California Companies Brace for Change in 2018

The San Diego business litigation lawyers at Gehres Law Group, P.C. provide trusted and knowledgeable assistance in understanding your company’s obligations involving both state and federal regulations. The laws in California regularly evolve and businesses can face consequences, including civil liability, if they fail to follow the most current requirements. There are, for example, numerous new regulations going into effect in 2018 and the Pasadena Star-News indicates companies are bracing for big changes.

New Laws Affecting California Companies in 2018

New laws going into effect in 2018 will profoundly impact the rights and obligations of employers and employees. Some of the new rules that will begin being enforced in 2018 or in subsequent years include the following:

• The New Parent Leave Act: Under this newly passed legislation, small companies that have at least 20 employees will now be required to provide unpaid leave for parents to bond with a new child. The leave must be taken within a year of a child being born or adopted or within a year of a foster care child being placed. Employers are required only to provide the leave for the birth or placement of a child, not for any other medical needs of family members.
• Assembly Bill 1008: This new regulation prohibits an employer with at least five employees from making inquiries into an applicant’s criminal history on a job application. Employers are also barred from from considering an applicant’s criminal history at any time until the employer has made a conditional offer of employment, except in limited circumstances such as when a background check for the profession is mandated under local, state, or federal laws.
• Assembly Bill 168: Employers are not permitted by law to ask about a job applicant’s prior salary or job benefits, and employers are not allowed to use salary history as a factor in setting an applicant’s current pay. If a job applicant discloses salary information voluntarily, however, the employer is permitted to use that information. This law is aimed at combatting alleged wage discrimination whereby women are paid less than men for similar work.
• The Immigrant Worker Protection Act: This law protects undocumented workers from immigration enforcement while they are working. Under the law, employers aren’t permitted to reverify whether current employees remain eligible to work.
• SB 396: This law requires that any employer who provides a mandatory training course must include in the course a discussion of harassment or discrimination based on sexual orientation, gender expression or gender identity.
• SB 295: This law establishes new requirements for sexual harassment prevention training and requires the training be conducted in a language spoken by the workers who are receiving the training.

This is just a small sample of the laws expected to go into effect in 2018. It is critical to speak with your San Diego business litigation lawyer for assistance complying with these changes in rules and regulations that could affect your rights or obligation as a business owner.

Contact a San Diego Business Litigation Lawyer

Gehres Law Group, P.C. represents small to medium-sized companies in California who need assistance ensuring labor laws are followed and who need assistance responding to violation claims. To find out more about how a San Diego business litigation lawyer at 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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Restrictions on Employers Limiting PAGA Claims With Arbitration Agreements

The employment litigation attorneys at Gehres Law Group, P.C. represent California owners and their businesses in defending their rights in court, through mediation or arbitration. Under certain circumstances, the Labor Code Private Attorneys General Act (PAGA) provides employees with another tool to assert claims against California employers, making it imperative that these businesses understand how PAGA works, and how they can thwart such claims. 

Julian v. Glenair Addresses Arbitration Clauses and PAGA Cases

The Labor Code Private Attorneys General Act (PAGA) provides authorization for aggrieved workers to file civil lawsuits. Civil lawsuits under PAGA allow the worker who files the suit to recover civil penalties both on his or her own behalf, or on behalf of other employees, and the state of California. Employees may recover a portion of these penalties for themselves if an employer has been found to have violated the labor code.

There are very specific requirements as to when a PAGA claim has ripened, allowing employees to assert such a claim against their employer or former employer. There are filing fees, rules for providing notice to opposing parties, and other conditions that must be met in order for a plaintiff seeking to recover civil penalties under PAGA to prevail.

However, employers have been increasingly limited in their ability to preclude employees from asserting PAGA claims through the use of arbitration agreements, as illustrated by a recent case, Julian v. Glenair.  There, the California Court of Appeals addressed the issue of arbitration agreements as a mechanism to limit the use of a judicial forum for PAGA claims.

