Cohen Durrett LLP

A Rose By Any Other Name???

2012-01-27T16:15:00.000-08:00

California continues to prove that it wants to be on the cutting edge of discrimination laws in our country having passed Assembly Bill 887 last year which became effective January 1, 2012. This new law pertains to gender and prohibits discrimination and harassment in both housing and employment regardless of a person’s sex or gender. This new law extends that protection by defining gender to include a person’s gender identity as well as gender expression whether or not that appearance and behavior are stereotypically associated with the person’s assigned sex at birth. In other words even if an individual is a cross dresser he now has protections at work and employers are going to have to deal with this conduct or face additional claims of discrimination under California law. Because the law defines sex to include gender and gender includes identity and expression, there should be no reason to amend employee handbooks to include specifications of gender identity or expression unless the employer wants to be extremely safe and certain that there employees know all of their rights. Instead I would recommend that employers continue to provide a strong employee handbook with protections against discrimination based on sex and that all management who enforce company policies understand that the definition includes the new rules regarding gender identity and expression.

As with all new laws it remains to be seen how this protection will play out and how the courts will balance this protection with the employers’ ability to mandate certain appearance and grooming standards.

END OF YEAR RANTS AND RAVES

2010-12-17T10:29:00.000-08:00

By David L. Cohen

As we close out 2010 (Wow! Where did it go?), I want to remind employers Employers that the Sexual Harassment Training for managers is still required of all companies with fifty (50) or more employees. As we prepare to enter the new year, companies should contact me regarding this training as we have exciting new programs for management. Even if you have not had extensive turnover in management, the training is required; so we’ve changed it up for you. Scheduling early may provide you with the best opportunity of having your first choice of training dates. and I would suggest not waiting until the end of the year and trying to squeeze it in during next year’s holiday season.

My second rant pertains to the Equal Employment Opportunity Commission which has finally issued regulations concerning GINA (Genetic Information Non-Discrimination Act) passed by Congress in 2008. If my math is correct, it has only taken the Federal agency 2½ years to finally issue the final regulations concerning this strange and peculiar law. Employers should immediately have handbooks revised to include “genetic information” as a protected class in the listing under their Equal Employment Opportunity Non-Discrimination and their Harassment policies. Other changes may also apply including: (1) training of managers (GINA could be included with the harassment training, couldn’t it?); (2) making sure that “safe harbor” language appears in requests for information and specifically requests for medical certification; (3) implementing additional procedures to make sure that any genetic information that is acquired is kept in a separate and confidential medical file.

Genetic information is defined by the new regulations to include results of genetic tests specifically, but also any “manifestation of a disease or disorder” present in the applicant’s or employee’s family, whether or not such a disease or disorder is genetically linked. Clear as mud, I know, but as with most things this will take even longer to become clear through court action.

If you have any questions regarding the new GINA regulations, want to schedule harassment training or just say “Happy Holidays!” (Merry Christmas and Happy Hanukkah), reply to my blog or e-mail me at dcohen@cohendurrett.com. Better yet, pick up the phone the old-fashioned way and call me. Happy Holidays!

Just When You Thought It Was Safe To Go In The Water Again…

2010-11-24T14:26:00.000-08:00

By David L. Cohen

The California Supreme Court has sided in favor of employees in a holding announced November 18, 2010. The Supreme Court ruled that a three-year statute of limitations applied when an employee sued his former employer for penalties. According to the case, the employee was paid four days after he was terminated and received all wages due. More than a year later the employee brought suit against the employer for “waiting time penalties” under California Labor Code § 203. Both the trial court and Appellate Court ruled in favor of the Company; that the employee was outside the one-year statute of limitations governing the recovery of “penalties.”

On appeal, the California Supreme Court reversed the lower courts and held that the three-year statute of limitations specifically providing for the recovery of unpaid final wages, governed the penalties provided for in that section as well.

Employers are reminded that payment of all wages upon the firing of an employee are due immediately and must be made available at the place where the employee works; or with the consent of the employee, may be mailed. Mailing is dangerous, however, as penalties will accrue if the wages are not received in a timely fashion. Any questions regarding the payment of wages and/or penalties can be directed to me at the numbers below.

Purchase Price Pandemonium!

