California’s Cannabis Industry May Face Banking Issues in the Months Ahead

As the clock ticks toward January 2, 2018, the date – under voter-approved Proposition 64 – when California entrepreneurs and businesses might legally be able to grow, distribute, and dispense recreational marijuana to adults in the state, a number of questions still aren’t fully answered. One important one: What sort of banking relationship will be possible for those who have jumped through all the regulatory hoops in order to sell cannabis products?

Cannabis Industry in Other States is Largely Done on Cash Basis

Federal law generally prohibits banks and credit unions from taking deposits generated through marijuana sales. In Colorado, Washington, Oregon, and Alaska (where recreational marijuana is already legal), and in the more than 20 states in which some sort of medical marijuana is allowed, the cannabis industry has experienced significant banking issues in spite of legality under state law. Most business is done on a cash basis.

The “Cole Memo”

Some thought that the situation would be eased when then Deputy Attorney General James M. Cole issued a memorandum (the “Cole Memo”) providing guidance to federal prosecutors concerning marijuana enforcement under the Controlled Substances Act. Generally speaking, the Cole Memo indicated that the Department of Justice (DOJ) would take a look-the-other-way approach to marijuana enforcement in legalized states. Under the Cole Memo, the DOJ would step in only to keep cannabis products away from minors, and to prevent criminal gangs and cartels from expanding their presence in the industry. Shortly thereafter, the Treasury Department issued guidelines indicating that it would be legal for banks to provide financial services to marijuana-related businesses.

Since the Cole Memo, some community banks in other states quietly began serving the cannabis industry, but large banks still refuse. Big banks generally have determined that the risks outweigh the benefits. Where Colorado and Washington cannabis sellers have found banking relationships at all, they tend to be limited and costly. According to some industry experts, sales of legal marijuana exceeded $5 billion in 2015, mostly in cash. According to Colorado congressman, Ed Perlmutter, 40 percent of Colorado cannabis businesses lack bank accounts altogether.

Other Challenges of a Cash-Based Business

Experts point to other problems faced by businesses without adequate banking relationships. They include:

•  Payment of employment taxes for employees (including, in most cases, a 10 percent penalty since the IRS doesn’t like cash).

•  Payment of income taxes to the IRS.

•  Increased headaches in paying typical business bills: Electricity and other utilities, rent, professional services (legal and accounting), and the like.

Marijuana Sales May Be a Boon for ATM Manufacturers

The cash basis business model required of most legal sellers of marijuana has been good news for at least one business: ATM manufacturers. Virtually every cannabis outlet in Washington and Colorado sports at least one ATM, since the businesses themselves cannot process credit or debit card payments. Credit card companies are just as leery of the cannabis industry as are large national banks.

Cash Lures Crime

Having all that cash lying around is a legitimate concern, of course. While most Colorado “stores” employ armored car services to pick up the day’s revenue, where it is that all the cash goes each night can be somewhat of a mystery since, as already noted, banking options are limited. According to at least one report, since Colorado fully legalized marijuana in January 2014, the Denver Police Department has logged more than 200 burglaries at marijuana businesses, as well as shoplifting and other crimes.

Heady Times Ahead: Experienced Attorneys Can Help Get Things Under Control

Is your business prepared for California’s rollout of legalized recreational marijuana? Do you have questions and concerns about how to maneuver through the twisting road of regulations ahead? Have you correctly weighed the benefits and risks that lie ahead for the cannabis industry in California? Prudent business owners turn to experienced attorneys like CKB VIENNA LLP for assistance.

For years now, we have represented all sorts of businesses in many types of legal and regulatory environments. We have researched the technical requirements of Prop 64 and the myriad other regulations that will have an impact on the sale of recreational marijuana in California. We also have extensive experience in representing financial institutions. We know what makes them nervous. Our team stands ready to represent you. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Prop 64 “Pot Shops” Must Await Finalization of Licensing Process Before Legal Sales Can Begin

Last November, when voters passed Proposition 64, pushing California into a short column of five states (California, Colorado, Washington, Oregon, and Alaska) that have legalized recreational marijuana use, some Golden State residents may have anticipated that “legal” pot shops would spring up almost immediately. That, of course, has not been the case, as California’s Adult Use of Marijuana Act is actually quite complex. Recognizing that multiple layers of regulation would be required, the Legislature postponed the actual licensing process until January 2018.

While the 14-month window within which to iron out any kinks in the process may have seemed like an unusually long time frame, state regulators indicate that they will need virtually all that time to get ready.

Home Grown Marijuana is Legal During Waiting Period

While one cannot currently legally purchase recreational marijuana in California, one can use, possess, share, and even grow cannabis at home, as long as no money exchanges hands. It is still illegal to sell a marijuana plant, but it may be permissible to share a bud or a clone under certain circumstances.

Bureau of Medical Cannabis Regulation

California’s Department of Consumer Affairs is in the early stages of establishing the Bureau of Medical Cannabis Regulation to oversee the regulation of the cannabis industry. Some regulatory framework was already in place following the passage, in 2015, of California’s medical cannabis laws. Government officials have stressed, however, that the regulations governing recreational marijuana will differ from those related to the use of medical products. Indeed, a number of different agencies will have some stake in the way marijuana is regulated. For example, CalCannabis – which regulates medical marijuana cultivation – is housed with the state’s Department of Food and Agriculture. The Office of Medical Cannabis Regulation is governed by the Department of Public Health. There is even a separate agency – the Office of Manufactured Cannabis Safety – also housed within the Public Health Department, which has additional duties.

Interaction With Local and Federal Laws Still Uncertain

As medical and recreational marijuana both become legal in more and more states, regulators and citizens alike must also recognize that marijuana use is still prohibited under Federal law. Indeed, U.S. Attorney Jeff Sessions has expressed opposition both to recreational weed and the medical variety. California’s stance itself is somewhat inconsistent, since the Office of Environmental Health Hazard Assessment of the California Environmental Protection Agency added marijuana smoke to list of known carcinogens on June 19, 2009. Some California legal experts indicate that there is also a maze of local ordinances that may come into play as businesses contemplate how and where they might open retail sales outlets for recreational pot. The next six months will be an important and complex period legally.

CKB VIENNA LLP – Experienced Attorneys and Advisors

Is your business prepared for California’s rollout of legalized recreational marijuana? Have you contemplated the barriers and hurdles that await those who seek to take commercial advantage of Prop 64? Are you concerned about the interaction between recreational and medical marijuana uses in California? These are just a few of the questions that call out for answers in the upcoming turbulent period before January 2018. Navigating the legal world can be difficult. Prudent business owners turn to experienced attorneys like CKB VIENNA LLP for assistance. For years now, we have represented all sorts of businesses in many types of legal and regulatory environments. We have researched the technical requirements of Prop 64 and the myriad of other regulations that will have an impact on the sale of recreational marijuana in California. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Confidentiality Agreement of Limited Use Against Whistleblowers

California Lawyers

Banks, mortgage firms, and other financial services companies generally require employees to sign confidentiality agreements at the time of hire that prohibits the employee from downloading or disseminating the employer’s confidential information to third parties. However, such confidentiality agreements may be of limited value when it comes to whistleblowing activities, at least according to a recent decision by a federal judge sitting in Southern California [Erhart v. BofI Holding, Inc., 2017 U.S. Dist. LEXIS 20959 (S.D. Cal. Feb. 14, 2017)].

Background

Erhart worked as an internal auditor for BofI Federal Bank (“BofI”). As an internal auditor, Erhart had access to information BofI treated as proprietary and confidential. Over a three-month period, Erhart contacted the SEC and the U.S. Department of Treasury to report what he suspected was misconduct, including the alleged failure to disclose all relevant information in response to an SEC subpoena.

