Articles Tagged with “sacramento business law”

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Many business owners, particularly start-ups, remain unaware of the complex legal issues involved in employer-employee relationships. It is critical to have guidance on these matters, to understand your risks, rights, and obligation as an employer. Consider employer duties to accommodate employees with disabilities.

For example, a case recently passed through the federal district court system regarding an employer’s failure to accommodate an employee with a disability. The Americans with Disabilities Act (ADA) states that an employer must make reasonable accommodations for an employee with a disability, if such accommodations are possible and do not cause undue hardship. Common accommodations include providing wheelchair accessible offices or meeting spaces, modifying work equipment or schedules, and adapting training procedures or specific job duties. Reasonable accommodation must be made to allow employees to complete the interview process, training programs, and regular job duties.

Gooden v. Consumers Energy Co.

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In October, NetApp Inc. sued its rival, startup Nimble Storage Inc., in the U.S. District Court for the Northern District of California, alleging unfair competition, misappropriation of trade secrets, breach of contract, and five other counts related to the hiring by Nimble of former NetApp employees. NetApp accuses Nimble of recruiting its employees and encouraging them to steal confidential information, including sales materials, pricing models, and details about customers. According to the complaint, about 15 percent of Nimble’s employees — or 55 employees — and half of its executives are former NetApp employees. The suit was filed just weeks after Nimble filed to raise up to $150 million in an initial public offering. The company went public on December 13, and is led by former NetApp executive Suresh Vasudevan. Both Nimble and NetApp are in the business of providing data storage.

Startup Secrets

This lawsuit raises a very important issue for startups: Keeping secrets — particularly trade secrets — private. Startups should understand that there are four types of intellectual property that can and should be protected: (1) trademarks; (2) copyrights; (3) patents; and (4) trade secrets. A trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others. Examples of trademarks include McDonald’s golden arches symbol. Figures or characters, such as Geico’s talking gecko, can also be a trademark. A copyright protects works of authorship, such as writings, music, and works of art that have been tangibly expressed. A patent is a limited duration property right relating to an invention, granted by the United States Patent and Trademark Office (PTO) in exchange for public disclosure of the invention (we have discussed patent trolls many times in previous articles). A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers. Examples of trade secrets include the recipe for Coca-Cola and KFC’s fried chicken. Both recipes are allegedly stored in secret safes and known only by a few select employees.

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Regardless of which political party you align yourself with, the Obama Administration’s October rollout of the Patient Protection and Affordable Care Act, commonly called the Affordable Care Act or Obamacare, was a disaster. The HealthCare.gov website was — and remains — overrun with traffic and technical glitches, and it appears that the number of Americans signing up for coverage is well below the number forecasted by the Administration. Six days ago, the Department of Health and Human Services Secretary Kathleen Sebelius announced an internal review of what happened and why, stating that the Inspector General for the Department would review what happened with the “flawed and simply unacceptable” launch of the website. The Department also released the latest enrollment figures, which shows a promising jump in sign ups during the month of November of 365,000, up from the 106,000 people who signed up in October.

The Affordable Care Act was signed into law by President Barack Obama on March 23, 2010. The goals of the Act are to (1) increase the quality and affordability of health insurance; (2) lower the uninsured rate by expanding public and private insurance coverage; and, (3) reduce the costs of healthcare for individuals and the government. Though there are many critics of the Act, including those who are opposed to specific provisions of the Act and the promised insurance reforms, and those who object to the way in which the Act was passed in 2010, it appears that one group of individuals may be applauding its implementation.

According to a report from the Robert Wood Johnson Foundation, the Urban Institute, and Georgetown University’s Health Policy Institute, the Affordable Care Act is expected to produce a significant increase in entrepreneurship. One of the major roadblocks to entrepreneurship in this country is difficulty obtaining health-insurance coverage on the open market. The report finds that because of the Affordable Care Act, the number of self-employed Americans will be 1.5 million higher in 2014 (an increase of 11 percent). Why? The Affordable Care Act means that access to quality, affordable health-insurance coverage is no longer tied to employment. The report finds strong evidence that without this barrier, the number of self-employed people in the United States will increase with “full implementation” of the Act and lead people to start their own businesses as self-employed entrepreneurs.

