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Business partners usually establish an agreement in which they divide responsibilities, whether they are financial or managerial duties. Partners also share a set of duties under the law. WHAT IS A PARTNER’S FIDUCIARY DUTY? Business partners hold a fiduciary duty to their business and their partnership. Put simply, this duty requires business partners to make decisions and act in the best interest of the business partnership. California law clearly outlines the obligations included within this duty. General partners have: A duty of loyalty: Of course, business partners would expect each other to have a sense of loyalty to the business. However, this specific duty means partners should not work against the interests of the business or compete against it. This includes placing the business’s interests above one’s own interests. A duty of care: This obligation requires partners to offer and maintain the best possible service to the partnership. Therefore, partners must avoid acting negligently or in any way that knowingly violates the law. Essentially, partners should always act in good faith. In many cases, the partnership agreement also includes these responsibilities. Even if it does not, California law still requires partners to uphold these duties. WHAT ACTIONS CAN BE TAKEN IF PARTNERS BREACH FIDUCIARY DUTIES? Breaches of a partner’s fiduciary duty often manifest as: Omitting financial information in certain records; Taking opportunities from the business for their personal gain; Making decisions in favor of a conflict of interest; or Even, in extreme cases, engaging in insider trading. In a partnership, any of these actions can feel like a betrayal. They can also result in significant losses for a company – which are primarily financial. Partners who breached their fiduciary duties are liable for the damages the business suffered as a result of that breach. The other partners who suffered from the breach can file a legal claim to recover damages over: The breach of the fiduciary duty itself; or Any resulting breach, such as a breach of contract. Regardless, they should ensure they follow any guidelines the partnership agreement provides for them in the event of a dispute. Disputes involving a breach of fiduciary duty can be complex. Business owners facing such a case should consider consulting an experienced business attorney so they can determine how to manage the dispute – and the damage caused – while protecting the future of their business.

Every construction project carries a risk, whether severe weather delays work, or the parties dispute terms of the contract. However, defect claims possibly pose the greatest risk. Even when builders follow all of the plans down to the last detail, mistakes can happen. Builders know that construction defects can often lead to time-consuming and expensive litigation, but it can also put the company’s reputation in jeopardy. That is why construction companies must always be mindful of the risk of construction defects – especially the ones that occur most often. STUDY: WHAT ARE THE MOST COMMON CONSTRUCTION DEFECTS? LJP Construction Services recently completed a four-year study regarding construction defects. The study determined the most common sources of defects in residential construction projects. These included issues with: Weather barriers; Framing; Mechanical and plumbing systems; Window and door installations; and Fire-resistant components. The study also found that these defects commonly resulted from the misinterpretation or deviation from manufacturer plans. There is some good news. There were fewer defects reported in California, which also held a lower deficiency rate than many other states and the national average. Even so, builders face the risk of liability for any defects found in a finished project. Construction companies must always be diligent when inspecting their work and be on the lookout for these common defects in particular. IS IT POSSIBLE TO PREVENT THESE DEFECTS? Construction companies must be proactive, but it is a difficult task to completely eliminate the risk of defects. In many cases, defects do not manifest until long after the project is completed. However, there are several steps that construction companies can take to mitigate the risk of defects and defect claims, including: Completing a thorough review of manufacturer guidelines; Performing careful and continuous inspections of work completed; Maintaining quality control policies; Evaluating individual workers’ labor; and Documenting the entire process of the project. Builders should also review California law and all contract information.

