How Tax Reform Could Incentivize the Creation of Pass-Through Entities

San Diego corporate attorneys provide assistance in structuring companies using the appropriate type of business entity to secure protection from liability and to reduce tax burdens by the corporation and by shareholders.

Tax reform proposals put forth by the U.S. House of Representatives and by the U.S. Senate both propose modifications to the corporate tax rate which might necessitate a change to your business structure. Gehres Law Group can provide assistance in understanding the implication of tax reform on the decisions your company must make about whether to operate as a C-corporation, an S-corporation, or another type of business entity. 

How Tax Reform Could Incentivize the Creation of Pass-Through Entities

When a company is organized as a C-corporation, the company pays taxes on profits. Shareholders also pay taxes when profits are distributed, which means some corporate income is double-taxed.  Pass through entities work differently. When a pass through entity like an S-corporation is formed, the S-corp does not pay taxes on income the company earns. Instead, profits and losses “pass through” to owners and shareholders declare profits and losses on personal tax returns.  S-corp income is thus taxed at the tax rate of the shareholder who declares that income on his tax return.

As part of initial tax reform proposals, President Trump indicated he wanted to lower the corporate tax rate applicable to C-corporations. However, the president also wanted pass-through income from S-corps and other pass through entities to be taxed at the lower rate as well.

President Trump indicated he wanted to lower the corporate tax rate to 15%, including for S-corporations. Because many S-corp owners have a significantly higher personal tax rate than 15%, this would amount to a substantial tax cut for any shareholders with a higher tax rate. This proposal from President Trump was viewed as a loose framework for House and Senate republicans to put forth their own tax reform plans, but each plan was expected to include changes to how pass-through income is taxed along, with other modifications to the corporate tax code.

Bloomberg reported, before the tax reform proposals were formally released, that proposals to modify the pass-through rate would create a “pass-through boondoggle,” by changing the current system and introducing added complexity through offering a different lower-tax rate for pass-through owners. A strong incentive would be created for anyone with a tax rate above the new lower rate to form S-corps and earn as much income as possible through these organizations to be taxed at the lower rate. According to Bloomberg, “to keep other people who make lots of money from shifting their income into these vehicles to take advantage of the 25 percent rate, Congress will have to “adopt measures,” whatever those might be.”

The tax reform proposals have been released now, and both do include important changes to how pass-through income is taxed.  According to the Washington Post, the House plan contains a complicated rule permitting 30% of pass through income to be taxed at the 25% rate that the House proposed for the new corporate tax rate. The remaining percentage of the business income would continue to be taxed at ordinary income tax rates by shareholders.  The Senate plan, on the other hand, allows pass through entities to reduce income by 17.4 percent. However, law, engineering, medicine, and financial service companies with higher incomes would not be permitted to take this deduction.

It remains to be seen which plan is adopted or if either initial proposal for changing pass-through income ultimately makes it into law. However, it is clear that with proposed changes to the tax code that could have such a profound impact on how businesses are taxed, many companies will likely benefit from working with our San Diego corporate attorneys.

How San Diego Corporate Attorneys Can Help

San Diego corporate attorneys at Gehres Law Group can provide invaluable assistance with determining how best to structure your business to reduce your tax obligations within the current legal framework. To find out more about how our firm can help you, give us a call today.

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How Does the Business Judgment Rule Protect Corporate Executives?

Corporate attorneys at Gehres Law Group, P.C. provide representation to companies and executives when these parties are at risk of being sued.  Executives have some protection from personal liability for decisions made in the course of doing business, and should consult with an experienced attorney to understand when and how the business judgement rule can provide protection. 

How Does the Business Judgement Rule Protect Corporate Executives?

In California, there are two parts to the business judgement rule. The first part of this rule provides protection for corporate directors so they are not held personally liable for business decisions if they comply with the standards found within the relevant statutes. For nonprofits, the standards are found in California’s Corporation Code section 7231 and for for-profit corporations, the standards are established in California’s Corporations Code section 309.

There is also a common law aspect of California’s business judgement rule which protects against court intervention in management decisions made by directors acting with a good faith belief regarding the best interests of the corporation. Click here for more information on the common law aspect of this rule.

In order for a director to be protected from liability by the statutory protections in the Corporation Code, the requirements that must be fulfilled include:

• The director acted in good faith.
• The director acted in what he or she believes to be the corporation’s best interests and the best interests of the company’s shareholders.
• The director acted with such care that an ordinarily prudent person in the same position would exercise. This can include making reasonable inquiries. Directors are allowed to rely on information, statements and opinions provided by other reliable and competent officers or corporate employees; information from independent accountants or counsel; and board committees that the director has confidence in.  If the director relies upon information from committees, the director must act in good faith and must make reasonable inquiries if necessary.
• The director must not have any knowledge about the information or individuals upon which the director relies that would cause the reliance to be unwarranted. 

Provided that a director has complied with these specific requirements in making decisions, the director cannot be held accountable for the consequences of decisions that he or she made in accordance with these provisions when acting within the scope of his or her official duties.

The second part of the business judgment rule also insulates a board of directors and corporate executives from court interference in business decisions. The common law business judgement rule requires that courts defer to the judgements made by corporate directors as long as there is no conflict of interest, breach of trust, or fraud. Provided the decision by executives or board members was made in good faith, courts will not typically substitute their own judgement for the judgement of those individuals in charge of business operations. 

Getting Help from Corporate Attorneys

Corporate executives who are facing legal action because of their role in decision-making for their organization should consult with the corporate attorneys at Gehres Law Group, P.C. Our experienced legal team provides representation in mediation, informal disputes, arbitration, and court proceedings, and can help business executives take advantage of the protections that the business judgement rule provides to them. Call or contact us online today for your complimentary consultation.

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California Businesses are Banned from Asking Applicants Their Prior Salary

Business lawyers at Gehres Law Group provide assistance to California organizations in complying with labor and employment regulations, including new laws that are passed in California. Keeping abreast of legal changes is important as new regulations are passed frequently that employers are expected to comply with. For example, AB 168 was signed into law by Governor Jerry Brown on October 12, 2017 imposing a ban on California employers inquiring about salary history from job applicants. 

California Employers May No Longer Ask Applicants About Their Salary Histories

California law currently prohibits discrimination in pay on the basis of a worker’s gender. The Fair Pay Act and other equal rights legislation exists in an attempt to close the continuing wage disparity between men and women. However, while the California Fair Pay Act prohibits prior salary from being used to justify a pay differential between a male and female employee doing substantially similar work, the Fair Pay Act does not prohibit an employer from asking about salary history when hiring or promoting workers.

The state legislature has now recognized that inquiries into salary history often perpetuates this wage gap which results in female workers being paid significantly less, on average, than male workers. Numerous locations throughout the United States, including in Oregon, New York, Delaware, Massachusetts, and Puerto Rico, already prohibit employers from making inquiries into salary history. Some California cities, including San Francisco, also have existing rules that prevent employers from asking about wage history.  Now, with the signing of AB 168, a new provision — Section 432.3 — is being added to California’s Labor Code to prevent employers statewide from seeking salary history information.

Employers are not only prohibited from asking applicant’s about their past salary but they are also prohibited from finding out about a candidate’s salary history through an agent. However, there is an exception if salary history is publicly disclosable as a result of the Freedom of Information Act or as a result of the Public Records Act in California.

