Commercial Law Articles | Fremont, Hayward, San Leandro, Milpitas

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Why Might a Business Incorporate in Delaware Instead of California?

Classified Board of Directors

Many of the largest public companies in the world are incorporated in Delaware. California business owners ask me whether they should incorporate in Delaware when choosing a state of incorporation for a business about to go public. This post will examine some of the key differences between incorporation and corporate governance laws in California and Delaware.

Under Delaware law, corporations are permitted to have a classified board of directors, with each class having a term of longer than one year. Whereas, a non-public California corporation requires annual election of its board of directors.

Cumulative Voting for Directors

Delaware law permits cumulative voting for directors, so long as this provision is included in the company’s certificate of incorporation and/or its bylaws. California law is more expansive with respect to cumulative voting. By default, cumulative voting is available to shareholder elections of directors and it need not be specified in the articles of incorporation or bylaws. Cumulative voting is considered a statutory right for shareholders of non-publicly traded corporations, unless specifically excluded in the company’s articles of incorporation and/or its bylaws.

The Right of Stockholders to Call Special Meetings of Stockholders

Stockholders are only permitted to call special meetings if the company’s certificate of incorporation or bylaws authorizes it under Delaware law. In California, on the other hand, not only may a special meeting of shareholders be called by the holders of 10% or more of the voting stock of the corporation, but this right may not be waived by the shareholders in the company’s certificate of incorporation or bylaws.

Insulation of Directors

California permits unlimited monetary liability for directors upon a finding of breach of fiduciary duty. Delaware law provides a complete shield to directors from monetary liability for breach of fiduciary duty except in circumstances in which a stockholder can demonstrate a breach of the duty of loyalty, a failure to act in good faith, intentional misconduct, or a knowing violation of law, among other violations.

Predictability Surrounding Corporate Outcomes

In Delaware, both the legislature and the courts work in concert to act quickly and effectively to meet changing business needs. Corporation law in Delaware is one of the most extensive and well-defined bodies of corporate law in the United States. The Delaware Court of Chancery is renowned for its sole focus on business and corporate law, no backlog, and a knowledgeable bench in resolving complex corporate issues.

If you are starting a business in California, or own an existing business in the East Bay Area including Fremont, Newark, Hayward, East Bay Milpitas, Union City, San Leandro, Gilroy, San Jose, or Santa Clara and you are seeking to explore incorporating in California or Delaware, you will need to ensure that the right steps are taken for incorporation. Seek legal advice and counsel from a knowledgeable California business lawyer today, call us at 510-794-9290.

board of directors, business entity, business incorporation, startups, stockholders

Navigating California’s Work Breaks and Overtime Laws

California’s work breaks and overtime laws regularly confuse companies that do business in California. Understanding your obligations to provide rest and meal periods to employees is critical to the operation of any size business. A mistake, however innocent or inadvertent, results in costly penalties at rates much higher than any wages that may be due. The crux of the problem involves understanding which employees must be relieved of all their duties prior to a work break and what that entails, and which employees are entitled to overtime compensation for working in excess of 40 hours in a work week.

When companies encounter these issues they are immediately blindsided by numerous laws, case law, and regulations in the area of labor and employment law. If your business has inadvertently misclassified a worker as an independent contractor instead of an employee or an hourly worker as a salary worker, you could find yourself owing these employees hundreds of hours of unpaid wages.

Rest and Meal Breaks

California law requires employers to provide a paid 10-minute rest break to it employees, relieving them of all their work-related duties, when they work for more than 3 1/2 hours. This break should be as far as practical in the middle of a worker’s shift, not at the beginning or end of the work period. The assignment of the slightest task during an employee rest period is not permitted. The break itself must be paid and the employer is not required to record the rest period.

The same is true for meal breaks — no employer may interrupt a worker’s meal period by requiring them to perform a task. This 30-minute meal period every five hours does not have to be paid, should fall in the middle of the worker’s shift, and must be recorded.

In Augustus v. ABM Security Services, Inc., the California Supreme Court issued a ruling holding an employer responsible to pay wages to security guards when they were required keep their pagers and radio phones on during rest and meal breaks. The court awarded the employees close to $90 million in statutory damages, interest, and penalties.

Overtime Laws

California’s overtime laws mandate that any hourly worker who works more than eight hours a day or more than 40 hours in a work week receives overtime compensation for the extra hours. That means that the employee shall not be employed more than eight hours in any workday or more than 40 hours in any work week unless he or she receives one and one-half times his or her regular rate of pay for all hours worked over the threshold.