The Julian v. Glenair case involved employees who brought claims against an employer for violations of the Labor Code, and for violations of the unfair competition act. The employees sought to make a PAGA claim for civil penalties in connection with the employer’s alleged violations. However, while the suit was pending, the employer attempted to short circuit the employees’ ability to pursue such claims, or at least to minimize the company’s exposure to liability and damages, by requiring the employees enter into a new employment agreement. More specifically, the new agreement included language indicating that continued employment with the company would constitute consent to mandatory arbitration of any employee claims. The proposed agreement stipulated that employees could no longer utilize the courts, but must submit to arbitration on a wide range of claims, including claims related to wages, rest breaks, meal periods, and all violations of federal, state, and local laws and regulations. The arbitration provision specified that the Federal Arbitration Act would govern the agreement and should, to the fullest extent permitted, preempt state laws.

The arbitration language also stressed that it was voluntary and employees could opt out. While most employees who had claims pending against the employer did opt out, two employees did not. Meanwhile, the employer continued trying to force the plaintiffs into arbitration through the pending court proceedings until the case made it to the Second Appellate District Court of Appeals for California.

While pre-dispute waivers of PAGA rights have previously been invalided in California, the Appellate court found there was no existing authority clearly determining the enforceability of a post-dispute waiver of the right to assert a PAGA claim in court. The Court utilized a two factors in determining the boundary between a permissible post-dispute waiver and an unenforceable one: a) the capacity of the employee to make a “knowing and voluntary” choice on whether to waive the right to bring a claim in a judicial forum given sufficient knowledge of the law, and b) the absence of public policy considerations.

The court reviewed past legal precedent finding that a person who acts in two legal capacities (e.g. in their individual capacity and on behalf of the state) in executing a pre-dispute agreement in one of those capacities (as an individual), does not effectively waive the rights that may exist in their other capacity (as an agent for the state). An arbitration agreement signed by an employee who has authority to commence a PAGA action which has not yet ripened does not, therefore, extend to PAGA actions because the employee isn’t the one authorized to bring the PAGA action – the state retains the control of the right to bring the underlying PAGA claim and the employee acts as an agent of the state. A pre-dispute arbitration agreement thus would not be effective in requiring the employee to arbitrate PAGA claims, even though it would typically be effective in requiring arbitration of individual claims.

The Court in Glenair further held that an individual employee may not waive their right to pursue a PAGA claim through the state courts even on a post-dispute basis if the employee was not represented by counsel, which would be necessary to reveal a “knowing and voluntarily” waiver of the employee’s rights. This analysis is required as to each employee, since the statute permits similar actions by employees against the same employer, and more than one employee can act as the state’s agent to assert PAGA claims for other employees (who may have waived their right to pursue their rights in court).

Therefore, in light of the holding in Glenair, even post-dispute arbitration agreement may be unenforceable with regard to PAGA claims if the affected employee has not retained counsel or if there is a clear public policy involved.

Getting Help from An Employment Litigation Attorney

If you or your business is being threatened with claims based on California Labor Code violations, including PAGA claims, contact the litigation lawyers at Gehres Law Group, P.C. for help. Give us a call at 858-964-2314 or contact us online to schedule a complimentary consultation with one of our knowledgeable employment litigation attorneys.

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Will California’s Business Tax Incentive Program End?

A San Diego business litigation attorney at Gehres Law Group, P.C. can provide assistance to companies in understanding their rights and obligations under current laws in California and can help companies navigate the court system to enforce their rights. 

The law regularly evolves in California, and companies should ensure they have an experienced, knowledgeable legal professional to assist them in operating within the current regulatory framework.

One potential change companies may need to address in the future, for example, is the end of California’s business tax incentive program.

Will California’s Business Tax Incentive Program End?

For four years, California has had a program in place called California Competes. The program’s purpose is to incentivize business organizations to move to the state or to remain within the state. The program works by providing tax credits to eligible organizations. It has been a very expensive program, awarding companies with close to $800 million in tax credits.

However, the Los Angeles Times indicates that the future of the program is in question. The program was scheduled to end next year and the nonpartisan Legislative Analyst’s Office has now released a new report indicating that the program should not be continued. The report from the Analyst’s office suggests that the state should instead provide broad-based tax relief instead of giving specific tax incentives to businesses that participate in this program.

