Q: How Can I Prepare for Business Litigation?
While no one plans to engage in business litigation, be it as the plaintiff or the defendant, the best advice for any business in dealing with third parties, be they suppliers, vendors, customers, employees, investors, etc., is to document, document, document. Documentation, prepared contemporaneously with the event being recorded, if the best evidence that a party can provide to its counsel whenever there is a threat of litigation, or when the party is seeking to commence litigation against a third-party. Having to rely upon your memory with reference to conversations and events that took place in the past is not reliable and may not be permitted as evidence in a court of law. Further, having documentary evidence can cut down on the inevitable “he said, she said” that occurs when parties have differing interests and only remember facts and events that support their position.
Having documentary evidence will also allow counsel to advise you with reference to your options when either facing litigation, or considering commencing litigation. This advice, from a good lawyer, reviewing good documentation, may be to resolve the threatened litigation before it is filed, or that filing litigation is not supported by the documents you provided. This advice can save a party significant amounts of money that can be incurred in litigation.
Q: Are There Alternative Dispute Resolution Options?
Yes, there are alternative dispute resolution (commonly called “ADR”) options to resolve business disputes, and these options can be available both prior to, as well as after a lawsuit has been filed.
Mediation is an effort to hold a constructive conversation between parties in conflict facilitated by a neutral third person, the Mediator. Mediation provides participants an opportunity to collaboratively design creative solutions to disputes, and can provide a definitive resolution for the parties. In mediation, the parties, not mediator, control the outcome of mediation. A mediator can also be a great barometer in helping both parties see the 3rd side of the story.
Arbitration is adjudicatory, as opposed to the more informal procedure utilized at mediation, because of the fact that the arbitrator (usually a retired judge or attorney) renders a decision at the end of an arbitration hearing, and that decision, depending on the agreement between the parties, may be final and binding, just as if it was rendered by a judge or jury. The arbitrator reads briefs and reviews documentary evidence, hears testimony, examines evidence and renders an opinion on liability and damages in the form of an “award of the arbitrator” after the hearing. Once confirmed by a court of appropriate jurisdiction, the award can be subsequently entered as a judgment.
What form of ADR you may be able to employ, or that you may be forced to engage in, is generally set forth within the terms of the written agreement that was previously entered into between the disputing parties. It is always important before entering into a business agreement to determine the manner in which any dispute between the parties to the agreement may be resolved.
Q: If My Business Is Sued, Is My Personal Property at Risk?
The answer to this question depends on the structure of your business, as well as the allegations made against the business and its owners, officers and/or members.
If you are operating your business simply under a fictitious business name, such as John Smith doing business as Smith Grocery, a claim against your business does open the possibility of your personal assets being at risk if a judgment is obtained by the other party.
If you are a limited partner in a business, subject to certain exceptions, your personal exposure is limited to your monetary investment in the partnership.
If you are a general partner in a business, your personal assets could be subject to exposure.
If you are a shareholder of a corporation, or a member of a limited liability company, subject to certain exceptions, your exposure is limited to your ownership interest in the corporation or limited liability company.
In that there are various reason other than asset exposure, it is important to confer with a lawyer before starting your business so that these issues may be fully explored, and the best business structure established for your business.
Q: Can an Employer Be Held Responsible for Sexual Harassment by One of Its Employees?
Yes, an employer is liable for creating and /or allowing a hostile environment amounting to harassment not only by it directly but by supervisors, managers, or agents, and which were committed within the scope of employment or the employment relationship. Additionally, the harassment need not occur on the work premises for the employer to be liable. The employer may be liable for harassment that occurs in the course of social functions and activities conducted off the work premises if: (1) it endorsed the activity by express or implied permission; and (2) the activity was conceivably for some benefit to the employer or was a customary incident of the employment relationship. On the other hand, there may not be liability for harassment during purely social activity off the premises of, and not connected with, the employer.
It is important to understand that Sexual harassment can consist of conduct that is nonsexual in nature.
Q: If We Are an At-Will Employer, Do I Have to Provide the Employee a Reason for Termination?
No, you do not need to provide an employee a reason for their termination. It is likely that you have previously provided the employee with both verbal and written warnings with reference to the behavior or activities leading to the termination. If the termination of employment is for a reason other improper action on the part of the employee, there is little reason not to provide the employee with the legitimate business reason on which their employment is being terminated, in an effort to part company on the best terms possible.
It is important to remember that while the employment relationship may be “at-will”, an employer may not terminate an employee for any unlawful or discriminatory reason.
Q: What’s the Difference Between an Employee and an Independent Contractor?
This is a question that can really only be answered based on the facts and circumstances on which such a determination is being made. In California, determining whether an individual is an employee versus an independent contractor for the purposes of a workers’ compensation claim made by an injured individual requires the use of a different legal test than the one that is used for making such a determination for the purpose of wage and hour claims. Therefore, making such a determination is dependent on a multitude of factors; far too many to be listed here.
Q: Am I Required to Pay Employees for Rest Breaks and Meal Periods?
In California, employers are required to pay employees for their statutorily permitted rest breaks. Alternatively, employers are not required to pay employees for their meal periods, subject to certain exceptions such as when the work conducted by the employee prohibits them from being relieved of all duties for their meal break. In that situation, a proper meal break waiver may be entered into between the employer and the employee under which the employee is paid for their meal period.
While employees are paid for their rest breaks and therefore are not required to clock out when taking their rest breaks, it is important for employers to implement a system to track when an employee does take their rest break, as failing to permit employees to take their rest breaks, as well as meal periods, is a frequent claim by employees in wage and hour disputes. An employer should implement a system requiring employees to clock out for their meal break. The burden of proof always rests with the employer.
