Israel Samuels LLP

A Law Firm for Businesses

You May Have To Pay Your Exempt Employees More – Much, Much More

By Leave a Comment

Back in June 2015 the Department of Labor’s Wage & Hours Division proposed amendments to the Fair Labor Standards Act (FLSA) Regulations, specifically with regard to the so called “white collar” exemption for executive, administrative and professional employees. The changes have not yet been implemented primarily due to administrative rulemaking procedures that require Notice and comments before final adoption. However, it looks like later this year the new regulations will likely take effect. Proper planning is essential.

The FLSA requires employers to pay employees overtime but exempted certain employees from the overtime pay requirements. One common basis for the so called “white collar” exemption – those employees described as executive, administrative or professional who perform executive, administrative or professional duties and make a certain weekly salary. In addition, “highly compensated” employees who “customarily and regularly” perform exempt duties of administrative, executive or professional employees are also exempt employees.

The proposed change to the FLSA regulations increases the minimum weekly salary that must be paid to remain exempt to the 40th percentile of weekly earnings for full-salaried workers according to data from the Bureau of Labor Statistics (BLS). As of 2013 this number equated to $921 per week or just under $48,000 per year. The 2016 level is projected by the Department of Labor (DOL) to increase to $970 per week or $50,440 per year and the number would then be indexed to the BLS data and updated annually. For highly compensated individuals to be exempt the
annualized value threshold would be set at the 90th percentile of earnings for fulltime salaried workers and is projected to be, in 2016, $122,148 annually.

The DOL is also considering whether nondiscretionary bonuses, commissions and incentive payments should count toward a portion of the salary level test for the “white collar” exemption. However, the new salary levels still will not apply to outside sales employees and professionals such as lawyers, teachers and doctors.

So what will this mean? It is anticipated that many employers will need to budget for salary increases and/or increased overtime costs for at least a portion of 2016. We suggest you work with your legal counsel and complete a preliminary assessment of all positions you currently
treat as exempt in order to assess the impact of these proposed changes in the regulations on your salary structure and workforce. We stress throughout our newsletters, “An ounce of prevention is worth a pound of cure.”

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.

Employers – Here’s How To Get Sued

By Leave a Comment

The California Chamber of Commerce has provided an analysis of the most common ways employers end up in litigation. They found these ten acts that many employers do, draw employee lawsuits and employer liability:

  • Classifying all employees as exempt, whether they are or not;
  • Being nice to employees – letting them take lunch whenever they want;
  • Making everyone independent contractors because having employees is too much trouble;
  • Letting employees decide which hours and how many hours they want to work each day;
  • Terminating any employee who takes a leave of absence, whatever the reason, because it is too much trouble to administer leaves of absence and the employer does not know if the employee will return;
  • Refusing to give former employees their final check until they return company property;
  • Providing loans to employees and deducting the money from the employees’ paychecks each pay period or from their final paycheck;
  • Using non-compete agreements to protect confidential information, such as business secrets, customer lists and pricing information, that prevent employees from working for the competition; and
  • Implementing a “use it or lose it” vacation policy and refusing to pay out all that money upon employment termination.

The listed conduct is prohibited by Federal and State laws. There are statutorily prescribed ways employers must treat and pay workers. If you fail to follow them you too could become the “Defendant.” Before you decide how to handle your employee situations get some good, solid legal advice so you don’t end up on the Court Docket.

Contact your legal counsel in order to help prevent you from making mistakes that could spell disaster.

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 NLRB “Joint Employee” Rule To Be Implemented

By Leave a Comment

The August 27, 2015, ruling by the National Labor Relations Board (NLRB) In The Matter of Browning-Ferris Industries of California, Inc., suggests that anyone who exerts “indirect control” over a worker’s terms and conditions of employment — even if that worker is an independent contractor — is essentially an employer. Browning-Ferris contracted with any company, Leadpoint, to provide contract employees. Consequently, this ruling by the NLRB found that they were “joint employers” of the contract employees. Many business groups petitioned the NLRB to reverse or delay implementation of this ruling. The NLRB has announced that it will not reconsider or delay its ruling.