Running all of the aspects of a trucking company requires great attention to detail. Employers must organize timetables, shipments as well as drivers to ensure they fulfill their contracts and maintain success. On a larger scale, they must also pay close attention to state and federal laws to avoid complex legal matters. A recent case only emphasizes the importance of understanding the nuances of the law. TRUCKING COMPANY ORDERED TO COMPENSATE EMPLOYEE Baker & Associates is not involved in this case, but it is critical that all business owners understand and learn from the details of this recent case. Earlier this year, California company JHOS Logistics and Transportation Inc. terminated an employee when he would not drive a truck he believed exceeded weight restrictions. This situation might seem rather simple and straightforward; however, it was anything but. Terminating an employee always requires care to make sure they do not violate the law. In the JHOS Trucking case, terminating this employee was in direct violation of the Surface Transportation Assistance Act (STAA). The STAA states that employers cannot discharge an employee if they: File a complaint regarding a violation; or Refuse to drive a vehicle if it violates safety standards. Therefore, the Occupational Safety and Health Administration (OSHA) determined that the company violated the law and ordered the company to: Rehire the employee; Repay $190,000 in lost wages; Pay $25,000 in punitive damages; and Cover $5,000 in compensation and attorney fees. OSHA’s order also required the company to train supervisors and managers regarding employee protections to prevent situations like this from occurring in the future. EMPLOYERS MUST TAKE TIME TO UNDERSTAND THE LAW This case illustrates only one of the reasons companies must be consciously aware of employment laws. Additionally, maintaining a thorough understanding of these laws allows business owners and employers to: Prevent risks related to terminating an employee; Protect the business from litigation; and Avoid significant financial consequences. Unfortunately, employers face a high risk of liability under the law in cases like this. They can reduce that risk if they take time to understand the law, but it might be helpful to consult a knowledgeable business attorney before moving forward.

Businesses depend on their brand. Everything business owners do is to build that brand, and in turn, trust in their company. Unfortunately, legal disputes and litigation often put the all-important brand in jeopardy. SHORT-LIVED DISPUTES CAN HAVE LONG-LASTING EFFECTS Reputational damage is one of the most serious risks businesses face. This is because business owners only have so much control over their reputation. They can build their brand with painstaking care, but a business’s reputation stems from what others – consumers and other business entities – think of them. That is why facing claims of discrimination or breach of contract can have a significant impact on: The trust established with customers; The relationships with partners or shareholders; Partnerships or relationships with other businesses and entities. These negative impacts can also directly affect the business’s value and financial success in the long run. As we discussed in previous blog posts, this risk is exponentially higher in the digital age than it has ever been before. News of any disputes or complaints can quickly spread in the media and undermine a business’s reputation and brand name. Even if the dispute is resolved quickly, the impact on the business’s brand and relationships can be lasting. HOW CAN YOU CONTROL REPUTATIONAL DAMAGE? It is difficult to control the business’s reputation, especially in today’s world. However, business owners can take action to protect it. Business owners should: Carefully monitor their company’s presence on the internet, especially when it comes to what consumers are saying about their business; Create a plan of action to protect the reputation in the event of a lawsuit; and Connect directly with consumers and business entities if a lawsuit threatens the business’s reputation to reassure them. The goal of protecting a business’s reputation is also one reason why many business owners strive to negotiate and resolve disputes outside of the courtroom. As of now, California business owners can still enforce arbitration agreements, since a judge put a hold on Assembly Bill 51’s ban. However, business owners should not rely on that ban alone. They must ensure they approach any dispute with great care and strategy to preserve their brand and reputation.

The digital world of commerce and business is growing every day. And over the last few years, third-party marketplaces that market catalogues of products from many different sellers have increased in popularity and use. Many businesses – large and small – often see these catalogues as an advantage to get their product out to consumers. Amazon is the epitome of this, as they allow competitors and small businesses to sell their products through their site. However, this model seems to be putting Amazon in a tough spot as they grapple with legal claims of liability. COURT FINDS AMAZON LIABLE FOR THIRD-PARTY PRODUCTS Baker & Associates is not involved in this case, but business owners must be aware of the lawsuit’s developments – and what they could mean for their own business. In a monumental ruling, California’s Fourth District Court of Appeals determined that Amazon could be held liable for defective products from third-party sellers. In this recent case, the plaintiff claimed she bought a replacement laptop battery through Amazon, though the battery was from a third-party seller under the name “E-Life.” The plaintiff stated the battery exploded and caused serious burns when she used the computer. When she filed a claim against Amazon, the online retailer reported it did not distribute, manufacture or sell the product. Therefore, they were not liable. However, the California Court of Appeals disagreed. In the ruling, the Court determined that Amazon played a significant role in the sale of the product, as the company: Provided the product listing; Stored it in an Amazon-owned warehouse; and Shipped it with Amazon packaging. Amazon successfully avoided liability in past cases like this one, but this decision could change that. Even with Amazon’s plan to appeal, this ruling establishes a precedent that could open the company – as well as other online retailers – to a considerable risk of more lawsuits and significant consequences. WHAT SHOULD BUSINESS OWNERS DO? Business owners know they could be held responsible for defective products they manufacture and sell. However, this ruling could substantially increase the liability businesses face, especially if they partner with third-party sellers. And businesses of all sizes, including retail giant Walmart, are taking steps into the e-commerce world. Business owners considering this step should ensure they take great care when participating or collaborating in third-party marketplaces. They must consider the risks involved in this most recent ruling and make sure they proactively evaluate the liabilities they could face before making this move.