2010-08-20T14:35:00.001-07:00

The Salomonic Solution
By Michael W. Pearson

Buyers and sellers of businesses are more likely to disagree about business values given the current state of the economy. Even where buyers and sellers might agree about the current value of a business, maybe a seller believes the economy will improve and wants to capture some of that upswing in a current sale. Should a disagreement over purchase price end negotiations? Not necessarily. By allocating some risk to the purchase price through an earn out, it is possible to complete a business sale at a price that benefits both the buyer and seller.

When choosing to include an earn out as part of your purchase price several factors should be considered and addressed. What will be the measure that determines whether the seller qualifies to receive earn out funds? If the measure is the profits, how should the seller conduct the business post sale? How should profits be determined? Are certain salaries excluded from expenses that are deducted from revenue to calculate profits? How long should the earn out period last?

Getting the best deal in your business sale or purchase involves having good legal advice during the transaction. Please contact me if you are in the process of buying or selling a business and looking for guidance in negotiation your transaction.

A Penny of Prevention is Worth a Pound of Cure

2010-08-13T16:30:00.000-07:00

by Michael Pearson

If you consider all of the time, effort and expense that you incurred setting up your corporation, LLC or other business entity, it becomes clear how important it is to maintain your corporate records. This has become even more important as creditors have begun to use increasingly inventive and creative methods to collect debts.

Typically, a court will not look past the assets of a business entity to collect on a debt unless the owner has promised to pay the debt, in the event that the company cannot. In other words, the owner’s personal assets are safe unless they have executed a guaranty. However, if a creditor can convince a court that an owner did not maintain their corporation as a separate entity and that the corporation was really just the owner’s alter ego; a creditor might be able to ‘pierce the corporate shell.’ A creditor that is successful in piercing the corporate shell would be able to attach an owner’s personal assets to satisfy what may have been believed to be a corporate debt.

One way to way to prevent a creditor from being able to pierce your company’s corporate shell and attach your personal assets is by maintaining good financial and corporate records. If it has been a while since you last updated your corporate records, or you just want some assurance that you are keeping everything in proper order, please contact me for a business entity check up.

WE’RE ON THE ROAD TO NO WHERE

2010-08-06T14:08:00.000-07:00

aka IS THE GOVERNMENT HERE TO HELP?

by David B. Durrett

In these difficult economic times, I often wonder if the government is part of the problem or part of the solution. Due to a freeway construction project, a local city recently asked my client to allow an access road to be built across the client’s property for emergency vehicle use and future residential access. Prior to the work being done, the city agreed to reimburse my client for the costs that would be incurred with the client’s engineer and attorney in order to accomplish this task. When the city received the bill for these costs it quickly dropped its request, rerouted the access road around the client’s property, and now wants to dispute the bill. As luck would have it, the city is now broke and no payment has ever been made to my client.

As real estate projects falter with the economy and construction grinds to a halt, fees that were collected in advance by cities and counties should be refunded for these now dead projects. Unfortunately, while the government may have been quick to collect money in the beginning, they are now moving at a snail’s pace to refund such fees. In fact, some jurisdictions are attempting to avoid such refunds completely because the money has already been spent.

For those developers who are still in a position to proceed with projects, government fees have become a stumbling block. Everyone is aware that real estate prices have fallen; however, most government fees have not. For example, a developer recently had the opportunity to purchase three city lots for $60,000. He knew the top price that anyone would pay for a completed house on one of those lots was $200,000 and the construction cost for each house would be approximately $100,000. The developer was shocked to find out that the fees required by the city would be between $80,000 and $100,000 per house. As a result, the developer did not proceed with the deal, the city did not receive any fees, and the city’s counterperson did not understand why the fees were an issue.

In light of most cities’ and counties’ need for revenue, it might be time to rethink government fee schedules. After all something is always better than nothing and if the government does not adjust with the times and start helping, we really will be on the road to nowhere.

DON’T IGNORE THE OFF-HAND COMMENT

2010-07-30T12:59:00.000-07:00

By David L. Cohen

Recent cases remind us that employers need to remain vigilant and attentive when employees complain and/or make an “off-hand comment.” In several recent decisions, courts have ruled that employers could be liable for failing to undertake proper workplace investigations after a “complaint” was lodged by employees or former employees. Even in cases were there was no “formal complaint” filed, the courts have suggested that an off-hand comment by an employee could give rise to liability if true, and could not be ignored without consequences.