Employees and candidates are not prohibited by law from voluntarily making the choice to share salary history with a current or potential employer; however, if applicants choose to share this information on their pay, employers may not use the employee’s past salary to justify paying the worker any less than a worker of the opposite gender would be paid for doing the same work. Employers also cannot prompt employees to provide this salary history information and, according to the new law, employers must be willing to provide staff members with information about the company’s pay scale upon request.

Business Lawyers Can Help Companies Comply with Rules and Regulations

The new rule is one of many modifications to California’s labor and employment laws that have occurred in recent years. The trusted and knowledgeable attorneys at Gehres Law Group represent companies who want to ensure they are not inadvertently violating any anti-discrimination rules, wage and hour rules, or other labor laws.  To find out more about how business lawyers at our firm can provide assistance to your company in complying with California’s complex framework of labor laws, give us a call at 858-964-2314 or contact us online today.

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California Law Entitles Shareholders to Annual Reports: What Your Business Needs to Know

Business lawyers at Gehres Law Group, P.C. can provide assistance to business organizations in understanding and complying with their obligations under state law. One such obligation for companies with shareholders is a requirement to produce an annual report. Your organization needs to understand when an annual report must be made and the requirements associated with the report. . 

What Your Business Needs to Know About Annual Reports to Shareholders

According to California Corporations Code section 1501(a), the board of directors of a corporation is required to send an annual report to shareholders no later than 120 days after the fiscal year closes. This requirement is in place except when a corporation has less than 100 shareholders of record and the requirement is expressly waived in the corporate bylaws.

Unless otherwise specified in the articles of incorporation or the corporate bylaws, the report can be sent by electronic transmission. The report must contain a balance sheet at the close of the fiscal year. The report also must contain an income statement for the fiscal year and a statement of annual cash flows for the fiscal year.  The report either must be accompanied by a report created by independent accountants or must contain a certificate from an authorized corporate officer indicating that the financial statements were prepared without an audit from the corporate books and corporate records.

The report must also provide notice of certain specific transactions, such as when advances or indemnification of more than $10,000 was paid during the fiscal year to directors or officers of the corporation.

California courts have broadly interpreted section 1501(a) because an annual shareholder report is vital to investors being able to understand the operations of business entities in which they are invested. As a result, court opinions have held that even former shareholders may be entitled to receive an annual report from the organization under certain circumstances.

If a report is not sent in a timely manner, shareholders can make a request for the report. California Corporation Code section 1601 establishes the rule that there is no requirement for shareholders to specify a separate reasonable purpose for obtaining the reports to which they are entitled under section 1501(a). Instead, they are entitled to such reporting as a matter of law.  California law also imposes a statutory fine if a corporation neglects to send, fails to send, or refuses to send an annual report.

If the corporation produces a false, misleading, or an improperly prepared report, the corporation is in breach of its fiduciary duty and can be held legally liable for losses. Shareholders may pursue a damage claim to recover compensation for losses caused by the corporation’s misconduct in connection with the annual report, including in situations where negligence was the cause of the losses.  See Small v. Fritz Companies, Inc.

Getting Help From Business Lawyers

If your organization requires assistance in understanding your obligations or complying with the laws regarding annual reports to shareholders, give us a call today. If you are a shareholder who has not been furnished with a required annual report, you can also reach out to our legal team for assistance. Just give us a call at 858-964-2314 or contact us online to find out how our business lawyers can help you.

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Key Facts Your Organization Needs to Know About the Revised Uniform Limited Liability Company Act

San Diego business lawyers at Gehres Law Group, P.C. provide advice to companies on rules and regulations governing different types of business entities.  Limited Liability Companies, or LLCs, are a popular option because they can provide protection from liability but be simpler in terms of administrative and corporate documentation and related costs, as well as ongoing operational requirements than S-corporations or C-corporations. However, the rules for LLCs changed in 2014 with the passage of the Revised Uniform Limited Liability Company Act. Both existing LLCs and new organizations must maintain compliance with these new rules and requirements. 

Key Rules from The California Revised Uniform Limited Liability Company Act

The Revised Uniform Limited Liability Company Act (RULLCA) establishes many default rules regarding the management of LLCs as well as the obligations of members of a member-managed LLC. For example:

• All members of a member-managed LLC owe a duty of care, a duty of loyalty, and a duty of good faith and fair dealing, while the manager of a manager-managed LLC owes the same duties. These obligations require managers and members to refrain from intentional misconduct, willful legal violations, or gross negligence, as well as requiring members and managers to deal honestly with each other and avoid the misappropriation of company assets or any conflicts of interest.  However, if an LLC is a manager-managed LLC, the RULLCA makes clear that members of the LLC do not owe any fiduciary duties.
• If an LLC is member-managed, the LLC must indemnify members who have acted in accordance with their obligations and duties. Under a manager-managed LLC, the LLC must also indemnify managers who have complied with their obligations.
• When an LLC is manager-managed, the manager is not permitted to act outside of the ordinary course of business without first obtaining consent from the LLC members.

It is important to note that most of the rules established by the RULLCA simply establish the default rules that will apply if there is no LLC operating agreement that provides for different rules and requirements. This means that members of an LLC are permitted to negotiate an operating agreement and adopt rules that deviate from the defaults established by the Act.  If the rules adopted in the LLC operating agreement differ from the default rules under the RULLCA, the rules in the operating agreement generally take precedence and govern how the LLC operates. This means organizations that want to opt out of the default are permitted to do so.

Getting Help from San Diego Business Lawyers

San Diego business lawyers at Gehres Law Group, P.C. will provide the personalized advice necessary to understand how LLCs work and to determine if a Limited Liability Company is the right type of business entity for your organization. Our legal team can also provide you with assistance creating an operating agreement to establish the rules that best suits your business needs, within the confines of RULLCA and other applicable laws.

To find out more about how our firm can assist with LLCs and other types of business structures, give us a call at 858-964-2314 or contact us online today for your complimentary consultation.

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Can Your Company Create a California Professional Corporation?

San Diego business attorneys at Gehres Law Group provide advice to companies on how best to structure their business entity. This decision should ideally be made with the help of business formation attorneys when operations first begin. However, as companies expand and change, many alter their business structure. Making changes to the type of business entity could also become necessary as a result of regulatory changes, such as tax reform, that makes a particular organizational type more or less attractive. 

There are many different kinds of business entities that could be created. One option for California companies is to operate as a California professional corporation. This option is not available to all businesses, but companies that are eligible to operate as a professional corporation should work with an experienced attorney to understand the option and to determine which business entity makes the most sense.

Can Your Company Operate as a California Professional Corporation?

The California Corporations Code establishes the rules and requirements for when a company may operate as a professional corporation. In particular, the Mascone-Knox Professional Corporation Act details exactly when a company may operate as this type of business entity. The types of entities which may operate as a professional corporation include attorneys (Gehres Law Group is organized as a professional corporation), some medical professionals, CPA’s, psychiatrists, psychologists, and others. These types of organizations may not operate as a limited liability company.

The relevant law stipulates that a professional corporation is organized under the Moscone-Knox Professional Corporation Act and the General Corporate Law. The professional corporation must generally be engaged in the business of rendering professional services in a single profession.

The professional services that are offered through the professional corporation must include services that are lawfully provided to the public only by someone who is licensed, certified, and/or registered.  The licensing, certification, or registration must be documented in the Business and Professions Code, the Osteopathic Act, or the Public Accountancy Act.

