October, 2014
By Lisa Chapman, Esq.

The hidden gem of intellectual property is the “trade secret”. The reader’s digest version of the definition of a trade secret is that it is something that has economic value to a company which that company takes efforts to treat as confidential. Translation – it is something that gives your company an edge over your competitors which you treat as secret. As for this latter point, this means that you don’t post the secret information on the internet, or share it with those who don’t have a “need to know” the information. Examples include both technical information (i.e., information about products, software and business designs) and non-technical information (customer lists, customer information such as pricing and preferences, and business plans.) Think of this as the “secret sauce” that makes your customers pick you over your competitors. Damages for trade secret violations can be “trebled” (i.e., tripled), so the legal risk if theft can have crippling economic consequences. This applies both to startups as well as other types of new companies.

Scenario No. 1 – You are an entrepreneur in startup mode and are forming a business. You think that you can ramp up quickly by “borrowing” your former (or current) employer’s trade secrets. This is never a good idea. Both employment law and commercial law have a lot to say about this topic. When you leave your former employer and form a competing business know that your former employer is watching your actions. When you begin to solicit their customers, expect that your former employer will find out. And, when you begin to develop and market a product that is strikingly similar to a product which you developed when employed by them and they rejected it, know that they will (rightfully so) fight you for ownership of that idea. Solution – start your new business with your own ideas and property; don’t “borrow” them from your former employer. Litigation that you may very well face will wipe out any early and easy profits that you might have gained from “borrowing” your former employer’s trade secrets. You could face litigation for violation of employment, contract and intellectual property laws. For those new companies that are willing to take this risk, there are key steps that you can follow to minimize the risk and help to ensure a better litigation outcome, most of which you will need to coordinate with counsel well in advance of forming your new company.

Scenario No. 2 – Key members of your team have left your company and formed a competing business and are soliciting (or you fear they are soon going to solicit) your customers. Your business is at a serious point of risk – you need to take action to stop the threat of trade secret theft. Likely they have violated key employment laws. You have leverage, but only if you use it. Legal action is required, either in the form of a lawsuit seeking an order enjoining the new company from contacting your customers (which should stop them in their tracks), or alternatively a letter from counsel threatening future litigation if they don’t cease their unlawful activities. Either way, enlist counsel to guide you. If you ignore this, and let it persist, then you will waive your right to claim damages, and will jeopardize future success in a claim for injunctive relief. Time is NOT on your side. The good news is that your economic position is likely much stronger than your opponents. Employment as well as other laws protect you, but only if you avail yourself of the benefits of the protections that they offer.

So, to conclude, be mindful of both the defensive and offensive aspects of this area of the law – and use it to your advantage.

April, 2014
By Lisa Chapman, Esq.

Following the trend of other states, the California legislature had passed legislation which has increased the minimum wage.  As of July 1, 2014, the minimum wage for employees in California will be increased to $9.00 per hour.  “Exceptions” to this new minimum wage rate include, but are not limited to, outside sales persons, employees who are the parent, spouse or child of the employer, certain types of “apprentices”, disabled employees and employees of certain types of non-profit organizations.  The minimum wage rate is set to increase to $10.00 per hour on January 1, 2016.  A failure to abide by these laws can result in avoidable litigation.  Businesses must be mindful of this change and plan to timely roll out this mandatory increase.

Note that many cities in the Bay Area have different min. wage requirements which exceed the state minimum wage laws.  When determining pay for an employee companies should be careful to enforce the local, as well as the state, minimum wage laws that apply.

October, 2013
By Michael Wiesner and Lisa Chapman

October 1 marked the opening of the governmental Health Insurance Marketplaces (“Marketplaces”) at which consumers can shop online for government health care insurance.  Concurrent with this date, most California businesses became required to notify all current employees (and each new employee within 14 days) about the Marketplaces.  This article answers two common questions that Royse Law Firm has received regarding the ACA employee notices.

Q.  Which Employers Must Issue Employee Notices?

A.  The notice requirement applies to employers subject to the Fair Labor Standards Act (“FLSA”), regardless of whether an employer has at least 50 full-time equivalent employees or not.  DOL Technical Release No. 2013-02.  Employing a worker that is subject to the FLSA (e.g., a domestic worker in a private home) probably does not cause a non-FLSA employer to have an employee notice requirement.  See ACA § 1512 (amending FLSA § 18B) (establishing a notice requirement on “an employer to which [the FLSA] applies.”  See also DOL Technical Release No. 2013-02 (making no mention of a notice obligation in this situation).