He subsequently filed a civil action against BofI under both California and federal whistleblower protection provisions, alleging BofI retaliated against him for reporting unlawful conduct to the government. The following day, The New York Times published an article titled “Ex-Auditor Sues Bank of Internet.” The share price of BofI’s publicly traded holding company plummeted thirty percent.

BofI counterclaimed and alleged that Erhart violated California state law, the Computer Fraud and Abuse Act, and the provisions of his confidentiality agreement with BofI by publishing BofI’s confidential information and deleting hundreds of files from his company-issued laptop.

Erhart admitted many of BofI’s allegations. He had indeed forwarded a copy of confidential information to his personal email account and downloaded BofI’s files to his personal computer. He printed copies of BofI documents, including customer bank account information and internal audit reports, and had even emailed his mother a spreadsheet containing customer social security information. He also used his girlfriend’s computer to access BofI documents.

Federal Court Said Government Disclosure Was Protected Activity

The federal judge made a number of important rulings, including the following:

•  That California Labor Code Section 1102.5 and the federal whistleblower statutes protected Erhart’s ability to report believed wrongdoing to the SEC and the Department of the Treasury, in spite of the existence of his confidentiality agreement.

•  To the extent that Erhart had disclosed confidential information to the Press, such “leaks” were not protected activity. To the extent that BofI could establish that Erhart was responsible for the leaks, he could be liable.

•  Erhart’s transmission of private and confidential information to his family members, and his accessing of such information from his girlfriend’s computer, was not necessarily privileged. The issue turned on whether he felt compelled to take such measures to protect relevant information from destruction. If so, then his actions were protected. If Erhart did not have a reasonable concern that such information would be destroyed, then BofI would prevail.

•  Erhart had a “qualified” right to preserve the downloaded evidence. The judge noted that a whistleblower cannot pilfer an employer’s proprietary documents in violation of his or her contract merely because it might help the person blow the whistle on an employer’s violations of law, “real or imagined.” But Erhart might be able to show that his appropriation should be protected if he established that such appropriation was limited to the documents necessary to support his whistleblower claims.

•  As to whether his disclosure of information in his court filings violated his confidentiality agreement, the judge said that Erhart was, of course, required to include factual allegations of wrongdoing in order to state a whistleblower retaliation claim. To the extent that he did so, his disclosure was allowed. But to the extent that Erhart disclosed information with intent to harm BofI and, for example, to benefit short sellers by disclosing confidential information, his disclosures would not be protected.

Conclusion: Confidentiality Agreements Work to Prevent Public Disclosure – They Do Not Shield a Business From Wrongdoing

In the judge’s decision, Erhart secured what one might call a half-victory. The judge affirmed that when it comes to disclosing wrongdoing to state and federal authorities, the employer cannot hide behind a confidentiality agreement. On the other hand, the employer should be protected from disclosure of confidential information to the press or to other third parties. It is likely that these sorts of disputes will have to be resolved on a case-by-case basis.

CKB VIENNA LLP: Proven Attorneys

CKB VIENNA LLP offers a full range of advocacy services that can be tailored to address each client’s unique needs. Whether it is litigation involving confidentiality agreements, disputes related to business contracts, or challenging issues related to commercial real estate, our attorneys have been successful in achieving results in a wide range of adversary proceedings. These proceedings have included federal and state, trial and appellate, and arbitration and other forms of alternative dispute resolution. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Tug of War: Lender vs. Tenant Priority in Commercial Real Estate

Lawyers Describe Lender/Tenant Priorities in California

California’s commercial real estate law, like that of many other states, has relatively straightforward rules when it comes to the priority of competing interests. Generally speaking, priority is based upon the timing of creation. For example, if a commercial lease is executed after the landlord’s loan, the loan will take priority and, in the event the landlord defaults on the loan, the tenant’s leasehold interest is generally extinguished by a foreclosure. Alternatively, if the lease is “older” than the loan, absent an agreement to the contrary, the tenant’s rights have priority over those of the lender.

Ordinary Priority Rules Can Cause Difficulty for Landlords and Lenders

Landlords, and particularly their lenders, are often dissatisfied with the ordinary rules of priority. While those rules may work for a lender providing construction financing – its deed of trust will generally be recorded prior to the execution of any leases – the situation is often different for the lender. If the lender provides permanent financing, those financial arrangements are often not finalized until after the execution of at least some leases, particularly those for anchor tenants. In short, the ordinary priority rules tie the landlord’s hands when it desires to:

•  Refinance its indebtedness, or

•  Sell the commercial real estate

In either of these situations, the new owner or new finance provider is typically going to require that it have absolute priority over other interests in the real estate. What the landlord (and lender) desires is a means of subordinating the interest of the tenant to that of the owner/lender.

Landlord’s Solution: Craft Special Provisions Giving Priority to the Lender

In virtually every instance, commercial real estate leases contain provisions that subordinate the rights of the tenant to the rights of any lender whose mortgage or trust deed encumbers the underlying property.

Tenant’s Solution: Nondisturbance and Attornment

A savvy tenant should not agree to subordinate its interest to that of a subsequent lender unless it has some protections of its own. Such protections are generally covered by a nondisturbance and attornment provision (often in the form of a separate agreement). In its basic form, the provision or agreement provides:

•  That in exchange for subordination by the tenant, the lender or lienholder will not disturb the tenant’s possession as long as the tenant is not in default under the lease; and

•  The tenant agrees that in the event of a default by the landlord, it will treat the lender (or a new purchaser under a foreclosure) as landlord for purposes of the leased premises.

In most cases, it is advantageous for both the lender and the tenant to sign a separate agreement setting forth each party’s rights, should the landlord default on its obligations to the lender.

General Rule: Forewarned is Forearmed

Prior to signing a commercial lease, a tenant should recognize the risks associated with signing a subordination agreement (or signing a lease containing subordination language). An ongoing tenant that pays its rent is an important asset for any landlord. Tenants often have more leverage than they think. While there may be no way around the subordination agreement itself, a tenant may be in a strong position when it comes to getting favorable nondisturbance and attornment language.

CKB Vienna: Experienced Attorneys

The law firm of CKB VIENNA has provided both legal and business consultation to landlords, commercial mortgage lenders, and commercial real estate tenants for years. Our attorneys know the sorts of risks and issues faced by those developing or purchasing commercial property, and we also possess keen perspective when it comes to tenant’s rights. In representing lenders, we have also drafted core loan documentation for numerous situations. We don’t use a cookie-cutter approach, since each landlord, tenant, or lender has specific and unique needs. Our firm is also skilled in all forms of litigation, should that become necessary. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Businesses Must Be Mindful of New Restroom Access Law

Legal Aspects of Bathroom Access Laws for California Businesses

On March 1, 2017, California’s Equal Restroom Access Act went into effect and many businesses are scurrying to determine if the new law covers their facilities and, if so, what must be done to ensure compliance.

New Law Applies to All Single-User Toilet Facilities

Under the new law, all single-user toilet facilities within a business establishment, place of public accommodation, or state or local government agency must be identified as all-gender toilet facilities. Specifically, a single-user toilet is:

•  A toilet facility with no more than one water closet and one urinal

•  With a locking mechanism controlled by the user

Any restroom that has those characteristics must now have a sign outside indicating that the restroom is for all genders. If a business has two restrooms, both of which are single-user toilets, then both such restrooms must be identified and labeled as all-gender toilet facilities.

California Law is Consistent with OSHA Rules

Employers and businesses should recall that OSHA’s Sanitation standard requires employers to provide their employees with toilet facilities. The standard is part of a larger health concern – that employees who have inadequate access to restrooms are subject to serious health issues, such as urinary tract infections and bowel and bladder problems. Not only must access to restrooms be available under OSHA rules, such availability must be prompt and sanitary. Moreover, employers may not impose unreasonable restrictions on employee use of toilet facilities.

