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Ever Heard of Comparable Worth? California’s New Gender Equity Law May be the Next Big Employment Issue

In the 1980s there was an to attempt to require employers to compensate male and female employees equally for comparable work.  It was commonly referred to as “comparable worth.”  It required that jobs of various types be compared to other “similar” jobs and that employees in both jobs be compensated at the same rate.  The idea was that some jobs were normally occupied by women and others by men so the types of duties and responsibilities of different positions should be compared to determine if these jobs were comparable to others and should be paid at the same rates.  The problem was determining what constituted “similar” work.  Is a nurse the same as an engineer?  Or a mechanic?  You can see the problems that arose and it was eventually abandoned.

The Amended Law

This year, the California Legislature has taken a step back towards comparable worth in their amendment of Labor Code section 1197.5.  This is not a new law.  Labor Code section 1197.5, passed in 1949, has always required that employees be compensated equally.  It previously prohibited an employer from paying an employee less than the compensation paid to an employee of the opposite sex in the same establishment for equal work in jobs that required equal skill, effort and responsibility.  The changes in the law effective January 1, 2016, remove the location element and place the burden on the employer to show that the differences in pay  are not based upon gender.

Specifically, the California Legislature has amended the statute eliminating the terms “within the same establishment,” “equal work” and “equal skill, effort and responsibility.”  Now California law prohibits an employer from paying any of its employees of the opposite sex different compensation for “substantially similar work, when viewed as a composite of skill, effort and responsibility.”  It appears that location can no longer be a consideration.  Should a  position in San Francisco be paid the same as a “similar” position in Los Angeles?  What about Fresno?  What is a similar position?  What happened to compensation to recruit and retain?  As you can see, employers are now required to make very difficult judgment calls on which positions are similar.

The changes place the burden on the employer to affirmatively show that any difference in compensation is not unlawful.  The employer cannot pay employees of the opposite sex different rates for “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.”  These terms are not defined.  However, the employer can pay different rates if such rates are based on (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production;  or (4) a bona fide factor other than sex such as education, training or experience.

The law also now prohibits retaliation against an employee who discloses their own wages, discusses the wages of others, inquires about another employee’s wages, or aids and encourages another employee to exercise his or her rights under this statute.  California already has a law that prohibits employers from preventing employees from discussing their compensation (sometimes referred to as the 9 to 5 law because it was authored by Tom Hayden, then married to Jane Fonda who starred in the movie “9 to 5”) and, therefore, employees are able to discuss their compensation if they choose to do so.

If an employer violates this law, the employee is entitled to the difference in the wage rates and an equal amount as liquidated damages.

The amended law is likely to generate additional litigation and new case law in California as the courts determine whether positions are comparable and evaluate employer defenses to differences in pay rates.

Affirmative Steps to Take to Determine if the Wages Paid by your Company or Organization are in Compliance

So, what precautions may an employer take?  There are several proactive steps that you can take:

  1. Conduct an audit of your compensation for the same positions and do that on a state-wide basis.
  2. Compare positions that are close to the same compensation level.  Determine if certain jobs are paid less and whether there is a gender tie to the pay differential.  Remember that paying a man (or woman) more because they are the “head” of the family or the sole or major breadwinner will be in violation of the law.
  3. Evaluate all positions to determine which ones are require similar skill, effort and responsibility. Do these jobs tend to be held by women or men?  Are they paid at different rates?
  4. Make sure any compensation adjustments are adequately documented so you can justify raises that are unequal.
  5. Make sure that anyone involved in hiring, or those who determine starting salaries and/or increases in wages are aware of the new law and that decisions are carefully documented.

Although immediate litigation in this area is not likely, it is prudent to try to bring your company or organization into compliance now rather than when you are gathering documents and preparing for litigation.

Thank you for joining us on ClarkTalk!  We look forward to seeing you again on this forum.  Please note that the views expressed in the above blog post do not constitute legal advice and are not intended to substitute the need for an attorney to represent your interests relating to the subject matter covered by the blog.  You should certainly consult legal counsel of your choice when considering conducting a review of your pay practices.  If you wish to consult with the author of this post or another attorney at Clark & Trevithick, please contact Debbie Petito dpetito@clarktrev.com or Leonard Brazil lbrazil@clarktrev.com by email at or telephonically by calling the author at (213) 629-5700.

