Significant PAGA Reforms Adopted by California Legislature
Effective as of July 1, 2024, California has finally adopted a substantial overhaul of the Private Attorneys General Act (“PAGA”). PAGA has long been a major thorn in the side of employers, with the threat of large-scale PAGA claims raised by employees constantly looming. The changes to the Act do much to narrow the scope and potential penalties associated with PAGA claims going forward, and provide employers with much-needed ways to cure and remediate potential harms both before and after PAGA claims have been raised. Though the bar was admittedly very low to begin with, the new version of PAGA is much more employer-friendly than the original version. As an initial matter, an employee may now only bring a PAGA claim based on Labor Code violations actually experienced by that employee. Previously, employees had been authorized to use a single Labor Code violation as a springboard to allege violations of any other Labor Code provisions experienced by other employees, whether or not the complaining employee had suffered such violations themselves. This essentially brought every possible Labor Code violation into play any time a PAGA action was filed, leading to wide-reaching discovery and extreme difficulty in accurately determining the scope of claims and potential damages. The new PAGA also makes clear that the aggrieved employee must have actually suffered the alleged Labor Code violation within one year of the date of the complaint, closing another loophole which had been partially opened by the courts to greatly expand the timeframe for raising PAGA claims. Collectively, these changes drastically limit the scope of claims an employer is likely to face in a PAGA action, and provide a stronger-than-ever incentive to correct any weaknesses in labor practices early to start the one year clock ticking. The potential penalties an employer faces with respect to PAGA claims may now be significantly reduced through cure and remediation provisions in the new statute. If employers have taken reasonable steps to comply with the Labor Code prior to receiving notice of a potential claim or violation, default penalties can be reduced by 85 percent. Reasonable steps include payroll audits, taking steps to adopt and distribute lawful employment policies, training supervisors and managers on various Labor Code issues which often form the heart of PAGA complaints under the original version of the Act, and taking corrective actions as soon as possible with respect to violations. Employers may also reap the benefit of significantly reduced penalties for taking remedial action within sixty days of receiving a PAGA notice (a precursor to a PAGA claim). Where a violation is cured, the employee’s right to obtain a civil penalty for the violation may now be completely eliminated. Again, the new statutory language builds in strong incentive for employers to take early preventative action to ensure Labor Code compliance to the greatest extent possible before claims are raised and immediately thereafter. The new PAGA is far from perfect, and questions remain as to how various remediation and cure efforts will be accomplished. But the changes, including the opportunity to cure, are welcome ones for employers nonetheless. Another significant change is a codified prohibition on the stacking of Labor Code violations to create additional PAGA penalties. Under the original version of PAGA, an employee could allege a failure to pay overtime or minimum...
read moreBREAKING NEWS: Navigato & Battin Obtains Complete Victory Over General Contractor in Arbitration
Press Release - JDS (Final)
read moreEmployer Alert: Revisions to Required Employment Pamphlets
Employers have to provide a number of pamphlets and notices to a new hire. Recently, the State of California has revised two of those pamphlets. Effective February 1, 2024, the Division of Workers Compensation of the California Department of Industrial Relations updated its “Time of Hire” pamphlet. The pamphlet explains the workers’ compensation process, including the benefits and how to file a claim in the event of a workplace injury. This pamphlet must be provided to all newly-hired employees. Also, the California Employment Development Department (“EDD”) recently updated its “For Your Benefit” pamphlet (Form DE 2320). Employers must provide this pamphlet both at the time of hire and termination of employees. This pamphlet provides information on unemployment insurance, including eligibility, benefits, and the application process. The pamphlet also provides information on State Disability Insurance, Paid Family Leave, and other State services. If you need assistance with any employment matter, the attorneys at Navigato & Battin, LLP are here to assist...
read moreFederal Court Rules BOI Reporting Is Unconstitutional
On March 1, 2024, in the case of National Small Business United v. Yellen, a federal district court in Alabama ruled that the Beneficial Ownership Information (BOI) Reporting Rule of the Corporate Transparency Act (CTA) is unconstitutional. The court determined that the CTA exceeded the Constitution’s limits on Congress’s power. The court granted a preliminary injunction prohibiting the Financial Crimes Enforcement Network (FinCEN) from requiring the plaintiffs (The National Small Business Association and one of its small business members) to comply with CTA’s beneficial owner filing requirement. It is widely believed that the United States Department of the Treasury will appeal the ruling. At this time, the prohibition on enforcing the BOI requirements only applies to the plaintiffs who filed the lawsuit. Technically, FinCEN is not barred from requiring anyone other than the Plaintiffs from complying with the BOI filing rules. Thus, if you are required to file with FinCEN before the end of the year (i.e., companies formed on or after January 1, 2024), you should do so, or potentially face penalties. However, if you are like most required filers, you have until January 1, 2025 in which to report beneficial ownership information to FinCEN. If you fall into this category, it may make sense to wait to file until closer to the deadline as it is likely that we will have more clarity in the coming months about whether the reporting requirements will be enforced against...