Any organization that operates as a professional corporation must do so pursuant to a certificate of registration that has been issued by the appropriate regulatory body with jurisdiction over the profession and with authority over the way in which that the profession is practiced, such as the State Bar of California. A business that chooses to operate as a professional corporation must make certain to designate that it is operating as this specific type of business entity and in compliance with the rules promulgated by the regulatory body governing such profession.

Getting Help from San Diego Business Attorneys

The San Diego business attorneys at Gehres Law Group will provide guidance and advice on whether your organization is eligible to operate as a professional corporation. If you can and should operate as a professional corporation, we can assist you in completing the required process to create your corporation and give your business it’s own identity in the eyes of the law. If a professional corporation is not an option for you, or is not the correct option based on your circumstances, our business formation lawyers can provide assistance in selecting the type of company structure that is right for you.

To find out more about how Gehres Law Group can provide you with assistance in forming the right type of business entity to accomplish your company goals and provide your company with desired protections, give us a call at 858-964-2314 or contact us online today for your complimentary consultation.

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California Extends Family Leave

The San Diego business lawyers at Gehres Law Group, P.C. assist companies and employees in understanding their rights and obligations. Consulting regularly with an attorney is important to monitor changes in the law. One such change occurred recently when California extended family leave to millions of new workers. 

California Extends Family Leave

California has long been among the minority of states that provide broader protection for employees with short-term disabilities and family-care needs than the federal government offers. Now, California has once again expanded the basic protections guaranteed by the federal government so workers in the state have more rights than workers in most other states.

This time, California expanded the rights of workers in connection with family leave. Two decades ago, the Clinton administration passed the Family and Medical Leave Act (FMLA), which provided federal protection to employees who needed to take unpaid family leave. Under the FMLA, workers employed by companies that had 50 or more employees were guaranteed the right to take up to 12 weeks of unpaid leave for certain qualifying family events such as the birth of a child. While employers are not required to offer paid leave (California does provide separate disability benefits paid from a state fund), the FMLA prohibits certain employers from terminating or retaliating against a worker for taking up to 12 weeks of unpaid leave for certain types of personal and family member medical conditions, including the birth of a child. For more information on covered conditions and family members covered by the Act, click here.

When the FMLA was passed, California matched its state laws to the federal regulations. However, no protections in the form of guaranteed unpaid leave were provided to employees who work for small businesses with fewer than 50 employees in the state. As the Sacramento Bee explained, this left millions of California workers without a guaranteed right to take time off if they added a new baby to their family.

This has now changed. Governor Jerry Brown signed Senate Bill 63, which will take effect on January 1, 2018, and which will make 2.8 million small business workers in California eligible for unpaid family leave. These workers, like those previously covered by the FMLA, will be protected from adverse employment actions as a result of taking leave. Eligible workers must work for companies that employee at least 20 people, and they must have at least a year of experience. They also must have worked for at least 1,250 hours with their employer to qualify for leave. The bill not only covers situations when a new baby is born to a family, but also extends to situations when parents have adopted a child or where a foster child is placed with the parent-employee.

California workers also receive broader protection in another important way. In 2004, California had enacted a law allowing parents who take time off to care for children to apply for and receive disability compensation. Since workers of small businesses were previously not protected from losing their jobs if they took time off, many employees who worked for small companies were not able to take the leave and also take advantage of the disability benefits due to a fear they would not have a job to return to. With their jobs now guaranteed, new parents at small companies can take off that 12 weeks to spend with their child, can receive unemployment disability benefits during that time period, and can return to work without fear their position will have been filled.

Getting Help from San Diego Business Lawyers

The San Diego business lawyers at Gehres Law Group, P.C. provide representation to companies who wish to ensure they are in full compliance with all updated laws and policies applicable to their organization. Our legal team can also provide representation to employees who are concerned their rights may have been violated. To learn what our firm can do to help you or your organization, give us a call at 858-964-2314 or contact us online today for a complimentary consultation.

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The Supreme Court is Considering Arbitration Clauses in Workplace Contracts

The business contract lawyers at Gehres Law Group, P.C. provide advice on the drafting, negotiation, and enforcement of contracts. One especially common provision in many different types of business contracts is called an arbitration clause. Arbitration clauses have become more widely used in recent years and have become the subject of a series of contentious court cases. Most recently, a case has arisen in connection with arbitration clauses in employment contracts. As the New York Times explains, this case is now being considered by the United States Supreme Court. 

Can Employers Include Arbitration Clauses in Employment Contracts?

Arbitration clauses require a dispute to be resolved through arbitration rather than litigation. Companies regularly include arbitration clauses in consumer contracts and these clauses frequently prohibit class actions and group arbitration. A ban on collective action creates a de facto bar on the pursuit of many small claims because bringing individual causes is often not worth the time or effort.

The Supreme Court has largely upheld the use of arbitration clauses in consumer contracts, and while the Consumer Financial Protection Bureau issued a rule restricting the use of these contracts in the financial services sector, Congress used the Congressional Review Act to overturn this proposed rule and to once again permit banks, credit card companies, and related businesses to use arbitration clauses that make it more difficult for consumers to pursue claims. Learn more about the Court’s history of enforcing arbitration provisions here.

Now, the Supreme Court is considering a case related to the use of arbitration clauses in employment contracts. This could curtail the rights of workers to take collective action. Employees may wish to take collective actions in cases such as when employees are all adversely impacted by things like wage-and-hour violations or employment discrimination. However, when this collective action is barred, there may be grievances employees have that are difficult to pursue in independent arbitrations.

The Supreme Court will soon be ruling on a series of three consolidated cases. See Epic Systems Corporation v. Lewis, No. 16-285, Ernst & Young v. Morris, No. 16-300 and National Labor Relations Board v. Murphy Oil USA, No. 16-307. The question in these cases centers around whether employment contracts can require workers to waive the right to collective action in arbitration or whether this an impermissible restriction on employee rights.

Attorneys for the federal government actually appeared on both sides of the case, arguing before the Supreme Court. The National Labor Relations Board is, of course, opposed to permitting employers to use arbitration clauses barring employees from bringing collective action in arbitration. During its arguments before the Court, the NLRB’s general counsel argued that while no class action waivers should be permitted in employment contracts, he conceded that the private entities conducting arbitration could require that the cases be pursued independently. However, one of the Court Justices pointed out the weakness of such an argument which could result in an employment agreement which does not waive an employee’s right to pursue a class action suit, but where the employee is nevertheless prevented from pursuing such claims because the applicable arbitration association does not permit class arbitration, essentially make collective action impossible.

It remains to be seen how the Supreme Court will rule on this issue. While some justices suggested workers could potentially band together if they hired the same attorney who then filed individual arbitration cases for each of them, Justice Kagan expressed the belief this may not be good enough to protect worker rights since it takes away or restricts many of the avenues employees have for addressing their grievances.

Getting Help from a Business Contract Lawyer

The decision made by the Supreme Court could affect approximately 25 million employment contracts throughout the country, so both workers and employers should ensure they are aware of such developments with regard to their workforce contracts. The business contract lawyers at Gehres Law Group, P.C. add value to your business by remaining abreast of such developments and helping you understand the applicable rules and regulations when drafting arbitration clauses, as well as other key provisions that should be included in your business contracts. To find out more about how our firm can help you, give us a call at 858-964-2314 or contact us online today for your complimentary consultation.