Unrestricted Restroom Access is Not a New Idea

While the issue has become controversial in some parts of the country, providing unrestricted restroom access is no new idea. Anyone who has traveled on a commercial airplane recognizes that the restroom facilities are not restricted by gender. The same is true generally for restrooms in homes and many small businesses. Portable restrooms that are required for most construction projects are not gender specific.

Restricted Restroom Access Causes Other Problems

State officials have noted for some time now that placing too many restrictions on restroom access cause significant issues for the public. For example, when out in public, children of a different gender than their caretakers and people with disabilities who rely on caretakers of a different gender often have no choice but to break social norms when the only available restroom is designated to a specific gender. The new California law is designed to reduce the problems associated with this issue.

California Law Should Benefit Everyone

While much of the publicity surrounding the new Access Act relates to transgender and gender nonconforming persons, most experts indicate the new law will promote bathroom equity for everyone, regardless of gender.

CKB Vienna LLP – Experienced Attorneys and Advisors

Some business owners worry that the regulatory world is just too confusing and that the changing maze of rules that must be followed takes too much time and attention. Many turn to experienced attorneys for assistance. For years now, CKB VIENNA LLP has represented all sorts of businesses in many types of legal and regulatory environments. As attorneys, we keep up with the latest requirements so that the business owner can keep his or her attention on business. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

California Employers Should Be Wary of Using Job Abandonment to Terminate Workers

Attorneys Discuss Rights to Terminate in California

Terminating an employee for excessive absenteeism is a relatively common practice in California. HR officers often feel that terminating an employee for, say, five days of unexcused absences is an objective decision, whereas firing the employee for “poor performance” is subjective and more difficult to document. A recent California appellate decision shows, however, that where the employee’s absences are potentially linked to medical leave, the employer must be very careful, lest it open itself to a claim that it has violated the California Family Rights Act (“CFRA”).

The Bareno Case

According to the employer in the case, San Diego Community College, Bareno had a history of unexcused absences. It reprimanded her on numerous occasions; in 2013, it imposed a three-day suspension for excessive absenteeism. On the Monday she was supposed to return to work, she called her supervisor and advised that she would be absent while she sought medical attention. Later that day, she followed up with an email indicating she would be out that workweek. She provided a medical authorization note. Later that week, she emailed her supervisor’s boss, indicating she wanted to appeal the three-day suspension and further indicating that she was out on medical leave.

On that same day, she sent her supervisor a new medical form using the email system at a UPS Store. The employer claimed it did not receive the “UPS” email and, after five days of what it said was unexcused absence, it sent Bareno a termination letter. During the time that letter was in transit, Bareno emailed another medical verification form, indicating she needed more leave. By this time, the employer told her she’d been fired and refused to reconsider its decision.

Bareno sued the community college, saying she had been terminated in retaliation for taking medical leave – a personnel action that violates the CFRA. The trial court granted the college summary judgment and Bareno appealed.

Appellate Decision

On January 13, 2017, the appellate court reversed the trial court, noting that if the evidence was viewed in the light most favorable to Bareno, she had stated a CFRA claim. The court said Bareno’s email indicating she was appealing the three-day suspension and that she “was on medical leave” was a sufficient notice to the employer that she needed medical leave. The college had an obligation to ask Bareno for additional information regarding her leave request if it thought such was necessary. It could not merely sit back and wait the five days, and then terminate her.

Employer Takeaways

The case provides a number of important takeaways for employers. Among them are the following:

•  Proceed with caution when an employee mentions being out of work for medical reasons.

•  The courts will generally give the employee the benefit of the doubt; so don’t just rely upon an employment contract provision that says the employee is deemed to have “voluntarily resigned” after a specified number of unexcused absences.

•  Recognize that spam and email filters can prevent delivery of important messages from an absent employee. Keep in contact with the employee during any period of absence.

•  If the employer feels that verification for an absence is wanting, it has a burden of moving forward with employee contact. If there is any reason to believe the employee is absent for a CFRA-protected medical reason, the employer should not assume the employee has resigned.

CKB VIENNA LLP: Experienced Legal Counsel in Employment Law

In light of the Bareno case, all California employers should review their HR policies to determine what changes, if any, need to be made. Many employers determine that having experienced, outside counsel is a key to best practices in personnel law. For years now, CKB VIENNA LLP has represented all sorts of businesses in employment law matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Joint Trusts: Are They a Good Idea?

Many couples take pride, and appropriately so, for the bond they share. They have no secrets; they share responsibilities. They have similar goals, likes, and predispositions. They view the marriage as a special partnership within which everything is shared. When it comes to estate planning, they may see the benefits that can flow from revocable trust arrangements, both in terms of the overall management of assets and the avoidance of at least some of the headaches of probate administration. They’ve always had a joint checking account, so why not a joint trust arrangement? But is a joint trust really a good idea?

What Does the Joint Trust Look Like?

Generally speaking, with a joint trust (particularly a joint revocable trust), the spouses create one trust, into which their assets are contributed during their lifetimes. Typically, the joint trust document provides that all assets contributed are deemed to be owned 50 percent by each spouse, usually as tenants in common. Upon the first death, the assets are segregated into a “Decedent’s Trust,” and a “Survivor’s Trust.” The provisions of each of these segregated trusts are different so as to take advantage of desired estate tax objectives.

The Goal is Convenience – the Result Can Be Confusion

While a joint trust can – particularly for small estates – be convenient, more often than not, any convenience is outweighed by the complexity. Often, the initial goal with the joint trust is to avoid the division of the couple’s assets, with some going to one spouse’s trust and other assets going to the separate trust of the other spouse. In many cases, however, the only thing that is accomplished is the postponing of the required division to a time that coincides with the first death. Many trustees, particularly if they do not have legal or accounting backgrounds, find their duties become truly complicated as they wrestle with the needs – and requirements – of the Decedent’s Trust and the Survivor’s Trust. What assets go where? When, and at what tax consequences, are the transfers made?

Errors in Administration Can Be Expensive

Some survivors and trustees find that errors are easily made in the administration of a joint trust. Remedying those errors can be costly. What seemed at first to be a plan to save time and money ends up more costly than if two separate trusts had been created in the beginning. Most legal experts agree that the administration of separate trusts is more straightforward and much less prone to error.

Estate Planning: Skilled, Experienced Legal Counsel a Key

The law firm of CKB VIENNA has extensive experience in the drafting and creation of trusts of all types. We have helped individuals establish both revocable and irrevocable trusts and have given our insight into all facets of estate planning and wealth management. We are skilled in drafting and coordinating all sorts of estate planning documents, from wills to trusts to buy-sell agreements and succession planning arrangements. While the firm is skilled in all forms of litigation, our attorneys offer guidance designed to avoid the consequence and cost of litigation wherever possible. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

For California Mechanic’s Lien Filing Purposes, When is a Project Complete?

Cal. Civ. Code § 8412 provides, in relevant part, that a general contractor has 90 days from “completion” of its work to record its mechanics’ lien claim. That sounds simple enough, but in recent years, questions have often arisen as to when work on a project is considered “complete.”

“Substantial Completion” isn’t Enough to Start the Clock

For example, is work complete when the owner receives a certificate of occupancy (COO)? Those who are familiar with construction industry practices recognize that the issuance of a COO doesn’t necessarily mean all punch list items have been completed. In recent years, some California trial courts took the position that the 90-day clock began to tick upon “substantial completion” of the contractor’s work. In 2016, the California Court of Appeal clarified the rule, however, finding that “completion” – for purposes of the 90-day filing window – only occurs upon “actual completion” of the work of improvement.