The courts stated that selection of an investigator needs to be based on expertise and experience. While many Human Resources Managers or “experts” are quite good at their jobs, courts prefer an impartial outside investigator with experience in employment and labor law. The courts have also noted that the investigations must be “prompt, thorough and impartial.” Where inappropriate behavior has occurred “appropriate corrective action” must be taken. Who should be interviewed, how interviews should be conducted and interviewing techniques are subjects which should be carefully considered and planned strategically before the investigation begins. Even if the investigation does not “catch the culprit,” an employer may be protected as long as they have outlined a policy prohibiting misconduct; performed a prompt, thorough and effective investigation; and taken appropriate corrective action after the investigation. Confidentiality of all parties must be maintained as much as possible. Communicating the results of the investigation to the complainant is important, but at the same time the Employer must preserve the confidentiality of personnel actions taken against other employees.

Employers are reminded that either training to perform workplace investigations and/or hiring legal counsel to conduct investigations in the long-run is cost effective and a better choice than blindly trying to investigate on their own, especially where personalities may be involved and expertise may be focused elsewhere.

NAVIGATING A BUSINESS PURCHASE OVER TROUBLED WATERS

2010-07-26T16:24:00.000-07:00

By Michael W. Pearson

If you find a business for sale in the current economic climate, that business is likely to be in some kind of financial difficulty. So you investigate and decide that you should purchase the assets of the business. While an asset purchase will limit your exposure to a lot of the seller’s liabilities, California’s successor liability rules can still be a trap for the unsuspecting buyer purchasing the assets of a business.

After you and the seller agree that you should purchase only the assets of the business so you can limit your post-closing liability, you can still do more to make sure you are not exposing yourself to unwanted risk. You can take advantage of the California Bulk Sales law.

While the Bulk Sales provisions have been available for decades, in better economic times the only worry most attorneys had about Bulk Sales was how to avoid going through one. But today, by complying with Bulk Sale notice rules and timelines, a buyer may be able to eliminate the liability trade debts that the seller cannot pay as part of the sale of its business.

When you find that business opportunity, let me help you make sure you are getting the assets you wanted to purchase without the liabilities that you wanted to leave behind.

EXIT….STAGE LEFT!!! - BUY-SELL PROVISIONS

2010-07-19T09:47:00.000-07:00

By Michael W. Pearson

The best time to decide how you might exit your partnership, corporation or LLC is when you decide to join. While you may be able to deal with exiting yourself or escorting a partner out later, the right agreement can make that exit faster, easier and less costly.

A well drafted agreement for your business will make it clear how the business will continue if one partner dies, goes bankrupt, or has a creditor attach his or her ownership interest. Other issues that should be addressed include providing for partners’ rights when: a third party wants to purchase an existing interest, or a partner withdraws and one partner wants a buyout of his or her partnership interest.

In addition to setting forth the triggering events that let you buy out a partner or sell an interest, a buy-sell agreement should also give instructions for how to establish the valuation of the interest being sold. Should the interest be valued on a regular basis? Should the partners agree on a value? Should an appraiser be hired for a valuation? What should be valued, the interest (with or without minority and marketability discounts) or the underlying assets?

If you are operating your business with partner or are ready to start a new business, let me draft an agreement that can help you and your partners know what to expect when one of you needs or wants to leave the business.

GOOD GUYS WIN

2010-07-09T16:23:00.000-07:00

By David L. Cohen

Proving again that once in awhile the good guys win, the United States Supreme Court has overruled the Ninth U.S. Circuit Court of Appeals (San Francisco) by ruling that the City of Ontario could search company provided cell phones/texting devices that are used by City police officers.

In the case of City of Ontario v. Quon, the Ninth Circuit’s had originally held that the City of Ontario could not search cell phone and texting devices because the officers had a “reasonable expectation of privacy” in text messages sent on City provided devices. Although the City had a policy that stated that personal use was prohibited, they also allowed officers to use the devices for personal reasons so long as they paid for the personal use. However at trial, the court determined that even though the City did not enforce the pay for personal use policy, the officers still maintained the expectation of privacy.