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Starting a new business is an incredibly exciting adventure. While there are countless different issues that need to be handled beforehand, there is one area that is often neglected: delineating the relationship between different founders. In the rush to advance the business itself, there may be cut corners as it relates to ensuring those involved in a venture have safe, secure legal understandings between one another. 5351289407_f6b5e459f3_m.jpg

For this reason, founders of a start-up enterprise must be vigilant about memorializing various items in a Founder’s Agreement. This is an absolutely critical initial step that should obviously be created in conjunction with a legal professional.

What is included in a Founder’s Agreement?
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It’s a dreaded reality that some business owners may have to face. In fact, in some areas of the California, it’s a reality that a firm majority of new businesses have to face. We’re talking about the prospect of closing. And whether you’re making the decision to close the business because it isn’t bringing in the profit you had hoped, or whether you’re planning to retire with no one to take up the reigns, closure of the business has several serious legal implications.closed.jpg

First and foremost, you will need to break the news to your employees. Depending on the structure of the business, those employees may be entitled to severance pay, temporary health insurance benefits, and notice of the date of their final paycheck. Regardless of the time of year in which you close, your employees will need to be provided with W-2 forms for whatever portion of the fiscal year they worked. The bad news is best delivered sooner than later so that employees can begin the job search process as soon as possible.

Another legal implication has to do with existing contracts. If, for example, a failing restaurant has an existing contract with a food supplier for fresh vegetables each week, the company operating the restaurant still has the obligation to adhere to the terms of the contract for the duration of the contract period. Contracts are legally binding promises that usually do not expire just because one of the parties becomes insolvent. An experienced California small business attorney can help renegotiate contract terms in this situation so that you’re not paying for deliveries of fresh vegetables well beyond your closing date.

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Many Sacramento small business owners, when establishing their business for the first time, are confronted with an important decision: Should their business be organized as an S-Corporation or as a Limited Liability Company? The choice can have a tremendous impact on the manner and extent to which the business and its owner are taxed. For this reason, most novice business owners rightfully contact a Sacramento small business attorney for better understanding of how the type of business entity can affect taxation.1820231187_43f260616b.jpg

In many respects, there is little difference between the characteristics of an S-Corporation and a Limited Liability Company. Both entity types are created at the state level by filing various incorporation papers and maintaining certain regulatory filings. Both entity types legally differentiate their owner from the business itself. Both business entity types offer limited liability protection so that the owner can segregate his or her personal assets from the business’s assets. This often makes the prospect of litigation far less onerous and terrifying.

The main difference between an S-Corp and a Limited Liability Company, however, is the way the Internal Revenue Service chooses to collect taxes from their owners and employees. In an LLC, the IRS does not tax the earnings of the entity itself, but rather the earnings that the member accumulates through the LLC. A sole LLC owner, therefore, would pay a self-employment tax rate on his or her own personal tax returns.

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The question is simple enough. You have people whom you “employ” to perform work for your business. Are they technically your employees, or do they fall into a similar category as independent contractors? It may seem like a matter of semantics, but any Sacramento business attorney would caution you that the technical classification of those who perform work for you can have a tremendous impact on your business’s legal exposure.6a01053697c8b6970b014e5f679488970c-800wi.jpg

Unfortunately, there is no settled definition of what makes an independent contractor different from a typical employee. Their classification depends on a number of different factors, some of which can vary by jurisdiction. Moreover, there is no single factor that trumps all others in making the determination.

Generally speaking, independent contractors engage in a business that is distinct from your own, even if you both perform substantially similar work functions. An independent contractor likely operates under a different name than your own, likely has multiple clients, and advertises his or her business services independently from your own. He or she typically works his or her own hours, is not subject to your direct supervision, and utilizes his or her own tools or workspace. An independent contractor would likely provide you with an invoice for the value of the services performed. Some common examples of independent contractors include: attorneys, doctors, engineers, architects, construction contractors, and accountants. However, the classification is not limited to these listed service providers.

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It is no secret that California is a primary destination for aliens of both the documented and undocumented varieties. Each year, hundreds of thousands of immigrants, primarily Mexicans, flock to California’s major cities for work opportunities. Sacramento is no exception to this trend.

In 1986, Congress passed what is commonly known as the Immigration Reform and Control Act. Through this legislation, the federal government sets regulations as to the manner in which aliens may immigrate legally. The same legislation sets out penalties for non-compliance, including penalties for the illegal employment of undocumented workers. Given the rate of immigration and the federal guidelines in place, California business owners must be extra vigilant in making sure their employees are legally able to work. Consequently, California business lawyers must be just as vigilant in ensuring compliance by their client businesses.Trabajo.jpg

Penalties for non-compliance can be quite harsh, especially if a business exhibits a wanton disregard for maintaining a fully documented labor force. According to the Code of Federal Regulations, the civil penalties for employing undocumented workers can range from $275 to $16,000 per undocumented worker. Those business owners who engage in a pattern of illegal hiring behavior may also be subject to criminal fines up to $3,000 per violation and/or the possibility of six months imprisonment. Suffice to say that any Sacramento business law firm will advise a business owner that it does not pay to gamble against the federal government for the prospect of cheap labor.

