Publications Archives

A Shield, Not a Sword: Insurance Carriers' Rights When Intervening on Behalf of a Suspended Corporation

By: Paul T. McBride

On November 7, 2017, Judge David Brown of the Sacramento County Superior Court ruled that an intervenor insurance carrier may not file a cross-complaint in a construction defect lawsuit. While this ruling is not binding precedent, if upheld on appeal it will affect the rights of intervening insurance carriers, and so merits discussion.

Background- Effect of Corporate Suspension

California Revenue & Taxation Code §23301 provides for suspension of a California corporation's "rights, powers, and privileges" for nonpayment of taxes. Once it is suspended, a corporation is prohibited from taking any actions; it can neither prosecute nor defend lawsuits. Gar-Lo, Inc. v. Prudential Sav. & Loan Assn. (1974) 41 Cal.App.3d 242. Since it cannot defend a lawsuit, it is a comparatively simple matter to take a default judgment against a suspended corporation, provided it is properly served. Once a default judgment is entered against a suspended corporation, it may be enforced, i.e. collected, against its insurance carrier, pursuant to California Insurance Code §11580(b)(2), assuming the judgment creditor can prove the damages encompassed by the judgment are covered by the policy of insurance.

Don't Lose Your Lease! (How to Properly Exercise Your Option to Extend)

By: Kenneth W. Chung

If your lease contains an option to extend the lease term and you intend to extend your lease, then you must properly and timely send your written option exercise notice. If your notice is even one day late, then the landlord may reject your request to extend the lease term. In such event, the landlord has the right to evict you from the premises, increase your rent to an amount higher than fair market value, or require other payments or terms as a condition to extending your lease. In order to avoid such potential consequences, the option exercise notice must be properly and timely sent.

Unless you have a form lease, no two leases are identical. Therefore, you should review your lease and option provisions carefully so that you may understand and satisfy all requirements. However, please note that most leases require the option exercise notice to be sent within a certain time period before the lease expiration date. The following is a sample provision:

Tenant may exercise the Option by first giving to Landlord a minimum of 6 months written notice, but not more than 12 months written notice of Tenant's intent to exercise the Option.

Local Minimum Wages Increasing Throughout California

By: Kyle D. Kring

While the California state minimum wage is set to increase on January 1, 2018, many cities and counties throughout the state will increase their minimum wage rates on July 1, 2017. Employers should be well aware of the changes and make sure they are in compliance with state, county and local ordinances.

California State Minimum Wage

The current California state minimum wage rate is set at $10.00/hour for employers with 25 employees or less and $10.50/hour for employers with 26 employees or more. Until January 1, 2022 the minimum wage will increase every year beginning January 1, 2018. The next increase will see the minimum wage for employers with 25 employees or less rise to $10.50/hour and $11.00/hour for employers with 26 employees or more.

For more details and to see a schedule for minimum wage rates in California from 2017-2023, visit the California Department of Industrial Relations page.

California Prohibits On-Duty and On-Call Rest Periods

By: Kyle D. Kring

Recently, in Augustus v. ABM Security Services, Inc., the Supreme Court of California ruled that employers may not require their employees to remain "on call" during rest periods. The Court noted that, "state law prohibits on-duty and on-call rest periods" and "during rest periods, employers must relieve their employees of all duties and relinquish any control over how employees spend their break time."

In Augustus, plaintiff and the members of the class were security guards for defendant ABM. They were required to keep their pages and radios on during rest periods and remain available to answer and respond to calls if the necessary. Plaintiffs alleged that ABM failed to provide uninterrupted rest periods as required by state law and ABM acknowledged the fact. ABM argued that their policy did not violate state law because it simply required the guards to keep their devices on in case an incident arose. Importantly, plaintiffs presented evidence that breaks were regularly uninterrupted.

The trial court granted plaintiff's motion for summary judgment on damages, awarding $90 million, finding that an on-call break is no break at all. The Court of Appeal reversed, concluding that merely being on-call does not equate to performing work and therefore state law does not require employers to provide off-duty rest periods.

AB 1513 Update: Ninth Circuit Confirms that "Carve-Out" Provisions in AB 1513 May Violate the Equal Protection Clause

By: Kyle D. Kring

While some employers are alleging that AB 1513 is unconstitutionally vague and an improper retroactive application of California rest break laws, at least two large farmers are contending that they were improperly excluded from using the AB 1513 affirmative defense to their advantage to resolve past rest break claims.

