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Business contracts do not last forever. Many of them include a specific date when the contract ends, whether it is an employment contract or part of a partnership agreement. However, terminating the terms of a contract is not always in the best interest of the business. There are ways to make conditions of a contract continue to apply, even after the contract ends. Most California business owners are familiar with survival clauses, but they must understand how these clauses work and when to use them. HOW DO SURVIVAL CLAUSES WORK? If a section of a contract has a survival clause, that section persists and legally binds the parties even after the contract expires – or the parties terminate it. Business owners often use survival clauses in confidentiality agreements. Ensuring that these agreements remain legally binding for a time after the contract expires can help business owners proactively protect their company, should they face any changes regarding the contract. SURVIVAL CLAUSES ARE CRITICAL WHEN BUSINESS OWNERS DISCLOSE THEIR INTELLECTUAL PROPERTY Business owners can add a survival clause to their contract when they want specific warranties or liabilities to persist. However, since these clauses are commonly used with confidentiality agreements, these clauses are generally essential whenever intellectual property is involved. Survival clauses can help protect intellectual property when: Businesses enter into a new deal; Employers hire or terminate an employee; Businesses create a new partnership; or Businesses engage with manufacturers. REMEMBER, THE STATUTE OF LIMITATIONS STILL APPLIES Creating a survival clause can allow the terms of a contract to continue for a time. However, even this clause is subject to a statute of limitations. That is why it can be beneficial for business owners to consult an experienced business attorney to craft an effective survival clause that protects their business and prevents serious contract disputes in the long-term.

The year 2019 brought many changes to California employment laws. From new sexual harassment training regulations to the ABC Test for independent contractors, employers all across the state had to move fast to comply with these new laws to avoid lawsuits. However, yet another change in state laws could leave employers facing more risk from discrimination lawsuits. 2019 LAW EXTENDED THE FEHA STATUTE OF LIMITATIONS In October 2019, Gov. Gavin Newsom signed Assembly Bill 9 into law, which extended the statute of limitations under California’s Fair Employment and Housing Act (FEHA). In the past, employees had one year to report an incident of: Discrimination; Harassment; or Retaliation. The recent law change extended the statute of limitations to three years. Employees now have three years to file a complaint with the Department of Fair Employment and Housing. They also have an additional year to file a civil lawsuit. WHAT DOES THIS MEAN FOR EMPLOYERS? Discrimination lawsuits can be a considerable point of stress for employers. They pose a serious risk to the company – both in terms of finances and the company’s reputation. Extending the statute of limitations to three years could only increase that stress. In three years, employers might no longer have valuable information pertaining to a discrimination case, such as: The employee’s record; Documentation of the employee complaint; or Witnesses of the incident. Therefore, the extension of the statute of limitations should directly affect the way employers manage complaints of discrimination and keep records of these incidents. Proactively addressing the strategies for preventing discrimination and maintaining records can help businesses protect themselves in the long run.

While managing employees, you have likely distinguished between two diametrically-opposing mindsets. Some show up consistently and do what you ask them to do, without question. And others seek, and potentially require, further understanding about your business operations. A worker’s position, tenure and advancement prospects may convince you to allow increased transparency. However, protecting your interests is vital. As such, it may be best to require a non-disclosure agreement (NDA) before sharing sensitive information. WHAT IS AN NDA? Also called a confidentiality agreement, an NDA may be an essential part of concealing your business information from competitors. Whether this serves to protect your intellectual property, expansion plans or client information, an NDA legally prohibits a worker from sharing information gained under your employ. Discussions of a potential deal between your business and another may also involve an NDA. In this case, both companies would agree not to release information about the other. WHAT KIND OF INFORMATION WOULD YOU WANT TO KEEP PRIVATE? Disclosing your proprietary information may be one of the worst things you could do in business. The things that set you apart must remain secret to maintain your competitive edge. Examples of information you may protect in an NDA include: Trade secrets Computer applications, programs and software Sales and distribution strategies Innovative ideas, research and developments Manufacturing processes Contractor, supplier and vendor information The nature of your business may determine different agreements among those working in various capacities. And you may want to include a non-compete clause for some of your higher-level employees. Possibly, you will not experience problems related to information leaks. However, regardless of how much you trust those around you, an NDA will inform your employees about the facts and figures they may not divulge. And should a potential problem surface, you can refer to your documentation to support your case.

