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As of January 1, Assembly Bill 5, commonly referred to as the gig-worker law, went into effect. California lawmakers passed the law in May of 2019. The law requires all employers to use the ABC Test to classify workers, which would significantly decrease the number of independent contractors in the workforce. The changes that AB5 would bring worried many employers as 2019 came to a close, especially trucking companies, as we discussed in a past blog post. However, trucking companies do not have to worry about complying with AB5 – yet. A FEDERAL JUDGE PUT AB5 IMPLICATIONS ON HOLD FOR TRUCKERS A federal judge in California, U.S. District Judge Roger Benitez, has issued a preliminary injunction to prevent the State from enforcing AB5 on trucking companies. Judge Benitez is also currently considering a permanent exception for truckers as the case goes on. Last November, the California Trucking Association (CTA) filed a lawsuit against the law, claiming it: Violates federal trucking laws and interstate commerce; Would cause irreversible damage to companies and the industry; and It would be far too expensive for trucking companies. Most truck drivers are classified as independent contractors since they often own their own rigs and deliver for many agencies. Therefore, the CTA claimed that AB5 would not be good for the industry drivers either. Judge Benitez agreed; so, even though AB5 went into effect for other California companies as of January 1, 2020, trucking companies are currently exempt. WHAT DOES THIS MEAN FOR TRUCKING COMPANIES? In order for Judge Benitez to have granted the preliminary injunction, he concluded that the CTA’s lawsuit would likely prevail at trial. If that occurs, then trucking companies would continue to be exempt from AB5’s regulations and rules. For now, these companies can continue operating how they usually do, though it might be beneficial to keep a close eye on the developments of this case as time goes on.

Your company likely does its best to compensate employees in a fair and timely manner. Yet on occasion, a disgruntled employee might claim you violated wage and hour regulations. They may try pursuing a settlement, and you may worry that it will hurt your business’ reputation and finances. While your company may have made wage and hour mistakes, it’s crucial to protect it against employees seeking damages. Following these suggestions can help you do so. Follow California’s wage and hour laws California’s minimum wage will increase to $15 per hour in 2022. Currently, it sits at $12 an hour for businesses with 25 or less employees, and $13 per hour for those with 26 or more. The state and country’s fluctuating wage standards may confuse workers. But if you hire an employee at a pay rate that’s now lower than the current minimum wage, you must raise their pay to meet state standards. California’s overtime statutes decree that employees who work between eight and 12 hours in a day will receive one-and-a-half times their hourly pay. And employees who work over 12 hours in a day can receive double their hourly rate of pay. This rate also applies to employees who have worked over eight hours in a row on seven consecutive days. Some employees are exempt from this law, and it’s important to know if your employee’s work falls under this category. Keep detailed employee and pay records Make sure your company has comprehensive employee and pay records on hand. Employee records can help you identify their pay rate, pay changes and work schedule. And pay records track the number of hours the employee worked, any overtime they worked and the dates they received their paychecks. While auditing these records may help you find the mistakes your employee alleged, doing so may also dispel their claim. Wage and hour violations are serious matters. But by following California’s wage and hour laws and keeping proper records, you can protect your business against them. If your company faces a wage and hour suit, working with a legal professional can help you fight it.