This could have a direct impact on franchise owners. The application of the ruling may mean:

  • Franchise owners will now be responsible for medical care under the Affordable Care Act even if they have fewer than 50 employees, should contract employees and independent contractors be included along with the myriads of workers at other independently owned franchises of the same franchisor.
  • Franchise owners could be forced to re-negotiate responsibilities, payment and hours — even after they had previously negotiated them with contractors and employees.
  • Franchise owners could be confronted with “new joint bargaining obligations, expand[ed] liability for unfair labor practices and breaches of collective bargaining agreements, and may be subjected to economic protest activity that would have previously been unlawful secondary activity.
  • Jurisdictional standards could be combined so that the commercial data from both joint entities would extend jurisdiction of the NLRB to some small businesses.

The joint employer ruling requires a rethinking of many of the assumptions about the nature of employment. Unless Congress acts, small businesses will likely be stuck with new and uncertain rules with respect to employee relations that could affect everything from benefits and tort
liability to employer liability insurance coverage premiums. In fact, the effect upon independent contractor agreements will require them to be reanalyzed and, in most cases, restructured and redrafted.

Staffing services and their client employers will likely find themselves dealing with substantive new liabilities and bookkeeping challenges, as well as increased worker’s compensation and employee liability insurance premiums.

If you have any concerns with regard to how this new ruling may relate to your business, call and set up an appointment with Israel & Samuels, LLP so you can plan for this brave new world of employer liability.

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.

Key New 2016 Laws Affecting California Employers

By Leave a Comment

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.

2016: New Protections For California Franchisees

By Leave a Comment

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.

Time To Review Your Business Legal Compliance

By Leave a Comment

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.

Preview for 2016

By Leave a Comment

As a service to our readers, and your continuous need to be aware of changes in the law, next month we will focus on some important changes in laws for 2016 that are relevant to business owners.

We will also remind you in our next issue that the first quarter of the New Year is a great time to take care of your corporate formalities.

That’s all for now. All of us here at ISLLP wish you and yours a great Thanksgiving!

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.

Holiday Parties: Minimize Your Risk

By Leave a Comment

Every year about this time we warn our readers to be very cautious about serving alcohol at company holiday parties. Employers can be liable for an employee’s drunk-driving accident, even if the accident occurs after the work function is over. Here is a reprint of a pertinent California case we discussed last year.

An employee, Michael Landri, made it home safely from an office holiday party but went out later that night and drove his vehicle while still intoxicated from the party. Unfortunately, the employee killed another driver in a high-speed crash. Purton v. Marriott nternational, Inc., (2013) 218 Cal.App.4th 499.

In December 2009, Marriott Del Mar Hotel held its annual holiday party for employees and management as a “thank you” for their work. The party was held at the hotel. Marriott planned to serve only beer and wine and to provide two drink tickets to party attendees. Attendance at the party was voluntary. Even though only beer and wine were supposed to be served, the general manager for the restaurant was bartending the party and had a bottle of whiskey brought to the bar from the hotel’s liquor supply. The general manager filled Landri’s flask with whiskey on at least one occasion (maybe more), shared shots with him and served whiskey to other guests.

The manager also shared another bottle of hard alcohol with guests. She testified that “historically there has been a lot of drinking and not a lot of control at these types of [employee] parties.” In addition, the assistant general manager of the hotel (the second-highest-ranking hotel employee) saw Landri using the flask and shared shots of alcohol with him and another employee.

Landri left the party with some coworkers and testified that he “believed” he didn’t drive home, and that his coworker drove him. He did not drink any more after leaving the hotel party. After being home for about 20 minutes, Landri decided to drive a drunk coworker home. While doing so, he rearended a car at more than 100 miles per hour, killing the driver of the other car.

Landri’s blood alcohol level at the time of the accident was 0.16. Landri pled guilty to gross vehicle manslaughter while under the influence and received a six-year prison sentence.

The parents of the deceased driver sued Landri and Marriott for wrongful death. Marriott argued that it could not be liable for Landri’s actions because he was engaged in purely personal conduct when he left home after first arriving there safely. Marriott also argued that Landri’s travel was unrelated to work. Generally, employers are not liable for the wrongful acts of employees that occur outside of the employment relationship.

The court disagreed because the consumption of alcohol that eventually led to the accident was employment related, and the intoxication itself occurred during the scope of the employment. The court ruled that an employer can be liable if the activities that caused the employee to harm others were either:

  • Undertaken with the employer’s permission and were of some benefit to the employer; or
  • A customary incident of employment.