All of this became an issue when City officials searched through text messages sent by officers and found that they were of an inappropriate nature and thereafter disciplined the officers who sued for reinstatement.

In an unanimous decision the U.S. Supreme Court held in late June that the police department had the right to search the officers’ personal and sometimes sexually explicit messages because the device was government owned and there was government owned and there was no reasonable expectation of privacy nor any violation of the employee’s constitutional rights. Although the U.S. Supreme Court did not lay down any broad rules for employers regarding privacy in the workplace, they did uphold the right of employer’s (including the government employer) to conduct searches so long as employees were notified not to expect privacy in the use of company owned equipment.

Employers are warned that policies and practice should be consistent and policies should be reviewed to be sure that they are up to date including the latest fad dealing with social media policies. For more information contacted Dave Cohen at .

STOP AND COUNT THE ROSES

2010-06-07T16:29:00.000-07:00

By David B. Durrett

Any tenant who occupies space in a shopping center or office building and contributes its proportionate share to the common area costs or operating expenses needs to consider that landlords are not always the best accountants and sometimes make mistakes. For example, a regional drug store once complained that it was unwilling to pay for landscaping bark that was included as part of the common area costs for the shopping center. When the representative of the drug store chain was asked why, he responded that there is no landscaping bark in the shopping center. He noted that the landscaping bark was located in the front yard at the home of the shopping center manager. In fact, I knew of a shopping center manager who lost his job because the roses in his front yard were charged to the shopping center account. Needless to say, a tenant should always review the billing statements to determine that the line item costs bear some relation to the activity in the project.

Many of my clients, though, complain that the information provided by the shopping center or office building manager lacks sufficient detail to clearly understand. A recent California Appellate decision found that a tenant is entitled to verify that such expenses were, in fact, incurred and that the listed amounts are accurate. Accordingly, if requested, the landlord must provide the tenant with the documents it used in preparing this statement; otherwise, the tenant’s rights to the benefits of the contract would necessarily be frustrated. This case allows you to make sure that the landscaping bark actually was placed in the shopping center or that the new rose bushes were all delivered to the office project.

One other critical thing to consider is the scope of items that may be included as operating expenses and common area maintenance charges. For example, one of my clients questioned whether it should be charged for a line-item identified as a “roof recovery fund.” It seems that the shopping center owner had replaced the roofs on a number of buildings and had decided to pass this cost through over a number of years. However, the landlord had failed to include the roof as part of the definition of common area and as such the roof costs could not be passed through to the tenants. The same issue often arises with respect to the repair and maintenance of the parking lots. Most leases provide that the cost of a new slurry seal is acceptable, although the replacement of the asphalt may not. The language of the lease needs to be scrutinized with this in mind. Finally, the tenant should always review the management and administrative fees that are charged for the project. Sometimes such fees are paid to entities affiliated with the landlord and the fees exceed industry standards. While it is fine for a landlord to make a profit, it is not acceptable for the landlord to gouge the tenants.

LOOK BEFORE YOU LEAP

2010-05-28T09:34:00.000-07:00

By David B. Durrett

Clients often fail to do their homework, and do not take the time to research their business partners, landlords, tenants, or consultants until after a problem occurs. A few minutes of time invested at the outset of a business relationship may help you to avoid years of pain and agony in the long run.

Government records are an excellent place to start looking for any issues that might need to be to be explored. For example, in many counties, including Sacramento, you can check the Superior Court records online to see if someone has been sued on a civil matter or prosecuted criminally. If you are working with a contractor, it might be beneficial to check the online records of the Contractor’s State License Board to see if they are licensed and bonded. Finally, you might want to check the Secretary of State’s records to see if the business entity you are engaging actually exists in the eyes of the State of California.

If that fails, you might want to Google the business or person’s name. Through this process, I discovered that one of my client’s tenants was being pursued by the California Department of Corporations and that there was an issued cease and desist order. The information on the internet was essential.

As an aside, though, I remind my clients that their information is also available in the public forum and on the internet and may be problematic, especially if the information is less than flattering. Just consider how startled my twin boys were when they discovered that dear old Dad knew all about the various rumors and shenanigans associated with their band long before they had ever ‘fessed up their transgressions.

