During the covid-19 pandemic, our firm faced all the same challenges as our clients, while we worked to assist them in navigating the changes and challenges brought on by the pandemic.  We’re proud that we were able to continue delivering a high level of service to our clients throughout 2020.  

Firm Updates

During the past year, we also made significant changes at our firm. 

We Now Have Client Portals and Are 100% Cloud

“Re-Platfoming” happened here too.  In the fall of 2020, we migrated to a new practice management software platform after many years.  The new program is entirely cloud based, with user-friendly client features such as full Client Portals and integrated electronic document signing.  

Towards the end of last year, we migrated entirely off our own servers to a 100% Microsoft cloud environment.  While these migrations are always a project, it went fairly smoothly without interruption for our firm or clients.  It provides a highly-secure and flexible environment for us and our clients going forward.

We Launched A Refreshed AdishianLaw.com

We are excited to announce that in late 2020, after nearly six months of work, the new www.AdishianLaw.com website went live!  Our goals were to (1) modernize the navigation and flow to make it easier to find content and (2) update the look and feel.   We invite you to browse around, let us know how we did and connect with us if you have any suggestions. 

Practice Update 

Our practice is now heavily focused on advising clients and leading transactions in the areas of business, real estate and employment.  Over the past year, our firm has been very active in sell-side M&A assignments and financing transactions.  We expect the M&A activity to continue at a high rate as baby boomers retire or look to exit over the next decade, private equity funds sit on record amounts of cash and interest rates on cash remain close to zero.  Keep an eye out for highlighted transactions in upcoming newsletters.  

If you happen to have a legal matter outside our practice areas, we can often assist through our referral network of trusted attorneys. 

Observations From The Pandemic

“It is not about avoiding all crises, because you cannot”  

There is a quote that I’m fond of that is attributed to a former Nestle CEO: “We have crises and all that.  My job is not to manage the crisis.  My job is to make sure we have the capabilities of mastering them.” 

From its inception, the pandemic created a lot of uncertainty and chaos (and nobody knows what the delta or other variants may bring).  Our clients who navigated the pandemic most successfully embraced the truth of the above quote and acted upon it.  They focused on marshalling the necessary resources — legal, financial, operational — and rapidly adapting their business processes to weather the storm and be prepared when the pandemic abated.

“The pandemic highlighted enterprise financial fragility” 

The pandemic put a renewed emphasis on healthy, liquid balance sheets.  From late March 2020 through July 2020 a broad range of businesses were partially or completely shut down, some industry shutdowns lasted much, much longer.  The health crises became a financial crisis for many firms across the country, leading to business failures or severely weakened businesses.  Companies and organizations with a culture of healthy cash balances, conservative leverage and low cost operations were better able to survive the pandemic. 

The time to instill and maintain this culture is before the (next) crisis. 

“For investors and entrepreneurs the rate of change appears to be accelerating, and what seemed reliable became risky” 

A few examples….  For many years, residential real estate was seen as one of the safest, most reliable ways to build wealth.  During the pandemic, vacancies spiked and many tenants couldn’t or didn’t pay rent.  Prior to the pandemic, commercial real estate was one of the best performing asset classes.  During the pandemic, it was very painful to be a shopping center or commercial real estate owner.  Separate from the pandemic, minor league baseball was always viewed as a safe haven for nearly a century due to its alignment with Major League Baseball.  In 2020, MLB dropped forty teams from affiliation.  Some of these changes appear relatively short term while some appear permanent. 

Entrepreneuring has always been risky and the old saying, “the only constant is change” is even more true today.  The right team of advisors can help you de-risk your operations, prepare for the next change and take advantage of it when it comes.  

We hope that you have been able to stay healthy and safe during the pandemic and continue to do so during the reopening. 

We look forward to brighter days ahead which we are confident will bring their own challenges.  We’ll be here for you. 

How do businesses navigate the new California laws affecting independent contractors, wage and hour, discrimination and arbitration?  Read on.  

Given the many significant changes to California law affecting businesses, this newsletter is longer than usual.

Areas of Law: 
 This newsletter touches on several intertwined areas of business and employment law that are impacted by California’s new laws:  (1)  Employee v. Independent Contractor plus Wage and Hour; (2) Arbitration; (3) Discrimination and (4) Other areas. 
Why it Matters?:  In our opinion, any business — whether it has 5, 50, 500 or 5,000 employees — should pay close attention to all of these changes as any one can be the trigger for significant financial liability.  If your business needs help addressing these issues, please contact our firm. 