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AIR Lease Forms – Good for the Goose or Good for the Gander? A View From the Tenant’s Perspective

By James S. Arico

Despite what a landlord may tell a prospective tenant, there is nothing “standard” about any lease form.  This is true even for pre-printed leases labeled as “standard,” like the AIR Commercial Real Estate Association lease forms (collectively, the “AIR Form”) for both net (where tenant pays a base rent amount plus its share of taxes, maintenance and insurance) and gross (where tenant pays a base rent amount plus its share of increased taxes, maintenance and insurance over a base year amount) lease transactions.  Traditionally, the AIR lease forms have been landlord orientated and designed to protect the commercial real estate brokerage community.  While the AIR lease forms have become more tenant-friendly in recent years, tenants should take care in reviewing an AIR Form prepared by either landlord or landlord’s broker.  Preferably, tenant should seek the assistance of commercial real estate counsel to review and negotiate the AIR provisions, since the form itself is generally favorable to landlord.

With respect to changes to the AIR Form made by landlord, any revisions using the copywrited AIR Form or AIR software are easily recognizable.  Form language landlord wishes to delete will appear as strike throughs and additions or revisions will either appear in the AIR Form in conspicuous type (i.e. different from the form type font) or will be addressed in a separate lease addendum.

The following are some examples of lease items that you, the prospective tenant, should be aware of that are in both the net and gross AIR lease forms:

Condition of the Premises.  In paragraph 2.2 of the AIR Form, landlord warrants that, among other things, the existing plumbing, electrical, and heating, ventilation and air conditioning (“HVAC”) systems are in good working order and the structural condition of the building in which the premises is located is free of material defects.  While this landlord warranty is a benefit for tenant, the warranty period is only thirty (30) days, with the sole exception being the HVAC system, which carries a six (6) month warranty.  Any problems incurred with these items following the expiration of the warranty period are tenant’s responsibility to fix at tenant’s sole cost.  Since a prospective tenant needs to “live” in its new premises for some to determine which building systems may be defective, tenant should request that, at a minimum, landlord’s warranty for all building systems and the building structure be extended to six (6) months.

Security Deposit.  The security deposit section of the AIR Form (paragraph 5) provides that if the base rent increases during the term of the lease, landlord has the right to increase the amount of tenant’s security deposit to maintain the same proportion as the initial security deposit bears to the initial base rent amount.  To avoid surprises, tenant should seek to strike this provision of the lease.

Tenant Improvements and Surrender of Possession.  Paragraph 7.3 of the AIR Form provides for tenant’s right to make alterations/improvements to the premises.  Tenant should keep in mind that, except for movable items of personal property used in tenant’s business (called trade fixtures), landlord has the right to keep or require removal of any other alterations or improvements tenant makes to the premises at the end of the lease term.  Since some alterations may be as expensive to remove as to install, tenant should request that all tenant improvements (other than trade fixtures) remain with the premises or, alternatively, that landlord make the “remove or remain” decision on all tenant improvements prior to installation.

Partial Damage that is an Insured Loss.  Under paragraph 9.2 of the AIR Form, if damage to the premises occurs that is insured and the cost to repair is $10,000 or less, landlord has the option to give tenant the insurance proceeds and have tenant undertake the repairs.  Two immediate issues arise with this concept.  First, tenant is usually not in the construction business and undertaking repair responsibilities, even if of minor nature, is a distraction to the ability of tenant to conduct its business.  Second, tenant may be responsible for any gap between the insurance proceeds received by landlord and the actual cost of the damage repair.  Tenant should carefully review its responsibilities in the event of damage or destruction and make sure that the provisions are “even handed.”