Try 'Em Before You Buy 'Em

2010-05-21T15:46:00.001-07:00

(Internships and “Working Tryouts”)

By David L. Cohen

I was recently called by a client who wanted to have applicants perform a “working tryout” to determine who would be the best suited candidate for a job. Likewise, another client recently called and asked if they could utilize interns in their workforce. Both are good questions. However, there are several pitfalls and risks in utilizing working interviews or using interns. Both the federal government and the state of California have recently issued opinions regarding these matters, which is also an indication that this may be a new “hot topic” for both employers and governmental agencies. The good news in this case is that both the state and federal government agree on the six factors which will be considered and how they will be applied. Working interviews may be used so long as employers do not derive a direct benefit by the use of the applicant and as long as the tryout is for a reasonable period of time given the nature of the business. This will allow employers to gage the effectiveness in a particular task, but not so long as to derive actual labor without pay.

The intern question is a bit more difficult, but contains elements similar to the working tryout. Interns are generally students from an established school or educational institution who will be earning educational credits while they perform duties in the private sector. Interns must, in fact, receive training which would be similar to an educational environment; the internship must be for the benefit of the intern and again not economically benefit the employer; the intern must not take the place of another worker who would normally be paid and must work under the close supervision of existing, paid staff; the employer may derive no immediate advantage from the activities of the intern and, in fact, both governments have noted that an occasional loss or imposition on the employer due to an internship would be considered the norm; the intern is not entitled to or guaranteed a job at the conclusion of their internship; and last, but not least, the employer and the intern agree that the intern is not entitled to wages for any time spent performing duties during the internship.

Employers interested in either putting together working tryouts and/or internships should check with Dave Cohen at The Employers’ Council for further information and to ensure that they are not taking on a liability which they are not prepared for.

An Ounce of Prevention is Worth a Pound of Cure

2010-04-30T16:52:00.000-07:00

By David L. Cohen

Employers are reminded that employee handbooks are an evolving document and need to be updated at lease annually with regard to changes in the law and changes in operations. Employers need to also be cognizant of the number of employees they have, as various thresholds trigger and/or relieve employers of certain obligations under state and federal law. Employers who have recently added and/or reduced the size of their workforce may need to address new issues in employee handbooks by adding and/or removing benefits previously mandated by law. Various thresholds apply at five (5) employees, fifteen (15) employees, twenty (20) employees, twenty-five (25) employees, and fifty (50) employees.

In addition, any employer who experiences a mass layoff and/or plant closure must be aware of and comply with state and federal laws requiring advance notice of the termination of employment or face substantial fines, with new legislation set to increase those penalties at the federal and state levels if they are enacted. In general, a half hour to one hour review and update of an employee manual that has been previously prepared by The Employers’ Council will be all that is needed in order to protect the investment that employers have already made in their greatest defense, the employee handbook. In addition, employers must be aware that changes in employment eligibility and I-9 requirements should also be addressed as there is no longer a grace period while employees attempt to secure documents proving their employment eligibility.

Finally, with technology advancing at such a rapid pace, it has also become apparent that social media policies should be included in employee handbooks to address what employees can and cannot say with regard to businesses on their own private, off-duty web pages on such sites as Facebook, MySpace, LinkedIn and others. The employers must advise employees of the confidentiality of certain information as well as the inappropriate nature of defaming the employer even when, by reference, because private pictures appear next to employees at the work site or in uniform. Any employer who has an employee handbook drafted by The Employers’ Council or Dave Cohen in the past several years should have it updated at a nominal charge in order to protect themselves with regard to these new provisions. Any employer who does not have an employee handbook drafted by The Employers’ Council/Dave Cohen should inquire as to the value and benefit of a well-crafted handbook that is specifically tailored to that company’s needs. Investing the necessary time and funds can protect employers against catastrophic lawsuits brought by employees.

DON'T GET CAUGHT WITH YOUR PANTS DOWN

2010-04-23T16:26:00.000-07:00

By David L. Cohen

In 2006, the California state legislature passed law requiring that all managers of companies with fifty or more employees receive training in sexual harassment within six months of the date they were hired and no less frequently than every two years thereafter. As we approach the mid-point of 2010, employers are reminded that this training cycle must be continued and in-house harassment training for managers and supervisors is the most cost effective means of accomplishing this requirement.

