Court Rules Proposition 22 Is Unconstitutional

Posted by on Sep 1, 2021 in Newsflash | 0 comments

Millions of dollars were spent by rideshare and food delivery companies to ensure Proposition 22 (“Prop 22”) was passed by Californians last November 2020. This ballot initiative was passed by a wide margin and provided an independent contractor exception for “app-based” drivers. However, on August 20, 2021, a California Superior Court judge found the voter-approved Prop 22 unconstitutional and therefore, unenforceable. Prop 22 is a California ballot initiative that classified app-based drivers as independent contractors rather than employees. This measure was a direct response to Assembly Bill (AB) 5, which introduced stringent guidelines for classifying workers as independent contractors. As a result of AB 5, app-based drivers were generally not classified as independent contractors. Prop 22 was specifically designed to circumvent California employment law, and AB 5, by creating an exception for app-based drivers. California has been pushing for independent contractors to be classified as employees, arguing that workers with employment status receive more protections and benefits such as health insurance, sick leave, and minimum wage. Proponents of Prop 22 argue that an employee classification of app-based drivers will restrict the work flexibility offered to app-based drivers and that a majority of app-based drivers do not want to be classified as employees. The August 20th decision, written by California Superior Court Judge Frank Roesch, stems from a petition filed by labor union Service Employees International Union and a handful of app-based drivers requesting the court to hold Prop 22 unconstitutional. Petitioners, in support of their petition, argued that by exempting workers previously classified as employees from workers’ compensation, Prop 22 infringes on the Legislature’s plenary power to create a complete system of worker’s compensation. Judge Roesch agreed with the petitioners and said that Prop 22 in its entirety is unenforceable because it “limits the power of a future legislature to define app-based drivers as workers subject to workers’ compensation law,” rendering all of Prop 22 unenforceable. The judge, expressing his criticism of Prop 22, said it “appears only to protect the economic interest of the network companies in having a divided, ununionized workforce.” He went on to state that “a prohibition on legislation authorizing collective bargaining by app-based drivers does not promote the right to work as an independent contractor, not does it protect work flexibility, nor does it provide minimum workplace safety and pay standards for those workers.” Although companies like Uber, Lyft, and DoorDash received a major blow in their battle with the State of California over the independent contractor versus employee status of their respective  drivers, Prop 22 will remain enforceable law while Judge Roesch’s ruling is appealed to the Court of Appeals. There is a strong likelihood that this issue will eventually reach the California Supreme Court, who will be the final arbiter in this ongoing battle between ride share and food delivery companies and the State of...

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Merger-and-Acquisition Activity

Posted by on Sep 1, 2021 in Newsflash | 0 comments

It may be counter-intuitive in light of the world-wide pandemic we continue to experience but, like the housing market in the United States, the market for buying and selling businesses is robust in 2021.  One explanation for the increased amount of merger-and-acquisition activity is the near-zero interest rates.  Cheap money allows prospective buyers to finance purchase opportunities they otherwise would not be able to afford.  Another factor is the relatively high prices for equities.  Stocks are trading at record high ratios of price-to-earnings.  Private equity firms and the industry players they back are looking for places to put their money to work other than the stock market.  Whatever the reason, clients of NavBat have been happy participants. “We have seen a whirlwind of activity in 2021,” founding partner Dan Navigato reported.  “I have helped close 6 transactions in the last 6 months,” and the deals have ranged from the high six figures to the mid-eight figures.  Navigato adds, “I’m not the only one helping our clients buy and sell businesses.  Mike [Battin] has notched another 5 transactions this year.” The businesses that have been bought and sold are not limited to one or two industries.  Rather, the transactions the attorneys at NavBat have closed include businesses in the automotive sector, the professional services sector, the manufacturing sector, and the construction industry, to name a few. “Due to the increased demand, it is definitely a business seller’s market,” Navigato explains.  “It’s like nothing I’ve seen before in nearly 30 thirty years as an attorney.  Sellers are able to name their price, negotiate favorable payment terms, and limit their post-closing obligations and exposure.” If you or your company need assistance in buying or selling a business, contact the attorneys at Navigato & Battin.  They have the knowledge and experience to assist you in completing a smooth transition from the letter of intent stage to the...