California became the first state to ban discrimination against employees based on hairstyles in 2019. The law especially refers to hairstyles that are typically associated with races or cultures. Like many other new California laws, the Create a Respectful and Open Workplace for Natural Hair (CROWN) Act went into effect on January 1, 2020. Some California employers may be aware of the CROWN Act. However, it is critical that they understand the details now that the law is in full effect. THE CROWN ACT BANS HAIR DISCRIMINATION IN THE WORKPLACE Federal and state laws are clear: employers cannot discriminate against employees based on race when making employment decisions, including: Hiring employees; Promoting or demoting employees; or Terminating employees. The CROWN Act goes further than that. It is an amendment to the California Fair Employment and Housing Act (FEHA) that specifically bans discrimination against hairstyles or textures in any workplace policies or actions. Essentially, the law now defines hairstyles as a protected characteristic, just like skin color under the current anti-discrimination laws. Employers can still enforce policies that regulate employees’ appearances and grooming at work. However, the policy must apply to all employees fairly, such as a formal dress code. An employer cannot force an employee of color to change their hairstyle as a condition of employment. WHAT MUST EMPLOYERS DO TO REDUCE RISK? Anti-discrimination laws are quickly becoming stricter and more specific – especially in California. To stay ahead of these laws and avoid the chance of an employee lawsuit, employers must ensure: They review company policies regularly, so they comply with state laws; and They are consciously aware of the new law when making employment decisions. The average discrimination case can take roughly two years to resolve. Managing the litigation while continuing to run a business can be disruptive and expensive.

The words “intellectual property” probably make you think about works that are copyrighted or trademarked like catchy company slogans or taglines. While this is true, it’s not all that intellectual property covers. Intellectual property (IP) also includes trade secrets, which covers private information related to your business, such as programs, processes, techniques and tools that give you a competitive advantage. Therefore, protecting trade secrets from theft and public release is crucial. An angry or opportunistic former employee could take your client list to a competitor to give them an edge. Confidential procedural documentation could end up misplaced or lost. No matter the cause, it is vital to protect your business from the theft of your trade secrets. Take the following tips into consideration for protecting your trade secrets: Provide secure devices and storage. Whether you use computers or storage cabinets to secure proprietary information, they should be as secure as possible. Computers should be password protected, storage containers should have locks, and access to confidential material should be limited. Label documentation properly. Mark confidential documents to prevent any confusion. Only employees with clearance should be able to access these documents. It’s also ideal to limit copies of classified documents so that it’s less likely for them to go missing. Offer onsite security. Posting guards at the entrances and requiring employees to use badges to enter or exit can ensure your building is secure from outsiders. For smaller companies, security cameras may be useful if hiring security officers is outside of your budget. Train your employees. Your employees must know how important it is to keep trade secrets a secret. Provide non-disclosure agreements, training courses and take disciplinary action if someone violates the procedures. These steps can help you secure private information. However, if you find yourself in a situation where you need to protect your business from trade secret theft, consult with an experienced attorney who can help you understand your rights to your intellectual property.

When a business partner breaches their partnership or joint venture agreement with you, it can feel like a betrayal. You may feel the urge to take immediate action against them, but letting emotions take over could put the business at risk. California business owners facing a breach of contract dispute must make sure they understand the next steps they must take to hold the other party responsible while still protecting their business. WHAT SHOULD BUSINESS OWNERS DO AFTER A BREACH OF CONTRACT? In cases of a breach of contract, it is often beneficial for business owners to consult an experienced business litigator to protect their interests and business. However, the next steps business owners should take include: Reviewing the contract: It is critical to carefully review the contract for a few reasons. It helps business owners understand all of the elements of the contract the business partner breached. It is also necessary to review the dispute-resolution clause they established, so they can understand the actions they can take, as well as the statute of limitations, to recover the losses. Gathering additional evidence: Did the business partner fail to complete their responsibilities? Or did they fail to provide the service or product agreed upon in the contract? It is helpful to collect and organize evidence of the breach of contract. Collecting this evidence often helps calculate the losses they suffered. Discussing the conflict with the other party: In most cases, business owners wish to avoid time-consuming lawsuits that draw their focus away from the business but also put their business at risk. It is beneficial to discuss the breach with the party to determine if there is a way to remedy the situation. Unfortunately, there are cases where the other party does not wish to negotiate or rectify the situation. They might also refuse to pay for any of the damages resulting from the breach of contract, claiming they did nothing wrong. In these cases, business owners may have to file a lawsuit to recover the damages they deserve for this breach.

