Increased Consumer Notifications Required for Subscription Renewals

Posted by on Jul 1, 2022 in Newsflash | 0 comments

An amendment to California’s Automatic Renewal Law (Business & Professions Code §17602) will go into effect on July 1, 2022. The amendment, which was signed into law in October 2021, requires increased notifications to consumers regarding any subscriptions or trials which automatically renew. It is important to be familiar with the existing Automatic Renewal Law, which requires businesses which offer subscriptions to do the following: Inform consumers of the cost and frequency of any automatic renewal before or during the subscription enrollment or when processing payment; Inform consumers of the details of the subscription and the applicable cancellation instructions in an email or other form of message; Inform consumers of any price changes before the subscription automatically renews; Have an easy-to-access cancellation system; and Make the above information conspicuous. The amendment which takes effect July 1 applies to free subscription trials longer than 32 days or any paid subscriptions which have an initial term of at least one year. The law will now require that an additional notification or message be sent to consumers between 3 and 21 days before renewal (for a 32+ day trial) or between 15 and 45 days before renewal (for a yearlong subscription). In addition, the new notifications must state the date of renewal, the renewal duration, and the renewal cost. Similar to the current requirements, the new notifications must include a cancellation link or instructions. Finally, the contact information for the business must also be included in the message. All of this information must be conspicuous. A company which does not adhere to these new requirements, or the existing requirements, of the Automatic Renewal Law can be subject to civil penalties from both consumers and the government. Therefore, it is important for all businesses which offer subscriptions to regularly review their automatic renewal processes for legal...

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Employees May Be Required to Arbitrate Individual PAGA Claims and Waive Non-Individualized PAGA Claims

Posted by on Jul 1, 2022 in Newsflash | 0 comments

California’s Private Attorney General Act (“PAGA”) allows employees to file claims against their employers to recover civil penalties on behalf of themselves, other employees, and the State of California for various Labor Code violations. Claims under PAGA may be individual claims (those suffered by the employee making the claim) or “representative” claims (those suffered by employees other than the employee making the claim), but an employee generally needs to have an individual claim in order to have standing to pursue representative claims. Many employment contracts contain class waivers, which prohibit an employee from filing a class action lawsuit on behalf of others. Many employment contracts also contain arbitration clauses, which require employees to arbitrate claims against their employer rather than filing a lawsuit. In PAGA cases, California courts have held that PAGA prohibits employees from waiving the right to assert representative claims, regardless of what the applicable employment contract states. This has meant that even an employment agreement with an airtight arbitration provision and class action waiver would not require an employee to arbitrate PAGA claims, providing many employees with powerful leverage to force employers into court and to assert a host of claims on behalf of others which the employee never had as an individual- all but ignoring the contractual agreement between the parties and the parties’ expectations about how issues between them would be resolved. A U.S. Supreme Court ruling has changed this arbitration v. PAGA landscape significantly. In Viking River Cruises, Inc. v. Moriana, an employee filed a lawsuit against her employer and brought individual and representative claims under PAGA. Her employment contract contained a class waiver which prohibited representative claims as well as an arbitration clause. Her employer argued that she was required to arbitrate her claims and was prohibited from bringing representative claims on behalf of her coworkers in that arbitration. The California courts ruled on behalf of the employee and held that the arbitration clause and waiver were invalid because PAGA prohibited such waivers. However, the case was appealed to the United States Supreme Court which held that the Federal Arbitration Act (“FAA”) preempted the PAGA prohibition on such waivers. In other words, the Supreme Court held that the FAA superseded PAGA, meaning that the employee was required to arbitrate her individual claims. Because she was required to arbitrate her individual claims, she no longer had standing to bring representative PAGA claims in court, and they could not be arbitrated under the arbitration provision in question. The Supreme Court’s ruling means that if an employee’s contract contains an appropriate arbitration provision relating to individual PAGA claims which contains valid class and other representative action waivers, then that employee can be forced to bring individual claims against the employer in arbitration and is prohibited from bringing a representative action under PAGA in either court or arbitration. While the ruling may very well elicit a further response from the California legislature and the courts, this is a very favorable ruling for California employers. Employment law attorneys have used PAGA claims to substantially raise the risk, scope, and cost of employment-related lawsuits for years even where employers have strong arbitration provisions in their employment contracts which require employees to waive class action and representative claims.  For the time being, this tactical advantage can be wiped out...