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California Supreme Court Announces New Formula to Calculate Missed Meal and Rest Period Premiums

Posted by on Aug 2, 2021 in Newsflash | 0 comments

In a recent decision, the California Supreme Court provided no breaks for employers when it unanimously overturned a Court of Appeal decision that instructed employers to pay meal and rest period premium pay at the employee’s base hourly rate.  According to the California Supreme Court, the common practice of paying missed meal and rest break premiums at an employee’s base hourly rate violates California employment law.  In Ferra v. Loews Hollywood Hotel, LLC (2021) WL 2965438, the California Supreme Court held that meal and rest break premium pay must be based on the employee’s “regular rate of pay” as opposed to their base hourly rate.  The “regular rate of pay” includes all hourly wages and other nondiscretionary earnings (such as shift differentials, nondiscretionary bonuses, commissions, or other nondiscretionary incentive pay).  Importantly, the Court also held that its ruling applies retroactively. Background Under California Labor Code section 226.7(c), if an employer fails to provide an employee with a meal, rest, or recovery period, the employer must pay the employee one additional hour of pay at the employee’s “regular rate of compensation.”  The phrases “regular rate of compensation” and “regular rate of pay” were held to have different meanings by the California Court of Appeals.  The widely held interpretation was that the phrase “regular rate of compensation” used for meal and rest break premiums is just the employee’s base hourly rate, while the “regular rate of pay” is the rate utilized in the overtime context, which includes all nondiscretionary payments. The now-outdated interpretation made the calculation for meal or rest break premiums straightforward – simply one hour of pay at the employee’s base hourly rate. The California Supreme Court ruled that the two terms were a distinction without a difference and that the “regular rate of compensation” paid for meal and rest break premiums must be calculated in the same manner as the “regular rate of pay” used in calculating overtime pay. California Supreme Court Decision The defendant in this case, Loews Hollywood Hotel, LLC (“Loews”), employed plaintiff Jessica Ferra (“Ferra”) as a bartender.  Loews paid Ferra hourly wages and quarterly nondiscretionary incentive payments as compensation.  When an hourly employee was not provided with a compliant meal or rest period, Loews paid the employee an additional hour of pay according to the employee’s hourly wage.  Any nondiscretionary payments were not factored into the calculation of premium pay owed under Labor Code section 226.7(c). Ferra filed a class action suit against Loews alleging that Loews, by omitting nondiscretionary incentive payments from its calculation of premium pay, failed to properly pay her for noncompliant meal or rest breaks in accordance with her “regular rate of compensation.”  The trial court granted summary adjudication for Loews on the ground that calculating premium pay using the employee’s base hourly rate was proper.  The Court of Appeal affirmed, holding that “regular rate of compensation” and “regular rate of pay” are not synonymous, and that the premium owed to an employee for a missed meal or rest periods is one hour of the employee’s base hourly wage. After an exhaustive analysis of legislative history and statutory interpretation, the California Supreme Court concluded that “regular rate of compensation” is synonymous with “regular rate of pay.”  As a result, employers must pay meal and rest period premiums at a blended...