In previous blog posts, we have discussed the importance for businesses to comply with the Americans with Disabilities Act (ADA). If they do not make their businesses accessible, they face the risk of lawsuits from both consumers and employees. However, a landmark case here in California may have just increased the risk that all businesses could face. APPELLATE COURT RULES WEBSITES ARE PUBLIC ACCOMMODATIONS In 2019, the Second District Court of Appeal in California ruled that business websites are also subject to the standards and accommodations established by the ADA. Essentially, since websites are open to the public, they must also be accessible to the public. This ruling resulted from the case of Thurston v. Midvale Corp. Cheryl Thurston, who is blind, could not access the website of The Whisper Restaurant and Lounge with her screen reader technology. She claimed that the website was not compatible with the technology so she filed a lawsuit against the restaurant – not under the ADA, but under California’s Unruh Civil Rights Act. The restaurant, owned by Midvale Corp., argued that the website was not subject to the regulations because the Unruh Civil Rights Act provides equal rights for all in “business establishments.” However, the Court ruled that the website was, in fact, “a part” of the business establishment. THIS RULING COULD LEAD TO MANY MORE LAWSUITS IN THE NEAR FUTURE This case could set a precedent and open the door for many other lawsuits regarding accessibility to business’s websites. However, businesses can be proactive to prevent such lawsuits by: Reviewing the features of their websites carefully; Ensuring websites are compatible with many technologies, including screen readers; and Creating standards and best practices for the business and employees to follow to ensure accessibility. Generally, it is also helpful for business owners to review the regulations set forth by the ADA and the Unruh Civil Rights Act to make sure their business remains in compliance.

Every business owner hopes that they can instill a positive culture in their workplace – where employees feel valued and appreciated, and in turn are happy and productive. However, certain aspects of the business world naturally bring about the opposite of those feelings. From not getting a job to facing termination, or even dealing with unfair treatment in the workplace, the job market can be rife with rejection and disappointment, leading to complaints that result in discrimination lawsuits. According to the California Department of Fair Employment and Housing, the protected classes of employees in California are numerous: Race Color Religion (includes religious dress and grooming practices) Gender (includes pregnancy, childbirth, breastfeeding and/ or related medical conditions) Gender identity, gender expression Sexual orientation Marital status Medical Condition (genetic characteristics, cancer or a record or history of cancer) Military or veteran status National origin (includes language use and possession of a driver’s license issued to persons unable to provide their presence in the United State is authorized under federal law) Ancestry Disability (mental and physical including HIV/AIDS, cancer, and genetic characteristics) Genetic information Request for family care leave Request for leave for an employee’s own serious health condition Request for Pregnancy Disability Leave Retaliation for reporting patient abuse in tax-supported institutions Age (over 40) While discrimination as a concept might be common knowledge and running a business comes with risk, there are steps business owners can take to prevent it. The first is training. The second is seeking legal advice at the very outset of a potential issue. And the two concepts are not mutually exclusive; employers must do both in order to minimize their potential exposure.

The term “union” alone can create a significant amount of stress for employers and large business owners alike. Even though unions now exist in most companies and fields of employment – and have for a long time – it can be an overwhelming matter to deal with for many employers. So, what should employers know if their employees begin efforts to unionize? EMPLOYERS MUST KNOW WHAT THEY CANNOT DO Employees have a federal right to form or join a union. Although unions do not generally threaten businesses, it is essential that California employers understand what they can and cannot do in these cases. For example, employers cannot: Discriminate against or threaten employees involved in union activities; Offer benefits, such as more health benefits or higher wages, for the sole purpose of persuading employees not to unionize; Prevent employees from exercising certain rights, including joining the union, speaking about union efforts or wearing insignias relating to the union; or Ask or interrogate employees about union efforts and events. Engaging in these activities is a violation of the National Labor Relations Act, which could create significant issues for employers and companies. THERE ARE A FEW ACTIONS EMPLOYERS CAN TAKE However, there are a few things that employers can do when facing unionizing efforts. In these cases, it is often beneficial to consult legal counsel about how to move forward, but employers should know: They do still have the right to know about any unionizing efforts occurring in their company. For example, although this article pertains to small businesses, the information and rights covered apply to businesses of all sizes; They can provide employees with comparisons of unionized workers’ benefits and nonunionized workers’ benefits; and They can make a statement to employees about current benefits, as well as their perspectives about unionizing and the current work without a union. Employers can directly state that they hope their employees will not vote in favor of a union. They simply cannot pressure employees or violate any of their rights in the process.