Accessibility ADA.  The last numbered paragraph of the AIR Form (Paragraph 50 on the net form and Paragraph 49 on the gross form) identifies three important things.  First, whether the premises has been inspected by a Certified Access Specialist (a “CASp”); second, that landlord makes no guarantees that the premises is ADA compliant; and third, that any ADA modifications required by tenant’s use will be the sole responsibility of tenant.  Tenant should consider the following:  First, if the premises have not been inspected by a CASp, tenant may want to retain its own CASp to inspect the premises; and second, tenant should negotiate a fair resolution of the allocation of costs related to any required ADA modifications.  For example, tenant should be responsible for only those non-structural modifications related to the unique nature of tenant’s use of the premises (as opposed to any other use of a tenant in the building, or a general office/warehouse use) and landlord should be responsible for all other modifications.

NOTE: THE ABOVE LEASE ITEMS ARE ONLY EXAMPLES OF POTENTIAL PITFALLS A TENANT MAY ENCOUNTER.  For this reason I reiterate the suggestion to seek the assistance of a commercial real estate counsel.

Good luck!

Thank you for joining us on ClarkTalk!  We look forward to seeing you again on this forum.  Please note that the views expressed in the above blog post do not constitute legal advice and are not intended to substitute the need for an attorney to represent your interests relating to the subject matter covered by the blog.  You should certainly consult legal counsel of your choice when considering your real estate needs.  If you wish to consult with the author of this post or another attorney at Clark & Trevithick, please contact Jim Arico by email at jarico@clarktrev.com or telephonically by calling the author at (213) 629-5700.

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If Uncle Sam Already Bought You an Estate Plan, Why Hire an Attorney? The Pitfalls of Intestate Succession

By Tiffany A. Halimi

Why spend a few thousand dollars on an estate plan when federal and state law bought one for you for free? Why pay for private health insurance when you can rely on Medicaid?  Why purchase media (books, magazines, music), when you can use it online or in a public library for free?

The law’s default estate plan that is in place for individuals who do not have their own estate plan can be a useful stop gap for specific situations and certain individuals.  But free initiatives implemented by the government are not always the best approach for each individual.

All U.S. citizens who die without a Will or a Trust will have an estate plan in place for them free of charge, compliments of federal and state law.  That estate plan is referred to as “intestate succession” and is set forth under the Probate Code[1].  Pursuant to Probate Code Section 6400 et seq., intestate succession (when a person dies without a will or trust) mandates that the estate of a deceased individual (“decedent”) who was married shall pass to that individual’s spouse, if that individual dies without children.  If the decedent dies with a spouse and one child, and no children or grandchildren from a deceased child, then the decedent’s estate passes one-half (1/2) to that decedent’s spouse, and the other one-half (1/2) to that decedent’s sole child.  The estate of a decedent who dies intestate with a spouse and more than one child will pass one-third (1/3) to the surviving spouse, and the other two-thirds (2/3) to be divided equally among the surviving children and the offspring of any deceased children. These are general guidelines, which can change depending on the facts and circumstances of each specific case.

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Drizella, Cinderella’s evil stepsister.

When the Probate Code refers to a child, what is included in that definition?  Under Probate Code Section 21115, a child includes, but is not limited to, halfbloods, adopted persons, persons born out of wedlock, stepchildren and foster children.  Thus, a person who may not wish to leave their estate to a stepchild, but who dies intestate, may be out of luck.

By using  a Will or a Trust, a person can change the recipient of their estate assets to individuals other than the ones provided for by the Probate Code section relating to intestacy succession.  Additionally, a person can choose to leave all or part of their estate to an entity, such as a charity or a school.  Through the use of a Trust or a Will, a person can even control when a beneficiary will receive their distribution, within certain limitations.

Not only is the distribution of the property of the intestate decedent provided for by federal and state law, as illustrated above, the estate tax and property tax planning of the intestate decedent is also provided for by federal and state law.  To learn more about estate tax and property tax planning, please contact Tiffany A. Halimi, Esq. or one of our other estate and tax planning attorneys.

[1] All references to the Probate Code are to the California Probate Code

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Considering Selling Your Business and Wondering Where to Begin? Here are Some First Steps!

By Rajnish Puri

Part one of a four-part series.

In this four-part series on the subject of selling your business, I plan to share with you, based on my experiences, the various stages an owner of a privately-owned business can expect to go through when considering an exit strategy.