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California Court of Appeal Imposes New Restrictions on Criminal Background Checks

Posted by on Aug 2, 2021 in Newsflash | 0 comments

California employers should review their employment background check policies to ensure compliance with evolving California law.  A recent Court of Appeal ruling restricted the use of a date of birth and/or a driver’s license number to identify individuals in an electronic search of criminal court records. (All of Us or None v. Hamrick (2021) 64 Cal.App.5th 751.)  This ruling, if not successfully appealed to the California Supreme Court, will impose challenges on employers conducting background checks on job applicants and employees. This case revolved around California Rule of Court 2.507(c), which governs and specifies how a California state court’s electronic records are made available to the public.  This rule requires that courts provide remote electronic access to its electronic indexes.  This rule also requires courts to exclude specific information from such indexes, including defendants’ dates of birth and driver’s license numbers. The issue in the case was whether members of the public should be allowed to search Riverside County Superior Court’s electronic database to access court records and data linked to a criminal defendant by inputting a person’s date of birth or driver’s license number.  The plaintiffs alleged that by allowing members of the public to use an individual’s date of birth or driver’s license number as a data point to search the court’s criminal records, Riverside County Superior Court violated California Rule of Court 2.507(c). Riverside County Superior Court argued that because it did not disclose a person’s date of birth or driver’s license number, it was not in violation of the rule. The Riverside County Superior Court contended that only individuals with independent knowledge of such information could effectively use it as a search criterion to narrow their search parameters. Unlike the trial court, the Court of Appeal was not persuaded by Riverside County Superior Court’s argument that attempted to distinguish a “search” from a “disclosure” and concluded that allowing the public to search a court’s electronic index by inputting an individual’s known date of birth or driver’s license number constitutes a violation of California Rule of Court 2.507.  The Court of Appeal stated that “in authorizing such searches, defendants may reasonably be said to have failed to exclude date of birth and driver’s license number in the Riverside Superior Court’s index as is required, even assuming that defendants are not disclosing this information.” After examining the history of California Rule of Court 2.507, the Court of Appeal stated that “while defendants’ alleged practice undoubtedly facilitates public access to information, the rules’ history unequivocally establishes that the drafters of the rules of court governing electronic access to trial court records did not intend simply to maximize the public’s access to information. Rather the drafters sought to balance the public’s access to court records with the privacy concerns of those involved in criminal proceedings.” The court’s ruling as to how the public can access criminal records will present challenges for employers seeking background checks now that employers conducting background checks will be unable to narrow their searches by date of birth or driver’s license number. As a result, simply searching for the name of a particular applicant or employee may show the criminal history of someone else with the same name, leaving the employer with unreliable and inaccurate information. Employers are encouraged to carefully review federal, state, and...

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Court of Appeal Provides Important Guidance on the Use of Electronic Signatures

Posted by on Jul 1, 2021 in Newsflash | 0 comments

A recent California Court of Appeal decision provides important guidance for California employers who allow or require employees to execute arbitration agreements and other employment-related documents using electronic signatures.  In a time where employers are increasingly relying on technology to complete the onboarding process of new employees, this recent opinion touches directly on the validity and verification of digital signatures for not only arbitration agreements but also for various other forms and agreements new employees execute during their employment. In Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, Maureen Bannister (“Bannister”) filed a wrongful termination action against her former employer, Marinidence. In response, the employer filed a petition to compel arbitration, and attached Bannister’s electronically-signed arbitration agreement. Bannister challenged the validity of the arbitration agreement, presenting evidence to the court that she never saw the agreement during the onboarding process and did not affix her electronic signature to the arbitration agreement. Moreover, Bannister provided evidence that the employer’s human resources team had instead signed the arbitration agreement electronically for her. As a result, the trial court denied employer’s petition to compel arbitration, finding that the employer failed to meet its burden to prove that Bannister actually signed (electronically) the arbitration agreement. The trial court therefore found the arbitration agreement unenforceable. The Court of Appeal affirmed the trial court decision. Civil Code §1633.9(a) governs the authentication of electronic signatures. It provides that an electronic signature may be attributed to a person if “it was the act of the person.” The “act of the person” may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable. For example, California courts have held that an employer may establish that the electronic signature was “the act of the person” by presenting evidence that a unique login and password known only to that person was required to affix the electronic signature, along with evidence detailing the procedures the person had to follow to electronically sign the document and the accompanying security precautions. In Bannister, the employer provided evidence that Bannister had to enter her social security number, a client ID, and pin code to access and sign the arbitration agreement. Bannister, in turn, argued that the employer also had access to that information and therefore could have signed the agreement for her. In light of this conflicting evidence, the court ruled that the employer failed to meet its burden to prove the existence of a valid and enforceable arbitration agreement. Employers should review their onboarding process to comply with the requirements of Civil Code §1633.9(a). When requiring an employee to sign an arbitration agreement electronically, the employer must take verifiable steps to ensure that only the employee to be bound by the arbitration agreement can sign the agreement. If you have any questions regarding the compliance of your onboarding process or would like to discuss the adequacy of the security measures you have or intend to put in place with respect to electronic signatures, please do not hesitate to contact...

