, there are splits in case authority as to whether imputed knowledge and constructive knowledge (such as available knowledge through a recorded document) will suffice. Proving “actual knowledge” by the third party may can be very difficult.

Even if the members cannot unwind the transaction, they may have remedies against the manager for breach of fiduciary duties. But victory on that claim will often be pyrrhic if the LLC’s main assets or other rights have already been transferred away.

If you are a member of a manager-managed LLC and believe the manager is exceeding his or her authority in entering into transactions on behalf of the LLC, contact your attorney immediately. Hesitation may limit your ability to undo the unauthorized transaction.

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.

Holdover Tenants Cannot Exercise Right of First Refusal

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In California, a holdover tenant (a tenant who remains in possession after the expiration of the written lease) has fewer rights than a tenant operating under a lease. Recently, the Second Appellate District of California, in Smyth v. Berman decided whether a holdover tenant could assert a right of first refusal to purchase a leased property.

In Smyth, James Smyth operated a recording studio on premises he had leased since the mid-1990’s. The last time he signed a lease with his landlord was in 2011 that contained a right of first refusal to purchase the premises and a three year option to extend. That lease expired in 2012 without exercise of the right of first refusal or the option to extend.

By 2016, the lease had expired and Smyth remained in possession as a holdover tenant.

In June 2016, a third party submitted a written offer to buy the property. Smyth objected to the sale, and submitted his own offer to purchase the property pursuant to the expired lease’s right of first refusal.

The Lessor rejected Smyth’s offer and sold the property to the third party. Smyth sued. The trial court sustained demurrers without leave to amend to Smyth’s Complaint and dismissed the case. Smyth appealed.

The Court of Appeal affirmed the trial court’s judgment. The court held that, when a written lease expires and the tenant remains in possession as a holdover tenant, the relationship of the landlord and tenant “changes.” Specifically, “the only terms from the expired lease that are presumed to carry forward into a holdover tenancy are the ‘essential’ terms of that lease” such as the “amount and time of payment of rent.”

The court noted that other decisions have held that an option to purchase property set forth in a lease was a “separate and distinct right and power that was not an essential covenant of that lease” and did not carry forward into the holdover tenancy, and that a right of first refusal “is a species of option to purchase.” Unless the evidence shows that the parties intended such a right to carry over into the holdover tenancy, it will expire with the lease.

If you have a right of first refusal in your existing lease and the lease is coming up for renewal, you should check with your legal counsel to make sure the right will continue or you may lose it.

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.

BUSINESS LAW UPDATE FIRST EDITION FROM NOVEMBER 5, 2001

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(These Articles are not current and should not be treated as such)

New Laws Coming!
As usual, there is a bunch of new laws taking effect January 1, 2002. Some of the more important employment-related laws:

  • Unemployment benefits: significant increases each year, nearly doubling by 2005. Consequence for you: all the more important to contest what you perceive are erroneous decisions (benefit awards) for employees discharged “for cause”, to avoid unwarranted charges to your reserve account, and an increase in your premiums.
  • Accommodations for nursing mothers: all employers must provide a reasonable amount of break time to permit a nursing mother to express or pump breast milk for her infant child. There are a variety of conditions and obligations associated with this, as well as significant ambiguity about various issues, that will need to be resolved by the Legislature or the Labor Commission. Consequence for you: for many small businesses, this situation may never be encountered. If it is, feel free to call my office for further advice and guidance.
  • Child Support Withholding: if you fail to comply with a wage garnishment order for child support, the authorities can get a court order for an electronic transfer out of your account, and under certain circumstances, can charge you with a 50% penalty. Consequence for you: don’t even think about not complying with such an order! There may be “thought police” who catch you out.
  • Health care plans: must now provide coverage for FDA-approved AIDS vaccines recommended by USPHS. Consequence for you: expect health insurance premiums to increase, and consider what portion you will absorb, and what portion you will ask your employees to cover.
  • Workplace privacy: businesses are barred from printing Social Security Numbers on ID cards and mailed documents, plus some other restrictions. Consequence for you: probably not much…but I wonder how this will work for certain ID cards, such as my Blue Shield health-plan ID card and my FAA Pilot’s License, both of which use my Social Security number for identification purposes. And one that makes more sense…
  • For the third year in a row, the Governor vetoed a bill that would have prohibited secret employer monitoring of employee e-mail or other computer records. Procedures would have been established to issue policies and get all affected employees to sign an acknowledgement of receipt. In his veto message, the governor said employees should already know that their email may be monitored! What a welcome breath of fresh air…we need more of them!

