Page 7 – Adishian Law

The concept of ownership is deeply woven into the American Dream — e.g. own a home, own public stock, own bonds, own a business — so deeply woven in fact that sometimes “ownership” becomes the goal regardless of the consequences attendant to that “ownership.” Yes, when done properly, with due attention to the risks, rewards and ROI (return on investment), ownership can create equity expansion and increase net worth like few other opportunities in our economy.

However, poorly thought out investments in privately held Companies can lead to “dead money”, where the only “return” is pride of ownership and you cannot get your money out. That is, you get to tell your friends and family that you are an “owner of this Company” but in fact you see no financial benefit to this ownership at all! Even worse, such investments can result in a complete loss of the capital invested. Either way, the money is effectively gone, and you are unable to use it in another productive investment. Bad result.

Some points to consider before investing in a privately held company:

Will I ever see a return on my investment?
How will I see that return? (Dividends, interest, appreciation?)
How likely is it that I will actually see that return?
Will I ever get my original investment back?
Can I sell my stock to somebody if I want/need my money (or some of it) back?
At what price can I sell my stock?
How long will that take?
There are many other issues to consider as well.

Adishian Law Group, P.C. assists investors in privately held companies in maximizing the value of their ownership interest and minimizing the risk of capital loss or “dead money.” We assist with the “capital allocation decisions” for both majority and minority shareholder positions, as well as subsequent ongoing management of these investments. If you are contemplating an investment in a privately held company, or you are already a minority investor, we would be happy to talk with you about your options for increasing the value of your shares.

About Adishian Law Group, P.C.

Adishian Law Group is a California law firm with a statewide practice in the areas of Corporate law, Employment law, Real Estate law and Mediation Services. Adishianlaw.com is one of the oldest continually operating law firm websites on the Internet. The firm serves its clientele via three offices located in the major business hubs of El Segundo, Palo Alto and San Francisco. As of March 2013, Adishian Law Group, P.C. has represented individual and corporate clients located across 20 California counties, 4 States outside of California and 9 foreign countries — in over 340 legal matters.

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In this article we revisit the topic of California non-competition agreements (also referred to as California non-compete agreements).

In the recent Silguero case, the California Court of Appeal for the Second District was presented with a twist on a recurring issue….that is, the enforceability of non-compete agreements in California. (See this blog’s earlier post, California Non-Compete Agreements).

Summary Facts:

In Silguero, the Plaintiff was employed as a sales rep for Company A. During her employment with Company A, Silguero was required to sign an agreement which prohibited her “from all sales activities for 18 months following either her departure or termination.” Silguero was eventually terminated from Company A, and she subsequently found employment with Company B. Thereafter, Company A contacted Company B and informed Company B that Silguero had signed a confidentiality/noncompete agreement with Company A, which prohibited Sugiura from all sales activities for 18 months following her departure from Company A. As a result of this communication from Company A., Company B terminated Silguero. Silguero sued Company B under various theories, including a Tameny claim (termination in violation of California public policy). The lower court granted Company B’s demurrer without leave to amend and Silguero appealed.

Holding:

The Second District reversed and remanded as to the Tameny claims, holding that Silguero had a viable Tameny claim against a subsequent employer based on public policy violation of California BPC 16600.

We’ve seen this fact pattern prior to the Silguero ruling, and we believe that it is not an uncommon practice in California.

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EL SEGUNDO, CA (October 1, 2010)—”We believe that social media is one of the fastest growing methods by which people connect with professional service providers,” says Chris Adishian, President of the Adishian Law Group headquarted in El Segundo, CA. “We look at Twitter as a tool that allows us to better serve our clients,” he explains.

Like most industries, the legal industry is changing ever faster. Adishian Law Group embraces this rate of change and makes strategic use of the latest technology in all aspects of its practice. States Adishian, “In his iconic book, Good

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to Great, author Jim Collins reinforces the point that technology accelerates momentum. The Adishian Law Group applies Collins’ premise to its firm’s operations: The right technology applied properly will help our firm serve our clients even better. Social media is one of those technologies.

“Whether delivering top level legal services for our clients or making the latest legal developments and resources available to the community at large, our firm embraces application of the latest technology to traditional law firm functions,” continues Adishian. “Our clients appreciate knowing that when they hire us, they are getting a firm operating on the leading edge.”

Twitter allows the Adishian Law Group to raise awareness about relevant legal issues to its clients and the community at large on a continuous basis without being intrusive. This distribution channel is expanding the firm’s reach in its primary practice areas—Corporate, Employment, Real Estate and Arbitration/Mediation—creating new relationships, and reinforcing its brand as the law firm to call when you need legal services in California.

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California overtime law is an area of constant confusion, tension and struggle with employers and employees.

Legislation which became effective on January 1, 2000 implemented significant changes to California’s labor laws. One major impact of this legislation is that California has since become a “daily overtime” state. What is the difference between a “daily” overtime paradigm and a “weekly” overtime paradigm?