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California Supreme Court- Employees May Recover Additional Penalties for Failure to Pay Premium Pay for Meal and Rest Period Violations

Posted by on Jun 1, 2022 in Newsflash | 0 comments

The California Supreme Court has just overturned a Court of Appeal decision which had been seen as a significant “victory” for employers in the wage and hour arena.  That Court of Appeal decision had ruled that unpaid statutory payments owed by a California employer for meal and rest break violations were not “wages” under California law, at least for purposes of determining whether an employee who was not paid such amounts could recover “waiting time” penalties for such failure after termination and whether such penalty payments were required to be documented on an employee’s paystubs. Because such payments were not considered wages, the Court of Appeal ruled that the failure to pay such penalties could not serve as the basis for a claim by the employee for paystub violations or waiting time penalties. However, on May 23, the California Supreme Court held that an employer’s failure to pay an employee the applicable penalties for missed meal periods would give rise to claims by the employee for waiting time penalties upon termination and for failure by the employer to provide proper paystubs.[1] California law requires employers to provide non-exempt employees with an unpaid, thirty-minute meal break during each shift of at least five hours, during which the employees are not required or permitted to perform work. In addition, employers must provide non-exempt employees with a ten minute paid rest period for each four hours (or major fraction thereof) worked. If employers fail to provide either a meal break or a rest period, employees are entitled to one hour of payment at their regular rate of pay as a “penalty” for having been deprived of the statutorily-required breaks. Such payments are often referred to as “premium” payments. Prior to the Supreme Court’s Naranjo decision, there was a great deal of confusion as to whether and for what purposes these premium payments were considered wages or penalties. If premium payments were treated as penalties and not wages, employees would not be able to collect waiting time penalties where the premium payments were not made at or before termination.  Likewise, employees would not be able to pursue claims that their employers had provided them with improper or incomplete paystubs based on the failure by the employers to itemize the required premium payments on the paystubs.  Coupled with an earlier California Supreme Court decision which determined that employees could not recover attorney’s fees on meal and rest period violation claims under a statute authorizing an award of attorney’s fees and costs on “actions to recover wages,” the earlier, pre-Naranjo legal landscape took a great deal of the sting out of claims for missed meal and rest periods. That has now changed. Because the premium payments for missed meal and rest breaks are clearly determined to be wages, employees are entitled to pursue waiting time penalties for the failure of employers to include such premium payments in an employee’s final paycheck upon termination.  Likewise, the failure to provide and properly document such premium payments on each paystub covering a pay period in which they are due to be paid will constitute a separate potential Labor Code violation (subject to applicable defenses). In addition to employees being able to seek waiting time penalties and penalties related to paystub violations, the classification of premium payments as wages...

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Best Practices for Handling Board of Director Conflicts

Posted by on Jun 1, 2022 in Newsflash | 0 comments

On April 28, the Delaware Chancery Court issued a verdict in a shareholder derivative lawsuit against Tesla regarding the company’s 2016 acquisition of a solar company. At issue in the case was Tesla’s failure to address conflicts of interest among the company’s board members, several of whom had an interest in the company to be acquired. The Court held that the deal was fair to the company and thus ruled in Tesla’s favor. In its ruling, the Court pointed out several best practices for dealing with director conflicts that Tesla failed to follow. However, it also pointed out several best practices that the board did follow. First, Tesla failed to establish a special committee of independent directors. If a company’s directors have conflicts of interest, it is best for the company to establish a special committee consisting of independent directors to analyze the issue at hand (even if the committee only consists of one independent director). Second, Tesla’s conflicted directors failed to recuse themselves from voting on the acquisition. Tesla CEO Elon Musk was a conflicted director but only partially recused himself and still participated in some meetings regarding the potential acquisition. Any conflicted directors should entirely recuse themselves from the conflicted transaction or decision so that the board’s independence cannot be questioned or challenged. Third, Tesla’s conflicted directors were involved in the selection of independent advisors. While it is a best practice for a company to select independent advisors for advice, such as lawyers, CPAs, and financial advisors, the actual selection of the advisors should only be done by the non-conflicted, independent directors. If the conflicted directors choose which independent advisors to hire, the advisors’ “independence” may be subject to challenge. The court pointed out three best practices for dealing with board of director conflicts to which Tesla did adhere. For one, Tesla allowed the independent directors and advisors to lead the acquisition negotiations. The court noted that Tesla’s lone independent director was in charge of the process and that the conflicted directors did not push back against the independent director and advisors. In the event that a company’s conflicted directors fail to recuse themselves, it is in the company’s best interest to allow any independent personnel to be in charge. Also, Tesla created a “record of hard bargaining.” The court explained that Tesla negotiated a lower price for the acquisition following proper due diligence. A company should always keep appropriate records and minutes for board decisions, but it is particularly vital to do so in situations where the board’s independence and process could later be challenged or questioned. Lastly, the court recognized Tesla’s decision to require the acquisition to be approved by its minority shareholders, despite there being no such requirement under Delaware law. Obtaining shareholder approval for any deals, not just those involving conflicted directors, can be a way in which a company can protect itself from potential shareholder litigation. These best practices are an effective way to ensure that both a company and its shareholders get a fair deal and can help prevent litigation over the board of directors’ decisions or transactions. Following these practices could save a company a great deal of money and...