There is currently no employer penalty for failing to make the required employee notice.  DOL, FAQ on Notice of Coverage Options, http://www.dol.gov/ebsa/faqs/faq-noticeofcoverageoptions.html.  However, compliance is a relatively small administrative burden.  Royse Law Firm encourages FLSA-employers to issue employee notices, and has advised several employers on acceptable and appropriate methods for doing so.

Q.  What Information Must the Employee Notices Contain?

A.  The employee notice must inform employees about the Marketplace’s existence.  It must convey that, depending on their income and current coverage options, they may be able to get lower cost private insurance in the Marketplace.  Finally, it must communicate that if an employee buys insurance through the Marketplace, he or she may lose the employer contribution (if any) to his or her health benefits.  The Department of Labor has issued model notices for employers who currently offer a health plan to some or all employees (available at http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf) and for employers who do not offer a health plan (available at http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf).  Employers may provide the employee notices electronically so long as the notice communications meet the Department of Labor’s electronic disclosure safe harbor standards.  See 29 CFR 2520.104b-1(c).

July, 2013
By Lisa Chapman, Esq.

Newly enacted California employment laws have either recently or will in the near future become effective.  Like most employment laws these ones are very easy to comply with, and the risk of non-compliance far outweighs the perceived inconvenience of compliance.  To the extent that these laws and regulations apply to your company, we urge you to make the minor changes that these new laws require.

  • Employment Records – This new law amends a prior law which governs employer’s obligations with respect to employee records.  While there are aspects of this law, we recommend that you note that under this new law Employers must now retain employee records for at least three years after termination.  If an employee demands copies of his or her employment records, employers must make those records available within 30 days.  Employers may provide a copy at a charge no greater than cost.
  • Commission Agreements– Employers must document all commission agreements in writing.
  • Wage Statements –Temporary services employers are now required to provide pay rate and total hours worked per assignment information one each wage statement.  Also, they must identify the name and other identifying information about the office of the legal entity for which the employee worked.

Other new laws provide additional protection for California employers.  These include the following:

  • Disability Access Issues – Attorneys that represent plaintiffs in disability lawsuits are now obligated to send a notice letter 30 days before filing a lawsuit against a company.  Plaintiffs now have a higher burden of verifying their disability claims.  Certain minimum statutory damages awards have been reduced.
  • Workers’ Compensation Reform – Certain types of disability claims are eliminated, including claims for sleep disorders, sexual dysfunction and other psychological issues.

Please contact Lisa Chapman of the Royse Law Firm, PC, at lchapman@rroyselaw.com, if you would like to discuss the contents of this article.

September, 2012
By Lisa Chapman, Esq.

Certain companies which do business with and have contracts with the federal government are considered “federal contractors” and are subject to regulation by the Office of Federal Contract Compliance (OFCCP) of the U.S. Department of Labor (USDOL). Federal contractors are, among other things, companies that contract with the federal government to provide supplies, services, experimental work or research. The OFCCP is tasked with implementing federal regulations intended to increase the employment rate of workers with disabilities disabled veterans, minorities, and women. Federal contractors are therefore required to have affirmative action policies in place setting forth their respective policies to actively recruit disabled workers, disabled veterans, minorities, and women, and they must also file time sensitive reports documenting their compliance with these requirements.

Recently, the USDOL has stepped up efforts to monitor the extent to which federal contractors are in compliance with federal affirmative action laws, reflecting an increased focus by the Obama administration on eradicating affirmative action violations. This has resulted in increased audits of federal contractors by the USDOL, which audit process can be onerous, time consuming, and expensive.

Upon receipt of an audit request a company must provide detailed information about its employee and candidate populations, with an emphasis on its hiring of people with disabilities, disabled veterans, minorities and women. In preparing an audit response a company must conduct a statistical analysis that compares the company’s hiring practices to hiring practices nationwide and hiring practices in the company’s local business environment. The audit process often involves multiple stages of analysis, review and investigation. Companies face penalties if they fail to comply with an audit request. Additional penalties and enhanced future reporting requirements may result if an audited company is determined by the USDOL to have failed to comply with applicable affirmative action guidelines. At all times personnel and representatives for companies subject to audits should be mindful of the legal ramifications of their oral and written statements during the audit process, and whenever possible companies subject to audits should secure legal representation to help them navigate the process and avoid, if possible, follow-on audits by the OFCCP, USDOL, and related Federal agencies.

For additional information on this topic, contact Lisa Chapman.

July, 2012
By Lisa Chapman, Esq.