Large companies often feel like they are untouchable. However, often just the opposite is true. The larger a business becomes, the more risks they must manage – and the more scrutiny they might face. These increased risks are clear in the lawsuit recently filed against Amazon and its partnership with the home security company, Ring. RING AND AMAZON FACE AN ONSLAUGHT OF CHARGES Home security systems, like the ones sold by Ring and Amazon, have swept the nation. However, hackers have been able to get into these systems, leading many consumers to turn their anger on the companies. According to Business Insider, customers brought a federal lawsuit against the companies with a long list of charges, including: Negligence and breach of an implied contract; Invasion of privacy; Breach of the implied warranty; and Unfair competition law violations. These are all serious charges, and Amazon and Ring could face considerable damages and penalties if federal courts find them liable for these claims. LARGER COMPANIES CAN SUFFER LARGER DAMAGES IN CASES LIKE THIS In cases involving the violation of unfair competition laws, businesses generally have to reimburse the other parties for damages they suffered, plus potentially punitive damages and attorney’s fees. To calculate these damages, courts will consider: The damage caused by the misconduct; How many violations of the law occurred; How long these violations continued; and The net worth of the accused party, which in Amazon’s case, is significant. This could add up to huge financial losses, not to mention the damage to their reputation and public image. Small companies as well could suffer irreparable harm if found liable for unfair competition violations. That is why it is critical for businesses to seek experienced counsel if they are charged with violating the law, so they can protect their reputation and future business ventures.

When it comes to employment issues, most employers should try to resolve a dispute before it escalates and a lawsuit is the only alternative. As an additional alternative to trial, many employers have required their employees to enter into arbitration agreements as a condition of their employment which, in California, were previously legal. This has recently led to a statewide controversy over a new law. CONTROVERSY OVER AB 51 LEADS TO A LAWSUIT, RESTRAINING ORDER We have discussed AB 51 in previous blog posts, in which we indicated that Gov. Gavin Newsom signed the bill in October 2019 to: Ban employers from mandating agreements that force employees to waive their rights, such as mandatory arbitration agreements; Prevent employers from including such agreements as conditions for employment; and Prohibit retaliation against employees who choose not to sign voluntary agreements. And any violations of these new regulations could have left employers not only facing lawsuits from employees but also criminal charges. The law was set to go into effect on January 1, 2020. However, the Chamber of Commerce filed a lawsuit claiming the law violated the Federal Arbitration Act in December. In January 2020, U.S. District Court Judge Kimberly Mueller determined that lawmakers could not move forward with enforcing Assembly Bill 51 and issued a temporary restraining order on the enforcement of the new law. WHAT DOES THIS MEAN FOR EMPLOYERS? The end of 2019 left California employers rushing to comply with several new employment laws. However, the requirement for employers to adjust their arbitration agreements and workplace policies is not enforceable just yet, now that AB 51 is on hold. This is good news for many employers across the state, but it is only a temporary reprieve. Soon the court will determine whether to permanently enjoin AB 51 or allow it to be enforced. We will, of course, address that upcoming ruling in future blogs. In the meantime, we will continue to discuss the pros and cons of having an arbitration clause in your employment contracts.

When a former employee misappropriates your company’s secrets in violation of their non-compete agreement with your company, it may feel like a punch in the gut and you may not know how to respond. WHAT DO NON-COMPETE AGREEMENTS PROTECT? Non-compete agreements protect a variety of business interests. They prevent employees from working for a competitor, or providing them information, within a certain geographical area and/or period of time after leaving your company. They may also prohibit employees from using company trade secrets if they decide to start their own business. By law, California does not enforce these agreements in most circumstances. But your company – and many others in the state – may use a properly crafted non-compete agreement, in conjunction with a non-disclosure agreement, to discourage the misappropriation of your business information. WILL EMPLOYEES FACE CONSEQUENCES? You may have concerns that a former employee will use or reveal your company’s trade secrets. California does not recognize inevitable disclosure doctrine. This doctrine assumes an employee would use your secrets in their new role and enjoins them from doing so. Yet, your company can receive injunctive relief if the employee has threatened to appropriate your secrets. A court-ordered motion will stop them from acting on their threats. When your former employee uses your company’s secrets for personal or business advantage, they have committed theft. In this case, you can file a lawsuit against them for stealing your information. Understanding the difference between non-compete agreements and non-disclosure agreements, and how they can be applied in California, will help you to implement the appropriate, enforceable safeguards to protect your business secrets.