Most business owners take great care to prevent legal disputes. However, it is almost impossible to totally eliminate all their risk; it’s simply the reality of running a business. Even so, there are ways that business owners can protect themselves while resolving legal disputes. For example, one critical factor to protect the business is to secure a confidential settlement agreement. WHO IS SUBJECT TO CONFIDENTIALITY IN THESE CASES? There are often many parties involved in the process of resolving a business dispute. This can make it challenging to keep certain matters confidential from the public – including their consumer base and other business affiliates. So, business owners often wonder how they can protect their business when settling damaging disputes or claims. In many cases, making a settlement agreement confidential can help. The confidentiality clause applies to all parties involved in the case, including: Plaintiffs; Defendants; and Attorneys or counsel. With such a clause in place, none of the parties listed above can discuss either the dispute or the settlement of the matter. This not only keeps the details of this case between the relevant parties, but it can also protect businesses from landslide of similar claims. CONFIDENTIALITY IS NOT ALWAYS A POSSIBILITY In 2018, California lawmakers and Gov. Jerry Brown passed a law that bans the use of such agreements in employment disputes involving: Sexual harassment or assault; Discrimination based on sex; or Retaliation for reporting sexual harassment. This ban applies in all these cases, regardless of whether the parties resolved the dispute in or outside of court. Understanding the benefits – as well as the limitations – of a confidential settlement agreement is critical, especially when business owners face the risk of a legal dispute.

All employers know their responsibilities and obligations when it comes to their workers’ personal protective equipment (PPE). Fulfilling these obligations is necessary to keep workers safe and employers in line with state and federal regulations. However, in the middle of this global pandemic, the nuances of these obligations have recently led some employers to face serious disagreements with their workers and a high risk of litigation. EMPLOYERS MUST PROVIDE PPE TO EMPLOYEES According to the Occupational Safety and Health Administration (OSHA), federal law requires employers to take several steps to ensure workplace safety, including: Assessing hazards in the work environment; Determining the proper PPE to mitigate these hazards; Providing their employees with PPE at no charge; and Maintaining the PPE and updating PPE policies if necessary. Violating these requirements could result in employers facing significant fines and even legal disputes. It seems some employers are currently facing complex issues regarding PPE, though not for the same reasons many might think. COULD CONTROVERSY BE BREWING REGARDING PPE AND WORKER CLASSIFICATION? In July, CNN reported on a protest conducted by Lyft drivers in California who stated their employer did not provide them with the proper PPE to stay safe during the pandemic. They have safety kits available for purchase, but they are not providing PPE free of charge. And many drivers claim Lyft will not provide them with PPE because they still do not want to recognize them as employees under Assembly Bill 5. California employers are familiar with AB 5 by now, as it went into effect on January 1, 2020. However, CNN reported that Lyft and Uber still have not complied with the new law. Therefore, they still classify their drivers as gig workers instead of employees. WHY IS THIS IMPORTANT FOR EMPLOYERS TO KNOW? Several businesses across California employ both employees and independent contractors. These employers must always be consciously aware of: Keeping workers safe; but also Complying with AB 5. This is critical to avoid serious penalties – and litigation. Business owners should monitor the developments in this case. However, they should also proactively review their practices and PPE policies. This is especially important to avoid complex disputes with employees and future legal issues.