The proliferation of social media as a medium for communication poses significant risks for employers. Some of those risks include:

  • Misuse of your confidential information. Employees with access to your confidential information, including your customer list and intellectual property, are in a position whereby they can intentionally or unintentionally misuse such information. The risk of data leakage or misuse is significant in the digital age. Once published, the “confidential” nature of such information for purposes of trade secret rights and for obtaining certain future intellectual property rights is compromised.
  • Posting of disparaging or defamatory comments. Employees can intentionally or unintentionally post comments which cause harm to their employer’s reputation. Twitter, blogs and other sites give disgruntled employees an easy opportunity to cause serious damage.
  • Posting of discriminatory or other illegal comments. Employees are in a position to make discriminatory comments about co-workers on a company intranet, blogs and other social media postings and in email communications. A seemingly innocuous email comment or blog posting can expose a company to substantial liability and pose a litigation risk.
  • Use of social media to investigate employee qualifications and conduct background checks. Using Facebook or similar sites to “check” employee qualifications can expose your company to claims of age or other types of discrimination.
  • Overambitious monitoring of employee email can expose an employer to privacy claims. Employers must strike a balance between honoring the legitimate privacy rights of their employees and their own legitimate need to investigate and monitor employee communications.

Faced with these risks, there are several things that a company can do to proactively protect itself against intentional or unintentional misuse of social media, including:

  • Consider instituting a social media policy. There are pros and cons to such policies, however at a minimum, companies should have a baseline policy that sets out what is, and what is not, acceptable conduct for social media communications regarding the company or communicated through company channels or servers or on company time. Such policies must be carefully constructed to comply with legal requirements.
  • Have all employees sign nondisclosure agreements, and maintain a company handbook that contains a strict policy relating to the use and disclosure of confidential information. Employees must be made aware of the fact that a failure to abide by their employer’s trade secret and other intellectual property policies will likely result in a termination of their job, and also potentially expose them to liability. Be vigilant in punishing employees who violate such policies. A failure to do so may constitute a waiver of a future right to challenge such indiscretions.
  • Monitor your employees’ public use of social media, as allowed under California and federal law. Companies must refrain from “stalking” their employees personal social media entries, however should be vigilant about monitoring blogs, industry related websites and other social media mediums such as Twitter where comments are made about the company which could be harmful to the company. Any discovery of potentially illegal or harmful entries should be investigated, and your legal options should be carefully considered before taking any action upon learning about such entries.
  • Strictly enforce your policies aimed at eradicating discrimination based on age, gender, sex, etc. Discipline employees for all infractions, regardless of how minor. Document such infractions in employee files, and punish employees who violate your anti-discrimination policies. Require that all offenders attend sexual harassment training, regardless of whether it is mandatory under California law.
  • Maintain a policy that informs employees that they should not expect that any of their email communications are private. This policy must be in writing. Do not use passwords or other related confidential information to access employee’s private webpages or private email accounts.
  • Carefully limit how much you review the social media sites of job applicants. If possible, refrain from such review as it can expose your company as an employer to future liability.

For additional information, contact lchapman@rroyselaw.com
Lisa Chapman is an employment and litigation attorney with the Royse Law Firm.

The Royse Law Firm Employment and Tax Law Newsletter

May, 2012
By Lisa Chapman, Esq.

In January, a new California law that imposes a duty on employers to provide certain notifications to non-exempt employees went into effect. N

The California Supreme Court finally issued a long awaited decision on a case concerning the obligations of employers to provide “meal breaks” to employees who are not exempt from overtime laws. This decision was important as it answered the question of whether employers are obligated to force employees to take meal and rest breaks. In Brinker Restaurant Corp., et al. v. Superior Court the Court held that employers are NOT obligated to force employees to take meal and rest breaks. The Court acknowledged the serious nature of meal and rest break laws however, and set forth specific time schedules for such breaks, confirming thereby the Court’s position that enforcement of meal and rest break laws are important. The Court held that an employee whose shift is more than five hours must be allowed to take a break no later than the end of their fifth hour of work, subject to certain restrictions. An additional meal break period is required no later than the 10th hour of work in a shift. The Court’s decision provided additional rules regarding the implementation of rest breaks, all of which companies must comply with on a mandatory basis.

For additional information, contact Lisa Chapman, Esq. at the Royse Law Firm.

LISA CHAPMAN, lchapman@rroyselaw.com

March, 2012
By Lisa Chapman, Esq.

In January, a new California law that imposes a duty on employers to provide certain notifications to non-exempt employees went into effect. Non-exempt employees are employees who, because of the nature of their work and the amount they are paid, qualify for overtime pay under California and federal overtime laws and regulations.

Under this new law, employers must provide a written notification to all non-exempt employees at the time they are hired or when the terms or conditions of their employment are changed. The law specifies the type of information companies must convey to such employees. The form of the notice is a relatively simple one-page document. The State Department of Labor Standards Enforcement has published a sample form that can be used as a starting point for compliance with this new law. This form can be found at http://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html

Unlike many new laws, compliance with this law is relatively simple. We urge all companies to take the time fill out this form as needed and file copies of this form in employee files.