1.   Independent Contractor v. Employee (Dynamex and Borello) 
AB5 codified the Dynamex ruling from the California Supreme Court, which applied the ABC test (see our August 2, 2018 update, “The ABCs of Independent Contractors“) to determine whether a worker is an independent contractor.  In summary, to be an independent contractor the worker must (a) be “free from control and direction”; (b) “perform work outside the usual course of the hiring entity business” and (c) “customarily engaged in an independently established trade.”  Under this ABC test, we believe it is very difficult for a business to establish that a worker is an independent contractor.  There is some minor flexibility for businesses hiring licensed professionals or receiving professional services as these relationships are analyzed under another test (Borello). 

Our business has always used a lot of Independent Contractors, what could go wrong?  
Well, everything.   Lawyers often use the phrase a “parade of horribles”, and that would be appropriate here.  A single alleged independent contractor could (a) file a complaint for workers compensation, (b) file an unemployment insurance claim; (c) file a labor claim for overtime, or (d) hire an attorney to file a “wage and hour” claim (including pay stub compliance, meal break violations, rest break violations and failure to pay overtime).  If a wage and hour claim is filed, the damages escalate quickly including statutory penalties and attorney’s fees…and there is no insurance.

Wage and hour claims are frequently filed as class actions.Likewise, there could be an EDD audit.  In a “misclassification” based action, the Company’s only defense will be that the worker is an independent contractor, which was always hard to establish, and just became much more difficult.  Bottom line, in most situations, the Company will lose the independent contractor battle in our opinion.  If you are a business owner with a history of hiring a lot of independent contractors, we recommend that you consult with law firm to see what can be done to lessen your exposure.  There may be lawful steps you can take before a lawsuit is filed.  If you would like us to confidentially review your situation, please contact our firm. 

2.   Changes to Arbitration:  Immediately challenged 
AB51 banned mandatory arbitration agreements and prohibits employers from requiring applicants or existing employees to waive any right, forum or procedure for any employer violations of FEHA, the Labor Code or other statutes governing employment as a condition of employment, continued employment or the receipt of employment related benefits.   The bill also prohibits an employer from threatening, retaliating or discriminating against, or terminating any applicant for employment or any employee because of the refusal to consent to the waiver of any right, forum, or procedure for a violation of specific statutes governing employment.  SB707 also requires that in an employment or consumer arbitration where the drafting party is required to pay for arbitration and fails to do so within 30 days after the due day, the drafting party will waive arbitration and face drastic monetary and non-monetary sanctions.  

AB51 has been challenged in federal court, and the court issued a 10 day temporary restraining order (TRO).  Stay tuned.

3.   Changes to Discrimination law: Lactation Rooms, Hair Styles, Training and Time.
There are a number of important changes.  SB142 requires a lactation room or location that includes prescribed features with close proximity to a refrigerator and sink.  SB188 adds “hairstyles: to the list of potential basis for race discrimination.   AB9 extends the time to file a discrimination complaint with FEHA from 1 to 3 years.  SB788 extends the time to comply with sexual harassment training for employers with 5 or more employees.  For help here, contact our firm. 

4.  Other updates. 
California also passed the following employment related laws, which we will just list in summary form here:

AB749 prohibits No Rehire clauses in settlement agreements
AB673 and SB 688 provide additional remedies for failure to pay wages
SB83 increases the maximum wages replacement under California paid family leave
AB35 strengthens law protecting employees from toxic materials
AB203 requires Valley Fever awareness training is expected to be working near substantial dust disturbance
AB1223 requires private employers with 15 or more employees to provide leave of absence with pay for organ donation
AB1554 requires new notice requirements for Flexible Spending Accounts (FSA)
AB1804-1805 address the law regarding occupational injuries 
IRS New W4

If you have a concern that touches on one of these other areas, please contact our firm.

Key Takeaways, What Should a California Business Owner Do?  
If you own a business in California with a substantial pool of employees, you might be feeling overwhelmed with all these changes, the associated risks and the potential financial exposure.  What should you do?  Our recommendations:
1.    Get an attorney involved on your side.  If you don’t have a general counsel or employment attorney, or your attorney is not experienced with these issues, contact our firm. 

2.    Review your independent contractor / wage and hour exposure.  We have helped several clients address these issues.  Work with an attorney immediately (i.e. don’t wait until the lawsuit is filed), and if you receive an EDD audit have your CPA work with your attorney. 

3.    Improve your payroll systems and processes.  You may need to redesign your compensation plans, and processes to get into compliance and minimize future risks.

4.    Revise your handbooks.  If you don’t have a handbook, get one.  We offer a flat rate for our California 2020 handbook, and a reduced rate for annual updates, with reduced rates for multi-company engagements.  Contact us for information.