The court found that this was the case. According to the court, Marriott could not “ignore the fact that it created the risk of harm at its party by allowing an employee to consume alcohol to the point of intoxication.” Liability, according to the court, continues until
the risk that was created within the scope of employment “dissipates.” In other words, in the case of alcohol consumption related to work, the employer is potentially on the hook until the employee sobers up.

Employers should consider whether they should serve alcohol at company functions given the risk of liability. Alcohol can create other problems at office parties, such as unprofessional conduct or sexually harassing behavior. As the court noted, the only way to completely eliminate the risk of harm to others and the risk of potential liability is to forbid alcohol at company functions entirely.

If alcohol is served, several measures should be in place to lessen the risk. The court also offered suggestions for lessening the risk of liability for those companies that still choose to serve alcohol:

  • Create and enforce a policy that prohibits employees from sneaking alcohol into a party
  • Enforce a drink ticket policy
  • Serve drinks for a limited time period
  • Serve food

Other suggestions to limit risk include:

  • Providing designated drivers or cab fare
  • Holding the event off-site and using experienced bartenders
  • Making sure that there are non-drinking individuals monitoring the situation
  • Close the bar well before the event ends
  • Reminding employees of company expectations

As always, the ultimate decision is in your hands.

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.

That Real Estate Purchase Contract May Only Be An Option To Purchase

By Leave a Comment

The facts examined arise quite frequently in real property transactions:
Martin Steiner purchased 10-acres of a 12.29-acre parcel owned by Paul Thexton. Thexton indicated that any potential buyer would have to be responsible for obtaining the necessary approvals for a parcel split to allow Thexton to sell the 10-acre parcel and live on the remaining two acres. Steiner and Thexton entered into a written agreement for the sale of the 10-acre parcel that required Thexton to sell the 10-acre parcel to Steiner by September 2006 if Steiner so chose, after Steiner pursued, at his own expense, governmental approval
of the parcel split. Steiner deposited $1,000 of earnest money in escrow, to be applied to the purchase price if Steiner chose to purchase the property, or to be returned to Steiner if he terminated the transaction. The agreement also contained certain contingencies, including an absolute termination right for Steiner:
Steiner pursued the parcel split and the governmental approvals and Thexton initially complied with several requests made by Steiner, including executing applications to the county planning department. Ultimately during the term of the contract Thexton decided he no longer
wanted to sell and contacted the title company to cancel escrow. Shortly thereafter, and after allegedly spending almost $60,000 Steiner obtained approval for a tentative parcel map from the county and filed suit seeking specific performance of the agreement.

The trial court and Court of Appeal found that the agreement was unenforceable as a matter of law “because it is, in effect, an option that is not supported by any consideration.” The California Supreme Court affirmed in part. It found the agreement was an option but reversed the finding that the option was not supported by consideration. It held, since there was consideration for the option the option became irrevocable. The Supreme Court also determined that Steiner’s promise was illusory until he partly performed by seeking the required approvals for the parcel split.

The majority of real property transactions are structured to give one side or the other, or both, the ability to cancel the transaction To avoid real estate purchase and sale agreements being deemed unenforceable after Steiner, parties have two alternatives: (1) ensure the option is irrevocable; or (2) limit the purchaser’s termination right to prevent the promise to purchase from being deemed illusory and thus, deemed an option.

If you are in doubt about the structure of a real estate transaction contact Israel & Samuels, LLP and have the contract reviewed before you sign on the dotted line.

An ounce of prevention is worth a pound of cure.

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.

Commercial Real Estate Brokers and Agents Dual-Agency Requires Written Disclosure

By Leave a Comment

Effective January 1, 2015, California Civil Code section 2079.13 will require commercial real estate agents and brokers to disclose proposed dual-agency roles to possible clients in writing before being hired.

Prior to enactment of this change only residential brokers and agents were required to make this written disclosure. Abuse became frequent among commercial brokers and agents who in some cases provided no disclosure of their indirect interests in the commercial properties they marketed. In many instances conflicts of interest were not disclosed in commercial real estate transactions. This law makes prior nondisclosure a violation of a statute and, thus, much simpler to prove, irrespective of whether the conflict was a real or potential conflict.

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.

Call Now Button