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California Court of Appeal Affirms Summary Judgment in Favor of Owner on Claim of Individual Liability for Wage & Hour Violations

Posted by on Jul 1, 2021 in Newsflash | 0 comments

In a recent opinion[1], the California Court of Appeal for the Fourth Appellate District affirmed summary judgment in favor of an individual owner of a company who was personally sued for alleged wage and hour violations under Labor Code §558.1. Labor Code §558.1 provides that a natural person who is an owner, director, officer, or managing agent of an employer may be personally liable if that person, on behalf of the employer, “violates, or causes to be violated” certain wage and hour laws. In the Usher opinion, the trial court granted summary judgment for the owner, concluding as a matter of law that she was not liable under Labor Code §558.1 because the court found undisputed evidence that she did not participate in the determination to classify plaintiffs as independent contractors. The Court of Appeal affirmed and held: “The undisputed evidence in this case shows that the owner was not personally involved in the determination to classify plaintiffs as independent contractors, which purported misclassification forms the basis of their class and subclass allegations and their 10 causes of action; and that she also lacked sufficient participation in the operation and management of the company to create a triable issue of material fact that she caused the wage and hour violations.” Whether an individual such as an owner, director, officer, or managing agent of an employer is personally liable for misclassifying an employee remains a highly fact-intensive inquiry. Employers, however, should be aware of this basis for personal liability for violations of Wage & Hour laws. [1] Usher v. White (2021) Cal.App.4th, WL 2173167...

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Court Dismisses Spouse’s Lawsuit Based on COVID-19 Exposure in the Workplace

Posted by on Jun 2, 2021 in Newsflash | 0 comments

An employee’s wife sued her husband’s employer for negligence in an attempt to hold her husband’s employer responsible for her COVID-19 infection. The complaint alleged that the employee’s wife contracted COVID-19 as a result of her husband’s exposure to a COVID-19 outbreak at his workplace. The complaint further alleged that the husband’s employer was negligent by failing to provide a safe workspace which in turn caused both husband and wife’s infections. The couple sought damages for contracting the COVID-19 infection and the subsequent hospitalization. The United States District Court for the Northern District of California dismissed the suit, with prejudice, finding in part that California’s workers’ compensation statutes provide the exclusive remedy to the extent the employer may have any liability for the alleged harm. California’s workers’ compensation law provides that workers’ compensation is the exclusive remedy for an employer’s liability where an employee sustains an injury in the course of employment. Because both the employee and his spouse’s claims hinge on the allegation that he contracted COVID-19 at the workplace, the only available redress is filing a workers’ compensation claim rather than a lawsuit for negligence. The court also found that the spouse’s claims could be dismissed for the additional reason that the employer’s duty to provide a safe workplace does not extend to non-employees like her, where she contracted the virus away from employer’s premises. This dismissal, if not appealed successfully, should help to assuage employer concerns over possible lawsuits by employees or their family members alleging a COVID-19 infection due to employer’s negligence. Employers must, however, still comply with federal, state, and local health and safety...