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California Small Businesses Must Offer Retirement Savings Programs by June 30, 2022

Posted by on May 2, 2022 in Newsflash | 0 comments

Under California law, businesses with 5 to 50 California employees must offer retirement savings programs to their employees by June 30, 2022. The law allows employers to either offer their own retirement savings program, such as 401(k) or profit-sharing plan, or to enroll in the CalSavers Retirement Savings Program. Even if an employer already offers its own retirement savings program, it must still register as exempt with CalSavers to avoid being penalized. CalSavers was enacted in 2016 as a way to allow California employees to save for retirement by deducting money from their paychecks even if their employer did not offer a retirement savings program. CalSavers is an automatic enrollment individual retirement account (IRA) with no employer fees or fiduciary liability. Employers are not required to assist employees with CalSavers and are not responsible for answering questions about the program. Rather, the State Treasurer oversees the program and oversees private financial firms which are responsible for managing the invested funds. If an employer fails to either register as exempt or enroll in CalSavers, it faces potentially significant financial penalties. Employers who fail to register within 90 days of the June 30, 2022 deadline can be penalized at a rate of $250 per employee. If employers fail to register within 180 days, the penalty increases to $500 per employee. For purposes of this law, the number of employees is calculated using the average number of employees an employer had in the previous calendar year. While the upcoming deadline is for small businesses, larger employers were previously required to register. Employers with over 100 employees were required to register by September 30, 2020, while employers with over 50 employees had a deadline of June 30, 2021. Larger employers who have not previously registered should do so immediately, so as to avoid any additional...

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Board of Directors Diversity Requirement Declared Unconstitutional

Posted by on May 2, 2022 in Newsflash | 0 comments

In September 2020, California Assembly Bill 979 was signed by Governor Newsom. The bill required publicly-held corporations (those with publicly traded shares on a stock exchange) to diversify their boards of directors. Specifically, such corporations were required to appoint directors from “underrepresented” communities to their boards. The bill defined “underrepresented” communities as those self-identifying as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, Alaska Native, gay, lesbian, bisexual, or transgender. Had it been upheld, the bill would have required that a publicly-traded corporation with its principal executive offices in California, even if incorporated elsewhere, have at least one director from an underrepresented community on its board by the end of 2021. By the end of 2022, corporations with between four and nine directors would be required to have no less than two such directors on their boards while those with greater than nine directors would be required to have a minimum of three such directors. The bill was challenged not long after it was passed by three taxpayers who filed suit in Los Angeles Superior Court. The taxpayers sought to enjoin the California Secretary of State from “spending public funds on California’s race, ethnicity, sexual preference, and transgender quotas for boards of directors of publicly-traded corporations with their headquarters in California.” The lawsuit also sought a judgment declaring the bill unconstitutional under the California Constitution. The taxpayers challenged the bill as unconstitutional on the basis that requiring a corporation to appoint a specific number of directors based on their race, ethnicity, sexual orientation, or transgender status is a violation of the equal protection clause of the California Constitution. On April 1, 2022, the Superior Court issued a ruling in favor of the taxpayers. Although the ruling did not discuss the Court’s reasoning, the Court declared the bill unconstitutional and enjoined the State from using taxpayer funds to enforce the bill. Thus, the State may not enforce the bill unless the State successfully appeals the ruling. Even if the bill is declared constitutional, the State may still be enjoined from using taxpayer funds to enforce it pending further...