Three Other Factors Can Trigger 90-Day Mechanic’s Lien Filing Requirement

In addition to actual completion of the improvement, three other events detailed in Cal. Civ. Code § 8180 can trigger the running of the 90-day time period for filing one’s lien:

•  Occupation or use by the owner accompanied by cessation of labor

•  Cessation of labor for a continuous period of 60 days

•  Recordation of a notice of cessation after cessation of labor for a continuous period of 30 days

Special Rules May Apply to Construction of Separate Residential Units

Contractors should bear in mind that special rules apply to mechanics’ liens associated with projects to construct separate residential units. Cal. Civ. Code § 8448 provides that if improvement work consists of the construction of two or more separate residential units:

•  Each unit is deemed a separate work of improvement, and completion of each unit is determined separately for purposes of the time for recording a claim of lien on that unit.

•  Material provided for the work of improvement is deemed to be provided for use or consumption in each separate residential unit in which the material is actually used or consumed, but if the lien claimant is unable to segregate the amounts used or consumed in separate residential units, it has the right to a mechanics lien against the entire property.

Mechanic’s Liens Provide Important Protections

California’s mechanic’s lien laws provide important equitable protection for those supplying materials and/or labor to a construction project. Generally speaking, courts have determined that strong public policy requires that mechanics’ lien laws be construed for the benefit of the potential lien claimants.

Attorney’s Fees and Costs Can Sometimes Be Recovered by Lien Claimants

While mechanic’s liens are generally limited to the reasonable value of the work provided by the claimant, or the price agreed upon by the claimant and the person who contracted for the work (less any payments received), where the lien claimant forecloses its lien, it may be able to recover its costs for recording the lien, as well as attorney’s fees.

California Law Regarding Mechanic’s Liens is Complex

California’s mechanic’s lien law is quite complex. Failure to file appropriate lien documents can be fatal to a claim. Most contractors and suppliers have discovered that the risks of proceeding without solid, experienced legal counsel are great. Most agree that the costs associated with retaining a good legal team are small compared to the risks of filing faulty paperwork on their own.

The law firm of CKB VIENNA has provided both legal and business consultation to contractors, developers, landowners, landlords, and others for years. We have extensive experience in both filing and defending mechanic’s liens in California. We have assisted a range of parties in assessing and managing the risks associated with construction projects. While we are skillful settlement negotiators, we are also experienced in all forms of litigation. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Los Angeles Employers Face Important New Hiring Practice Rules

On January 22, 2017, an important new Los Angeles employment provision – the Fair Chance Initiative Ordinance – took effect within the city. The new ordinance, passed last December, adds significant restrictions on the types of questions that area employers can ask prospective employees, and it also prohibits many employers from conducting a criminal background check prior to making a provisional offer of employment.

New Ordinance’s General Provisions

Los Angeles employers should familiarize themselves with the new ordinance. Generally speaking, it:

•  Applies to all private employers with more than 10 employees located or doing business in the City of Los Angeles

•  Covers employees who generally perform “at least two hours of work on average each week” in the City

•  Allows exceptions for city and local government departments, state or federal government units, and any employers that are required by law to inquire about past criminal convictions

•  Provides additional exceptions for employment positions that are required by law to be held by persons without specified criminal convictions

•  Provides exceptions for positions requiring the person employed to possess or use a firearm in the course of the employment

•  Covers any individual who submits an application for work performed in the City, including temporary, seasonal, commission, contracted, and even unpaid training positions

Employers Must Take Certain Affirmative Actions

The new ordinance also requires that employers modify their employment advertising and job posting in particular ways. For example, after the effective date of the ordinance, covered employers must:

•  Indicate in all advertisements and solicitations, whether they be internal or external, that the employer will consider qualified applications that reveal criminal histories in a manner that is consistent with the ordinance

•  Post a notice calling attention to the new ordinance in a conspicuous spot within every workplace and job site in the city

Conditional Offers of Employment

Perhaps the most important part of the new ordinance is the requirement that covered employers refrain from asking applicants about their criminal history until after a conditional offer is made. Once that conditional offer has been made, a covered employer is permitted to perform a criminal background check. If such a background check discloses criminal history information unfavorable to the applicant, the employer is not permitted to withdraw the offer until and unless the employer has completed a written assessment that effectively links the specific aspects of the criminal history with risks inherent in the job sought by the applicant. In making its determination, the employer must consider various factors, including the following:

•  The nature and gravity of the offense

•  The time that has elapsed since the conviction

•  The nature of the job that is sought by the applicant

“Fair Chance Process”

Before the covered employer takes any adverse action against the applicant, they must also engage in the “Fair Chance Process.” Generally speaking, that process includes:

•  Providing the applicant written notification of the adverse employment action

•  Providing a copy of the written assessment described above

•  Providing such other and further documentation that would support the proposed adverse employment action.

As to this last step in the process, the employer must allow the applicant five business days to respond and provide additional information or documentation regarding the accuracy of the criminal history results and to detail any important mitigating factors. If the applicant provides correcting or mitigating information, the employer must conduct another written assessment and inform the applicant of its decision with a copy of that new written assessment.

Employers Should Review Their Existing Policies

In light of these new requirements, all Los Angeles employers should review their HR policies to determine what changes, if any, need to be made. The penalties for non-compliance with the new law do not kick in until July 1, 2017, but they will be monetarily punitive: $500 for the first violation, $1,000 for the second, and $2,000 for subsequent violations.

CKB VIENNA LLP: Experienced Legal Counsel

Many businesses determine that having experienced, outside counsel is a key to best practices in personnel law. For years now, CKB VIENNA LLP has represented all sorts of businesses in employment law matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Mortgage Firms and Real Estate Agents Shouldn’t Get Too Cozy

Many prospective homeowners see the residential real estate market as a maze of red tape, paperwork, and endless bargaining. It’s no surprise, therefore, that California real estate agents are often called upon to give prospective buyers advice. The questions don’t just concern housing values, the quality of local school districts, and the levels of area property taxes; they often relate to mortgage lending. While real estate agents often have a wealth of information about current mortgage conditions and practices, both the agent and the mortgage firm can get into deep trouble if they maintain anything less than an arm’s length relationship. Mortgage firms and real estate agents shouldn’t get too cozy with each other.

Consumer Financial Protection Bureau Levies Steep Fine Against California Mortgage Lender

On January 31, 2017, the Consumer Financial Protection Bureau (CFPB) reported that it had taken action against a major California mortgage lender for paying what it labeled “illegal kickbacks” for mortgage business referrals. Under the terms of a CFPB consent order, the lender will pay a $3.5 million civil penalty and various real estate brokers, and a mortgage loan servicer will pay a combined $495,000 in consumer relief and penalties.

CFPB’s Allegations Were Far-Reaching

The CFPB alleged that the California lender used a variety of schemes to pay kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act. It alleged, for example, that the lender established marketing services agreements with some companies, which were framed as payments for advertising or promotional services, but which were created to disguise payments for referrals. The CFPB also contended that the lender:

•  Paid for referrals through agreements with more than 100 real estate brokers

•  Paid brokers to require consumers – many of whom were already prequalified with another lender – to prequalify as well with the lender

•  Split fees with a mortgage servicer in order that the lender might obtain consumer referrals

CFPB Actively Pursuing Many Other Cases

According to the CFPB, the agency has helped recover more than $11.7 billion since its creation, assisting more than 27 million consumers, and resolving more than one million complaints. According to the government entity, it makes sure banks, lenders, and other financial companies treat American consumers fairly. Quite a few lenders and others argue that CFPB’s methods are often heavy-handed.