When employees spend roughly 40 hours a week together, it is common to establish important connections, friendships and in some cases, romantic relationships. Most employers might not think this is significant. However, romantic relationships in the workplace could quickly turn sour and have considerable effects on the business that could lead to serious disputes. RELATIONSHIPS AT WORK CAN CAUSE MAJOR ISSUES FOR BUSINESSES An employee’s relationship is an aspect of their private life, right? Many employers believe it is not their concern, but workplace relationships are another matter entirely. Take the events in the ongoing lawsuit between McDonald’s and its former CEO, for example. The former CEO had relationships with several subordinate employees. He is now facing charges of misconduct and a lawsuit from the restaurant chain. This is an extreme case, but it still illustrates the risk these relationships can pose. Relationships between supervisors and subordinate employees create the most risk for employers, as they can often lead to: Hostile work environments: In 2005, the California Supreme Court determined that favoritism resulting from a workplace relationship could create a hostile work environment for other employees. The Court also ruled that employers could be held liable in these cases. Harassment: The risk of workplace relationships can increase exponentially if the relationship ends. If workers retaliate, or one continues to pursue the other, it could lead to sexual harassment complaints or claims of misconduct. These complaints could directly impact the employer and lead them to face serious legal issues. These issues might not exist in a relationship between two employees at the same level, but any personal relationship could lead to a conflict of interest and significant risk for businesses. HOW SHOULD EMPLOYERS ADDRESS THIS MATTER? Although employers cannot exactly enforce a company policy that forbids dating or relationships, they can discuss an employee dating policy in the employee handbook. For example, employers can: Implement policies restricting fraternization between employees and superiors; Establish expectations for employees’ behavior in the workplace; Ensure employees understand the sexual harassment policies at work; and Have the two employees inform Human Resources about the relationship. Workplace relationships are more common than many employers might think, and they are not something employers should overlook. Remember, protecting the business must come first. That means employers must address these risks proactively.

The road can be a dangerous place for anyone – but especially for trucking companies. A majority of their business takes place on the road, therefore auto accidents involving commercial trucks often pose the greatest risk to companies. This is due to the fact that truck accidents often lead companies to face claims of negligence and litigation. According to a recent study, that risk of litigation is only increasing, along with the verdicts against trucking companies. JURIES RULE AGAINST TRUCKING COMPANIES MORE OFTEN THAN NOT The American Transportation Research Institute (ATRI) released a study in June, 2020 evaluating the impact of litigation on trucking companies. The survey determined that: Juries ruled against trucking companies at an increasing rate of 51.7% each year; Plaintiffs, the injured parties, won 97.1% of these cases in California; and The amount of damages juries award injured parties in these verdicts is rising. Essentially, more juries are ruling against trucking companies in accident and liability cases at a considerable rate. This is significant – and worrying – for many trucking companies. TRUCKING COMPANIES MUST UNDERSTAND THIS RISK Most trucking companies, regardless of their size, wish to avoid taking matters to court. Litigation can be costly and damaging to their reputation. However, it is not always possible to avoid litigation when it comes to accident or liability claims. Therefore, trucking companies should be consciously aware of this trend, and how it could affect their: Insurance premiums; Liability; and Defense strategies. It is beneficial for trucking companies to consult a business attorney proactively before they face a legal claim. Then they can take measures to protect their business. HOW CAN COMPANIES REDUCE THE RISK OF LITIGATION? Business owners must ensure they take great care long before they face litigation if they wish to reduce the risk. For example, business owners should review: Hiring, screening and licensing policies for drivers; Training strategies and requirements; and Vehicle inspection policies. Companies should also take great care in choosing who they partner with or contract to drive for them. After all, the steps to prevent truck accidents in the first place are also the steps to reduce the risk of litigation. It is not always possible to avoid risk when most of the business happens on the road, but these are measures that business owners can take to protect the company.