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State Payroll taxes California Employers Should Know About

Business attorneys at Gehres Law Group, P.C. advise companies on their obligations as employers. California imposes myriad requirements on companies that hire staff members. Among those requirements are rules related to payroll taxes. 

California Payroll Tax Rules for Employers

The Employment Development Department in California provides a comprehensive guide to state payroll tax rules for companies. Some of the key rules that employers should know about include the following:

• Employers with one or more employees must register with the Employment Development Department if they pay any employee more than $100 in a calendar quarter. However, if you pay wages to gardeners, housekeepers or others who work around your home, you are considered a household employer and must register only after paying $750 or more in wages per calendar quarter.
• Employers with 10 or more employees are required to file and submit tax returns, wage reports and payroll tax deposits electronically as of January 1, 2017.

Anyone who is considered an employer in California must comply with payroll tax obligations. There are four payroll tax programs in California which are administered by the Employment Development Department. These payroll taxes include:

• Unemployment tax: Unemployment tax must be paid on the first $7,000 in wages employers pay to each employee during the calendar year. Employers pay this tax on a quarterly basis. Tax rates vary based on factors including whether the employer is a new employer as well as the employer’s experience with the unemployment program. Taxes could vary between 1.5% and 6.2%. This tax funds unemployment payments for workers who are laid off from their jobs.
• Employment training tax: Employment training tax is charged at a rate of .1% of the first $7,000 in wages employers pay to employees during each calendar year. The tax provides funding to train employees in industries necessary to keep California businesses competitive. Employers pay this tax.
• State disability insurance: State disability insurance is funded by a tax on employee wages. Employees pay this tax. Employers must withhold .9% of the first $110,902 in wages that are paid to employees during each calendar year. The taxes fund short-term disability payments and paid leave for eligible workers who take time off to care for a new child or for a sick child, parent, grandparent, sibling, spouse, or other close relative.
• California personal income tax withholding: California personal income taxes are paid by workers on income they earn within the state of California. Employers must withhold an appropriate amount of money from an employee’s entire salary based on the information provided by employees on their W-4 forms.

Employers are responsible for the payment and/or collection of each of these payroll taxes as well as for the timely submission of payroll tax forms and payments of all taxes due.

Getting Help from California Business Attorneys

Gehres Law Group, P.C. provides assistance to employers in understanding payroll tax obligations. Payroll tax obligations are just one of many legal requirements employers must comply with when operating a business within the state of California. Business attorneys at our firm can help you to understand the full range of laws applicable to your organization so contact our legal team for help as soon as possible after beginning operations or when you hire a staff member for the first time.

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Steps to Take Before Forming a Partnership

San Diego business attorneys at Gehres Law Group, P.C. will help you to determine if you should form a partnership and will guide you through the partnership formation process. Give us a call if you are considering organizing your business entity as a partnership. 

Steps to Take Before Forming a Partnership

A partnership is one of several options to structure a business entity. Partnerships are an alternative to Limited Liability Companies (LLCs) and corporations. If you are considering starting a partnership:

• Determine if a partnership is the right business structure. Corporations and LLCs can provide broader protection from liability for all partners. Corporations can also provide more tax flexibility and can make business succession simpler, although paperwork requirements and ongoing expenditures for corporate compliance can be higher.
• Decide between a general partnership and a limited partnership. If you form a general partnership, all partners can be held legally liable for debts of the business and judgments against the business, creating significant risk of personal liability. A limited partnership protects some partners, but there must be at least one general partner with unlimited personal liability, making even limited partnerships more risky than most other entities.
• Ensure you meet the requirements for partnership formation. For example, to form a general partnership in California, you must have two or more people or entities engaged in a for-profit business, according to the California Secretary of State.
• Select a business name: You are permitted to use the partners’ surnames as your business name or you are allowed to create a fictitious business name as long as the name is not too similar to any other existing company that is currently registered with the state of California. If you have made the decision to use a fictitious name, after you have chosen the company’s name you will need to file a fictitious business name statement with the clerk of the county where the business will operate. You do not have to register the name of your partnership if you will be using the surnames of the partners.
• Negotiate, draft and sign a partnership agreement: This is an optional step not required by California law but is an important step so you and your partners can ensure you are on the same page in terms of what each partner will contribute, how profits and losses will be distributed, and how authority is shared among the partners for business operations. This step is too often overlooked, leading to costly disputes and even lawsuits.
• Complete the required forms. If you wish to form a limited partnership, you must submit a Certificate of Limited Partnership (Form LP-1) with the Office of the California Secretary of State. If you wish to register your general partnership with the state, you must submit a Statement of Partnership Authority to the Secretary of State. Registering a general partnership with the state is optional.
• Obtain an employer identification number: Your partnership will need an EIN if you intend to hire any staff members.

Getting Help from San Diego Business Attorneys

Gehres Law Group, P.C. can guide you through all of the steps to form a business partnership. We can also advise you on other types of business entities you wish to create. Give us a call at 858-964-2314 or contact us online today to find out more. We offer a complimentary consultation to new clients.

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What is the Process to Copyright Creative Works?

A copyright attorney at Gehres Law Group, P.C. can help you through the process of registering your creative works so you get legal protections. Contact our legal team to determine if you can copyright a work and to get help with the registration process. 

The Process of Registering a Creative Work

The Copyright Basics Guide prepared by the United States Copyright Office explains the laws in the United States protecting creative works.

According to the Copyright Office, registration has not been required since March 1, 1989, as a copyright exists automatically when an original work of authorship is created in an eligible medium. However, registration of copyrighted work is required to enforce copyright protections. In other words, if you want to be able to sue to stop someone from improperly using your copyrighted material, you must have registered that material. Learn more about the benefits of registering your copyrights here.

To register your creative work, you’ll need to take these key steps:

• Ensure the work can be copyrighted: You can copy musical works and lyrics; literary works; dramatic works including soundtracks and musical scores; choreographic work; pantomimes; pictorial and graphic arts; sculptural works; motion pictures; audiovisual works; sound recordings including music, spoken word and other recorded sounds; and architectural work. You cannot copyright widely-used symbols or designs; variations of letters or typographic ornamentation; ideas or procedures; or lists of contents or ingredients.
• Determine if you have the rights to copyright the work: You can copyright creative works that you produce. You can also copyright works made for hire, which include works created by your employees as part of their customary duties.
• Submit an online application to register your work with Copyright.gov or mail in your registration application. If you are going to electronically register your work, there is a registration portal where you can go through the registration process. You will need to select the type of work you want to copyright and go through the specific application necessary for that type of work product. If you are registering electronically, are the sole author of the work, and are registering one work, you can submit a streamlined single application; however using this application when you are not eligible could cost you additional fees and could result in registration delays. You will also need to make a payment to the Copyright Office and will need to either ship a copy of your work to the office or will need to upload a digital copy of your work depending upon what you are copyrighting.

Once you have registered your copyright, you have legal protections. If someone attempts to use your copyrighted material without your authorization, you can pursue litigation to stop the misuse of the copyrighted material and, in some cases, to obtain damages for loss.

Getting Help from A Copyright Attorney

Gehres Law Group, P.C. can provide assistance with determining if your creative work is eligible to be copyrighted or if you should use an alternate approach, such as filing a patent or trademarking your work product. Our legal team will also guide you through the formal process of applying to register your copyright, which can be a difficult process that begins with choosing the correct application. Just give us a call at 858-964-2314 or contact us online to find out how we can help; we offer free consultations for new clients. Learn more about our copyright flat fee packages here.