Business mergers can be incredibly complex. It takes time and great care to negotiate a deal, navigate the legal process and merge businesses properly while reducing risks for both companies. The stress of a merger between two large companies might only increase if the businesses face a lawsuit, as in the case of the merger of Sprint and T-Mobile. SPRINT AND T-MOBILE MERGER ON HOLD DUE TO LAWSUIT Two of the largest telecommunication providers and companies, Sprint and T-Mobile, have been planning a huge merger for a while now. T-Mobile offered to buy Sprint for $26 billion, and the Federal Communications Commission approved the merger in October 2019, stating that: It would advance the development of 5G in telecommunications; and It would help both companies to better meet consumer needs. However, ABC News reports that the merger has led to litigation. Several states, including California, are suing to prevent the merger. They state that the merger would decrease the major players in this field from four to three, which they claim could disrupt competition. Although Baker & Associates is not involved in this case, it is critical for business owners to understand the details, so they can protect their own companies. ANTITRUST LAWS CAN PLAY A LARGE ROLE IN THE PUSHBACK AGAINST MERGERS The states suing to stop the merger claim that it would have negative consequences for: Consumers; Prices of the products; Workers in both companies; and Innovation and competition in this field. These concerns could be heavily influenced by state and federal antitrust laws, which encourage competition to benefit the public and consumers. Essentially, these states are saying the merger would create a monopoly that would only benefit Sprint and T-Mobile, not the consumers. WHEN COULD MERGERS LEAD TO LITIGATION? There are a few common reasons that a business merger could lead to litigation, including: When the merger involves a large sum offer; If the merger involves large, influential companies; When shareholders challenge the merger; or If the offer is hostile. Most mergers will not receive the same national attention as the one between Sprint and T-Mobile has. However, business owners considering a merger must still be aware of the potential risk of litigation and be prepared to manage it to help their merger go smoothly.

Employers can avoid significant risks if they take the time to understand the duties they have under the law. And it is easy to determine what these duties are when employers understand their employees’ legal rights. A recent case highlights one of the duties that employers should not overlook: their duty to provide reasonable accommodations for their disabled employees. WALMART SUED IN A CLASS ACTION CLAIMING PREGNANCY DISCRIMINATION In October 2019, the retail giant Walmart faced a large lawsuit over claims of discrimination against pregnant employees. According to Forbes, the employees claimed: They received poor accommodations compared to other employees with disabilities or medical conditions; and Walmart’s policy listed pregnancy in a separate category than those conditions, which excluded them from obtaining certain accommodations. Since pregnancy can cause health complications and even lead to temporary disabilities, the employees filed complaints that they were treated unfairly under the law. Walmart denied these claims. However, they settled the lawsuit and agreed to pay $14 million. WHAT CAN EMPLOYERS DO TO AVOID THIS RISK? California employers can learn quite a bit from this case. If employers ensure they: Comply with the law; and Accommodate employees of protected statuses; Then, they can significantly decrease the chance of both complaints and litigation. That is why employers must understand what kinds of adjustments might be necessary. The Equal Employment Opportunity Commission (EEOC) provides a guide to help employers comply with federal laws. This guide states that employers have a duty to make reasonable accommodations, including: Providing an adjusted work schedule; Restructuring a position or the workplace; Revising workplace policies; and Increasing accessibility in the workplace. It is important to note that the cost of making these adjustments is significantly lower than not complying with the laws that require employers to make these accommodations.