As the business world ventures further into the digital world, doing business theoretically becomes easier and more convenient for businesses and consumers. However, as business increases online, so do the regulations. Every California business owner is probably now familiar with the California Consumer Privacy Act (CCPA). The law requires business owners to inform consumers how they will use their personal information and give them the option to opt-out of any such uses. If they do not comply with this requirement, business owners could face serious fines and legal consequences. And as a recent case demonstrates, these consequences might only increase if a security breach puts consumer data at risk. SECURITY BREACHES ALREADY POSE A SERIOUS RISK FOR BUSINESSES A 2016 report from CNBC found that in 93% of data breaches where information was stolen, the breach occurred in mere minutes. It may only take a few minutes to breach and steal information, but these incidents can cause serious damage to businesses: IBM reports that a data breach costs businesses $3.92 million on average; Hackers could steal intellectual property and jeopardize business practices; and Data breaches involving consumer data also put the business’s reputation at risk. When security breaches involve consumer data, businesses could also face legal consequences. We discussed this in a past blog post, regarding the federal lawsuit against Amazon and their partnership with Ring. However, it seems that the risk of litigation is only increasing with the CCPA. RECENT CASES: THE RISK OF LITIGATION EXPONENTIALLY INCREASED UNDER THE CCPA Although Baker & Associates is not involved in this case, it is important to highlight it. Business owners must understand the risks they face. The retail giant Walmart Inc. is facing a class-action lawsuit under the CCPA after a hack put consumer data at risk. The proposed case claims that consumers could suffer significant damages, especially if hackers share their personal information on the dark web. It seems that this issue is not unique to Walmart. Several businesses are facing lawsuits after security breaches. And with the new requirements under the CCPA, it does not seem that the high risk of lawsuits will decrease anytime soon. BUSINESS OWNERS: TAKE SECURITY MEASURES SERIOUSLY Business owners understand the importance of maintaining a high level of security, both in-person and in the digital world. With this increased risk of litigation, business owners must ensure they revisit their cybersecurity strategies to protect their business.

In a way, contracts are the law in the business world. They establish the terms of a business relationship, as well as what each party’s specific responsibilities are in that relationship, and even a small breach of the contract can have devastating consequences. When business owners discover a breach of contract, it can be tempting to take immediate action to try to recover the losses suffered and reduce the risks posed to their business. However, to be most effective before moving forward, business owners should know the types of remedies they’re entitled to and both the downsides and costs of attempting to pursue their remedies. THERE ARE A FEW POSSIBLE REMEDIES AFTER A BREACH In a breach of contract case, there are typically a few theories of recovery, perhaps including: Requiring the breaching party to fulfill the obligations outlined by the contract; Obtaining monetary compensation for the damages from the breaching party and an injunction; Rescinding the contract and releasing both parties from contractual obligations, especially if the breach caused serious damage to the business; or Creating a new contract, plus repaying damages, especially if the breach occurred because of a misconception. All theories of recovery require legal action within the time limit established by the state statute of limitations. WHY SHOULD BUSINESS OWNERS CONSIDER THE OUTCOME BEFOREHAND? Generally, the contract outlines the remedies for a breach of contract within its language. And if business owners ascertain their remedy beforehand, it can also help to inform their strategy for how to best proceed. Breach of contract cases can be complex. In almost all cases, the sooner business owners contact a competent litigator, the better their chances of obtaining a quick, favorable result.

Joint ventures can be a profitable relationship for both businesses involved. For example, one of the most famous joint ventures in recent years has been Google and NASA to create Google Earth. The companies, as well as the venture, remain separate entities, but work together to create products or even share information for the common good of the overall industry. However, business owners must also be aware of the potential risks that joint ventures might involve, so they can avoid the risks and protect their own ventures in the long run. WHAT ARE THE COMMON REASONS FOR A JOINT VENTURE DISPUTE? In a joint venture, the parties initially negotiate who is responsible for the venture’s costs, profits and losses. These items should be, but generally are not required to be, memorialized in writing. This shared responsibility and liability could potentially lead to disputes over: The percentage of profits that each company collects; If one business does not fulfill their responsibilities; If businesses disagree over their obligations; or If businesses accuse each other of fraud. JOINT VENTURES MIGHT ALSO LEAD TO INTELLECTUAL PROPERTY DISPUTES Businesses in similar industries are often the ones who pursue joint ventures. In the example of the Google and NASA joint venture, both companies play a significant role in technology innovation. Therefore, joint ventures might also involve disputes over intellectual property, including: The ownership of the intellectual property if it was developed in the venture; Intellectual property theft; or Trademark infringement. If businesses pursue a joint venture, they must take great care to ensure their intellectual property is properly protected. AVOID COMPLEX DISPUTES WITH AN EFFECTIVE AGREEMENT Under California law, a joint partnership is viewed similarly to a general partnership. However, businesses often cannot approach disputes in the same way as they would in a general partnership. Understanding potential disputes and complicated legal issues involved in a joint venture can help business owners to create effective agreements to protect their future. To assist in the process in order to avoid the many potential pitfalls, it is typically highly beneficial to consult an experienced attorney to help structure and document the deal.