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What Does Fair Use Mean?

A San Diego copyright attorney at Gehres Law Group, P.C. can advise you on your rights as a copyright holder. We can also advise you on limitations of copyright protections, including fair use. If you have been accused of copyright violations, our legal team will also defend you if you fall within a fair use exception. 

What is Fair Use?

Copyrights protect creative works, such as books and artwork. When a creator copyrights material, the creator or those he assigns has exclusive rights to publish, perform, print, or record the creative material. This could include songs, plays, books, photographs, or any other type of original creative work.

While copyright protections are important to keep intellectual property secure, it is also necessary to ensure that constitutionally protected rights of free expression are not stifled by copyrights. The Fair Use doctrine attempts to balance the interests of copyright holders against those who wish to criticize the work or who otherwise wish to comment or build on previously copyrighted material.

Under the fair use doctrine, it is generally permitted to use certain copyrighted works without license from the copyright owner for specific purposes. For example, copyrighted works can be used without license to criticize those works, to create parodies, to make relevant news reports, and for permissible teaching, research and scholarship.

The fair use doctrine does not excuse all unlicensed use of copyrighted materials. For example, while there are fair use exceptions that allow copyrighted works to be used for teaching and scholarship, it likely would not be fair use for a teacher to make 20 photocopies of a full copyrighted textbook and hand the copyrighted pages out to students so they don’t have to purchase the book.

There are four key factors that are outlined in Section 107 of the Copyright Act which are used to determine if the use of copyrighted material falls within fair use exceptions. The factors that determine if the use of the material is permissible or a violation of intellectual property laws include:

• The purpose and character of the use: This factor relates to how the copyrighted material is used and what it is used for. Courts tend to provide more leeway when the use of the copyrighted material is of a non-commercial nature, rather than a commercial nature. Courts also consider whether the work was transformed, which would mean that the user of the copyrighted material added something new or changed the character of the work. The more transformative the work is, and the less likely it is that the new work will serve as a substitute for the original use of the work, the more likely it is the court will find fair use.
• The nature of the copyrighted work: The court considers the degree to which the copyrighted work is considered creative expression. This means, for example, that the court is less likely to find that the use of a novel or song is fair use compared with a technical or news article.
• The amount of the copyrighted work used in relation to the portion of the whole: Copyrights will look at how long the copyrighted material is and how much of it was used. For example, while it might be permissible fair use to include 10 lines of a 100 page book in a blog post reviewing the book, it might be less permissible to include all 10 lines of a 10 line poem. The court may also find copyright laws were violated even if only a small section of the work is used if the court finds that the section which was used is considered to be the heart of the work.
• The effect of the use on the market for the original: Courts will consider whether, and to what extent, people might be discouraged from purchasing the original copyrighted work as a result of the unlicensed work. If the unlicensed work harms the market for the original, it is less likely to be considered fair use.

Getting Help from A San Diego Copyright Attorney

Gehres Law Group, P.C. represents copyright holders, those who have used copyrighted works without a license, as well as those who wish to claim their actions were justified under fair use. Give us a call at 858-964-2314 or contact us online today to find out more about how one of our San Diego copyright attorneys can assist you when legal issues arise involving copyrighted works. We offer a complimentary consultation for new clients.

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Steps to Incorporating in California

San Diego corporate lawyers assist your company in incorporating new business entities. Incorporation carries many benefits, including protection from personal liability and tax flexibility. To reap the rewards of being incorporated, the proper process must be followed in accordance with California law. What many business owners fail to realize is if they do not meet all of the legal requirements of proper formation and maintenance of their business entity, they lose most, if not all, of the benefits of incorporating. Gehres Law Group, P.C. is here to help. 

Steps to Incorporating in California

To form a corporation in California:

• Determine if your desired company name is available. As the California Secretary of State explains, you may not use a name for your corporation that is too similar to the name of an existing company or that is misleading to the public.
• Determine whether to form a C-corporation or S-corporation for tax purposes. Both provide liability protection, but there are more restrictions on who can own S-corporations. Click here for more information on these ownership restrictions. Corporations are taxed differently depending upon whether they are treated as a C-corporation or S-corporation. S-corporations do not pay corporate tax, but must file an information return annually. Profits and losses are passed through to owners of an S-corporation. C-corporations create risks of double taxation since the company is taxed on profits and shareholders are taxed on profit distributions.
• Complete and file Articles of Incorporation. Articles of Incorporation are available from the website of the California Secretary of State . There are different forms for general stock corporations; closely held corporations; nonprofits and other specific types of corporations.
• Pay a filing fee: A $100 filing fee is required for most companies that wish to operate as a corporation in California.
• Comply with tax obligations: Corporations should obtain a federal employer identification number to properly comply with IRS rules and to be able to open bank accounts in the company’s name. California corporations are also mandated to pay $800 or more in taxes to the California Franchise Tax Board annually.
• Election of S-corporation Status: If you have chosen to form an S-corporation, your first step is form a C-Corporation and then elect S-corporation status with the Internal Revenue Service using Form 2553.
• Complete a Statement of Information. A statement of information is due 90 days from the date a corporation was registered. A statement of information is also due each year thereafter once a corporation has been created.
• Hold shareholder and director meetings: Among other things, shareholders must elect a board of directors and the directors must pass resolutions for the new company, including approval of Bylaws, which dictate how your company will operate. Bylaws should be created even if you are the only owner and only employee of the company. All corporations must maintain corporate formalities – which means taking steps to operate as a legitimate corporation – to benefit from tax flexibility, protection against personal liability for company obligations, and other advantages of incorporation.
• Obtain required business licenses. Depending upon the nature of the business that will be operated and where it is physically located, a newly formed business may be required to obtain a business license from the county as well as from the city where business will be conducted.
• Register with the California Employment Development Department (“EDD“): This step is necessary only if the corporation will have at least one employee.
• Obtain a Seller’s Permit to remit sales tax: The California State Board of Equalization regulates sales tax collection and remittance. If your corporation will be offering services and not products, it is generally not required to obtain a Seller’s Permit.

Getting Help from San Diego Corporate Lawyers

The knowledgeable and trusted San Diego corporate lawyers at Gehres Law Group, P.C. provide representation and assistance with the incorporation process for individuals and entities in a wide variety of industries. Give us a call at 858-964-2314 or contact us online to find out more about how our legal team can work with you to select and form the business entity most advantageous to you.

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How the Battle-of-the-Forms Impacts Your Contract

New Business Laws in California in 2017

The business litigation lawyers at Gehres Law Group, P.C. provide effective assistance in responding to allegations in civil court, as well as initiating lawsuits and other claims to proactively protect the rights of clients. Litigation can arise between a company and suppliers, employees, customers, or anyone else with whom a company has a relationship. 

California’s business and employment-related laws often determine the outcome of litigation involving of all sizes. The law is constantly evolving and changing, so it is critical to retain business attorneys who stay abreast of the laws in order to understand your rights and obligations under state and federal law, and plan strategies accordingly.

As Mercury News explains, many new business and labor laws were passed in California in 2017. Employers are expected to know these laws to avoid regulatory action, to avoid litigation that could arise due to a violation, and to implement new requirements and otherwise remain compliant with our evolving regulatory environment. Some examples of new laws in California affecting businesses in 2017 include the following.