Q: Should I Have an Attorney Review My Workplace Policies/Contracts/Termination Agreements?
Yes. A business’s workplace policies, employee handbook, employment contracts, and termination agreements, are vital instruments in preventing, or at least limiting, employee claims for Labor Code violations and for monetary damages. These documents should be discussed with, and prepared by an attorney at the same time as the business is being established. If the business is already operating, these documents, if not already in place, need to be created and implemented as soon as possible. Finally, no matter when these documents are created, they should be reviewed and discussed on an annual basis as the Legislature and the courts are constantly making additions, revisions, and modifications of the laws affecting the employer-employee relationship, and every employer need to make sure that their policies, practices, and procedures regarding this relationship are kept up to date.
Q: How Can I Evict My Commercial Property Tenant?
The most important thing to know with reference to evicting a commercial tenant from your property is that there is no “self-help” provision for landlords in California. What this means is that a landlord who alleges that a tenant is in breach of the lease cannot simply change the locks on the doors, or take other action, to prohibit the tenant from access to the premises. The landlord also cannot simply turn off the utilities to the space occupied by the tenant.
A landlord must follow and strictly comply with the legislatively mandated notice provisions to the tenant, and then if no resolution is reached, the strict requirements of proceeding with an Unlawful Detainer action. As Unlawful Detainer actions are summary proceedings, i.e., they are given priority over other civil action, a party bringing such an action has to follow the procedures for such action to the precise letter of the law, or the court can dismiss the action and the landlord will need to completely start the process over again.
It is also important to understand the breach and default terms set forth in the lease, as they may dictate terms of the notice provisions.
Further, a commercial landlord needs to be aware of the effect (s) of accepting rental payments from the tenant after serving the required notices, as well as after the Unlawful Detainer action is commenced.
Q: What Are a Design Professional’s Rights Against a Property Owner when He Property Owner Fails to PayThe Design Professional?
A design professional is a person licensed as an architect, landscape architect, professional engineer, or land surveyor who provides services pursuant to a written contract for a work of improvement. A design professional is entitled to enforce a special “design professionals’ lien” where physical work of construction has not commenced on the site.
Once work commences the design professional may enforce a mechanics lien or stop payment notice. A design professional may place a lien on real property on which a work of improvement is to be constructed for the recovery of fees for services rendered prior to the commencement of the work of improvement only if a building permit or other governmental approval has been given in furtherance of the work of improvement in connection with or utilizing the services of the design professional.
Q: What Are a Contractor’s or Materials Supplier’s Rights Against a Property Owner when The Property Owner Fails to Pay the Contractor?
The following persons are entitled to enforce a mechanics lien on the property benefited by their labor and materials: A contractor who has a direct contractual relationship with an owner, a subcontractor, defined as a contractor that does not have a direct contractual relationship with an owner, including one who has a direct contractual relationship with a “direct contractor” or with another subcontractor, a person that provides materials or supplies to be used or consumed in a project, an equipment lessor, a person who, acting as an employee, provides labor or provides services on a project, including a person or entity to which a portion of that claimant’s compensation is paid by an agreement, and a person licensed as an architect, landscape architect, professional engineer, or surveyor.
There are very strict time deadlines by which notices must be provided, liens file and recorded, and the liens perfected by the filing of a mechanics lien foreclosure action. The failure to follow these deadlines can cause a claim to be lost.
Q: What Are My Responsibilities as A Commercial Property Landlord?
A: These obligations are generally set forth in the lease agreement between the landlord and the tenant. The lease agreement will also set forth the consequences if the commercial landlord fails to comply with its obligations under the lease.
One of the biggest differences between the obligations of the commercial landlord and a residential landlord is that a commercial landlord does not have an obligation to make sure the premises are “habitable”, and the tenant generally does not have a “repair and deduct” right with reference to alleged defects in the commercial structure.
Q: What Is an Auditable Policy of Insurance?
As you probably know, your business insurance premium starts out as an estimate. As an estimate, this is not a final premium calculation. At the beginning of the policy term, you and your agent should use the prior policy period’s premium basis (sales and payroll data, among other things) to give the insurance company a picture of your annual projected business activity—and your risk profile. This data represents your premium basis. The insurance company, for its part, takes your premium basis and gives you a non-finalized cost for insurance. They take you on your word that these figures are accurate…for a little while, at least.
At the end of the year, your insurance company checks to see if your premium basis was accurate. Changes that occur during the year could heighten or lower your exposures. If you’re currently employing more people, changing or broadening your scope of services, working with more subcontractors, etc., your original estimate is no longer an accurate picture of your risk profile.
If your estimate underestimates your exposure, thereby increasing the insurance carrier’s risk of loss, you will owe the carrier additional premiums for the expired policy. If the estimate overestimated your exposure, and therefore decreased the insurance carrier’s risk of loss, you will obtain a return premium.
It is important to understand that the amount of losses incurred during the policy period subject to the audit, including the fact that no losses were incurred, does not have any effect on the audit
Q: What Is an Employer’s Responsibility when Their Workers’ Compensation Insurance Carrier Wants To Conduct an Audit?
Workers’ compensation policy of insurance contain provisions allowing for an inspection and audit of the employer’s book and records to compute an actual premium calculation. A premium audit will set your insurance premium to its appropriate rate based on your company’s actual payroll, revenue, and expenses over the policy term. If your estimates were too low, your premium will go up at the end of your policy period.
To be prepared for this audit, an employer should have accurate records relating to the names of each individual who was employed during the policy period, the job duties performed by each individual, and the amount of compensation the employer provided to each employee during the policy period. Having accurate records with all the necessary information, properly classified, will simplify the audit process, as well as making sure that audit results allows the insurance carrier to correctly compute any additional and/or return premises with reference to the policy.