If you are a business in the East Bay Area including Fremont, Newark, Hayward, Milpitas, Union City, San Leandro, Gilroy, San Jose or Santa Clara looking for guidance on overtime and rest and meal break laws and regulations, seek legal advice and counsel from a California business lawyer today.

California labor laws, meal breaks, overtime laws, work breaks

Three Things You Must Know When Starting a Home Health Agency

Home health agencies have revolutionized elder care options, permitting many older adults to live in their own homes longer than before. These agencies are responsible for placing health care professionals – registered nurses, nursing assistants, physical therapists, or home care aides – in the patient’s home to provide primary care, medical treatment, and assist with day-to-day living activities so that the patient may remain in his or her home.

If you are interested in starting your own health care agency, you will need to master the following three topics to successfully grow your business and meet market demands:

Regulations that apply to home health agencies
The importance of providing employee training, and
The labor laws that apply to the home health care industry.

Know the Regulations That Apply to Home Health Agencies

The federal government and the state of California heavily regulate the home health agency field. There are different laws that apply when hiring a home health care worker directly than when hiring a health care worker through an agency. Additionally, you must have a license to operate a home health agency before you start operating your business.

Copying information from another home health agency to create your compliance documents may not be sufficient. The information may not apply in California, may be outdated, or may never have been correct. It is important to consult with a business lawyer who is knowledgeable about the legal needs of a home health agency and can help you comply with all legal requirements, including record keeping, on-going legal requirements, and compliance with HIPAA.

One of the costliest problems is that if the home health agency collects Medicare, their rules regarding what protocol must be followed and required documentation must be kept in compliance. Medicare performs audits routinely and then charges back the agency many thousands of dollars if records are not in compliance.

Develop and Train Your Team of Employees

It is important for your employees to be fully trained to perform their tasks and to understand what documents need completing and maintaining when providing care for an individual in his or her home. You must provide training that demonstrates how to properly complete these documents and why their inclusion in the patient’s care plan is necessary. Other topics that you should cover in training include HIPAA compliance and labor law compliance.

Know Applicable Labor Laws

Owners of home health agencies must know the labor laws that apply to their workforce. Your payroll department must understand when to pay overtime, the rest and meal break laws, the difference between independent contractors and employees, and what labor records to keep.

If you are an entrepreneur planning to start a home health agency or already running one in the East Bay Area including the communities of Fremont, Hayward, Union City, Milpitas, or Newark, California, seek legal advice and counsel of a business lawyer today.

Business Startup, HIPAA, home health agency, labor laws

The Business Activities Without Corporate Protection

Back to the Basics: Understanding Limits on Corporate Protection

Protecting personal assets from liability for business activities that produce a loss, debt, or liability is one of the chief drivers motivating business owners to establish a corporation, limited liability company, or limited partnership when they set-up their new business. For the most part, in California, once you form one of these entities, your personal assets (such as your home, automobile, and savings) are protected from the reach of creditors of losses, debts, or liabilities, incurred by the business.

There is no corporate protection, however, for debts and liabilities of a business if:

The corporation was not formed correctly; and/or
The corporation does not operate as a corporation.

Even if your corporation was formed correctly and operates as a California corporation, personal liability for the corporation’s debts and liabilities may flow to you personally if you are an officer, director, and sometimes shareholder of the corporation.

California does not provide corporate protection to directors, officers, and shareholders when:

Wages owed to employees: If the corporation is unable to pay employee wages, the officers and directors of the corporation are personally liable during the time that they are directors and officers for those unpaid wages. California holds officers and directors to a higher standard as fiduciaries of the corporation. A fiduciary in these cases is one who is legally obligated to act in the best interest of the corporation (as opposed to themselves). As fiduciaries, the officers and directors should have made provisions to pay employee wages first. If they failed to do so, they can be held personally liable for the employee wages. This also includes the wages of independent contractors, who are wrongly classified as independent contractors, when they are actually employees.
When officers and directors have extended personal credit: Officers and directors of corporations will remain personally liable on corporate debts and liabilities if they extend their personal credit in two types of situations:
- First, granting a personal guaranty on a corporate debt, usually done for commercial leases and bank loans, makes one personally liable for the corporate debt in the event the corporation cannot meet the repayment terms.
- Second, when the corporation operates initially as a partnership or sole proprietorship, and it is then incorporated. If personal credit was utilized to obtain credit for the business in the past, it will remain after a change in status. Even though vendors are informed of the new corporate structure, and they change the name on the account to the corporation, personal liability holds.