Over the past several years, there have been numerous court challenges surrounding who is qualified to provide in this training, and what form it has to take. The state has now determined that only “interactive training” is permissible and prerecorded or internet programs will not be acceptable. The training must be provided by an “expert” in personnel and harassment law, and requires that attorneys or others with special training who are qualified to present the information, must present the training in an interactive format. Although many “webinars” claim to have interactive experts on the panel, in-house training for all managers with a live trainer is still preferable according to many of the cases.

The Employers’ Council and David L. Cohen have provided training for clients and others over the past six years. In fact, in house training (including harassment) has been a staple preventative tool for my clients for more than twenty-five years. Employers who are interested in harassment training should contact The Employers’ Council to arrange a mutually convenient time and location. The cost is frequently less for in-house training than to send two individuals to a so-called “expert training” offered by the multitude of companies that have sprung up as a response to the California law. In-house training also provides the benefit of a private, interactive session in which your supervisors and managers can ask specific company related questions without concern for exposing confidential information to outsiders.

STOP!!!!!!!!!!! LOOK!!!!!!!!!!! LISTEN!!!!!!!!!!!

2010-04-16T16:29:00.001-07:00

(How to Avoid Buying the Business from Hell)
by David B. Durrett

Quite often a client has that great opportunity to buy a business, although the client does not truly appreciate the risks. Typically, businesses should be purchased through an escrow handled by an independent third party in order to confirm that all government agencies have been paid, all vendor invoices are current and no third party claims exist.

There are also significant tax issues related to how the business is purchased. If the business is a corporation, a buyer could choose to buy the corporate stock, although this means that the buyer is foregoing significant tax deductions for depreciation. Also, the business risks carry forward with the corporation. For example, there may be an employee lawsuit for discrimination. Typically, businesses are purchased not as a whole but in part through the purchase of the assets and not the liabilities.

Finally, it is always nice to obtain some representations and warranties concerning pending litigation, the accuracy of financial statements and the status of certain key employees. To avoid the possibility of being a successor employer subject to exposure, a buyer will need to fire and rehire those employees that will remain after the sale. As my law partner has often mentioned, this is a good chance to rid the business of problem employees and avoid future exposure to employment disputes.

Any purchase of a business needs to involve an accountant to consider the tax ramifications and allocation of the purchase price, an escrow holder to handle the claims of government agencies and creditors, and an attorney to evaluate the structure of a transaction.

LENDERS ARE GODS

2010-04-09T17:00:00.000-07:00

By David B. Durrett

Behind every real estate project is a lender, who calls all the shots. Landlords and tenants often forget this fact, and mistakenly believe that they can modify their relationship without considering the rights of the lender. Loan documents and ancillary documents signed by the tenants for the benefits of the lenders, like Estoppel certificates and Subordination, Non-Disturbance and Attornment agreements, usually provide that the lease may not be modified or terminated without the lender’s approval, and the lender has the right to cure a landlord default before the tenant can take any action.

If the loan was made before the lease was signed, the lender has the power to terminate a lease following foreclosure. The only protection for the tenant is obtaining the lender’s execution of a Non-Disturbance Agreement. Such an agreement provides that the lender will not disturb the tenant in the event of a foreclosure or a sale in place of a foreclosure.

Finally, tenants in particular forget that, while the lease is the main document, there are other documents that may have been signed after the lease that modify its terms. A careful review of an Estoppel certificate signed as part of the refinancing of a project will reveal that the tenant has agreed to modify its rights and that the lease has been amended. Most tenants do not appreciate that at the end of the day, the lender truly owns the project and controls the tenant’s destiny.

YOUR TAX DOLLARS AT WORK

2010-04-02T14:26:00.000-07:00

For nearly two decades The Employers’ Council and Dave Cohen of Cohen Durrett have provided an annual update of legislative action for business owners and employers. This year was no exception with the update seminar on Wednesday, March 24, 2010 at the Citizen Hotel. Joining me this year was a benefits expert from the Proskauer law firm in Los Angeles who spoke briefly about the health care reform legislation. The Proskouer attorney, when asked how the health care “reform act” was suppose to help employers and save money, he responded “It won’t for at least ten years”. The bottom line is the Health Care Reform Act is actually a health care “extension” act designed to cover more than thirty million people without health care, and to have employers pay for the bill.