By the way, in Employee Manuals I write for my clients, that’s already covered: employees are advised to have no expectation of privacy in their emails and computer records and need to acknowledge receipt of the Employee Manual. It’s a worthwhile policy to have in place, with or without a specific law that covers it.

English Only?
Not according to a new law just signed by Governor Gray Davis. The new law makes it an unlawful employment practice for an employer to prohibit the use of any language in the workplace unless justified by “business necessity’. The bill would also require employers who adopt such a policy to notify workers of the language restriction and the consequences of violating it.

What’s an adequate “business necessity”? Here’s what the law says: “For the purposes of this section, “business necessity” means an overriding legitimate business purpose such that the language restriction is necessary to the safe and efficient operation of the business, that the language restriction effectively fulfills the business purpose it is supposed to serve, and there is no alternative practice to the language restriction that would accomplish the business purpose equally well with a lesser discriminatory impact.”

What’s that? You say you don’t know what “there is no alternative” is supposed to mean? Well, neither did the legislators who wrote this, nor the governor who signed it. It’s typical legislative phraseology, designed to allow lawyers to sue you later, if you make a mistake, even an innocent one.

The bottom line is this: if you have a bona fide reason for imposing a language restriction (most likely: safety requirements), it’s going to be challenging to come up with an explicit policy that conforms with the law’s requirements. It can and will be done…it will just take a fair amount of “policy development” and wordsmithing.

“Nanny Tax” Revisited
This isn’t directly a “business issue”, but I know that many of my clients utilize the services of gardeners, housekeepers and others at home. So, you’ll probably remember the “nanny tax”.

People who pay nannies, maids, gardeners and other household employees $1,300 or more this year are also supposed to pay Social Security and Medicare taxes, and also file Schedule H with their personal tax returns, not to mention tax withholding and other employment taxes. If you can’t understand why your gardener and your housekeeper, each working only a few hours a week for you, are considered “employees” …well, you’re not alone!

The WSJ recently reported that very few employers (meaning: “ordinary people”) seem to care what the law says. The number of such returns filed last year was down 5% from the year earlier, and Schedule H was filed with only 0.25% of all individual returns.

One reason may be (the Journal speculates) that many people still contend their household workers are “independent contractors”, not employees. There are other reasons as well. I’ve even heard of household workers who refuse to work for anyone who insists on paying them by check, and/or making deductions for payroll taxes.

Are lots of people breaking the law (or, at least, breaking the IRS’s regulatory interpretation of the law)? Sure sounds like it to me. It also seems as though the government (and our elected representatives) are unwilling to understand that a law that is “broken” far more than it is obeyed is a law that is palpably unpopular with the people they are supposed to represent.

Isn’t there a folk song that includes the lyrics: “When will they ever learn? When will they ever learn?”

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.

Employees Cannot Be Compelled to Arbitrate PAGA Claims

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Recently, in Correia v. NB Baker Electric, the California Court of Appeal held employees cannot be compelled to arbitrate their claim under California’s Private Attorney General Act (PAGA) without the government’s consent, despite signing an arbitration agreement.

In Correia, plaintiffs sued their former employer, for wage and hour violations and sought civil penalties under PAGA. Defendant petitioned the Court for arbitration based on the parties’ arbitration agreement, which provided that arbitration would be the exclusive forum for any dispute. The arbitration agreement also stated that no dispute could be brought as a class or representative action.

The trial court granted the arbitration petition on all causes of action except for the PAGA claim. The defendant employer appealed and argued the PAGA claim was required by the arbitration agreement to be arbitrated due to the broad preemptive scope of the Federal Arbitration Act (FAA).

The Court of Appeal affirmed the trial court’s decision. The Court noted the cases that required arbitration under the FAA did not apply since they did not specifically address claims for civil penalties brought on behalf of the government, and the enforceability of an agreement barring a PAGA representative action in any forum. The Court concluded that a waiver of PAGA representative claims in any forum is unenforceable. The Court further determined that the State is the real party in interest in a PAGA claim. Therefore, the State must consent to an
agreement to effectively waive the right to bring a PAGA claim into court.

California employers cannot avoid PAGA lawsuits in Superior Court through a general pre-dispute agreement. While an employee may still agree to waive their right to a jury trial and proceed to arbitration on a variety of claims, such an agreement is unenforceable as it relates to a PAGA claim.

The best defense to employee claims is a good offense. Work with your legal counsel to assure proper compliance with all local, state and federal regulations, and document your compliance.

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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