Seek Legal Advice From a California Business Lawyer

There are ways to minimize your personal liability when forming a California corporation. Limited liability company, or limited partnership. A California attorney can assist you in reducing your personal liability by forming a corporation correctly and advising you on the proper way to operate the corporation. A California lawyer can also assist you in minimizing or eliminating your personal liability on vendor accounts once incorporated, and not incurring personal liability for future corporate debts.

If you are interested in forming a corporation or converting an existing partnership, sole proprietorship into a corporation, in the East Bay Area including the communities of Fremont, Hayward, Union City, Milpitas, or Newark, California, seek legal advice and counsel of a California business lawyer today.

california corporation, corporate protection, liabilities, officer, shareholder

Resolving Employee Disputes Before You are Sued

Preventing employee lawsuits and other legal claims is more challenging than you might think for a business. When your company is experiencing a staff problem such as an employee who continually comes in late, frequently takes days off, or is not performing his or her job, your first inclination may be to terminate that person.

Confusion Surrounding “At Will” Employment

Many employers believe that because employment is “at will,” meaning an employee may be terminated with or without cause, that their actions against an employee are justified. However, even when the employment relationship is “at will,” some employers hold on to problem employees out of fear that the employee will make a claim against them or sue them for workplace discrimination.

A situation such as this is difficult to resolve without support from legal counsel. If you are facing this challenge, it is important to seek legal advice from an attorney as to the proper way to terminate employment and to understand fully the legal risks associated with such a termination.

Legal Counsel for Employers Resolving Employee Disputes

An experienced California employer lawyer can assist your business by:

Reviewing your documentation
Helping you with your discipline process
Determining whether an employee has a protective status (i.e.: federal and state sick leave laws, disability laws, Title VII laws, etc.)
Evaluating what types of claim an employee could make, and the status of your company’s documentation to fight such a claim.

Often, we find that employers take action first and then belatedly seek legal advice when the employee makes a claim.

At this point, employers often realize that it is costly to resolve a claim after mistakes have been made. A knowledgeable employment law attorney cannot change the facts but will defend the employer and try to get the best outcome, minimizing monetary and reputational damage.

Relevant and timely legal advice regarding employment issues helps minimize problems before they arise. An attorney can help you understand the various federal, state, and local employment laws and make critical changes to your business practices to avoid further claims in the future.

The Importance of Documentation

Any employment conflict could potentially result in litigation. It is important that you, as an employer, comply with California law in all aspects of your business’s employment policies and procedures, including such items as policy training, complaint investigations, hiring and promotion practices, management development, and employee training. You must also keep documentation of these as proof that you are following California law. Your good faith efforts to prevent employment discrimination, harassment and retaliation, and maintain a safe working environment may serve you well – creating a shield or defense to employee litigation.

If you are an employer in the East Bay Area including the communities of Fremont, Hayward, Union City, Milpitas, or Newark, California seek legal advice and counsel of a local business lawyer today.

disputes, employees

Buying a California Business

Get Advice from an Experienced Business Lawyer

Buying an existing company is a great way to enter the market with an established customer base. You can obtain financing more easily, benefit operationally from existing systems and processes, and rely on the deep knowledge base of established employees. It may also be less risky than starting a business from scratch.

However, the risks of liability in purchasing a business are great. When you purchase all or substantially all the assets of a business OR you purchase the business as a whole, the liability of the business flows through to you. Some risks can be mitigated by a corporate shield, but some cannot, and you will find that you are personally liable for any wages and taxes that were not paid by the prior business (even if you did not know about them).

If you are looking at buying a business, the first thing you need to do is evaluate the business as a whole and make a list of pros and cons. This also means digging deep into the company’s financials.