read moreNew Disclosure Requirements for Most Small Companies
Background and Purpose In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new beneficial ownership information (BOI) reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. Which Companies Must File Starting January 1, 2024, nearly all corporations, limited liability companies, and other business organizations which are formed by a filing with the secretary of state must file a report with the Financial Crimes Enforcement Network (“FinCEN) identifying the beneficial owners and company applicant of the company (defined below). If a company is required to file, it is referred to as a Reporting Company. Are there Any Exemptions There are 23 categories of companies who are exempt from filing. The list includes insurance companies, accounting firms, registered broker dealers, and non-profits. A complete list can be found here: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf The one exemption that may apply to NavBat clients is the exemption for large operating companies. A business is exempt under the large operating company exemption if: (a) it employs more than 20 full time employees in the United States; (b) it has an operating presence with an exclusive physical office location in the United States; and (c) it has filed a federal tax return in the previous year reporting more than $5 million in revenue generated in the United States. Beneficial Owners and Company Applicants All Reporting Companies must report beneficial owners. Reporting Companies formed after January 1, 2024 must also report company applicant(s). A beneficial owner is any individual who, directly or indirectly, (i) Exercises substantial control over a reporting company, OR (ii) Owns or controls at least 25 percent of the ownership interests of a reporting company. An individual might be a beneficial owner through substantial control, ownership interests, or both. Reporting companies are not required to report the reason (i.e., substantial control or ownership interests) that an individual is a beneficial owner. There is no maximum number of beneficial owners who must be reported. A company applicant is the person or persons (up to a maximum of two) who directly filed the document that created a domestic reporting company and, if applicable, the individual who was primarily responsible for directing or controlling the filing which created the company. All company applicants must be individuals. Companies or legal entities cannot be company applicants. When to Report Companies formed prior to January 1, 2024 have until January 1, 2025 to report. Companies formed on or after January 1, 2024 and before January 1, 2025 have 90 days after formation to report. Companies formed on or after January 1, 2025 have 30 days after formation to report. What to Report The Reporting Company will need to report the following information about the Reporting Company: (a) full legal name; (b) any trade names or fictitious business names (i.e., DBAs); (c) address for principal place of business; (c) jurisdiction of formation; and (d) taxpayer identification number and employer identification number. The Reporting Company must also report the following information for each beneficial owner and company applicant: (a) full legal name; (b) date of birth; (c) residential address (except for company applicants who form companies as part of their business such as attorneys...
read moreCalifornia’s New “Workplace Violence Prevention Program” Law and Its Implications
California has long been at the forefront of enacting progressive legislation, especially when it comes to labor and workplace safety. One of the latest additions to this repertoire is Senate Bill 553 (SB553), aimed at preventing workplace violence. While the intentions behind this law are laudable, there are a number of potential drawbacks and costs associated with its implementation. SB553, recently signed into law by Governor Newsom, is designed to enhance workplace safety by requiring employers to establish comprehensive workplace violence prevention programs. The law mandates various training requirements, risk assessments, and reporting mechanisms to mitigate the risk of violence in the workplace. California employers must design and implement workplace violence prevention plans (“WVPP”) by July 1, 2024. On the surface, this seems like a commendable effort to protect employees. However, the legislation will undoubtedly prove to be a costly drag on businesses with uncertain, or at least unproven, benefits. 1. Compliance Burden One of the primary criticisms of SB553 is the substantial compliance burden it places on businesses, particularly smaller ones. Implementing comprehensive prevention programs, conducting risk assessments, and providing training can be costly and time-consuming. Smaller businesses with limited resources may find it challenging to meet these requirements, potentially diverting valuable time and money from other critical aspects of their operations. 2. One-Size-Fits-All Approach SB553 adopts a one-size-fits-all approach, which may not be suitable for all businesses. The law does not consider variations in industry, company size, or geographical location. What works for a large tech company in Silicon Valley may not be feasible for a small retail store in a rural area. This rigid approach could lead to inefficiencies and hinder businesses’ ability to tailor violence prevention measures to their specific needs. 3. Potential for Overreporting The law requires employers to report workplace violence incidents to the Division of Occupational Safety and Health (DOSH). While transparency is vital, the reporting requirements may lead to overreporting of minor incidents. This could overwhelm DOSH with unnecessary paperwork and distract from addressing more severe cases of workplace violence. 4. Ambiguity in Definitions The law’s definitions of workplace violence and appropriate preventive measures are somewhat vague. The lack of clear guidance could lead to confusion among employers, potentially resulting in misinterpretations and ineffective prevention strategies. Without clear and precise definitions, businesses may struggle to comply adequately with the law. While the intentions behind California’s SB553, the Workplace Violence Prevention Program law, are undoubtedly noble, there are legitimate concerns regarding its implementation. The compliance burden, one-size-fits-all approach, potential for overreporting, unintended consequences, and ambiguity in definitions all raise valid questions about the law’s effectiveness and impact on businesses. If you need any assistance with employment policies, the NavBat team is here to...