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When clients come into a Sacramento business law office for advice on how to start and maintain a new business venture, a significant portion of the conversation often turns to how to manage employees. In most cases, small businesses tend to hire employees “at-will.” At-will employment is the most flexible form of employment for both the employer and employee, as either party can terminate the employment relationship at any time. Further, the employee can terminate the relationship for any reason, while the employer can terminate the relationship for almost any reason, as long as the reason is not discriminatory or otherwise illegal.

In some limited cases, however, small businesses may benefit from creating more formal employment relationships with their employees. This type of employment is called “contract employment,” and it can help both the employer and employee understand precisely what each other’s rights are when it comes to the employment. An employment contract can include whatever provisions the employer and employee want to include, but below are some provisions typically found in most employment contracts.

contract.jpgFirst and foremost, employment contracts must include the start date and duration of the employment. The duration may be unknown to either party at the time the contract is made, which is fine. In place of a known end date, the parties may agree to such language as “indefinitely” or something similar. Some other mandatory things to include are salary and benefits. The salary clause must specify whether the employee’s compensation is hourly, weekly, monthly, or yearly. The agreement may also need to include alternate forms of earnings, such as profit sharing or stock options. The benefits portion should include the methods of calculating how benefits are to be paid, including future adjustments to account for inflation or cost of living.

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California Supreme Court mandates employee meal and rest breaks

On April 12, 2012, the California Supreme Court handed down a decision in Brinker Restaurant Corp. v. Superior Court (Hohnbaum), No. S166350 that may affect California business law. Brinker Restaurant Corporation, a subsidiary of Brinker International, Inc. and its related entities, own and operate a number of restaurant chains, including Chili’s Grill and Bar, Maggiano’s Little Italy, and Romano’s Macaroni Grill.

State law requires California employers to provide employees with meal breaks and rest breaks during the workday pursuant to California Labor Code 226.7 and 512, and Industrial Welfare Commission (IWC) Wage Order No. 5-2001. The case originated when a class of restaurant workers filed suit, claiming that their employer, Brinker Restaurant Corp., 1) failed to provide meal breaks or premium wages in lieu of meal breaks, 2) failed to provide rest breaks or premium wages in lieu of rest breaks, 3) required employees to perform work duties off the clock during meal and rest breaks. Additionally, the plaintiffs contended that the employers deliberately altered the employees’ time sheets in order to hide and misrepresent work time and break time. Finally, the plaintiffs objected to Brinker’s alleged practice of requiring employees to take an early lunch soon after their shift began and then to work 6 to 8+ hours without a meal break thereafter.

coffee mugh (DeaPeaJay).jpgWhat must employers provide now?

The Court’s decision represents a dramatic shift in California commercial law and employment rules. The following is a summary of the new provisions:

MEAL BREAKS

At designated meal breaks, the employer MUST relieve the employee of their duty for at least thirty (30) minutes. The employee may use the break time for any purpose he or she desires. The employer is NOT responsible for ensuring that the employee uses the time for a meal, or that the employee does not engage in any work. The meal break must occur after no more than five hours of work. A second meal break must occur after no more than ten hours of work.

REST BREAKS

Employees are entitled to a rest break of ten minutes for every shift of 3.5 to 6 hours in length. Twenty minutes is to be allotted for any shift of 6 to 10 hours in length. For shifts of 10 hours or more, thirty minutes must be allotted for rest breaks. Rest breaks are distinct from meal breaks.

How do I make sure my business complies with these regulations?

In our area, a Sacramento business law attorney can examine your workplace policies and even redraft the policies in accordance with the new law. Your attorney can also ensure that your policies are conspicuously available to your employees. It may be prudent to have your Sacramento business lawyer prepare documents for your employees to sign that acknowledge their understanding of your new business practices.

It is important to note that the law applies to out-of-state businesses that employ workers in the State of California. Out-of-state employers should consider the expertise of local legal professionals to make sure that their California employees enjoy the benefits of this new law and that their business remains in compliance.
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