Forum Selection Laws in Employment Contracts

SB1241 is a law stipulating that an employee who lives and works in California cannot be made to sign an employment contract that specifies another forum to resolve complaints or that forces a dispute to be decided under the laws of a different jurisdiction.

The purpose of this law is to prevent employers from requiring employees to arbitrate or litigate disputes in a jurisdiction outside of the state of California. Employers could otherwise mandate employees pursue their grievances in different state courts, or could mandate an employee’s claim be decided under the laws of a different state, effectively preventing employees from receiving the benefit of their home state’s laws.

Because California laws generally are very protective of workers (while the laws of other jurisdictions may be skewed to protect big business), ensuring California claims are resolved under in-state laws and by in-state courts is a significant benefit to workers, but can also cause big headaches for California employers who do not remain current on applicable laws.

Amendments to the State’s Fair Pay Act

AB1676 and SB1063 both amend the Fair Pay Act in California. SB1063 extends the Fair Pay Act to also cover ethnicity and race, while AB1676 prohibits prior salary from being used as an excuse for an opposite-sex employee being given lower pay.

Under previous laws, employers could potentially argue they paid a woman less than a man, despite the woman doing a comparable job, because the woman’s salary in previous positions was less than the man’s salary in prior positions. This is no longer permitted as an meritorious argument in defense of pay disparity. However, other bona fide job-related reasons which may justify a company paying less compensation to a worker of the opposite gender do remain, such as differing levels of experience.

New Protections for Sexual Assault, Stalking and Domestic Violence Victims

AB2337 requires employers to provide notice to workers who are victimized by stalking, sexual assault or harassment that those employees have a legal right to take time off from work. Any business with 25 employees or more is required to provide such employees with notice of their right to time off.

Employees may take this time to obtain medical treatment, make a safety plan, undergo counseling or take advantage of other services. In addition, employers may not retaliate against or otherwise penalize employees for taking unscheduled absences due to domestic violence, sexual assault or stalking as long as certification is provided to the employer indicating the time was missed for a covered reason.

New Protection for Immigrants

SB1001 prohibits employers from making requests for immigration documents that are more invasive than those required by law. More specifically, an employer is not permitted to ask for any documentation related to immigration status besides the minimum mandated by state and federal laws.

Employers are also not allowed under SB1001 to refuse any documents that reasonably appear, on their face, to be genuine.

Getting Help from Business Litigation Lawyers

These are just some of the many new laws passed in California affecting the rights of employers and employees. To ensure you understand and are in full compliance with applicable laws and regulations, contact the knowledgeable and trusted attorneys at Gehres Law Group, P.C. Whether you wish to pursue a claim or need a solid defense of claims, our business litigation lawyers provide each client with effective representation at every turn and ensure our client’s interests always come first.

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Do You Need a San Diego Business Lawyer if You’re Forming a Partnership?

A San Diego business lawyer can provide assistance if you are forming a partnership to conduct business. There are significant advantages to operating a business with a partner, including combining talents and sharing risk. However, depending upon the type of partnership, there are also risks – including the possibility of becoming legally responsible for actions taken by any or all of your business partners. 

Making the right choices during partnership formation is vital to protecting your personal wealth and your business interests. Gehres Law Group can help you with all aspects of partnership formation, whether you are starting a business or expanding an existing company and considering transitioning to a partnership. There are a few key reasons why it is important for you to get the proper legal help with partnership formation as your company gets off the ground.

An Attorney Can Assist you in Determining If a Partnership is Right for You

If you wish to do business with others, a partnership is only one of your options for shared ownership. You should also consider incorporation as well. Gehres Law Group can explain the different types of business entities that allow you to do business with other people so you can determine which type of business structure is best for you.

An experienced San Diego business lawyer at our firm can also assist you in choosing between a general and a limited partnership. A limited partnership can offer more protection for the personal assets of limited partners, as their potential loss will be restricted to their investment provided they actually act as limited partners. In a general partnership, a company bankruptcy could result in personal bankruptcy and judgments or claims against the company could put personal wealth at risk.

A San Diego Business Lawyer Can Help Comply with Legal Obligations for Partnership Creation

If you determine that forming a limited or general partnership is the best approach for structuring your business, Gehres Law Group will assist you in complying with all legal requirements within the state of California. For example, as the California Franchise Tax Board explains, every partnership which earns income or does business in California is required to file a Form 565, Partnership Rules of Income. Limited partnerships also must pay an annual tax to the state of California.

When a limited partnership is formed, a certificate of limited partnership must also be filed with the Secretary of State. And, any business that formed a limited partnership in a different state which decides it wishes to do business in California must first register with the Secretary of State before actually doing any local business.

San Diego business lawyers will advise you on the types of paperwork that must be filed before you begin operations, and can help you to understand the legal implications of partnership formation. Gehres Law Group will also explain how your partnership formation will affect your tax obligations so you can ensure you comply with state tax rules and IRS mandates.

A San Diego Business Lawyer Can Assist With Creating Partnership Agreements

If you form a partnership, it is advisable to create a partnership agreement. This agreement will spell out the terms of your relationship so you can reduce the chances of conflict once business operations begin. It is up to you and your partners to establish how the business partnership will be structured, how responsibilities will be shared, and how profits and losses will be shared. Gehres Law Group can assist in negotiating on these issues and creating a legally enforceable document so your rights are protected.

We can also help with other important contracts and paperwork that you may wish to put into place to protect your interest in the business and to reduce the chances that a conflict could adversely impact operations. Other documents that you may wish to produce could include, for example, a buy/sell agreement and employment agreements so it is clear what each partner’s specific job responsibilities will be within the organization.

Getting Help from San Diego Business Lawyers

Gehres Law Group has provided assistance to many clients in forming business partnerships and in forming other types of business entities including S-corporations and C-corporations. A San Diego business lawyer at our firm can provide you with the information you need to determine if forming a partnership is right for you and can guide you through the process of forming a partnership so you can maximize the chances your business relationship will be a successful one. To find out more about how our firm can help you, give us a call at 858-964-2314 or contact us online today.

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What is Required to Register a Trademark?

A trademark lawyer at Gehres Law Group, P.C. can help you to determine if you can register a brand name, symbol, words, or phrase under U.S. trademark laws. If so, we will provide unmatched representation through the process of registering your trademark. There are certain legal requirements and limitations on what can be trademarked, so it is important to work within the rules to protect your company’s valuable intellectual property. 

What is Required to Register a Trademark?

Trademarks must be registered with the United States Patent and Trademark Office. To register your trademark, you must comply with the following requirements:

• The actual owner of the trademark must apply for registration. The owner could be an individual, a corporation, a partnership or another legal entity that is recognized under the law. The trademark’s owner is defined as the person who controls the services or the goods that are sold under the trademark.
• The application must contain information about the actual owner of the trademark. Information that must be submitted should include the type of entity as well as the entity’s citizenship status. Non-citizens are permitted to register trademarks.
• The owner must intend to use the trademark in commerce or must be utilizing the trademark in commerce. If the owner is already using the trademark and has placed it on commercial products or in ads for services, the owner should explain this use in his or her trademark application. If the owner is not yet using the trademark in commerce, the owner may file an intent to use application and must make a good faith statement of an intent to use the trademark in a commercial context. Once the trademark is in use, the owner will need to file a Statement of Use/ Amendment to Allege Use form in order to officially register the trademark with the U.S. Patent and Trade Office.
• The owner must submit a drawing of the trademark and, if the application for the trademark is based on actual use, should also submit a real-world example of how the trademark is being used in connection with goods or in connection with the provision of services. Submitting a mailed ad or a brochure using the trademark is considered an acceptable real-world example, or a valid “specimen,” of the trademark, but ornamental use of the trademark, such as its image on a tote bag or on a pen, is not typically considered to be an acceptable specimen unless documentation was included to show how the bag or pen were used in actual commerce. Submitting the specimen showing the trademark in use does not satisfy the requirement to submit a drawing of the trademark; a separate independent drawing must also be submitted along with the remainder of the trademark application.