Weekly v. Daily Overtime

In much of the U.S. an employee who works more than eight hours per day but less than forty hours per week is entitled to just their standard rate of pay (i.e. “straight” time). But in California, all non-exempt (i.e. “hourly”) employees who work in excess of eight hours per day must be compensated for their excess hours at one-and-a-half (1.5x) times their normal rate of pay — even if the employee works LESS than 40 hours that week. Moreover, employees who work in excess of twelve hours per day be compensated at twice (2x) their standard rate of pay for each additional hour worked.

Example: To illustrate the difference in these two approaches, consider an employee who works ten hours per day, four days per week at a straight rate of $10/hour.

Under California’s daily overtime law, this employee would be paid her standard $10/hour rate for the first eight hours worked each day, but would be paid $15/hour for each additional hour worked that same day. Total earnings would be: $460 = $320 (4 * $80 per day) + 120 (4 * $30 per day).

Under a weekly overtime law, this employee would be paid her standard $10/hour rate for all 40 hours. Total earnings would be: $400 = (4 * $100 per day).

Somewhat predictably, management/ownership tends to favor the weekly overtime approach, and labor/employees tend to favor the weekly approach.

Daily overtime works in concert with Weekly overtime

Of course, the daily overtime legislation does not affect the “weekly overtime” provisions which are foundational principles of labor law nationwide. Under California’s weekly overtime laws, any employee who works either (1) in excess of forty hours per week, or (2) more than six days per week, is entitled to overtime compensation. Such an employee will receive one-and-a-half times their normal pay for each hour worked in excess of forty hours, or each hour worked on the seventh day, respectively. Additionally, on the seventh day of work in a single week, each hour worked in excess of eight hours requires compensation at double the ordinary rate of pay.

If you are an hourly employee in California, and work more than eight hours per day, forty hours per week, or six days per week, you have the right to overtime and double time rates of compensation for those additional hours. If you believe you are not being compensated in accordance with California’s overtime laws, please contact our firm for a free consultation.

About Adishian Law Group, P.C.

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EL SEGUNDO, CA (March 1, 2010)—Today Google named the Adishian Law Group as a Favorite Place. The status of Favorite Place puts the Adishian Law Group in the rarified atmosphere of less than 1 percent of all the estimated 28 million US businesses.

This acknowledgment by the world’s largest search engine measures the number of times people found the Adishian Law Group business listing and clicked on it for more information. Such recognition is an indicator of the useful information found in the firm’s Website (www.AdishianLaw.com).

“Google’s acknowledgment of our firm’s popularity was a complete surprise,” says firm President, Chris Adishian. “We view it as another affirmation of the value we aim to deliver. Our Website contains free, practical legal information and resources that help businesses and individuals evaluate their rights and options.”

Google’s Favorite Place status says something not only about how many people visit a website, but why. People will only visit the most useful sites that are on point with their search criteria. Says Adishian, “We view the plain talking, friendly, straight-forward and informative style of our Website as a reflection of our law firm and the way we conduct our practice. It is professionally satisfying that we have provided useful information to so many people and companies.”

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Unpaid wages, unpaid bonuses or unpaid commissions all refer to the same basic wrong, the employee was not paid! Litigation for unpaid wages, bonuses or commissions are among the most frequently filed lawsuits in America.

In an earlier blog post, we highlighted that under California statutory law, “wages” are broadly defined, and that case law has specifically included “bonuses” in the definition of wages.

Why it matters….

Pursuant to California Labor Code § 201 et. seq., if an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately. Simply put wages are due on the date of termination. If you are employer you should build that into your planning when conducting terminations or layoffs. If you are employee, you should make sure that you are paid all wages due on your date of termination, and certainly prior to signing any release. Failure to properly and timely pay wages can have consequences far in excess of the underlying amount due, including:

waiting time penalties;
interest and
attorney’s fees.

Waiting Time Penalties

California Labor Code § 203 “[i]f an employer willfully fails to pay, without abatement or reduction, in accordance with sections 201, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefore is commenced.”

Interest

California Labor Code § 218.6 further provides that “[i]n any action brought for the nonpayment of wages, the court shall award interest on all due and unpaid wages at [an annual rate of 10 per cent] as mandated by subdivision (b) of § 3289[1] of the California Civil Code, which shall accrue from the date that the wages were due and payable as provided in Part 1 (commencing with § 200) of Division 2.”

Attorney’s Fees

“In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney’s fees and costs to the prevailing party…” Labor Code §218.5. With the cost to get to trial in high-stakes cases running well into six figures on the plaintiff’s side, there is substantial exposure to a defendant company that fails to properly pay wages.

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What amounts are included in wages? We get variations on this question all the time including, “Is my bonus part of my wages?”

The Law

Wages are defined under California Labor Code § 200 to include “all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.” This is a very broad definition that includes virtually any form of compensation used in the modern economy, so long as it is “fixed or ascertainable” by some “method of calculation.”