Regardless of the price you are paying for a business, there are three things you should do when evaluating a business for purchase:

Hire an attorney. A California business lawyer can help you draft the purchase agreement to expand your rights during the due diligence process. A good purchase agreement incorporates the right to walk away if you don’t like what you find during the due diligence period and get your money back if you discover that the company’s financials or business operations are problematic.
Always have a business escrow. Including a business escrow in a purchase agreement, where the contract is provided to the escrow company, will help you minimize unknown risks when purchasing an established business. It means that all money is deposited into the escrow company and all debts of the business are paid through the escrow company so that when you close the business purchase, you will receive the business and its assets free of unknown liabilities.
Never waive the bulk sale requirement. Sending bulk sale notices to all creditors including the taxing authorities, that the business assets are transferring, limits the time for creditors to put forth a claim. In an Asset Purchase Agreement, known and unknown liabilities do not transfer to the buyer, if noticed through a bulk sales notice. However, in a business purchase, the business would remain liable for any debts owed by the business post sale.

If you are buying a business in the East Bay Area including Fremont, Hayward, Union City, Milpitas, or Newark, California, protect yourself. Seek legal advice from an experienced business lawyer today.

assets, business, purchasing a business

Will a T-Mobile/Sprint business merger get approved?

Two major U.S. wireless carriers are reportedly almost ready to submit a proposed agreement to antitrust regulators for approval. This mega business merger between T-Mobile and Sprint is projected to draw negative comments from the current presidential administration as the antitrust regulators adamantly expressed disapproval of proposed AT&T/Time Warner merger earlier this year. If approved, the T-Mobile/Sprint deal will create a combined company valued at approximately $146 billion. California residents considering stock purchases in either of these companies may want to stay updated on the situation.

Telekom currently owns a major portion of T-Mobile and would reportedly have controlling interest in the new company if the business merger takes place. Sprint and T-Mobile have always been fierce competitors. For the past four years, they’ve been discussing a plan to combine efforts to take on other telecommunications giants, such as those mentioned earlier in this post.

The public would hold approximately 31 percent of the shares in the new company if the merger goes through. Company leaders say the new company would provide an unsurpassed network experience for its customers. As it stands, T-Mobile and Sprint have combined liabilities totaling $60 billion.

Not every potential deal between two or more companies involves assets worth more than $100 billion. However, even mergers that take place on much smaller scales can significantly impact productivity and profitability within their respective companies. In fact, some mergers keep companies from going under and propel them toward future success by expanding their sizes and making them stronger competitors. To avoid major delays and obstacles in a proposed plan, it is always a good idea to have someone well-versed in California business and commercial law on hand to address any issues that arise.

tech business merger, telecom mergers

Three Labor Laws Every Employer Needs to Know

With unemployment rates hitting record-breaking lows and startups growing all around the Bay Area, companies in the Silicon Valley can’t fill roles fast enough. Whether you are planning to grow your team or hiring for the first time, our labor and employment attorney is an expert on the ever-changing laws. Here are three new employment laws to consider and tips for ensuring you are compliant:

Salary History Ban – Per section 432.3 added to the Labor Code in October of last year, employers may not request salary history, nor may they base a salary offer on an applicant’s salary history. Before your candidate search, our employment lawyer can caution you on the crucial topics you can and cannot discuss during the interview process and throughout the tenure of your employee.
Minimum Wage – According to MW-2017 which went into effect this year, minimum wage for companies with 25 or fewer employees is $10.50 an hour and for companies with 26 or more employees, it’s $11.00. Our labor law firm can help you not only ensure you are compliant with the most up to date minimum wage, but also how you can prepare for the slated increase to $15.00 an hour by the year 2023.
Sexual Harassment Prevention – SB 1343 (an amendment to Sections 12950 and 12950.1 of the Government Code relating to employment) states that companies with 5 or more employees are required to train all employees on sexual harassment prevention by January 1, 2020. What exactly does a training need to include? What sexual harassment documentation does a company need to have accessible to employees? Our trusted employment lawyer is an expert on these requirements and here to help you ensure your company abides by the law.

Labor and employment laws change frequently, so we recommend all employers large and small, new and old, have regular legal consultations to remain lawful. To ensure your recruitment team and office space are set up for success, especially in Fremont, Hayward, Union City, Castro Valley, Milpitas, or Newark, CA, call Lynnette Ariathurai to schedule a consultation.

employment law, sexual harrassment, wage law

2019 New Sexual Harassment Laws

Beginning January 1, 2019, the California legislature adopted several laws in the workplace with regards to sexual harassment claims against employers. These laws will impact any employee claims that have not reached resolution, even though the cause of action, claim or lawsuit may have arisen prior to the implementation of the new laws. Staying up to date with the newest laws and implementing this knowledge correctly can save employers hundreds of thousands of dollars and countless hours in court. The most significant changes in the laws regarding sexual harassment are as follows:

1. SB 820 prohibits employer in a settlement agreement where sexual harassment, assault or discrimination has been alleged including a confidentiality clause prohibiting disclosure of the facts regarding the claim, except the victim’s identity.