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Understanding the California Privacy Rights Act

Posted by on Apr 1, 2022 in Newsflash | 0 comments

The California Privacy Rights Act (“CPRA”) took effect in December 2020, but the major provisions will formally take effect on January 1, 2023. The CPRA may be confused with the CCPA, the California Consumer Privacy Act, because both acts create consumer privacy rights regarding the collection and sale of personal information. While the two acts serve a similar purpose, the CPRA significantly amends and expands the CCPA. When the CPRA was enacted in December 2020, it included exemptions for human resources information and business to business (“B2B”) contact information. B2B information includes things such as the telephone number or address of another business. The major provisions of the CPRA which take effect in January end these two exemptions. When the CPRA takes further effect in January, it will include a 12-month lookback period. As a result, on January 1, businesses must declare in their privacy policies whether they have been selling or sharing employee information or B2B information. If a business has been selling or sharing such information, it must offer the ability to employees and businesses to opt out of the sharing of their information. Beginning in January, businesses must update service provider agreements to include such privacy information as required by the CPRA and offer broad access to both employees and B2B contacts. Businesses must also employ the ability to delete private information which is protected by the CPRA and the CCPA. The right to have personal information deleted is not absolute under the CPRA, as it allows employers to retain information which is reasonably necessary to maintain and manage current and past employee relationships. Further, the CPRA states that a business shall not retain a consumer’s personal information for longer than it is reasonably necessary to do so. The CPRA also provides two new “right to know” rights to employees. Currently, the “right to know” applies to consumers. First, employees have the right to a disclosure which explains how employers collect and handle employee information. Second, employees have the right to copies of specific pieces of personal information. All businesses and employers in California should be aware of the CPRA and what changes it will entail before the new provisions go into effect. This is especially true due to the 12-month lookback period. Businesses and employers should be prepared to update or enact privacy policies and compliance programs before the new provisions of the CPRA take effect so that they are not overwhelmed come January 1. In addition, businesses and employers should keep accurate records of how they use consumer, employee, and B2B information so that they are able to respond to inquiries regarding the use of such...

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California Court of Appeal Rules there is No Right to a Jury Trial for PAGA Claims

Posted by on Apr 1, 2022 in Newsflash | 0 comments

The California Labor Code Private Attorneys General Act (“PAGA”) allows aggrieved employees to sue their employer to recover civil penalties on behalf of themselves, other employees, and the State of California for various Labor Code violations. PAGA allows claims to be brought for violations of the Labor Code specifically listed in the PAGA statute, as well as any other violation of the Labor Code. PAGA was enacted because California state agencies were having difficulty enforcing violations of the Labor Code. In a recent case[1], the California Court of Appeal ruled that plaintiffs in PAGA cases do not have the right to a jury trial with respect to their PAGA-based claims. In California, the right to a jury trial is derived from either the statute under which a claim is brought or the state constitution. PAGA does not provide a right to a jury trial, so the court considered whether the state constitution provided plaintiffs with such right. The Court of Appeal determined that the constitution did not provide the right to a jury trial for PAGA claims for two main reasons. First, by allowing a plaintiff to bring claims on behalf of the State of California, PAGA acts as an administrative regulatory enforcement action. Enforcement actions which are brought by the State do not provide for a jury trial because they are administrative in nature. Per the Court’s decision, a PAGA plaintiff does not have the right to a jury trial because such right was unavailable to other state agencies. Thus, despite PAGA claims being brought by employees rather than state agencies, the Court found that there was no right to a jury trial. Second, PAGA grants courts broad discretion to determine the amount of penalties for violations of labor law. The courts’ discretion in determining these penalties is equitable in nature and the weighing of equitable factors is traditionally up to the court, rather than a jury. Due to the equitable nature of the court’s analysis, combined with the fact that the harm suffered by the plaintiff is not an issue, only the court has the right to determine such penalties. Employers should be aware of the Court’s decision, as well as PAGA as a whole, because the potential penalties employers face for violations of the Labor Code in California can be severe. PAGA provides employees with a great deal of power to assert claims against employers, including claims asserting violations of labor laws suffered by others.  However, the Court’s recent ruling makes clear that such claims will be heard by the Court rather than a jury, which is at least a small consolation for most employers. [1] LaFace v. Ralphs Grocery Co., 2022 WL 498847 (Cal. Ct. App. Feb. 18,...