Business owners know that once they enter the business world, it is likely that they will face a serious legal issue at some point in their careers. However, sometimes a high-risk lawsuit can crop up without warning, whether it is from another business, a business partner or even an employee. Here is a brief overview of what businesses should consider when served with a lawsuit. HOW SHOULD BUSINESS OWNERS ANSWER A LAWSUIT? Forbes reports that business owners should not ignore a lawsuit. This often only increases the risks their business faces. Instead, business owners should confront the lawsuit as soon as possible and provide a written response. A carefully crafted, timely response can make all the difference for business owners when they are faced with a lawsuit. It cannot be emphasized enough, that the first thing you should do when served with a complaint is to CALL YOUR LAWYER! Preferably, an experienced business litigator, who will protect both your procedural and substantive rights. There are also very strict and short, time requirements so it is critical you contact your lawyer as quickly as possible. Once a lawsuit is filed and served on you, the chances of you being able to talk your way out of it is remote, and anything you say will inevitably be held against you, making your attorney’s job that much harder. The basic items your attorney will address with you are as follows: Service: The date, time, place and manner in which you were served to make sure it was all proper and the timing for filing a responsive pleading can be properly calculated. Your attorney will also determine whether the case was filed in the proper courthouse (whether federal or state, proper county and proper venue). Related Information:Be ready to supply your attorney with the entire package of documents served on you (or your company), all contracts, correspondence, emails, and notes in any way related to the subject matter of the complaint. Addressing the claims:Filing an answer does not admit fault of any kind. It merely allows you to answer the claims brought against you. If the complaint is defective, your attorney may recommend filing a motion to dismiss instead. Your attorney may also determine that you are entitled to file a cross-complaint for damages to which you may be entitled. Consider terms of negotiation:At certain strategic points during the litigation there may be opportunities to negotiate a resolution. There are also procedures to mediate the case and have the judge conduct a settlement conference.

Employees obviously play a critical role in a company. Most California employers know that, but it often bears repeating. After all, without employees, a company might not succeed – or even survive. Therefore, employers should take care to develop a healthy relationship with their employees. WHY SHOULD EMPLOYERS FOCUS ON A HEALTHY RELATIONSHIP WITH EMPLOYEES? Cultivating a healthy, professional relationship with employees is critical because it can: Significantly increase productivity and quality; Promote loyalty; and Decrease the chance of lawsuits. A good relationship does not eliminate conflict. However, if employees do have concerns, they will likely be more willing to bring their concerns to their employer if they have a trusting relationship. The relationship must be genuine for employers to experience these benefits. A healthy employer-employee relationship should be based on mutual trust, communication and support. VALUES ARE PLAYING A BIGGER ROLE IN THE WORKPLACE THAN EVER BEFORE This relationship might also depend on the elements of the workplace environment, such as: The physical environment of the workplace; and The values that both the company and employer promote. At the beginning of November 2019, the CEO of the fast-food chain McDonald’s was terminated because he carried on a romantic relationship with a colleague. According to NBC, the CEO was ousted because values are playing a larger role for employees across the nation. Employers should take this new focus on values seriously. It might be helpful for employers to revisit their employee handbooks or policies, or perhaps even revise their strategies for how they connect with their employees.

There is no doubt that almost all businesses face significant risks when it comes to social media, even more so when they are already mired in complex litigation. Handling negative social media is the last thing that business owners want to do while they navigate complicated litigation and keep their business running. However, it is still critical for California business owners to understand how they can handle negative social media and press, so they can mitigate the risks and losses they might face outside of litigation as well. ANSWER THE NEGATIVE POST THOUGHTFULLY The last thing that businesses should do is ignore negative posts on social media – especially if they go viral. Business owners should treat negative social media just like any other negative press. They should also take it just as seriously. News can spread quickly on social media. Therefore, it is necessary to respond to these posts in a timely and thoughtful fashion. This does not have to cause business owners more stress during litigation, as long as they make a plan in advance. This plan should include: Assigning a public relations representative to speak for the business. This person is assigned to handle negative press effectively; Having the representative monitor social media and newsfeeds to supervise the business’ reputation and act quickly; and Creating a strategy for how they will respond to negative press in different situations with facts and civility. That way, businesses can address negative press as soon as possible. MANAGE THE DETAILS PRIVATELY Businesses should address the negative press publicly. This demonstrates that businesses are personally handling these issues and still focused on maintaining consumer trust – regardless of lawsuits. However, businesses can still find resolutions to this issue in a private setting, as long as they make a public statement after the issues are resolved. WEIGH THE RISKS BEFORE TAKING LEGAL ACTION CNBC reported in October 2019 that business owners can take legal action against individuals if their negative social media posts – or in this case, reviews – lead to considerable losses and damage for the business. However, most consumer reactions online are protected by the First Amendment. This includes negative posts and even the online movement promoting the boycott of Backcountry.com’s products, which we covered in a recent blog post. That is why businesses need to create a strategy to handle negative press effectively. Whether or not they face negative press when dealing with a lawsuit, a social media plan will help businesses preserve their reputation.