2. SB 1300 makes non-disparagement agreements preventing employees from disclosing the unlawful acts in the workplace, including sexual harassment, against public policy.

3. SB 1300 also makes not enforceable, agreements not to sue or bring a claim against the employer under FEHA, in exchange for a raise or bonus, or as a condition of (continued) employment.

4. SB 1343 states that all employers with 5 or more employees are required to provide 2 hours of sexual harassment training to its supervisor, and 1 hour to other employees within 6 months of hiring and every 2 years thereafter. The initial training needs to conclude before January 1, 2020.

5. AB 2770 protects victim from claims of defamation by alleged harasser when employee reports sexual harassment based on credible evidence and without malice. Even if the claim is found to be false and the accused’s reputation is ruined.

6. AB 2770 also permits an employer to reveal to prospective employers on a job reference, the reason for employee’s inability to be rehired – if the employer determined that employee had engaged in sexual harassment.

Staying up to date on current employment laws is the easiest way to protect an employer. Often times employer thinks that just knowing the law is protection enough. My law office provides legal services in the best implementation of these laws, and dissolving confusion around the laws from the employers perspective. A consultation with an employment attorney can often save the employer time and peace of mind in regards to avoiding unnecessary litigation or tumultuous relationships with their employees.

I have represented a multitude of businesses in resolving claims against employers through pre-litigation, California and federal agencies, including the Labor Commissioner, EEOC and several others.

Litigation is sometimes the first notice of an allegation an employer receives, in which case a lawyer is even more pertinent and can be indispensable to that process. Every claim I have worked on has resulted in a satisfactory resolution for the employer, even in cases where initially there were stark differences in opinion. Settlements, although not always unavoidable, can be an option in which we can still reach a solution that satisfies the employer as well as discouraging future litigation from employees.

If your business is seeking information, guidance or protection for existing or possible sexual harassment claims in Fremont, Hayward, Union City, Castro Valley, Milpitas, or Newark, CA, please contact the Law Office of Lynnette Ariathurai.

california laws, employer responsibilities, sexual harrassment

New Supreme Court Ruling Impacts Companies with Independent Contractors

Companies desire to hire independent contractors rather than employees to save money on overtime pay, payroll taxes, and unemployment and worker’s compensation insurance, just to name a few benefits. But are companies taking advantage by misclassifying workers? Ride sharing and food delivery are a few of the big industries that retain independent contractors, but also within the tech industry, companies can independently contract software programmers, graphic designers, digital marketers and pretty much any kind of service-based freelancer. With technology making our world more interconnected, independent work is only getting easier and therefore the need for an employer to consult with a labor lawyer is more important than ever.

A new court ruling is dramatically changing the rules for how to determine whether a person is an employee or an independent contractor. So if you employ or are thinking about hiring independent contractors, our employment attorney can ensure you’re compliant with the most current labor laws. The Supreme Court ruling on April 30 (Dynamex Operations West, Inc. v. Superior Court of Los Angeles, No. S222732) is more clearly defining how workers are classified as employees or independent contractors. In order to be considered an independent contractor, a worker must be ‘free from the control and direction of the hirer in connection with the performance of the work.’ Based on this ruling, workers whose employers are directly connected to their work (such as drivers connected to passengers through ride sharing companies) cannot be classified as independent contractors and rather should be considered employees. This ruling seems to be directed at companies such as Uber and Lyft.

While companies save on financial obligations by retaining independent contractors, the legal responsibilities are crucial and penalties for misclassification can be severe. There are both civil and criminal penalties against companies and their owners/operators who wrongly classify an employee as an independent contractor.

Our full-service labor law office can not only help you understand whether any of your workers should be considered employees or independent contractors but can also ensure you have the proper contracts and documentation in place to retain your workers. With over 20 years of employment law experience, our labor lawyer is an expert in California labor laws.

Businesses in Fremont, Hayward, Union City, Castro Valley, Milpitas, or Newark, CA, can call to schedule a consultation with our employment attorney before hiring to understand how to legally employ independent contractors.

contractor vs employee, independent contractors