CKB VIENNA LLP: Experienced Attorneys

Because the attorneys at CKB VIENNA LLP have such a broad financial services practice, the firm has the experience to provide lenders, servicers, and others with in-depth advice regarding the CFPB and its practices. Our firm has been active in monitoring developments at the CFPB and other government agencies. We have helped financial clients with compliance with the Dodd-Frank Act, with Truth in Lending issues, and with other important legal matters related to mortgage lending.

We can provide financial entities with an important, dispassionate perspective when it comes to potential CFPB exposure. We can examine your practices and advise what changes, if any, ought to be made to strengthen your position in regulatory matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Alert to Commercial Landlords: New Access Law Disclosure Requirements Are Now Effective

In recent years, the California legislature has echoed the state’s strong public policy in fostering access to public and commercial properties by persons with disabilities. In 2012, for example, the legislature passed a bill that codified California Civil Code § 1938. Under that bill, every commercial lease agreement executed on or after July 1, 2013 must contain a provision indicating whether the property being leased has undergone inspection by a Certified Access Specialist (CASp), and, if so, whether the property has or has not been determined to meet all applicable construction-related accessibility standards.

AB 2093 Adds Additional Disclosures in Commercial Leases

Late in 2016, the Legislature passed AB 2093, which amends § 1938 by adding additional requirements. Landlords should alter their business practices in light of the following:

•  If the leased premises has not undergone a CASp inspection, or if the property has been altered or modified between the date of an inspection and the date of the lease agreement, the landlord must inform the tenant of its right to request a CASp inspection. Special language for this purpose is now contained in Cal. Civ. § 1938(e).

•  If the landlord has obtained a CASp inspection report that indicates the premises meets applicable construction-related accessibility standards, the landlord must also provide the tenant with a copy of the report within seven days following the execution of the lease.

•  If the landlord has obtained a CASp inspection report that indicates there is a need for modifications or repairs, the landlord must provide the CASp report to the tenant prior to the execution of the lease agreement. If the report is not provided to the tenant at least 48 hours prior to lease execution, the tenant may rescind the lease agreement within 72 hours after lease execution.

Delivery of the CASp report by the landlord to the tenant or prospective tenant may be conditioned upon the latter’s covenant to keep the contents of the report confidential.

AB 2093 Presumes Responsibility for Repairs Remains With Landlord

Under the amended version of Cal. Civ. § 1938, any repairs or modifications necessary to correct violations shown in the CASp report are presumed to be the responsibility of the landlord. The landlord or tenant may specifically agree otherwise, of course.

Landlords Are Not Required to Obtain CASp Reports

Passage of AB 2093 does not change existing law with regard to the need for commercial landlords to secure CASp inspections and reports. Such inspections still are not required.

Prospective Action Needed by Many Commercial Landlords

In order to be in compliance with the new law, California commercial landlords should immediately review current lease agreements and determine if they are in line with the new requirements. Lease agreements should clearly indicate which party is responsible for any repairs or modifications to the premises that are made necessary in the event that the leased property is determined to be in violation of accessibility standards.

Commercial Real Estate Leasing Calls for Experienced Legal Counsel

The law firm of CKB VIENNA LLP has provided both legal and business consultation to commercial landlords for years. We have reviewed and drafted all types of commercial leases and have assisted both landlords and prospective tenants in assessing and managing the risks associated with the letting and renting of commercial real estate. If commercial disagreements arise, our firm is also skilled in all forms of litigation. Our attorneys provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Advertising: When Does “Puffing” Become False and Misleading?

We’re all familiar with “puffing,” even if not by name. Puffing (a/k/a “puffery”) consists of advertising that states, in general terms, that a product or service is superior to others. Classic product slogans come to mind:

•  BMW: “the ultimate driving machine,”

•  Maxwell House: “good to the last drop,” or

•  Miller Lite: “Taste great, less filling.”

It isn’t that BMW is promising that you’ll never find a better car, or that Maxwell House is saying that its coffee is the absolute best; U.S. law considers the statements to be sufficiently general in nature as not to be misleading.

Some Product Statements Are Misleading

There is sometimes a fine line, however, between puffing – which is allowed under U.S. law, and making misleading statements in advertising, which is not. A recent decision by the Federal Trade Commission (FTC) concerning a California product is illustrative.

In a mid-December, 2016 decision, the FTC held that promotional advertising by California Naturel, Inc., promoting its “all natural” sunscreen on the company website as containing “only the purest, most luxurious and effective ingredients found in nature” violated Section 5 and 12 of the FTC Act. During the litigation, California Naturel admitted that eight percent of its sunscreen formula was dimethicone, a synthetic ingredient.

Clarifying Statements in Web Site’s Fine Print Often Isn’t Enough

The company contended that it included an accurate product ingredient list and a disclaimer on its web site, but the FTC said it wasn’t enough. It noted that the use of dimethicone was buried within a list of more than 30 ingredients and that nothing identified the ingredient as synthetic. The FTC was particularly critical of the disclaimer, since it was positioned at the bottom of the web site. The FTC contrasted that inconspicuous location with the prevalence of “all natural” advertising elsewhere on the site and on the product packaging. In light of the situation, the FTC issued an order prohibiting California Naturel from advertising its products as “all natural” and making other similar misrepresentations.

“Catch-22” in Advertising

There is somewhat of a Catch-22 when it comes to advertising. Under the “80/20 rule,” 80 percent of all advertising is ignored. So, if your advertising campaign is too bland, no one will pay any attention to it. On the other hand, if you stretch things too far, you could be in trouble with a claim of misrepresentation. How can your advertising land within the 20 percent that is effective and yet still be safe (or relatively so) from FTC and other claims? One smart response: Don’t just engage a marketing team; make sure that team engages with knowledgeable, skilled attorneys at CKB Vienna.

CKB Vienna LLP: A Full-Service Consulting and Law Firm

The law firm of CKB VIENNA LLP provides legal and business consultation to nearly every type of business, from large to small – even to startups and nonprofits. We have helped with advertising and branding issues and have assisted numbers of businesses in trademark research, due diligence research, and in various forms of associated litigation. And while the firm is skilled in all forms of litigation, our attorneys also provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. At CKB VIENNA, we use our collective resources to address every detail of your complex business and legal demands. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Waivers in Connection with Insurance Settlement Offers

California Lawyers 

Negotiating with your property insurance insurer concerning a business claim can be time-consuming. And, since “time is money,” it can also be expensive. If you or your California business is negotiating (arguing) with your insurance insurer, you know that at least one fact is true: It can usually afford a delay in resolution of the claim much better than can your business. It has deeper pockets. What you really want is a reasonable settlement offer, and sooner rather than later would be nice.

In California, the Carrier May Demand a “White Waiver”

Within the settlement process, however, there is sometimes a hitch. Before it communicates an offer of settlement to you, your insurance company may demand that you and/or your business sign a special waiver acknowledging that its communication of an offer cannot be later used to establish bad faith against the insurer. Sometimes referred to in California litigation circles as a “White waiver,” the special waiver gets its name from a 1985 decision by the California Supreme Court [see White v. Western Title Ins. Co., 40 Cal. 3d 870, 710 P.2d 309, 221 Cal. Rptr. 509 (1985)], in which the Court said that the contractual relationship between an insured and its insurer does not end when litigation begins. Accordingly, if the insurer makes a “low-ball” offer, the offer itself can be used by the insured as evidence of bad faith on the part of the insurance company.

Should You Sign Such a Waiver?

Faced with a “White waiver,” the answer of whether to sign it is the same as is offered for many legal questions: “It depends.” Generally speaking, if the communication between you and the insurer has been friendly and positive, if the discussions that you have had with the adjuster or insurance executive show a reasonable attitude by the insurer toward the claim, it may be in your best interest to execute such a White waiver. One suggestion here, however: Have the waiver expire in a reasonable, stated, time period. That way, you aren’t waiving the right should the insurer turn out to be negotiating in bad faith. After all, the White decision was never intended to allow an insurance company to withhold performance until the policyholder waived its contract rights.