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Court of Appeal Opinion Reminds Contracting Parties They Are Stuck with the Contract They Signed

Posted by on Jun 2, 2021 in Newsflash | 0 comments

The case entitled Coral Farms, L.P. v. Mahony (2021) 63 Cal.App.5th719 involved a dispute between three neighboring property owners that incurred varying damages due to a mudslide. The three parties sued and countersued one another for negligence and other claims related to water drainage. The parties eventually settled their dispute.  As part of the settlement, the owners agreed to perform mitigation and repair work on their own properties according to their own separate plans. The agreement was memorialized in a Settlement Agreement. The Settlement Agreement contained a “Final Approval” provision which stated: “Upon completion of the work, each party shall obtain a written report by the design engineer or geologist that the work performed is in substantial compliance with that Parties’ plan . . . and will provide a copy to all other Parties within 30 days of completion.” Subsequently, two owners sued the third owner. Those two owners alleged the third owner breached the Settlement Agreement because the work completed by the third owner was not in substantial compliance with their plan. But in a bench trial, the court found that the defendant owner complied with the contract, which merely required the owner to provide a copy of an engineer’s report stating their work was substantially completed in accordance with the approved plans (which, as noted above, the third owner did in fact provide). The Court of Appeal agreed with the trial court’s findings and observed that it is a well-settled rule that, when parties to a contract agree that the sufficiency of a party’s performance is to be decided by a third person (such as an engineer, in this instance), that third person’s decision is conclusive and binding on the parties in the absence of bad faith, fraud, or gross negligence. Per the Court of Appeal: “Courts are not in the business of rewriting ill-advised contract provisions. Plaintiffs were stuck with the contract they signed.” Plaintiffs attempted to argue that the Settlement Agreement “does not state that the report of each party’s design engineer is valid, or that it is conclusive, or that it is binding.”  The Court, while agreeing with that general statement, held that it is of no consequence. “The incorporation of current law into a contract is presumed and does not require a deliberate expression by the parties.”  The Court focused its attention on the “Final Approval” heading and held that under the facts of this case, the Court must presume Plaintiffs were aware of the conclusive consequences of the “Final Approval” provision in their fully integrated contract and the Court found that there is no evidence to the contrary. “In any event, even though the precise words may not be explicitly stated in the Settlement Agreement, the valid, conclusive, and binding nature of the “Final Approval” provision is apparent from the contract’s plain language.” This opinion is a helpful reminder for contracting parties to carefully review the language of their contracts and retain an experienced attorney who is familiar with the current state of the law to ensure the parties’ intentions are accurately set out in the contract and that they will be enforced in...

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California Recording Law Requires All Parties to Consent

Posted by on May 3, 2021 in Newsflash | 0 comments

California generally provides heightened protection for individual privacy rights. Consistent with protecting individual privacy rights, the California Supreme Court recently ruled that both parties and nonparties must get consent from everyone on a cellular or wireless telephone call before making a recording of the call. From a legal perspective, the most important question in the recording context is whether consent must be obtained from one or all parties to a wireless communication before recording it. Federal law and many state statutes from other states permit recording if one party to the telephone call or conversation consents. In California, however, not only is it a criminal offense to record a communication without consent of all parties, but it can also potentially give an injured party a civil claim for money damages. Individuals and businesses often have a need or desire to record telephone conversations that relate to their business dealings or customers. California law applies when you and the person you are recording are both located in California. Anyone in California who records telephone calls should know and understand California law on the subject, as even minor violations can carry significant consequences. In Smith v. LoanMe, Inc. (2021) WL 1217873, the California Supreme Court struck down a California Court of Appeals ruling which held that only third-party eavesdroppers needed to obtain consent to record a phone call.  The Court of Appeals had held that California Penal Code section 632.7 did not forbid one party in a call on a cellular or cordless telephone from recording the call without the other party’s consent. The California Supreme Court disagreed, holding instead that the statute applies to both active participants on the telephone call and non-participants alike. The facts giving rise to the case are rather succinct. LoanMe extended a loan to plaintiff’s wife, after which a LoanMe employee called a phone number provided by plaintiff’s wife. The employee reached plaintiff Jeremiah Smith instead. Plaintiff answered the phone on a wireless telephone and informed the employee that his wife was not home. The call was brief- lasting only 18 seconds. The LoanMe employee recorded the call but did not inform plaintiff that the call was being recorded. In September 2016, plaintiff filed a class action consisting of anyone in California whose calls on a wireless telephone with LoanMe were recorded without their consent by LoanMe within one year of September 2016. The complaint alleged that the recording of these calls violated California law. The trial court dismissed the action. The Court of Appeals ultimately concluded that California law prohibits only nonparty eavesdroppers from intentionally recording phone conversations. The California Supreme Court reversed the Court of Appeal ruling and allowed the class action to move forward. The Supreme Court reasoned that Penal Code section 632.7 is a general prohibition against the intentional recording of a covered communication without the consent of all parties, regardless of whether the recording is performed by a party to the communication or by someone else. While it is common business practice to inform incoming callers that the call may be recorded, businesses should also be mindful to implement this practice on outbound calls. Businesses should train employees to immediately inform the person answering the telephone that the call is being recorded and to obtain consent to continue to do...