The legislative analysis determined that in excess of one-third of the total credits that were made available through the California Competes Program did not produce any demonstrable change to the overall economic conditions of the state, and thus continuing the tax credits could not be justified by providing value to the state’s economy. The analysis also determined that awarding the substantial tax credits created a competitive disadvantage for existing businesses within the state of California who were not eligible for the tax relief that California Competes provides.

The Legislative Analyst’s office was not able to assess the value of the remaining nearly 2/3 of the tax credits that were awarded as part of California Competes because the analysts were unable to make a determination regarding how the businesses who received the credits would have reacted if they had not received the tax breaks.

The Legislative Analyst’s office was able to use the data they collected to make a recommendation regarding California Competes overall though. They indicated that the program should be allowed to end in 2018 on its scheduled expiration data. The office suggested that instead of continuing the program, the state should consider lowering overall business taxes for all organizations. They also recommended that if lawmakers do intend to extend the existing California Competes program, they should narrow the program to focus more specifically on providing tax incentives to attract and retain high-value companies.

Getting Help from a San Diego Business Litigation Attorney

The San Diego business lawyers and business litigation attorneys at Gehres Law Group advise California companies on legal developments that affect their operations or their legal rights, and represent small to medium-sized businesses and their owners in utilizing the state and federal justice systems to advance and protect client interests.

To find out more about how Gehres Law Group, P.C. can assist you with understanding California’s current laws and with asserting your company’s rights in court, give us a call at 858-964-2314 or contact us online today.

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The Economics of Paid Parental Leave

The employment litigation lawyers at Gehres Law Group, P.C. provide representation to companies and individuals in connection with alleged violations of labor law. California has some of the most stringent laws aimed at protecting workers, including laws related to employee family leave. 

Recently, Scientific America published a report on the economics of paid parental leave. According to the report, California’s paid parental leave policies demonstrate that offering paid leave can provide businesses with financial savings.

Paid Family Leave Can Save Companies Money

California passed the first comprehensive Paid Family Leave (PFL) program in the United States back in 2002. Because there are no federal laws guaranteeing paid leave, California’s program provided substantial benefit to parents which would not otherwise be mandated by any law.

California’s program provides that workers who add a new biological child, adopted child, or foster child to their family are eligible to receive up to six weeks of partial paid leave. Both fathers and mothers are entitled to this time off and leave can be taken within the first year that a child is born or is placed with the family.

California’s paid leave program for bonding with children is in addition to the medical leave that mothers can receive in order to recover from pregnancy and child birth. Parents are permitted to take the six weeks of leave either continuously or intermittently at any time during the first year of their child’s life.

To ensure that the program is operating effectively, California regularly updates the program in response to data regarding how the program is used.

In 2017, for example, the program offered payments of 55 percent of the earnings that a parent would be making while working, up to a maximum payment of $987 weekly. For 2018, the wage replacement rates increased to 60 percent of wages for most taxpayers. Employees with low wages that are close to the minimum wage will be entitled to receive 70 percent of their customary weekly wage during their six weeks of leave. The change is prompted by the fact that most low wage workers aren’t able to make use of California’s paid leave program as currently operated because they cannot afford to live on 55 percent of their wages.

California’s program has been funded by a payroll tax that is paid by employees, which is indexed to inflation. Employers do not incur any direct costs through the operation of the program and do not incur administrative costs because the program is administered through California’s state disability insurance system.

A survey of employers determined that these paid family leave policies had either a positive impact or no noticeable impact on productivity, turnover, employee performance, or employee morale. Employers did not identify abuses of the program, and small businesses were especially unlikely to report any negative effects. Furthermore, 60 percent of California employers indicated they were able to coordinate their own benefits programs with the state’s program, providing cost-savings for employers.

As Scientific American concluded: “California’s experiment showed that paid family leave generated cost savings for businesses, either due to reduced turnover or because they coordinated their own wage replacement benefits.”

Contact Employment Litigation Lawyers

Employment litigation lawyers at Gehres Law Group, P.C. can provide assistance to companies and employees in addressing legal issues arising in connection with workplace benefits, including paid family leave. Give us a call at 858-964-2314 or contact us online to find out more about the assistance we can offer.