Other legislative news included updates with regard to flexibility in the alternative work week schedules; tightening of the Disabled Veterans Business Enterprise Act; and an extension of the Emergency Unemployment Claims Act (to take advantage of federal funding). The state has also increased the penalties for employers without workers’ compensation, and made it more difficult for insured employers who allow services to be provided outside the medical provider network to thereafter deny payment for those services. Apart from the state of California, the Federal Government passed very little legislation last year in the area of employment and labor. Other than the Health Care Reform Act (which will impact employers), the Fed did manage passage of the HIRE Act of 2010, formally known as the Hiring Incentives to Restore Employment Act, which was signed into law on March 18, 2010. This act provides federal funding to employers to hire and retain qualified employees currently unemployed, by providing a social security tax break and a possible business tax credit for each employee, if goals are met regarding hiring and longevity of those individuals. Details on the bill can be obtained from my office upon request.

Pending legislation introduced by Congress recently includes several bills which may come to the forefront now that health care is settled, including the Employee Free Choice Act (commonly referred to as mandatory unionization) as well as the Secret Ballot Protection Act intended to balance EFCA. Also pending is an amendment to the Worker Adjustment and Retraining Notification Act (WARN) which is also known as the Plant Closure law. If approved this bill would increase applicable penalties and required time for notice, before an employer could engage in a mass layoff or plant closure. Congress has also introduced bills that will require employers to provide paid vacation and paid sick leave.

Apart from the legislation, the annual update covered several court decisions. Most notably Rutti v. Lojack Corporation, which impacts employers who allow and/or mandate employees to engage in work before their initial commute in the morning, or after the employee returns home in the evening. The court ruled that “preliminary” activities change the non-compensable commute to a portion of the work day and must be paid. The second case that employers must be aware of is Dowell v. Biosense Webster Inc. in which a California court for the first time indicated that where employees were required to sign employment agreements containing “a choice of law”, “choice of venue” provisions outside of California, and where those states provide for less protections than California the court would not enforce such agreements. Any employer interested in the details of the information above can contact Dave Cohen at Cohen Durrett and/or The Employers’ Council.

Privacy and Free Speech in the Information Age by David L. Cohen

2009-11-16T15:49:00.000-08:00

In this day of MySpace, Facebook, LinkedIn, Plaxo, forums, blogs and websites; with employees posting anything and (nearly) everything on-line; is there anything employers can do to limit employee’s participation in this world-wide social experiment? Are an employee’s off-duty hours on the internet really their own, or can employers pose limitations. California Courts are balancing the employer’s right to control information and the employee’s freedom of speech and right of privacy.

What employees do on their own time has for many years been held to be their own business, as long as it does not directly affect the workplace. This rule was first enunciated in the case of Rulon-Miller v. IBM (1984) 162 Cal. App. 3d 241, in which an employee of IBM began a personal relationship with a co-worker. The co-worker eventually left IBM for a rival company, but the relationship continued. IBM became concerned about potential conflicts of interests and suspected that Ms. Rulon-Miller might be giving away trade secrets. IBM gave Ms. Rulon-Miller a choice of either ending her relationship or losing her job. When she refused to break off the relationship, IBM terminated Ms. Rulon-Miller who thereafter sued and won. The Court ruled that there was no evidence of a direct conflict or impact upon IBM and therefore the employee’s right of privacy was paramount to the unsubstantiated concerns of IBM.

The privacy rights of employees have been at the forefront of numerous lawsuits since the case of Rulon-Miller and have even triggered legislation in the State of California. One law, Labor Code section 96(k), permits employees to file a claim with the State Labor Commissioner for any loss of wages as the result of demotion, suspension, or discharge from employment for “lawful conduct occurring during non-working hours away from the employer’s premises”. Other sections of California law give employees the right to discuss their benefits with whomever they please, and even allows employees to talk negatively about their employers.

On the other hand, public employees have been found to be far more restricted in their freedom of speech because of their positions. In the case of Roe v. City of San Diego (9th Circuit, 2004) 356 F 3d 1108, the U.S. Supreme Court ultimately decided that a police officer did not have the right to operate a website offering adult content videos and materials because his activities on the website could be linked closely to his activities as a police officer. Although the employee did not wear a specific San Diego Police Department uniform in the videos, his apparel was clearly identifiable as a police uniform, his user profile on the internet was police related in a play on radio codes, and he identified himself as being employed in the law enforcement field.