If the insurer declines to talk unless a White waiver is provided, then signing it may not be a good idea. Refusal to talk is itself a showing of bad faith. Signing the waiver allows the insurer to act in a fashion that is contrary to insurance law.

When the insurer demands a White waiver, it is asking the policyholder to take on faith that the offer that is about to be communicated is a reasonable one. If that were so clear, particularly if the negotiations have turned to acrimony, why would it need the waiver?

What if the Insurer Does Not Require a Waiver?

If no such White waiver is required, and if the insurer’s offer is patently unreasonable, a policyholder should consider using the White decision to hold the insurer accountable in a bad faith claim. One should always expect the insurer to offer a rigorous defense.

Takeaway

The White decision was never intended to place a shield around all communications between an insurance company and its insured. The requirement that it act in good faith continues after a dispute arises over coverage or a claim. If your insurance company shows signs of making a reasonable offer or shows signs of moving up significantly from its prior settlement offers, you may want to consider signing the White waiver. If, on the other hand, there is any doubt that this is going to happen, perhaps you should consider whether:

•  To condition the waiver on the carrier’s making an offer at or above some minimum confidential number, and/or

•  To consider making the waiver apply only for a short period.

Insurance Negotiation Involves Complex Legal Issues

While some businesses choose to negotiate insurance claims without the aid of a skilled, experienced attorney, many find that in doing so they fail to come out ahead. As the saying goes, they “often leave money on the table.” Negotiating takes skill and patience, particularly where there is any question that the insurer may not be dealing in good faith. Are you or your business involved in an insurance claims dispute? Have you been presented with a White waiver? Having experienced, aggressive legal counsel on your side can be crucial to protect your interests. For many years now, CKB VIENNA LLP has represented business, large and small, in all sorts of insurance disputes in California. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Four Pointers to Comply With Recent California Supreme Court Rest Break Decision

Just prior to Christmas, the Supreme Court of California, in a split decision [see Augustus v. ABM Security Services, Inc., 2016 Cal. LEXIS 9627 (Dec. 22, 2016)], held that it was a violation of Cal. Lab. Code, § 226.7 and Industrial Welfare Commission (IWC) wage order No. 4-2001, subd. 12(A), to require that security guards keep their pagers and radio phones on and that they remain vigilant and responsive to calls when needs arose during their rest periods. The high court added that under California law, employers relinquish any control over how employees spend their break time; a rest period must be a period of rest.

California’s Rest Break Requirements

While rest breaks aren’t actually addressed in California’s Labor Code, the state’s IWC’s industry-specific Wage Orders require employers to authorize and permit their non-exempt employees to take a net 10-consecutive-minute rest break for each four hour work period or major fraction thereof. Insofar as it is practical, the rest breaks should be taken in the middle of each four-hour work period.

Some HR officials say that rest and meal breaks make scheduling difficult. For example, if a business has just one person working at any given time, it is impossible to keep the business open and allow a complete break in duties for the employee. In the past, some businesses have allowed the employee to take breaks (if business allowed), subject to being called back to the job if necessary. That practice runs afoul of the Augustus decision.

Your Business May Inadvertently Violate the New Augustus Rule

Legal experts caution that the HR practices at many businesses may now violate this new Augustus rule. Here are four pointers to help you comply with the Augustus decision.

Pointer 1: Review all Employee Handbooks

The Augustus majority stresses that the plain meaning of the word “rest,” as well as other language in the Wage Order and Labor Code, caused it to conclude that rest breaks need to be off-duty. Employers may not require an employee to work during any meal or rest period. Make certain your employee handbooks reflect this.

Pointer 2: Relieve Employees of all Duties During Breaks

All too many employers have one policy in print and another in practice. Having the appropriate language within your employee handbooks is useless if your practices are inconsistent with the rules that you have set. During breaks, relieve employees of all duties. Discontinue the use of on-call duties during rest breaks. Recognize that you may have to shift work schedules to accommodate this requirement.

Pointer 3: Allow For Rest Break Premiums if There is No Alternative

If the demands of work are such that employees cannot take the required rest break, employers should have a system in place to compensate the employee the applicable “wage premium” of one hour of pay (at the employee’s regular rate of pay) for any violations.

Pointer 4: Counsel Supervisors Not to Disturb Employees During Breaks

Many employers need to have short training sessions with supervisors to make certain they understand the implications of the Augustus decision. In Augustus, the trial court awarded the class of aggrieved employees $90 million in statutory damages, interest, and penalties. Take the time to train those in charge that the new rules are strict and must be followed.

Augustus is a Significant Decision

Legal experts agree that the Augustus decision is a significant one. Employers who have questions about its ramifications may wish to consult an attorney for clarification. If your firm has historically utilized “on-duty” or “on-call” rest breaks, you should consult an expert to evaluate strategies to avoid potential liability.

For years now, CKB VIENNA LLP has represented all sorts of businesses in employment law matters, including those related to wage and hour issues. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

What is “Fair Value” in Statutory Buyout of Minority Shareholders?

California is among the states that allows for a kind of shareholder “divorce” when a corporation is hopelessly deadlocked due to shareholder disagreement. As long as the minority can assemble a coalition of at least one-third of the outstanding corporate shares, that minority can sue for an involuntary dissolution of the company.

In turn, however, the holders of 50 percent or more of the voting stock of the company have the statutory right to avoid the dissolution by purchasing for cash the shares owned by those seeking the involuntary dissolution at their “fair value” [see Cal. Corp. Code § 2000]. The statute defines “fair value” as the liquidation value as of the valuation date but taking into account the possibility, if any, of sale of the entire business as a going concern in a liquidation [§ 2000(a)].

A recent California Court of Appeals decision [Goles v. Sawhney, 2016 Cal. App. LEXIS 1010 (Nov. 22, 2016)] provides new guidance in determining the “fair value” of the minority’s interest. The Appeals Court for the Second Appellate District indicated:

•  The determination of “fair value” should include an assessment of the value, if any, of any pending derivative claims. These can be quite common where one block of shareholders blocks the actions of another.

•  § 2000 does not permit a “lack of control discount” in determining “fair value.”

•  Where a trial court appoints three appraisers and then proceeds to determine “fair value,” it should not simply average those appraisals in determining the correct value.

“Fair Value” Versus “Fair Market Value”

Minority shareholders are often disappointed in learning that within the context of an involuntary dissolution, the concept of “fair value” is not the same as “fair market value.” Had the legislature intended the court to determine “fair market value,” it would have said so. And so, in determining the value of the minority’s interest, the Court need not make the evaluation on the basis of a going concern. True, the Court can consider a firm’s going value, but need not do so. It may alternatively consider what a piecemeal sale of the firm’s assets might bring.

Lack of Control Discount

The Court of Appeals clearly indicated the minority’s interest should not be discounted by the fact that the minority, by definition, lacks any effective control of the corporation. This is an incredibly important point. Consider the following hypothetical:

Assume a corporation has two shareholders, one with a 51 percent interest, and another with a 49 percent interest, that it is valued at $1 million. If the value of the minority owner’s interest were determined as the value of his or her proportionate interest in the corporation, the minority owner would receive $490,000. Many valuation experts say, however, that the minority interest should be discounted for lack of control at as much as 33 percent. Were that to be applied, it would result in a final evaluation of the minority’s shares factored in, and the value of the minority owner’s shares could conceivably be reduced by 33 percent, to $323,400. That’s a difference of $166,600.