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Fifth Circuit Rules Evidence from Wayback Machine is Inappropriate for Judicial Notice

Posted by on Mar 1, 2022 in Newsflash | 0 comments

Many people may not be aware of the Internet Archive or its nostalgic digital library, the “Wayback Machine.” The Wayback Machine is a service provided by the Internet Archive which allows users to visit and view archived versions of websites by simply entering the desired URL and selecting a date range. Internet Archive’s proclaimed mission to preserve the web’s electronic history may be noble, but there are also significant legal consequences for website owners and litigants seeking to authenticate a webpage containing facts necessary to support or defend a claim. For example, intellectual property owners can use the Wayback Machine to monitor potential infringers’ websites and potentially enforce their intellectual property rights. Website owners have limited options available to them for excluding their sites’ content from the Wayback Machine. The main evidentiary issues that arise when submitting archived screen shots into evidence relate to hearsay and authentication. Thus, to be admissible, such evidence must fall within a hearsay exception and must be authenticated. To satisfy the requirement of authentication, the proponent of any proffered evidence “must produce evidence sufficient to support a finding that the item is what the proponent claims it to be.” (Fed. R. Evidence 901(a).)             In a recent case[1] involving a dispute over terms of an online auction, the Fifth Circuit contemplated whether documents and/or other information obtained from the Wayback Machine are admissible as evidence and whether the district court abused its discretion by improperly taking judicial notice of the terms contained in such archived pages. The plaintiff in this case brought a breach of contract action in which there was a dispute relating to the terms of an online auction. The plaintiff contracted with an auction company to auction off a large housing module. The auction company hosted the auction on its website, but when auction participants clicked on the link to bid they were directed to Proxibid, a third-party website, where they could view the auction’s terms and conditions and place their bids. Among these terms was a declaration that bidders would be liable for only 20% of the bid price in the event of a breach of contract. Instead of using the website, defendant Davie Shoring, Inc. placed the winning bid of $177,500 via a telephone call with an employee of the auction company. After the auction concluded, Shoring refused to pay for the module when it proved difficult to remove from storage. Plaintiff sought recovery of the full winning bid, while Shoring argued that the auction’s terms and conditions limited available damages to 20% of the winning bid price. Defendant introduced the auction terms and conditions in two forms: (1) as an internet printout labeled “Exhibit 41;” and (2) as an archived webpage from the Wayback Machine. The district court granted Shoring’s request for judicial notice of the archived webpage under Fed. R. Evidence 201 and limited the damages to 20%. Plaintiff appealed, arguing that the district court’s granting of judicial notice was improper. The Fifth Circuit concluded that the district court erred in taking judicial notice of the auction’s terms and conditions because a private internet archive falls short of being a source whose accuracy cannot reasonably be questioned, as required by Fed. R. Evidence 201. The Court further explained that sister circuits have allowed district courts to rely...

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Employers Must Remember to Post Form 300A Beginning February 1

Posted by on Mar 1, 2022 in Newsflash | 0 comments

Cal/OSHA, in a recent news release, reminded employers of their obligation to post their 2021 annual summary of work-related injuries and illnesses. Beginning February 1, 2022, employers that are covered by Cal/OSHA’s record-keeping rule must post their Form 300A – Annual Summary of Work-Related Injuries and Illnesses in a visible and easily accessible area at every worksite. Form 300A must remain posted through April 30, 2022. Employers with more than 10 employees are subject to Cal/OSHA’s record-keeping rule and must keep a record of serious work-related injuries and illnesses throughout the year, including COVID-19 related illnesses.[1] If a work-related COVID-19 case meets one of the below criteria, covered employers must record the case on their 300, 300A, and 301 or equivalent forms. To be recordable, an illness must be work-related and result in one of the following: Death Days away from work Restricted work or transfer to another job Medical treatment beyond first aid Loss of consciousness A significant injury or illness diagnosed by a physician or other licensed health care professional Companies with no recordable work-related injuries or illnesses in 2021 must still complete and post the summary (Form 300A) with zeros on the total line. Form 300A must be certified by a company executive. Remember, employers are only required to post Form 300A, not the entire Form 300 log.  According to Cal/OSHA, posting the summary “helps ensure workers are aware of work-related injuries and illnesses that occurred the previous year. Current and former employees are entitled to a copy of the summary or the log upon request.” In addition to the mandated posting of Form 300A, certain employers are required to submit additional electronic reports, due by March 2, 2022. The following employers have this additional requirement: Employers with 250 or more employees, unless exempt under Cal. Code of Regulations Title 8, Section 14300.2. Employers with 20-249 employees in the specific industries listed in Appendix H of Cal/OSHA’s regulations regarding occupational injury and illness records. For more detailed guidance, Cal/Osha provides instructions and form templates for employers to complete both the log (Form 300) and annual summary (Form 300A) of work-related injuries and illnesses here: Brief Guide to Recordkeeping Requirements (ca.gov). [1] If your company had more than 10 employees at any time during the last calendar year, you must keep Cal/OSHA injury and illness records unless your establishment is classified as a partially exempt industry under Cal. Code of Regulations Title 8, Section 14300.2. (Cal. Code of Regulations Title 8, Section...

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