The applicant must comply with strict rules regarding the timeline for filing forms and documentation with the U.S. Patent and Trademark Office. Because of the strict deadlines, the Patent and Trademark Office recommends hiring an attorney before beginning the process of applying for a trademark.

Getting Help from A Trademark Lawyer

If you wish to protect your brand name or to protect any identifying symbol, service mark, words or phrases, you should reach out to a trademark lawyer as soon as possible. Gehres Law Group, P.C. will offer advice on whether your intellectual property can be trademarked and will assist you with the trademarking process so you can maximize your chances of the process going smoothly. To find out more about how our legal team can help you to secure trademark protection, give us a call at 858-964-2314 or contact us online today.

For additional information concerning benefits of obtaining trademark protection and considerations in choosing trademarks, click here and here.

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What is Considered a Material Breach of Contract?

Our skilled San Diego business litigation lawyers at Gehres Law Group, P.C. can provide representation in breach of contract claims. Contracts are agreements created between private parties, such as between individuals and businesses or between two business entities. A valid contract creates rights and obligations between the parties to the contract, and provides various remedies when contractual obligations are breached, either expressly or by default based on applicable laws. All parties to a contract must comply with the written terms of the agreement and can face civil action if they fail to perform, unless they have a legally valid defense. 

There are a number of remedies available to a party to a contract in the event of a breach. The remedies that may be successfully pursued by a plaintiff in a breach of contract case will vary depending upon whether the breach is a material one or not, so those involved in contract proceedings should consult with the civil litigation lawyers at Gehres Law Group, P.C. as soon as possible to find out what type of breach likely occurred and what kinds of legal action they can pursue.

What is Considered a Material Breach of Contract

California law sets forth the essential factual elements of a breach of contract claim in California Civil Jury Instructions (CACI) section 303. According to the relevant jury instruction, a plaintiff can prevail in a breach of contract claim by proving:

• The plaintiff and defendant entered into a legally valid contract.
• The plaintiff fulfilled all contractual obligations or was excused from fulfilling said obligations.
• The specific conditions in the contract, if any, required for the defendant to perform his part of the contract were either excused or had occurred.
• The defendant failed to fulfill some obligation that the contract required or the defendant did something that was prohibited in the contract.
• The plaintiff suffered harm as a result of the failure.

When the plaintiff proves these elements of a breach of contract claim, the plaintiff could obtain monetary damages for failure to perform if the plaintiff can prove actual financial loss. The plaintiff could also demand other remedies, such as specific performance, which would involve the court ordering the defendant to fulfill his obligations under the contract.

While a breach of contract claim can arise from both a material and a non-material breach, the parties to a contract also have additional remedies available in the event of a material breach. For example, if there is a material breach of contract by one party, the other party can be discharged from his or her duty to perform. This makes it important to understand whether a breach was a material one or not.

The question of whether a breach is material or not is a question that must be considered in each case, given the unique facts and circumstances of that particular claim. The general rule is that an assessment of whether a breach is a material breach or not is made on the basis of how important and serious the breach was and is made on the basis of whether it is likely that the party injured by the breach has a low or high probability of the breaching party substantially performing the contract. If the breach goes to the heart of the contract and affects the very thing for which the parties created and entered into the contract, then the breach will typically be considered a material breach.

In Brown v Grimes, the California court made clear that a material breach of any part of a contract could constitute a material breach of the contract in full.

Getting Help from San Diego Business Lawyers

San Diego business lawyers at Gehres Law Group, P.C. can offer comprehensive, personalized advice on breach of contract claims and on all legal issues arising under contract law. Whether you require assistance in understanding your rights and obligations in a contract, or are suing or being sued for a failure to perform, our business lawyers can provide the advice and advocacy you need to protect your interests. To find out more about the ways in which our legal team can help you, give us a call at 858-964-2314 or contact us online to today.

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What is Required for a Contract to be Valid?

San Diego business attorneys at Gehres Law Group, P.C. can provide help in negotiating and drafting a contract that is legally valid. When you enter into a contract, one of your principal goals is to protect your legal interests. Contracts can facilitate many objectives, from guaranteeing on-time delivery of goods based on a promise from a supplier, to guaranteeing payment for services rendered. Because contracts are so important to protect your interests, it is vital that all contracts be clear and concise, and the terms enforceable under applicable law. 

There are specific requirements under the laws in the state of California which must be met for a contract to be legally valid. You should talk with an attorney to understand what is required for your contract to be enforceable so you can ensure that the contract you create is a valid one that provides the protections you expect.

Requirements for the Creation of an Enforceable Contract

California Civil Jury Instructions section 302 explain what parties must prove in order to demonstrate that a valid contract was created. According to these jury instructions, to prove the existence of a contract, it is necessary to show:

• That the terms of the contract were sufficiently clear so that each party could understand the requirements imposed by the contract. This does not mean that formal legal language cannot be used, and it does not absolve the parties to the contract of their obligation to read the contract and to perform their due diligence before signing it. This requirement, instead, simply makes it apparent that a contract will be unenforceable, or sections of it may be unenforceable, if it is so vague that the parties to the contract – or a judge or jury in a breach of contract dispute – cannot understand what the contract actually requires.
• That the parties exchanged consideration. This means that each party must have given something of value. Mutual promises (a promise to paint a house in exchange for a promise of payment) can be considered valid consideration. However, it is not valid consideration if one or both parties to the contract promise to do something they are otherwise obligated to do. For example, if Tim promises to give his nephew Pete $100 if Pete does not drink alcoholic beverages until Pete turns 21, this is not a legally valid and enforceable contractual agreement because Pete is legally required to abstain from drinking alcoholic beverages under California law, so he has given nothing of value in exchange for Tim’s promise of $100.
• That the parties agreed to the terms of the contract. The parties must have acquiesced to be bound by contract terms without any fraud or coercion. If one party intentionally misled the other in order to convince the other party to sign the contract, then the contract may be invalided, in whole or in part.

In addition to these general requirements, the parties to a contract must have the capacity to enter into a legally binding contract, which means neither party can be a minor and both parties must be of sound mind. The contract also cannot be void as against public policy or otherwise unlawful or it will not be enforced. For example, if Molly and Bailey enter into a contract in which Molly promises to pay Bailey $1,000 if Bailey kills Molly’s cousin, the contract is obviously not going to be a valid one. Similarly, if one of the parties has been diagnosed with dementia, their contract may not be enforced.

Getting Help from San Diego Business Attorneys

The experienced and trusted San Diego business attorneys at Gehres Law Group, P.C. can provide help with reviewing a contract you are considering signing or can assist with negotiating and drafting a contract. We can also provide representation if a dispute over the validity of a contract arises, if you have been damaged by non-performance of a contract, or if you are being accused of breaching a contract.