Averaging the Appraisers’ Valuations

Equally important is the Court’s indication that a trial judge should not merely average the evaluations offered by the three appraisers.

CKB VIENNA LLP: A Full-Service Consulting and Law Firm

The law firm of CKB VIENNA has a long history of representing shareholders of closely held corporations. Our firm has offered valuable advice to those involved in family businesses, particularly when members of the family cannot agree on the future direction of the company. Our attorneys provide counsel on sales of corporate stock and other appreciated assets. We have helped settle business disputes and have designed special client plans to foster estate planning. We don’t stamp out cookie-cutter solutions; we first gain a true understanding of the client’s goals, concerns, and unique issues. Then, we work with the client to achieve success. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

California Employers Have “Take-Home Exposure” Duty to Employees’ Families

For some time now, California businesses that expose employees to hazardous chemicals and materials – such as asbestos – have known that they can be liable to those employees for significant workers’ compensation benefits in the event the employee contracts an occupational disease, such as mesothelioma. The employer’s duty to members of the employee’s family, who may suffer from “take-home exposure,” has been less clear.

Employees Can Be “Vectors” Carrying Harmful Materials

In a decision released December 1, 2016, the Supreme Court of California offered some clarity to the issue, holding that employers (as well as premises owners in some instances) have a duty that extends to “members of a worker’s household” to exercise ordinary care to prevent take-home asbestos exposures. The Court indicated that where it is reasonably foreseeable that workers, their clothing or personal effects will act as “vectors carrying asbestos from the premises to household members,” employers have a duty to take reasonable care to prevent this means of transmission.

The high court’s decision struck down two earlier California Courts of Appeal cases that held employers and premises owners owe no duty of care to household members for take-home exposure to asbestos and other toxic chemicals. The Supreme Court said an employee’s return home from work was an unusual occurrence. The Court added that preventing injuries to members of the workers’ household due to asbestos exposure imposed no greater burden on the employer than preventing exposure and injury to the workers themselves.

No Duty, However, Owed Beyond the Employee’s Household

The Court indicated, however, that the duty extends only to members of the worker’s actual household; not to others who claim they also were exposed to the hazardous materials by contact with the employee, or his (or her) clothing or personal effects.

Supreme Court Struck a Balance

While not altogether pleased with the Court’s decision, some employer groups do acknowledge that the Court may have struck an appropriate balance. An employer’s potential tort liability should not be endless and the Court agreed on that point, holding that the employer’s duty to protect persons did not extend, for example, to the worker’s other relatives, friends, acquaintances, service providers, babysitters, neighbors, carpool partners, fellow commuters on public transportation, and laundry workers. Indeed, the Court was attempting to strike a workable balance. It is one thing to allow compensation for reasonably foreseeable injuries of family members; it is an altogether different matter to burden the courts and the defendants with the costs associated with litigation of disproportionately meritless claims.

Premises Owners Have Duty to Contractors and Their Families

Another important part of the decision affects premises owners. Whether the owner hires out work to an independent contractor or has it performed by an employee, the owner has a duty to provide reasonable protection from exposure to hazardous materials, both to the worker and to his or her family. Premises owners may need to examine their practices in this regard.

California Businesses Have Far-Reaching Obligations

California businesses have far-reaching obligations. Some extend even to members of an employee’s household or to the household of contract workers. If it’s been some time since your business reviewed its practices, it might be time to consult with a firm that can provide broad legal and business advice. For years now, CKB VIENNA LLP has represented businesses in all types of legal issues, from litigation to business structure, from best practices to personnel matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Entrepreneurs Should Recognize Differences in Short and Long-Term Borrowing Needs

Just as there are different tools for different tasks – one cannot use a screwdriver effectively to pound a nail – there are also different financial tools to assist an entrepreneur as he or she works to fulfill a creative business dream. Business experts allow, however, that the principals in all too many business startups fail to account for important differences – and choices – in financing their enterprises. Choosing an inappropriate financial tool can lead to headaches and needless expense. The entrepreneur should be particularly aware of the differences between short and long-term borrowing needs.

Addressing the Entrepreneur’s Short-Term Needs

Working Capital Loans

Most short-term borrowing needs relate to the need for adequate working capital – having sufficient funds on hand to operate the immediate and short-term needs of the business. Properly crafted, a working capital loan can help an enterprise deal with the fact that day-to-day expenses must be covered, yet often there is a lag in the company’s revenue related to those expenses.

A working capital loan usually has a number of common characteristics, including the following:

•  It is a short-term (one year or less) line of credit from a bank or other lender

•  It most usually comes with a variable rate of interest that is tied to some specific, identifiable, short-term interest rate

•  It is usually set up as a “draw” against a maximum amount of principal

•  The borrower generally pays interest only at the specified (variable) rate, often with a provision that the outstanding balance be zero for at least 30 days during the period of the short-term loan

Advantages of Working Capital Loans

Working capital loans have some advantages over other, longer-term borrowing, including:

•  Funds are available quickly

•  The entrepreneur maintains control over the day-to-day operations (this may not be the case, for example, if working capital is obtained through the sale of capital stock)

•  Depending upon the amount of the loan and the credit-worthiness of the entrepreneur, the funds may be made available on an unsecured basis

Addressing the Entrepreneur’s Long-Term Needs

Where the entrepreneur must purchase real estate, machinery, and other durable goods in order to operate the business, a short-term, working capital loan may be insufficient. In those circumstances, there is a need for long-term borrowing. Long-term borrowing usually has a number of common characteristics, including the following:

•  The term of the loan is generally for much longer than a year

•  The loan is often offered at a fixed rate of interest (often somewhat higher than the rate of interest charged for short-term borrowing)

•  The borrower pays both principal and interest in equal installments over time

•  The payout may be based on a long-term amortization schedule

•  Alternatively, the equal monthly payments may extend for some time, with a “balloon” payment due to pay the loan off fully.

•  Most often, these loans are fully secured. In the case of real property, the loan is secured by a mortgage or deed of trust. In the case of equipment and machinery, the lender generally holds a security interest in the property.

Advantages of Working Capital Loans

Long-term borrowing may offer some advantages over working capital loans, including:

•  They may be made in very large amounts

•  As with short-term borrowing, long-term borrowing allows the entrepreneur generally to maintain control of the business; there is no dilution in ownership that would result from the sale of capital stock

•  Access to even large sums can be accomplished in a relatively short period of time

•  Depending upon the circumstances, the long-term borrowing allows for the preservation of working capital that can be used for short-term matters

Should You Review Your Borrowing Needs with an ExperienceD Attorney?

Every entrepreneur’s financial needs are different. Cookie-cutter approaches can be expensive and inefficient. Many entrepreneurs find that it helps to discuss business concerns with an experienced, capable attorney. Banking loan officers can be tied to particular products or terms. Having the counsel of an attorney who can offer dispassionate advice can help you craft a plan for the future. For years now, CKB VIENNA LLP has represented all sorts of businesses in all sorts of business issues. From startups to established businesses, we understand the issues and we stand ready to represent you skillfully. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

California Employers: Are You Ready for New Employment Laws?

During 2016, the California legislature passed a number of significant laws that affect most Golden State employers. Virtually all the changes take effect January 1, 2017 and it is, therefore, important that California businesses review their employment policies and procedures to make certain that they comply with the new law. While there may be additional laws and regulations that affect your particular service or industry, the following is a brief review of five important employment-related provisions.

Increase in Minimum Wage

While the national debate as to the appropriate level of the minimum continues, California has jumped out ahead with a multi-step increase. SB 3 increases the state’s minimum wage each January 1 from 2017 through 2022 (or 2023 for employers with less than 26 employees). Effective January 1, 2017, the new minimum wage is $10.50 per hour. Employers should also recognize that this increase has other effects, as well. For example, in California, in order to qualify as an “exempt” employee, the worker must earn at least twice the state minimum wage for full-time employment (40 hours each week). The new threshold for exempt employees is now $43,680.