The Court of Appeals for the Ninth Circuit recently held that two large farmers' "complaint states a plausible claim for relief under the Equal Protection Clause, but fails to state a plausible claim that AB 1513's carve-outs amount to a Bill of Attainder." The equal protection claim was remanded to district court for further proceedings. As to the Bill of Attainder claim, the court ruled that plaintiffs were not individually punished by AB 1513, which is a necessary element of a bill of attainder.

Court Denies Request for Stay of AB 1513

By: Kyle D. Kring

Posted: December 5, 2016

Please be advised the court in the Nisei Farmers League v. California Labor and Workforce Development Agency (State of California), the case pending in the superior court for the County of Fresno, issued its final ruling on plaintiff's request for a Stay of AB 1513, which was part of plaintiff Nisei Farmer's prior Motion for Declaratory Relief. The court denied the plaintiff's request for a stay and granted the state's demurrer to the complaint without leave to amend effectively ending the case at the trial court level, but for plaintiffs filing a Writ or an Appeal of the ruling (depending on whether the plaintiffs are able to amend as discussed further below). A copy of the court's Minute Order can be viewed here with the Modified Tentative Ruling on the State's Demurrer and the Tentative Ruling on the Plaintiff's Motion for Partial Declaratory Relief.

As you may recall, the Plaintiff Nisei Farmers League and CBIA recently filed a Motion for Declaratory Relief, following the denial of its motion for a Preliminary Injunction. The plaintiffs argued that AB 1513 and specifically, "actual sums due" and "non-productive time" were ambiguous as a matter of law. The court disagreed finding "in this legal context, 'actual sums due' and 'non-productive time' are defined with 'reasonable specificity' and are not vague and ambiguous as a matter of law."

Is There Federal Preemption for California AB 1513 Claims Against California Trucking Companies for Rest and Recovery Breaks and Non-Productive Time?

By: Kyle D. Kring and Tyler Kring

AB 1513/Labor Code section 226.2 provides that companies who pay piece rate must pay for rest and recovery breaks and non-productive time separate and in addition to traditional piece rate wages. Trucking companies often opt to use piece rate pay because it incentivizes drivers to perform as efficiently as possible. In 1994, Congress aimed to prevent states from interfering with the trucking carriers' way of doing business and drafted a preemption provision in the Federal Aviation Administration Authorization Act of 1994 (FAAAA). The "safe harbor" affirmative defense which the recently passed AB 1513 create, has resulted in a number of trucking companies signing up with the Department of Industrial Relations (DIR) for the AB 1513 affirmative defense. The intersection between the FAAAA and AB 1513 has raised the question whether federal law, specifically the FAAAA, preempts California meal and rest break law including AB 1513/Labor Code section 226.2?

The answer to this question may be costly for California truck companies. The Ninth Circuit, in Dilts v. Penske Logistics, refused to adhere to Congress, holding that federal preemption did not apply to meal and rest breaks in California because the state laws were not sufficiently "related to" prices, routes, or services.

AB 1513 Due Diligence and Payment Procedures - Time to Comply is Running Out

By: Kyle D. Kring

Posted on November 8, 2016

As many of you know, the deadline to make the AB 1513 payments is currently December 15, 2016, unless the Fresno Superior Court issues a stay on payments made per AB 1513 within the next week or two, which appears unlikely at this time. What you may not know is that the December 15th deadline applies to both payments to employees you are able to identify and payments to the DIR/DLSE (two separate checks) for employees who you are not able to locate.

In order to accomplish your "due diligence" in locating ex-employees, you need to start the investigative process now to ensure compliance by December 15, 2016. We have recommended a two-step process of sending an initial letter to your ex-employees requesting they confirm their last known address. If the employee does not respond to this letter, we recommend that you conduct a public records search in a further attempt to locate the ex-employee and satisfy the "due diligence" requirement in AB 1513.

Paid-When-Paid Provisions and Effects on Subcontractors

By: Timothy J. Broussard

Posted on October 3, 2016

When a subcontractor is not paid on a project, it usually comes at the worst time. There is payroll and suppliers to be paid. Yet, the builder has failed to pay the subcontractor because the owner is in dispute with the builder, particularly on extra work charges. Or, perhaps the owner has run into cash flow issues that affect timing of funding. The subcontractor should conduct careful investigation to identify and verify these problems with the builder and, if available, the owner's representatives. Sometimes, there are other reasons why there is no funding to the builder.

Ninth Circuit Decides Against Class Action Waivers

By: Kyle D. Kring and Tyler Kring

Posted on September 1, 2016

On August 22, 2016, the Ninth Circuit joined the Seventh Circuit and the National Labor Relations Board (NLRB) with their ruling in Morris v. Ernst & Young LLP regarding class action waivers. The court found that arbitration agreements containing class action waivers violated employees' rights to bring class and collective actions against an employer.

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