Whatever legal issues arise in connection with contract law matters in California, we can help you to resolve them. Give us a call at 858-964-2314 or contact us online today to schedule a time to speak with one of our business lawyers at Gehres Law Group, P.C. about the help we can provide with contract law matters in or out of the court room.

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5 Wage and Hour Rules Your Company Should Know

Business and employment lawyers in California can help ensure your company complies with state and federal rules and regulations so you can avoid fines, penalties, and civil lawsuits. If your company has employees, California’s complex wage and hour rules are among the most vital set of laws and regulations that your organization must adhere to. Whether you decide to study these laws or retain a knowledgeable attorney to advise you, it is critical that employers understand the state specific guidelines that govern how employees must be paid, what benefits and break times they are entitled to, and the types of conduct employers are not permitted to engage in with regard to their employees. Five of the key rules that your company should know include the following. 

Overtime Rules

The California Department of Industrial Relations indicates that overtime rules apply to all non-exempt employees aged 18 or older, as well as employees aged 16 or 17 who aren’t required by law to attend school. Click here for common exemptions to California’s overtime rules.

Unlike some jurisdictions, including federal over time law, California lawmakers have enacted both a daily and a weekly overtime rule. In California, all non-exempt employees are entitled to overtime if they work more than 40 hours per week or more than eight hours per day. Overtime hours are payable at a rate of 1 ½ times an employee’s regular rate of pay.

Minimum Wage Rules

California requires that all employees be paid at least minimum wage, with few limited exceptions. For employers with 26 or more workers, minimum wage began increasing annually in California as of January 1, 2017. For employees with 25 or fewer workers, minimum wage will begin annual increases starting January 1, 2018.

The state minimum wage beginning January 1, 2017 for larger employers was $10.50 per hour, while minimum wage for smaller employers continued to be $10.00 hourly. Minimum wage will increase in $0.50 increments annually through January 2022 for larger employers and through January 2023 for smaller employers, until minimum wage reaches $15 hourly. Employers should also be aware that some cities in California, such has San Diego, Los Angeles, and San Francisco have adopted ordinances establishing a minimum wage higher than the state minimum.

Workers Doing the Same Job Must be Paid the Same Wages

California’s Equal Pay Act prohibits employers from paying one worker less than another on the basis of gender, if the employees are doing equal work. The California Fair Pay Act, signed into law in October of 2015, strengthened the Equal Pay Act by requiring that employers now pay the same wages for substantially similar work, rather than just for equal work. The California Fair Pay Act also made it more difficult for employers to claim a bona fide factor other than sex to explain pay discrepancies and otherwise provided stronger protection for workers, making employers more vulnerable to lawsuits, including class action lawsuits, for equal pay violations.

Bi-Monthly Payments are Generally Required

Although there are some exceptions, the Department of Industrial Relations indicates that workers in California typically must receive pay at least twice per calendar month and workers must be paid on designated paydays, which occur on a regular schedule. Employers are also required by California law to post a notice in the workplace of when and where paychecks will be handed out. Overtime wages, like all wages, must be paid within the payday for the next regular payroll after the payroll period in which the overtime wages were earned.

Final Wages Must be Paid Immediately

Click here for further information on wage statement requirements.
If a worker is terminated, California law requires that the worker who was involuntarily discharged be paid all outstanding wages upon termination. Not only does a worker have to be paid all of his or her wages at the time of termination, but the employee must also be paid for any and all accrued vacation at the same time. If a group of employees are all laid off at the same time because seasonal employment related to fish, fruit or vegetables comes to an end, then those season employees have to be paid within 72 hours after being laid off.

Getting Help from Business Lawyers in California

The business and employment lawyers at Gehres Law Group, P.C. provide invaluable help to companies who want to comply with these and other wage and hour laws and to companies against which a wage and hour claim or lawsuit has been filed. California is a very worker-friendly state and it is the responsibility of your company to know what the rules are and to follow them to avoid being sued or to avoid other consequences, including action by state worker protection agencies.

Our experienced and award-winning employment law attorneys provide the assistance you need to protect your company when you hire staff members. To find out how our legal team can help you with wage and hour rules and other employment law issues, give us a call at 858-964-2314 or contact us online to today.

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Are Non-Compete Agreements Permitted in California?

A business lawyer at Gehres Law Group, P.C. can help employees to understand their rights if asked to sign a non-compete agreement and can provide assistance to employers in taking appropriate legal steps to protect their intellectual property and proprietary information. 

Traditionally, employers used non-competition agreements to protect their business interests when they hired employees who had access to sensitive information. To ensure that employees did not take trade secrets to competitors or did not use client lists to start their own competing organization, employers required non-competes to be signed as a condition of employment. These non-competition agreements would prevent employers from engaging in certain behaviors, such as working for a direct competitor within the same geographic area for a certain time period after leaving a position.

In California, non-competes, however, have increasingly been viewed as unlawful restraints on trade and as contracts that are void and against public policy because they restrict the ability of an employer to make a living. While non-competes will still be enforced in certain states throughout the United States, as long as the contracts are limited in time and scope, they are typically wholly unenforceable against employees and independent contractors within the state of California.

California Laws on Non-Compete Agreements

The state of California essentially declared non-competition agreements unenforceable in California Business and Professions Code section 16600. This section of the Business and Professions Code states: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

California courts have aggressively enforced the ban on non-competition agreements, prohibiting employers from enforcing non-competition agreements even in circumstances where disclosure of confidential information is an inevitability for an employee to perform a new job that he has obtained.

The courts in California have also rejected agreements in which California companies attempted to use choice of law provisions in contracts which specify that a different state’s laws would be used to interpret the employment contract, and have refused to enforce agreements in which employers required extended notice for higher level employees under certain circumstances (such as agreements in which an employee would be required to give 90-days notice before resigning). Click here and here for previous discussions on these and related issues.

The strict restrictions in any contract that restrains an employee from performing work after leaving an employer have left companies with few options to take action before an employee goes to work for a competitor after departing employment.

How Can Employers Protect Themselves?

Because employers cannot use non-compete agreements effectively in California to protect their legal interests, employers will need to explore other alternatives. Securing intellectual property protections such as patents, trademarks, and copyrights, can help to protect some types of information, such as by preventing a competitor from using a proprietary (and patented) production process or recipe which is provided to the competitor by an ex-employee.

Non-disclosure agreements which restrict employees from disclosing certain confidential information can also protect an employer from having private information shared with competitors or otherwise misused. And aggressively enforcing trade secrets laws and following the proper process for keeping proprietary information confidential, such as keeping secrets confidential and taking legal action when an employee threatens a breach, can also help to ensure that a company’s information does not fall into the wrong hands. Click here and here for previous discussions on these issues.

Getting Help from A Business Lawyer

Gehres Law Group, P.C. will provide personalized assistance to employees who are asked to sign non-compete agreements, non-disclosure agreements or other contractual agreements related to their employment. We can advise employees on whether a contract they are being asked to sign is legally valid and can provide advice on what types of restrictions the contract will impose upon the employee in the future.

The trusted business lawyer at our firm can also provide assistance to employers who are concerned about how they can protect their confidential information and business interests in light of California’s refusal to enforce non-competition agreements against employees and independent contractors alike. To find out more about how we can help you, give us a call at 858-964-2314 or contact us online today.

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