Expansion of California’s Equal Pay Act

Two separate bills passed by the 2016 Legislature – AB 1676 and SB 1063 – work together to expand the California Equal Pay Act so as to: (i) Eliminate prior salary as a bona fide exception to equal pay based on gender, and (ii) prohibit employers from paying employees of a different race or ethnicity different rates for substantially similar work.

Out-of-State Arbitration

Employee groups point to the passage of SB 1241 as one of the most important pieces of worker legislation in years. Generally speaking, the new law provides that employees who work and reside primarily in California may not be required to adjudicate employment-related claims outside the Golden State, nor can they be required to adjudicate claims using the law of another state even if the claim is filed in California. Employers should take care that their post-January 2017 employment agreements comply with the new law. The law specifically applies to arbitration clauses.

Workplace Smoking

ABx2 6 expanded workplace smoking restrictions so as to expand the definition of “smoking” to include “the use of an electronic smoking device that creates an aerosol or vapor, in any manner or in any form, or the use of any oral smoking device for the purpose of circumventing the prohibition of smoking.” E-cigarettes are, therefore, now viewed on the same basis as actual tobacco cigarettes.

All-Gender Rest Rooms

AB 1732 requires all single-user toilet facilities in any business establishment, place of public accommodation, or government agency, be clearly identified and designated as all-gender toilet facilities. The provision actually takes effect March 1, 2017.

Is it Time to Review Your Employment Practices?

Leaders in many California businesses are making New Year resolutions that include a serious review of the firm’s HR practices. There is no time like now to assure yourself and your business that your personnel policies are adequate and up to date. Retaining experienced outside counsel is generally a key to best practices in personnel law. For years now, CKB VIENNA LLP has represented all sorts of businesses in employment law matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

What Prop 64 Means for California Employers

While the recent presidential election has appropriately garnered lots of interest and discussion in the Golden State, passage of Proposition 64 – the voter initiative to legalize the recreational use of marijuana – is also the talk of the town. Apparently a lot has changed since a similar initiative was voted down six years ago. Various pundits have voiced opinions about the probable effects of legalizing weed in the most populous state in the country. Many employers are voicing concern about the viability of their existing drug-free workplace policies. What does Prop 64 really mean for California’s employers?

Widespread Legal Recreational Use May Not Be Immediate

While Californians over 21 years of age or older may now legally smoke marijuana legally, they must do so privately. They may have up to 28.5 grams of marijuana and up to 8 grams of concentrated marijuana (e.g., hash) in their possession, at least according to the Official Voter Information Guide that was published in connection with the proposition.

Appropriately aged adults may also grow up to six marijuana plants at a private home. Under the proposition, they may not:

•  Smoke marijuana while driving a motor vehicle

•  Smoke it in a public place, or in any location in which smoking tobacco is prohibited

•  Possess marijuana on the grounds of any school, day care center, or youth center while children are present

Unless you have your own plants, you may find it difficult to purchase marijuana legally. People without a medical marijuana card may not be able to purchase the product from dispensaries until a separate provision of Prop 64 goes into effect on January 1, 2018. The state has until then to set up a dispensary system.

Prop 64 was not Crafted so as to Affect Employer’s Workplace Drug Policies

Employment law experts note that Proposition 64’s primary component is the decriminalization of recreational marijuana use; it does not ban or restrict a California employer’s ability to regulate marijuana usage within the workplace. In fact, the proposition explicitly allows public and private employers to enact and enforce workplace policies pertaining to marijuana.

Employers are generally allowed to set rules regarding productivity within the workplace. One’s ability to be stoned at home does not, therefore, translate into the right to show up for work in such a condition.

Testing is Not an Exact Science

One problem with marijuana testing: It can observe the presence of marijuana within a person’s system. Since the chemicals associated with marijuana can remain in body cells for days – some argue weeks – after pot use, there is no direct correlation between testing positive for marijuana, on the one hand, and being impaired by it, on the other. As law enforcement officials note, “There is no equivalent of .08 BAC for marijuana.”

Marijuana Remains a Schedule I Drug Under Federal Law

Employers and pot smokers alike should reflect upon the fact that under the federal Controlled Substances Act, marijuana remains a Schedule I drug. That designation is reserved for substances that are prone to abuse and psychological/physical dependence. Because of that federal law, employers can still refuse to hire applicants who test positive for marijuana use.

Employers Should Review Their Drug Policies

In the aftermath of Prop 64’s passage, employers will find it important to review existing drug policies to ensure that existing employees understand employer policies regarding marijuana use. They should also make sure those positions are clear for new hires. Navigating through the post-Prop 64 time frame can be difficult. Many prudent employers are seeking the counsel of experienced attorneys like CKB VIENNA LLP. Our firm has represented all sorts of businesses in employment law matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

“Just Walk Away Renee:” Consequences of a Seller’s Breach of a Commercial Real Estate Contract

It happens more often that one might think: The owner of a commercial real estate tract or parcel enters into a contract with a prospective buyer and the owner gets cold feet. Perhaps the owner realizes that the prospective buyer is getting the better side of the bargain. Perhaps the owner decides that it can best utilize the property for its own purposes. Can the owner take the advice of the classic 1967 song by The Left Banke: “Just Walk Away (Renee)?” If the owner does so, what can the shunned purchaser do?

“I’ll Sue, I’ll Sue”

In this litigious world, the quick retort of the jilted purchaser might be, “I’ll sue, I’ll sue.” Yet another legitimate question is, "Sue for what?” The purchaser wanted the tract or parcel of real estate, not a lawsuit.

Aggrieved Party Ordinarily Has Responsibility to Minimize its Damages

Within the American system of laws, an aggrieved party to a contract indeed can generally sue to recover the damages caused by the other party’s breach, but the aggrieved party may not merely sit back and watch the damages accumulate; it must mitigate them. For example, if two parties agree to the purchase and sale of 1,000 bushels of wheat at a specific price and the seller refuses to move forward with the sale, prospective buyer must mitigate its damages by completing the purchase with some other party. If the purchaser has to pay more to secure the 1,000 bushels of wheat, it can recover the difference in a civil action against the original seller.

Wheat is Wheat; Real Estate is Unique

American law, in general – and California law, specifically – recognizes that while wheat is wheat, one parcel of real estate is not like any other; real estate is considered unique. Under the law, no two parcels are considered exactly the same, even if they adjoin. If a shunned buyer is to be made whole, it generally cannot accomplish its original goals by merely buying another tract of real estate. The legal system, therefore, has crafted a special remedy that may, under appropriate circumstances, be used: Specific performance.

Specific Performance

Since each parcel or tract of real estate is unique, the only way an aggrieved purchaser can be made whole is to fulfill the terms of the original contract. Accordingly, California law (and the law of virtually every other state) provides a special remedy: Specific performance. Following a hearing or trial, a court orders the owner to deliver a valid deed to the buyer (upon the payment of the agreed sales price).

Note that specific performance only applies in an action against the seller in a breach of contract action. California courts ordinarily are resistant to the specific performance argument unless money damages are incapable of providing relief. Since sellers generally receive money in the purchase and sale transaction, specific performance is rarely ordered against a defaulting purchaser.

Breach of Real Estate Contract Involves Complex Legal Issues

Any alleged breach of a real estate contract can involve one or more complex legal issues. Having experienced, aggressive legal counsel on your side can be crucial to protect your interests, whether you are an aggrieved buyer or seller. For many years now, CKB VIENNA LLP has represented landowners, leaseholders, property owners, and others in all sorts of disputes related to California real estate. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.