read moreMandatory Paid Sick Leave for Employees Set to Increase on January 1, 2024
Effective as of January 1, 2024, California employers will be required to provide their workers with additional paid sick leave on a statewide basis. Currently, state law requires that each employee be provided with a means of accruing at least 24 hours or 3 days of paid sick leave each year. This can be accomplished by frontloading the mandatory minimum number of hours in each employee’s sick leave bank on an annual basis, or allowing each employee to accrue sick leave at a rate of at least 1 hour for every 30 hours worked. The amount of unused paid sick leave that employees are able to accrue at any one time can be capped at 48 hours or 6 days. At the state level, employers are authorized to cap the usage of paid sick leave to 24 hours or 3 days per year. Local ordinances increased or altered these requirements in certain jurisdictions, but the statewide requirements set the floor for all paid sick leave requirements. At the beginning of 2024, on a statewide level the amount of annual paid sick leave to which each employee is entitled will increase to at least 40 hours or 5 days of paid sick leave. Likewise, the amount of total paid sick leave that an employee must be allowed to accrue will increase from 48 hours or 6 days to a minimum of 80 hours or 10 days. Employers can still cap the amount of paid sick leave used by an employee on a yearly basis, but the annual cap will increase from 24 hours or 3 days to 40 hours or 5 days. Employers who do not front load the minimum 40 hours of paid sick leave into each employee’s sick leave bank each year or use the “1 hour for every 30 hours worked” accrual method will be required to ensure that their method for providing the required paid sick leave provides each worker with at least 24 hours or 3 days of paid sick leave after 120 days of work and at least 40 hours or 5 days of paid sick leave after 200 days of work. Depending on the accrual method selected, accrued but unused sick leave may need to be carried over from year to year, but given that employers can cap the amount of accrued sick leave used by employees in one year there appears to be little practical value in restricting carry over from year to year. This is particularly so given that some local ordinances have different carry-over requirements, and that under both the current law and new amendments thereto employees do not have to be paid out any accrued but unused paid sick leave at termination of their employment. Employees who leave the job and then come back are still entitled to have their accrued but unused sick leave reinstated under certain conditions. Accrued sick leave will still need to be tracked on employee paystubs or separate writings distributed with paystubs. Paid sick leave that is utilized by employees will need to be paid to them no later than the payday for the pay period immediately following the pay period in which the paid sick leave was used. Many of the updated requirements which will be kicking in on January 1, 2024 mirror...