Yes, under California law bonuses are wages. Ralphs Grocery Co. v. Sup. Ct. (Swanson) (2003) 112 Cal. 4th1090, 1103, 5 Cal. Rptr. 3d 687, 697.

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What is a §1031 Exchange?

Section 1031 provides for “Nonrecognition of gain or loss from exchanges solely in kind: (1) In general. No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.” In short, this means that if you want to sell an investment property now worth $3,000,000, that you originally purchased for $1,000,000, Section 1031 will allow you to rollover the entire $3,000,000 (including the roughly $2,000,000 in gain calculated as $3,000,000 minus $1,000,000, leaving depreciation out for the sake of simplicity) tax free!

Some Rules

In order to qualify for tax free treatment under Section 1031, the Seller must (1) use a Qualified Intermediary; (2) Identify the replacement property within 45 days; (3) The replacement property must be “like-kind” and (4) The replacement property transaction must close within 180 days of the closing of the relinquised property. As may be obvious, this area of real estate law is “jargon-heavy.”

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Telephone: 310.726.0888 | 650.955.0888 | 415.955.0888

Email: askalg@adishianlaw.com

Social Media: @algpc | LinkedIn | Facebook | YouTube

In the current recession, commercial landlord’s are just beginning to feel the pressure from tenants seeking rent concession or the outright elimination of their rent obligation. See Wall Street Journal, “Struggling Retailers Press Struggling Landlords on Rent”, January 2009. There is also a rapidly shrinking pool of high-quality “anchor” as major retail chains file bankruptcy seemingly one after the other. As a commercial property owner, what should you do to protect your interest?

Surrender or Termination or Both.

A lessee cannot effect a surrender and termination of a lease unilaterally. The landlord must accept the offer of termination for it to be in effect. Under California law, an abandonment of the premises by the tenant is merely an offer to surrender their lease. See Miller & Starr, 3rd. Ed., Vol 7, Sec. 19.

Upon receiving an offer of termination from a tenant, a commercial landlord must make an election of his remedy: (1) Ignore the offer to terminate, treat the lease as continuing and sue to recover rent as it becomes due provided that the lease permits the lessee to sublease or assign its interest; or (2) Accept the offer to terminate, and pursue remedies under CCC §1951.2.

How well companies and individuals managing real estate assets through an economic downturn is critical to long term success in real estate.

About Adishian Law Group, P.C.

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via three offices located in the major business hubs of El Segundo, Palo Alto and San Francisco. As of March 2013, Adishian Law Group, P.C. has represented individual and corporate clients located across 20 California counties, 4 States outside of California and 9 foreign countries — in over 340 legal matters.

For more information about this topic or to speak with Chris Adishian:

Minority shareholder rights in California include protections from oppressive conduct by the majority shareholder.

California Corporation Code § 1800 provides several grounds for involuntary dissolution. A court may grant involuntary dissolution where (1) “[t]hose in control of the corporation have been guilty of or have knowingly countenanced persistent and pervasive fraud, mismanagement or abuse of authority or persistent unfairness toward any shareholders or its property is being misapplied or wasted by its directors or officers.” § 1800(b)(4), and (2) “liquidation is reasonably necessary for the protection of the rights or interests of the complaining shareholder or shareholders.” § 1800)(b(5). See also Bauer v. Bauer, 46 Cal.App.4th 1113, 54 Cal.Rptr.2d 377, Stuparich v. Harbor Furniture Mfg., Inc. 83 Cal.App.4th 1268, 100 Cal.Rptr.2d 313, 2000 Daily Journal D.A.R. 10,657.

Involuntary corporate dissolution under subdivision (b)(4) requires a showing that those in control of the corporation have been guilty of, or have knowingly countenanced, “persistent and pervasive fraud, mismanagement or abuse of authority or persistent unfairness toward any shareholders,” or that the corporation’s property “is being misapplied or wasted by its directors or officers.”

Bauer described the course of conduct that satisfies the definition of the improper “squeezing out” of a minority shareholder, thus entitling a minority shareholder to dissolution of the corporation to protect his or her interests. The court took its definition of a from Marsh’s California Corporation Law, the portion quoted by the Bauer court is below:

“The term ‘squeeze-out’ is . . . generally intended to describe a situation where the majority controlling shareholders, who are also the principal officers of a corporation, engage in a course of conduct which is designed to exclude a minority shareholder or shareholders both from participation in the conduct of the corporate business and from the economic benefits derived therefrom . . . The conduct most typically takes the form of refusing to pay any dividends on the corporate stock, refusing to permit the minority shareholder to have any corporate office or position on the board of directors . . . , and the payment of large salaries to the controlling shareholders who are the principal officers of the corporation . . . Obviously it makes a great deal of difference whether dividends had once been paid on a regular basis, but were stopped; whether the minority shareholder had a job with the corporation from which he was fired; and whether the controlling majority shareholders increased their own officers’ salaries, after the rift appeared and the dividends were terminated.” 2 Marsh’s California Corporation Law (3d ed. 1995) § 11.46, 958-960

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