California business owners know that their company could suffer significant losses if they are faced with a lawsuit – whether it is one brought against them or one they file themselves. It is possible to proactively plan for the risks involved in a lawsuit; unfortunately, it is difficult to plan for how consumers will react to a lawsuit. And many of those reactions end up on social media for the world to see. If consumers perceive any action as unfair or negative, they might make one post that could significantly increase the risks business owners must manage in addition to the stress of litigation. SOCIAL MEDIA CAN INCREASE LOSSES Social media has become almost an essential part of everyday life – for both individuals and businesses. Companies can create social media pages to connect directly with their consumers and boost sales and their brand. However, the benefits of social media also come with risks. Social media also allows consumers to obtain real-time updates and spread messages faster than ever before. If even one negative post about a company goes viral, that company could suddenly face a significant financial loss and a lost consumer base. Consumers have been known to plan boycotts and even sign petitions against companies. And one e-commerce company in Colorado recently experienced the detrimental effects social media can have on business. CASE IN POINT: BACKCOUNTRY.COM In November, the outdoor Colorado company Backcountry.com, founded in 1996, faced just the kind of backlash mentioned above. The company filed trademark infringement claims against several small businesses using the term “backcountry” in their company names as well as online domain names. There are roughly 50 unresolved legal actions attached to these claims. Although many reports say Backcountry.com had valid claims, the lawsuits backfired. Upset consumers took to social media against Backcountry.com. According to The Colorado Sun: Consumers created a Facebook page to boycott Backcountry.com’s products. It currently has more than 12,000 followers; Many also began a GoFundMe page to support the small businesses named in Backcountry.com’s claims; and Thousands of former Backcountry.com consumers called and emailed the company to voice their disapproval as well. While this case is not in California, it sheds light on the risks that a company can face on social media.

Reaching a settlement in an employment dispute can be a relief. However, negotiating the terms of a settlement agreement can also be complex because it must cover the claims, possible compensation and any contingencies. A common contingency that California employers include is a “no-rehire” clause, but an Assembly bill signed by Gov. Gavin Newsom will no longer allow these clauses in any settlement agreements. WHAT IS A “NO-REHIRE” CLAUSE? The “no-rehire” clause of a settlement agreement allows an employer to avoid rehiring or deny employment to an applicant without facing charges of discrimination. These clauses only apply in the specific circumstances that: The applicant was a former employee of the business; and The applicant and employer were both involved in an employment dispute. These clauses allowed employers to end the professional relationship with the employee and avoid any future legal issues with them. THE CLAUSE IS BANNED, BUT EMPLOYERS DO NOT HAVE TO REHIRE Gov. Newsom signed Assembly Bill 749 on October 12, 2019. This bill bans employers from including “no-rehire” clauses in any future settlement agreements. It will also make any of these clauses in current settlement agreements void. However, the bill does not prevent employers from: Ending the employment relationship with the employee; Not rehiring the employee after reaching a settlement agreement, as long as this is not in retaliation; or Including a “no-rehire” clause if the employee in question participated in workplace harassment. Therefore, employers cannot use the clause, but they can still act on it if they have a legal reason. But state lawmakers banned the clause itself because they believe that the restrictions of a “no-rehire” clause violate an employee’s rights. Banning these clauses will likely create some new challenges for employers. However, they still have options to protect their businesses from problem employees and disputes, even without these clauses.