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Is California Experiencing an Economic Chill?

A business attorneys and business litigation lawyers at Gehres Law Group, P.C. provides assistance to small and medium-sized California business organizations by helping companies to ensure compliance with current regulations and by assisting them in taking appropriate legal action to protect their rights. 

Companies in California may face new challenges in growth going forward, as evidence suggests that the economy in California is cooling.

California May be Experiencing an Economic Chill

The OC Register reported on the evidence of slowed economic growth in California. According to the OC Register, California has slipped from fourth to 35th in terms of economic growth across the nation.

This ranking is based on state-by-state gross domestic product. It revealed that California’s economy grew at a rate of 2.1 percent annually in the second quarter of 2017. This is actually an increase compared with the first quarter, when California’s economy was growing at a very slow .6 percent growth. However, it reflects a marked decline from a year ago when economic growth in California was measured at 3.7 percent. It also suggests California is likely to fare far worse in annual growth this year than it did last year. In 2016, California’s economy grow at a 3.3 percent annual pace, which was the fourth best among all of the states in the U.S.

The growth rate in California of 2.1 percent was below the national growth rate of 2.8 percent annual growth, and it placed California as 35th among the 50 states in terms of its growth. This data point is not the only one suggesting a weaking economy in California either. Job creation was measured at just 1.6 percent statewide in 2017, which OC Register indicates is the slowest rate of job creation in the past five years. Furthermore, total wages paid in California also grew very slowly last year. In the second quarter, total wages paid in California increased at a rate of just 3.5 percent annually. This is the second slowest increase in total wages paid since 2013.

Because so many metrics show that California is experiencing slow growth, the outlook for the state going forward in 2018 is not as positive as some leaders hoped it would be. The Federal Reserve Bank of Philadelphia aggregates data on growth and tracks six-month outlooks for each state, and their analysis revealed more bad news for California. California was found to have the 10th worst economic prospects of all of the states in the U.S., when measured in August 2017, and was found to have the 13th worst economic prospects of all of the states when measured in September of last year. These are the worst projections for the state since 2010.

However, the OC Register indicates that the troubles in California could affect not just people in the state but also the nation as a whole. That’s because California’s GDP in the second quarter accounted for around 1/7 of the total business output across the nation. As a business leader, if California performs poorly, it could affect the economy as a whole.

Contact a Business Litigation Lawyer

When economic conditions are less than optimal in California, companies will need to work even harder to be successful. Companies should ensure they are not undermining their prospects of achieving success by making mistakes in compliance with regulations or by being lax in protecting the legal interests of their organizations.

Gehres Law Group, P.C. provides a broad range of assistance to companies in understanding their obligations and enforcing their rights in the state of California. Contact a business attorney or business litigation lawyer at our firm today to find out more about how we can help. You can give us a call at 858-964-2314 or contact us online at any time for a complimentary consultation.

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Benefits of Professional Corporations in CA

Corporate attorneys at Gehres Law Group, P.C. provide assistance to business owners in determining what type of business entity makes the most sense for their situation. For many companies, the creation of a professional corporation is the right choice. 

Advantages of Operating Your Business as a Professional Corporation

Operating as a professional corporation can have significant advantages compared with other business entities. Advantages of professional corporations, as summarized by Chron.com include:

• Protection from liability: Sole proprietors and partners are liable for business losses and for judgements entered against a business. Operating as a professional corporation can provide protection from liability. Business owners are not only shielded from possible losses caused by financial mismanagement or other related issues, but are also protected if co-owners engage in criminal or negligent behavior. Losses are limited to the invested funds in a business operated as a professional corporation.
• Favorable tax treatment: Professional corporations are not only eligible for general business tax deductions available to all types of professional entities, but are also eligible for some specific tax perks not available to all companies. For example, a professional corporation can write off salaries and bonuses that the corporation pays out to employees and owners. Professional corporations can also write off fringe benefits as business expenses.
• Retained earnings: Professional corporations are permitted, under the tax code, to retain some portion of company profits in order to invest in and improve their business. Money from retained earnings can be used to accomplish important goals, such as acquiring equipment or real estate or undertaking significant renovations. Many other types of business entities, including those entities operating under pass-through rules wherein profits and losses flow to owners and are reported on individual tax returns, are not set up for retained earnings like professional corporations are.
• Retirement planning: Professional corporations typically can provide retirement plans to workers that have higher contribution limits than in most unincorporated businesses. This is a major benefit that can provide help in attracting top talent.
• Professional corporations can last in perpetuity: When you operate as a sole proprietor, the business is irrevocably intertwined with you and the company may not survive your incapacity or death. Operating as a professional corporation, on the other hand, can allow the company to be passed on through a seamless business succession plan so the company can serve as your legacy and still be operational decades later even after you are gone.

These are just a few of the many advantages of operating as a professional corporation. If you have concerns about whether you should create a professional corporation or if you have any other questions related to how to structure your business, you can reach out to an experienced attorney for help.

Contact San Diego Corporate Attorneys For Help

If you are ready to get legal advice on whether the creation of a professional corporation is right for you, it is best to reach out to an attorney with experience on startup companies and business structures. A knowledgeable corporate attorney at Gehres Law Group, P.C. can provide insight into whether the creation of a professional corporation is advisable for you. Give us a call at 858-964-2314 or contact us online to talk with San Diego corporate attorneys to find out more and to get help forming a professional corporation if this is the right choice for your situation.

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Personal Liability for Employers Under A Fair Day’s Pay Act

A San Diego employment litigation attorney at Gehres Law Group, P.C. can provide assistance to companies accused of wage-and-hour violations, as well as to individuals who could potentially face personal liability under California’s Fair Day’s Pay Act. 

Could Owners or Directors Face Personal Liability for Unpaid Wages?

California’s Fair Day’s Pay Act stipulates that owners, directors, managing agents, or officers could be held personally liable for wage and hour violations under California Labor Code section 558.1.

The bill established provisions through which Labor Commissioners could enforce judgements against owners, directors, and others who can be held liable for wage theft, including placing levies on bank accounts and personal property. The goal of the bill is, in part, to ensure employers cannot escape liability for unpaid wages by closing companies and starting new ones.

Wage and hour violations that could give rise to personal liability include failure to pay minimum wage, failure to pay overtime, failure to pay for off-the-clock work, theft of tips, and failure to pay final wages to workers.

Those who are held personally liable under the bill could be liable for not just unpaid overtime wages, but also situations where miscalculations of the regular rate resulted in employees being underpaid. Owners, directors, and others who are held liable under the bill could also be held personally responsible for unreimbursed business expenses, for rest and meal premiums associated with missed breaks, and for providing wage statements to employees that do not meet all of the requirements set forth in California’s Labor Code section 226.

The law also stipulates that employers who have previously been found to have committed wage violations could be required to post bond before continuing operations.

An analysis of the Fair Day’s Pay Act conducted by the Senate Judiciary Committee indicated the law was necessary because cases of wage theft have been increasing, depriving workers of the money that they have earned. According to the brief of the bill by the committee, a UCLA study found that an estimated 654,914 workers just in LA County alone experience at least one violation of wage-and-hour laws weekly. Estimates also suggest that front-line workers who work within low-wage industries lose in excess of $26.2 million weekly due to wage and hour violations.

The California Labor Commissioner Julie Su has also indicated that she has sought, and will seek, to enforce criminal provisions of the Fair Day’s Pay Act if employers commit wage theft.

Employers face significant personal risk under the Fair Day’s Pay Act because of these provisions imposing personal financial liability and because of the provisions enhancing the tools for enforcement of wage and hour laws.

Getting Help from a San Diego Employment Litigation Attorney

It is imperative to get legal help if you or your company has been accused of violating any wage and hour laws as a substantial amount of money could be at stake, along with potential impacts on both ongoing business operations and personal financial security.

Gehres Law Group, P.C. is here to help. Give us a call at 858-964-2314 or contact us online to find out more about the assistance our legal team can offer in connection with wage and hour claims under the Fair Day’s Pay Act.

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