When property owners claim that the foundation is unstable, or water is intruding into their building, they often blame the company who built it. These property owners, whether they are homeowners or small business owners, often do not understand the complex details of construction. Therefore, they must rely heavily on expert witnesses to prove their claim. That is why it is important for contractors and construction companies to understand the role of expert witnesses in these cases. Depending on the type of issue – in our hypothetical water intrusion near windows – you would typically retain a window expert, framer, water proofer and perhaps a general contractor to provide an overall repair estimate. In other cases, perhaps a structural engineer for foundational claims, wall cracking and unlevel floors; a geotechnical engineer for soils issues, settling, toxicity; plumbers and electricians, etc. PROPERTY OWNERS NEED EXPERT WITNESSES TO PROVE DEFECT CLAIMS Claiming the existence of a defect or damage is not enough to warrant compensation in a construction defect claim. Property owners often have to consult expert witnesses to prove: The cause of the defect; The quality of work; Violations of California building codes; The standard of care; The extent of the damage; and The reasonable cost of repair. EXPERT TESTIMONY CAN BE ESSENTIAL FOR DEFENSE TOO Expert witnesses play an important role in defense as well. Adding expert testimony in addition to the defense is helpful to: Reiterate and give authenticity to the defense; and Effectively challenge expert testimony from the other party. Expert witnesses can significantly bolster defense against a defect claim. The use of expert witnesses often depends on the case that contractors face. However, contractors must ensure they understand how beneficial experts can be to preserve their reputation in these complex cases.

A trademark is more than just intellectual property. It is a symbol that represents the business’s quality, reputation and service. It differentiates a company’s product from any others. That is why California businesses must protect their trademarks. And it seems this is especially important in the current state of the business world. REPORT: A SIGNIFICANT INCREASE IN TRADEMARK INFRINGEMENT CASES IN 2019 According to a report by CompuMark, 85% of brands had to contend with trademark infringement in 2019. That is an alarmingly high rate. Several businesses across the country reported that they suffered significant consequences from infringement as well, such as: 38% of businesses experienced a considerable loss of revenue; 37% reported damage to their brand; 46% had to rebrand their business to make up for the damage; and 75% of these cases led to litigation. It is critical to note that not all of these cases involved infringement of their business’s name or symbols. Businesses face evolving kinds of infringement involving their: Web domains; Social media accounts; and Advertising practices. BUSINESSES MUST TAKE TRADEMARK PROTECTION SERIOUSLY Business owners should take aggressive action to protect their trademarks, including: Registering their trademark and/or trade name(s) properly; Monitoring the use of their trademark, especially online; and Issuing a cease and desist letter. If a business needs to escalate their effort beyond a cease and desist letter to protect their trademark or trade name, they should consult an experienced attorney to seek injunction relief and perhaps even to pursue litigation to recover damages for the infringement, while in the process attempt to negotiate a permanent resolution.

A business partnership is often compared to a marriage. A partnership resembles marriage in many ways—close relationships, shared finances, shared responsibility for the “kids”, i.e., employees. And just like divorce, splitting with a business partner can be devastating both personally and financially. So, what if your business partner sues you? HOW CAN YOU DEFEND YOURSELF AND YOUR STAKE IN THE BUSINESS? In sports sometimes the best defense is a good offense, and it’s also sometimes true in business. Even though at the beginning of a venture all the members, or partners, may have solid relationships with one another, and everyone is optimistic and enthusiastic, almost inevitably disputes will arise and to confront the larger disputes you’ll need a roadmap to guide you. Creating a clear operating agreement at the outset of your business venture is one of the best ways to protect yourself against future disputes. Defining your roles and each partner’s percentage of the business is key. Additionally, your Articles of Incorporation should include an exit clause, which outlines exactly what will happen if one of you wants out of the arrangement. Be a working, knowledgeable partner in your business. For example, periodically review the finances even if you’re not the partner in charge of maintaining the books. Select your legal representation carefully. If your partner moves forward with a suit, hire an experienced attorney who regularly handles business litigation. Be prepared for litigation. An excellent attorney will help you prepare for the meetings ahead. Bring financial records and any other pertinent evidence to relevant meetings so that it is readily accessible. Choose whether it’s worth it to stay. One possible outcome is buying out your partner, but this may or may not be right for your situation. While a partnership dispute is stressful and problematic, the right preparation and excellent representation can give you an advantage.