read moreEmployees Maintain PAGA Standing Even After Individual Claims are Submitted to Arbitration
In the latest development in what seems like a never-ending battle between employers’ efforts to limit their employees’ potential legal claims to individual claims only and employees’ efforts to ensure that they can bring representative or class claims against their employers, the California Supreme Court has determined that employees continue to maintain standing to have representative (or group wide) Private Attorneys General Act (“PAGA”) claims heard in court even where the employee’s individual claims are subject to valid arbitration provisions. Larger employers (or those more likely to be subject to class actions by employees) have long sought to curb employees’ ability to bring class action lawsuits (e.g., claims for failure to pay overtime, failure to provide meal and rest breaks) through the use of arbitration provisions with their employees which limit or eliminate the employee’s ability to raise such claims as class action lawsuits, thus requiring employees to bring these claims on an individual basis in arbitration rather than in court. While unpleasant to deal with on an individual basis, such claims are far less likely to cause financial ruin for an employer and can be dealt with one-by-one. Plaintiffs’ lawyers have sidestepped this strategy by asserting claims under PAGA in addition to individual claims in their lawsuits, as California courts have ruled fairly consistently that PAGA claims are not subject to arbitration even if an employee’s individual claims are required to go to arbitration on an individual basis. The United States Supreme Court made a 2022 ruling which seemed to indicate that a properly-worded arbitration agreement could eliminate this plaintiff-side strategy, stating in its Viking River Cruises v. Moriana decision that an employee’s individual PAGA claims could indeed be sent to arbitration along with other employment-based claims, and that once such individual PAGA claims were sent to arbitration the employee would have no standing to pursue representative PAGA claims in court. However, the California Supreme Court determined in Adolph v. Uber Technologies, Inc. that the US Supreme Court’s second point- that an individual employee loses standing to assert representative PAGA claims in court where their individual PAGA claims are subject to valid arbitration provisions- was not binding in California and was not the law of the land for California employers. Rather, the Court ruled that employees do maintain standing to have their representative PAGA claims heard even if their individual claims are sent to arbitration. This puts California employers on precarious footing with respect to arbitration agreements with employees in general, and with respect to legal strategies available to avoid and settle employment claims asserted by their employers. In the cat-and-mouse game being played between employers and employees, the California Supreme Court seems to have closed a door on what was otherwise a promising strategy for employers backed by a US Supreme Court ruling. Please contact NavBat to address issues with employment contracts with employees, and to talk over strategies for avoiding or limiting exposure to representative actions by employees or...
read moreEmployers Have a Duty to Protect Their Employees From Cybertheft
Everything these days is online, it seems. So it is not too surprising that a court recently ruled that an employer has a duty to protect its employees from cybertheft. That is precisely what the U.S. Court of Appeals for the Eleventh Circuit ruled in Ramirez v. The Paradies Shops, LLC. In that case, a Carlos Ramirez, on behalf of himself and a class of similarly-situated current and former employees, sued his former employer (a large company operating hundreds of retail shops in airports, hotels, and other locations), claiming that the employer was negligent in failing to protect employees’ personally identifiable information (“PII”) from a ransomware attack. In particular, the former employee argued that the company did not sufficiently protect the PII from cyber-attack and breached its duty to the employees by maintaining employee PII, including Social Security numbers, on an unencrypted, internet-accessible drive. While the court applied Georgia law, the legal principles applied are similar to other states, including California. The Eleventh Circuit found that the company required its employees to provide PII as a condition of employment and “employers are typically expected to protect their employees from foreseeable dangers related to their employment.” Given the company’s size and sophistication as well as the amount of data at risk (“extensive database of prior employees’ PII”), it was foreseeable that it would be the target of a cyber-attack and that it had a duty to take reasonable steps to protect its employees’ PII. For employers in California (where employment laws are even more stringent), the message is clear: take appropriate measures to protect employees’ PII. The level of protection and the amount of concomitant investment depends on a number of factors including the size of the company and the nature of the operations. Still, being proactive is key. If you are a California employer and have questions, contact the attorneys at Navigato & Battin, LLP for...
read moreSupreme Court Ruling Is All Bite, No Bark for Prospective Infringers
In a highly publicized case, the Supreme Court of the United States ruled in favor of Jack Daniels and against a company that marketed and sold a spoof dog chew toy. The toy was shaped like a Jack Daniels’ whiskey bottle. It used similar coloring and stylized labeling as the Jack Daniels’ bottle. Finally, it contained other similarities to the well-known Jack Daniels’ whiskey bottle, including the following labeling: “Bad Spaniels,” “The Old No. 2,” and “on your Tennessee Carpet.” Anyone who has enjoyed a few Jack and Cokes, knows these are plays on words, mimicking the phrases found on a Jack Daniels’ bottle. Jack Daniels asked the company – VIP Products LLC (“VIP”) – to stop selling the dog toys, claiming that the toys unfairly infringed on their famous trademarked whiskey bottle. VIP refused and filed a preemptive lawsuit attempting to establish that its dog toy did not infringe Jack Daniel’s trademark. The Ninth Circuit Court of Appeal agreed with VIP and ruled in its favor. The Supreme Court of the United States, however, reversed the decision. In reaching this conclusion, the Supreme Court rejected VIP’s argument that the dog toy was protected by the First Amendment because the toy represented an expressive work or parody. Because the dog toy did not qualify for First Amendment protection, the issue of whether the dog toy infringed on Jack Daniel’s trademark must be analyzed under the standard likelihood-of-confusion analysis that applies to typical trademark infringement claims. The Supreme Court’s ruling is welcome news for trademark owners. It will make it easier for brand owners to successfully “sic” or “unleash” their lawyers on infringers. If you need to register, maintain or protect your brand, contact the attorneys at Navigato &...
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