For additional information on this topic or any area of employment law, contact Lisa Chapman, Esq. at the Royse Law Firm.

LISA CHAPMAN, lchapman@rroyselaw.com

The Royse Law Firm Employment and Tax Law Newsletter

March, 2011
By Lisa Chapman, Esq.

The recent uptick in mergers and acquisitions has been widely reported in the press. While this is good news for companies looking for an exit and their counterparts looking to make an acquisition, California and federal employment laws and regulations create many risks for companies in transition.

Acquired companies must be mindful of their obligation to comply with wage and hour laws relating to termination of employees, whether in connection with a corporate sale or otherwise. Under California Labor Code Section 201, companies must pay discharged employees all accrued wages and benefits immediately at the time of termination. While certain industries, such as the motion picture, agricultural, oil drilling and other industries, face payment deadlines that differ from the standard “immediate payment” deadline, companies in every industry face this obligation to pay employees what is owed them. Acquired companies should not rely on the acquirer or successor entity to arrange for and handle this obligation unless it is specifically outlined in the transaction documents.

Regardless of whether an acquired company pays its employee’s wages at the time of the transaction, no employees of an acquired company become actual employees of the acquirer or successor entity unless and until that relationship is formalized. As with all other hiring decisions, acquiring companies must be careful not to violate laws that are designed to avoid discrimination against members of “protected classes”. If an acquiring company is not going to hire all of the acquired company’s employees, it must be careful not to unintentionally act in a discriminatory manner in connection with its hiring decisions. Disabled employees of the acquired company must be afforded all rights due them under laws designed to protect the disabled. Companies should be mindful of wage parity issues, and make decisions about wages in a fair and non-discriminatory manner. It is recommended that the acquiring company document its hiring decisions with respect to the acquired company’s employees, including pursuant to offer letters and/or employment contracts, NDA’s and confidentiality agreements, and the acquirer or successor entity should also provide its new employees with an employee handbook.

Acquired companies must also be mindful of obligations owed to employees under health, dental, disability and other benefit programs. Companies should consult with their benefits providers or agents to ascertain what impact, if any, the acquisition will have on the rights of employees. Flexible spending accounts (“FSA”) are often terminated after termination of employment. Companies must also mindful of their obligations to comply with COBRA.

Finally, an acquiring company should be sensitive to the manner in which it integrates new employees into its existing workforce. Employment decisions in any transition period should be made carefully and according to well articulated policies and procedures. Haphazard treatment of “acquired company employees” who are sensitive to their changing work environment can lead to unnecessary and costly litigation. Companies with a sizeable number of employees should consider working with a consultant well versed in integration issues.

For more information about this and other employment law issues feel free to contact Lisa Chapman, Esq. at the Royse Law Firm.

LISA CHAPMAN, lchapman@rroyselaw.com

The Royse Law Firm Employment and Tax Law Newsletter

January, 2011
By Lisa Chapman, Esq.

The Equal Employment Opportunity Commission (“EEOC”) reported last week that in fiscal year 2010 it experienced a 7.2% increase in the volume of newly filed discrimination claims. Discrimination claims are ones in which employees claim that they have been treated unfairly because of their sex, race, ethnic origin, disability or some other “protected category”. Typically these claims are brought either shortly before or immediately after an employee is terminated. In most claims of this nature the employee asserts that the “reason” for termination was discriminatory, and the reason given by the employer for the termination was false. This surge in new discrimination claims is believed by many industry experts to be a result of the recent recession, and to signal that layoffs are still widespread.

This trend underscores the need for employer caution when terminating employees. Employer should follow a strict protocol for reviewing employees regularly so that any performance problems or inadequacies are well documented prior to any termination. Employers should also communicate directly with employees about performance issues, and carefully monitor ongoing performance problems. When terminating an employee for performance reasons or a downsizing, employers should anticipate that employees will claim discrimination, and carefully document all grounds or reasons for termination.

On the flip side of termination, employers should be mindful of their obligations under Federal and state law to avoid discriminating against applicants based on a “protected category”. Employers should pay especially close attention to applicants’ ages, and be careful to avoid discriminating against older workers. With the “boomer” generations’ postponement of retirement because of financial losses and the large number of workers struggling to regain employment after having been laid off, more and more older workers are attempting to reenter the workforce. Employers are well advised to carefully monitor their applicant pools and take a long look at their hiring decisions.

For more information about this and other employment law issues feel free to contact Lisa Chapman, Esq. at the Royse Law Firm.

LISA CHAPMAN, lchapman@rroyselaw.com