The trial court originally dismissed the officer’s claim, but the 9th Circuit Court of Appeals upheld his rights. Thereafter the U.S. Supreme Court took the case, overturned the 9th Circuit, and found that the activity was not protected. More important than the particular case, the Supreme Court stated that public sector employees do not give up their First Amendment rights when they choose to work for the government, but they do not have the freedom to speak out on matters which will negatively impact the department or government they work for. The officer had the right to speak on matters of “public concern” even if it is a negative opinion, without suffering adverse employment actions. Other forms of speech that are not of public concern were subject to restraint by the government as an employer. The justices noted that government employers also have rights, and can impose certain restraints on speech that would be unconstitutional if applied to the general public. The Court found that where the free speech did not involve a matter of public concern, if there were appropriate justification, then the employee could be disciplined and/or dismissed for the activities. This is quite different than the private sector as evidenced by the sections noted above.

This does not mean that a private employer is completely without rights. If the employer can establish that the employee’s activities affect their work or the work of the organization in a negative manner, the employer may take action. I won’t address here the use of company e-mail, websites, and/or blogging during working hours on company premises as these clearly can be controlled by the employer and in fact should be.

However, employees who exercise their freedom of speech outside the workplace must be warned that they: 1) do not speak for the company and have no right to use company logos, names, or other materials from the agency in their blog; 2) do not have the right to bind the company with any agreements or statements; 3) cannot breach company rights of privacy and/or disclose trade secrets or sensitive information relating to the employer or their consumers; and 4) cannot disparage or defame competitors or other organizations.

Although the employer cannot dictate that an employee not engage in what management considers “distasteful” or inappropriate behavior, a more narrow set of guidelines and warnings can be set forth.

Problems with CPI Clauses by David B. Durrett

2009-11-16T14:53:00.000-08:00

Many leases include rent adjustment provisions that rely on changes in the Consumer Price Index. Unfortunately, landlords do not appreciate that the U.S. Department of Labor, Bureau of Labor Statistics publishes many indices and does not publish every index every month. Also, the base year for comparison has been changed for some indices and the calculation of the rent increase can be done for the single year just completed or for the period of time back to the original date of the lease.

Ironically, the negotiation of a CPI clause often results in a tenant’s desire for a ceiling (e.g., not to exceed five percent per year) and a landlord’s desire for a floor (e.g., not to be less than two percent per year). In essence, each party desires some certainty concerning the rent adjustment.

Because of the risk of using a CPI provision, landlords may be better served by simply increasing the rent by a fixed percentage each year. Aside from not clearly indicating the appropriate index, landlords often forget to enforce the CPI clause and to make the required calculations. If a landlord should fail to make the calculation and advise the tenant of a rent increase, then the landlord may be surprised to learn about Section 2076 of California’s Code of Civil Procedure.

Section 2076 requires a person receiving money, at the time the money is received, to object if the money tendered is insufficient. If no objection is made, then the person receiving the money is considered to have waived any right to additional payment. Based upon this statute, the California Supreme Court held in the case of Julian v. Gold, 214 Cal. 74 (1931), that a landlord cannot demand payment of rent for past months if he has already accepted partial payment for those months without objection. A similar result occurred in Bettleheim v. Hagstrom Food Stores, 249 P.2d 301 (1952), where a landlord was entitled to an increase in percentage rent from two percent (2%) to four percent (4%), but who continued to accept two percent (2%) by mistake. The appellate court held that the landlord lost its right to demand the additional two percent (2%).

Too often landlords contact attorneys after they have forgotten to send the tenant a notice of an increase based on the CPI adjustment. Section 2076 poses a problem as to the rent already collected. Landlords would probably be better served by using a rent schedule that shows fixed percentage bumps that require no future calculations by either party over the course of time. Of course, this still does not relieve the landlord of comparing the check with the rent schedule. The underlying theory for such a schedule is to keep it simple. If landlords feel that complexity makes the provision better, then attorneys will profit in resolving the complexity.