You have labored hard to build a profitable business and are now contemplating an exit.  So, where to begin? In today’s economy, where mergers and acquisitions of large businesses frequently dominate the front pages of major newspapers, what goes largely unnoticed, and, therefore, little discussed, is the corresponding activity in the world of small- to medium-sized, privately-owned businesses and the tough decisions that confront their owners.  Whether it is identifying the right buyer, determining the correct value of the enterprise, selecting the most tax efficient structure, or optimizing the timing – these are only some of the many complex decisions you must make. If you are one of those potential sellers, here are initial steps in the planning.

Identify Your Goal.  Sellers are motivated by different reasons to sell their businesses.  What is yours?  Is it retirement, tying up with a strategic partner for further growth, a new-found opportunity, or something else? The answer to this question sets the stage for the remainder of the process.  If retiring, the primary goal often becomes maximizing the value of the business being sold; a strategic alliance would focus one’s attention on seeking the right partners; and a new interest might influence the timing of the deal if capital is required to fund the new venture. Your ultimate goal may also affect what you intend to leave behind –financial security for the family, a legacy for those who helped grow your business or both.  It’s important for your advisors to understand what your goal(s) are early in the process to effectively implement tax planning tools for the benefit of the sellers and others impacted by the transaction.

Build a Team.  Just like you are undoubtedly the architect of your business, the art of selling businesses, too, has its specialists.  Similarly, as you trusted your talent to grow your business, trust the experts to help you with the sale process.  The four key advisors on your team should be – a tax advisor capable of addressing both income tax and estate planning needs, an attorney experienced in mergers and acquisitions, a valuation professional with experience in similar-sized businesses, and a point person within the business to ensure normal operations of the business during the sale negotiations and to be the liaison between seller and buyer.

Get Your House in Order.  Has curiosity ever tempted you to walk into an open-house in your neighborhood (even if you were not in the market to purchase real property)?  And, if so, did you notice the curb appeal, the landscaping, the fresh paint or the artwork on the walls, the kitchen with utensils neatly tucked away in the cabinets, or the clean bathrooms?  Doesn’t the appearance make the property more attractive, which also justifies, and, in some markets, even drives up, the price?  Or, at least, lays the groundwork for a buyer to be prepared to pay a good price?  Optics play a role.  Selling a business isn’t much different in terms of preparing it well to ensure the seller can demand a fair price. In the context of selling a business, getting your house in order means addressing multiple fronts, prior to putting up the “for sale” sign.  Some of the simple, but often overlooked, tasks are: ensuring the accuracy of corporate records; evaluating and managing the risks stemming from pending litigation, expiring contracts, aging receivables, and cyber security; knowing your financial statements; examining the application of regulatory framework; and confirming the condition of the operating assets.  Careful planning in managing these areas plays a role in attracting good value for the business and a faster closing schedule.

Timing the Deal.  Finding the perfect timing to complete a transaction is by far one of the most unpredictable elements of deal making, though there is no single factor that is controlling.  There may exist a willing seller, but is there an interested buyer? Does the economy favor a strong valuation for the seller’s business and also allow buyer to tap into credit markets for financing?  Are there tax issues, prevailing or looming, affecting the timing of a closing? Does the seller wish to reward key employees upon closing and, if so, are the desired plans in place?  And, so on and so forth.  All of the stars need to be aligned for a transaction to succeed.  Your preparation must weigh all the elements prior to beginning the sale process to ensure the best outcome.

In the next part of this series, I plan to focus on Letters of Intent – often the first formal step that commences the negotiations between a seller and buyer.  Stay tuned for another conversation on ClarkTalk!!

Thank you for joining us on ClarkTalk!  We look forward to seeing you again on this forum.  Please note that the views expressed in the above blog post do not constitute legal advice and are not intended to substitute the need for an attorney to represent your interests relating to the subject matter covered by the blog.  You should certainly consult legal counsel of your choice when considering the sale or purchase of a business.  If you wish to consult with the author of this post or another attorney at Clark & Trevithick, please contact Raj Puri by email at rpuri@clarktrev.com or telephonically by calling the author at (213) 341-1322.