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California Enacts Right of Recall

Posted by on May 3, 2021 in Newsflash | 0 comments

On April 16, 2021, Governor Gavin Newsom signed SB 93 into law, which law went into effect immediately. This new legislation enacts a “right of recall,” requiring certain employers to first offer employees laid off due to the COVID-19 pandemic available positions based on a preference system. The law applies generally to hospitality and maintenance-related employers- hotels, private clubs, event centers, and airport hospitality services as well as janitorial, building maintenance, and security services provided to office, retail and other commercial buildings. Covered Employees A “laid-off employee” under the new law is defined as an employee who was employed by the employer for 6 months or more in the 12 months preceding January 1, 2020 and was laid-off for a reason related to the COVID-19 pandemic. Employer Obligations Covered employers must make written job offers to “laid-off employees” for all job positions that become available for which the employee is qualified. Laid-off employees are deemed qualified under the law if the employee held the same or similar position at the time the employee’s previous employment with the employer terminated. The employer must deliver the offer “either by hand or to their last known physical address, and by email and text message” if the employer has that information. Laid-off employees have five business days to accept the offer. If more than one qualified laid-off employee accepts the job offer, the employer must rehire the “individual with the greatest length of service based on the employee’s previous date of hire,” (i.e., the employer must rehire based on seniority). In the event an employer declines to recall a laid-off employee on the grounds of lack of qualification, the employer must provide the laid-off employee a written notice of this decision within 30 days. The written notice must include a list of all employees hired for that position and state their length of service with the employer. Further, the written notice must include the employer’s explanation as to why the employee was not rehired. Employers must maintain records relating to rehiring laid-off employees for three years, “measured from the date of the written notice regarding the layoff.” These records must include, for each laid-off employee, the following information: (1) the employee’s full legal name; (2) the employee’s job classification at the time of the lay-off; (3) the employee’s date of hire; (4) the employee’s last known address; (5) the employee’s last known email address; (6) the employee’s last known telephone number; (7) a copy of the written notice regarding the layoff provided to the employee; and (8) all records of communications between the employer and the employee concerning offers of rehire. Penalties The Division of Labor Standards Enforcement (“DLSE”) has exclusive jurisdiction to enforce this law. A laid-off employee may file a complaint with the DLSE and DLSE is authorized to award the laid-off employee: (1) hiring and reinstatement rights; (2) front pay or back pay for each day during which the violation continues; and (3) the value of the benefits the laid-off employee would have received under the employer’s benefit plan. In addition, the DLSE may impose civil penalties of $100 for each employee whose rights are violated and liquidated damages in the amount of $500 per employee for each day the violation continues. The penalty and liquidated damages collected by the...

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