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Job Applicant’s Criminal Conviction: When Can it be a Reason to Deny Employment?

By Leonard Brazil 

Effective April 1, 2016, California Regulation 11017.1 was amended to further limit an employer’s policy to consider criminal convictions in rejecting a job applicant or take adverse employment action against an existing employee.  The amended regulation arose out of the California Legislature’s concern that reliance on criminal convictions has had a disproportionate and adverse impact on individuals on the basis of their gender, race, national origin or other protected classification.

Certain Criminal History Excluded from Consideration:  The following types of criminal history cannot be considered by an employer or requested of an applicant or employee:

  • An arrest or detention that did not result in a conviction;
  • Referral to or participation in a pre-trial or post-trial diversion program;
  • A conviction that has been judicially dismissed or ordered sealed, expunged or statutorily eradicated pursuant to applicable law; and
  • A non-felony conviction for possession of marijuana that is two or more years old.

Limitations on Employer Policies Regarding Other Criminal Convictions:  If an employer has a policy to rely on other criminal convictions in deciding whether to hire an applicant or take adverse employment action against an employee (e.g., deny a promotion), the company must be able to demonstrate the policy is job related, consistent with business necessity and appropriately tailored.  The amended regulation states that to satisfy this criteria, the policy must take into account at least the following factors:

  • The nature and gravity of the offense or conduct;
  • The time that has passed since the offense or conduct occurred and/or the completion of the sentence; and
  • The nature of the job held or sought.

The amended regulation indicates that if an employer has a “bright-line,” across the board policy that a criminal conviction disqualifies an applicant or employee, the employer must satisfy a very high standard to demonstrate that such a rigid policy is appropriately tailored  Alternatively, an employer who conducts an individualized assessment of the qualifications of the applicant or employee and the circumstances surrounding the criminal conviction in deciding whether to rely upon the conviction will typically find it easier to demonstrate that the policy is appropriately tailored.

For example, if a person applies to be a delivery driver, a criminal conviction for theft a year ago may be an improper basis to deny employment because it is not job-related, consistent with business necessity or appropriately tailored.  However, if the criminal conviction were vehicular manslaughter for driving under the influence, denial of employment would likely be deemed to be job-related, consistent with business necessity and appropriately tailored.  Yet, if that conviction were 20 years old, the decision to not hire the applicant may not be appropriately tailored because of the passage of time from the conviction to the application for employment.

Employer Notice of Reliance on Criminal Conviction:  If an employer refuses to hire an applicant or takes adverse employment action against an employee based on a conviction obtained through a third-party background report or employer generated internal report, the employer must notify the person of the disqualifying conviction and provide a reasonable opportunity for the individual to present evidence that the criminal conviction information is inaccurate.  If it is established that the employer has inaccurate information, the criminal history cannot be considered in the employment decision.

What You Should Do

  1. Ensure that your criminal conviction policy is (i) job-related, (ii) consistent with business necessity and (iii) appropriately tailored.
  1. Review your job application form to ensure it does not inquire about:

(a)        An arrest not leading to a conviction;

(b)        Referral to or participation in a pre-trial or post-trial diversion program;

(c)        A conviction that has been judicially dismissed or ordered sealed, expunged or statutorily eradicated pursuant to applicable law; or

(d)        A non-felony conviction for possession of marijuana that is two or more years old.

An application that states “Have you ever been convicted of a felony?” might be deemed a violation of the amended regulation because it would cause an applicant to answer “yes” even if the conviction had been expunged.

  1. Educate those involved in the hiring process regarding the new limitations and requirements related to criminal convictions.

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 this or any other employment issue.  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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Bring It On Home: Don’t Delay In Asserting Claims

By David S. Olson |

In an April 8, 2016 ruling, the Central District Court of California held that a 2014 case alleging copyright infringement could proceed to trial notwithstanding that the underlying song, Taurus (by the rock band Spirit), was released in 1968, whereas the allegedly infringing song, the iconic Stairway to Heaven by Led Zeppelin, was originally released in 1971.  The decision is not getting a whole lotta love from the general public or Zep fans who have been made to wonder why the plaintiff’s case was not found to be untimely.

Since 1957, the Copyright Act has required that infringement actions be filed within three years. In deciding the motion for summary judgment filed by the defendants based on laches (unreasonable delay), District Court Judge R. Gary Klausner found that he really did not have two paths he could go on because a new, remastered version of Stairway to Heaven was released in 2014 and the lawsuit was thus in fact filed within the three year limitations period in the Copyright Act.  As such, per binding Supreme Court precedent, the case could not be barred by the doctrine of laches and would have to wind on down the road to trial.

Judge Klausner’s decision has generated a lot of public comment but it is important to remember that this ruling can and should be seen as a case specific exception to the general rule that one must act quickly in asserting claims or else face the prospect of seeing those claims getting trampled under foot by a statute of limitations, laches, or related time bar.   As such, the song remains the same in that any time you believe you have been or may have been civilly wronged, it is still as critical as ever that you consult with an attorney as quickly as possible, including to ascertain the time in which you have to assert any claims.  Acting promptly ensures you will not be left dazed and confused later if your claims are dismissed based on a failure to act in a timely manner.

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 this or any other legal issue.  If you wish to consult with the author of this post, please contact David Olson by email at dolson@clarktrev.com or telephonically by calling him at (213) 629-5700.

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Starting a New Business? Don’t Drop the Ball on Your Lease

By Scott D. Page |

Leasing commercial office or retail space can be one of the most important and complex initial business decisions for startups. While the following are some of the most important issues for startups to consider, they also apply to any commercial tenant entering a new lease.

Length of the Lease – One area of the lease to focus on is the lease term. A short-term lease is almost always to your benefit, especially if your business isn’t particularly location-sensitive and finding comparable space won’t be a problem at the end of the lease term. Shorter leases give you more flexibility if the needs of your business change. On the other hand, a long-term lease ensures that the business will have an affordable space for a predictable period of time, especially if you have found a favorable location for a retail shop or other business where location is critical. Also, landlords are often willing to make more lease concessions (e.g., free rent or more money for tenant improvements) on longer-term leases.

A good solution for most tenants is to negotiate a shorter initial lease with one or more options to extend the term of the lease. If you ask for an option, expect the landlord to want a higher rent for the renewal period. A right of first refusal on other available space at the property can also give you important access to additional convenient space at agreed upon terms if your business quickly expands.

Understand What “Rent” Covers – Another primary issue to consider when leasing commercial space is how much rent you’ll pay and what costs are included in the base rent. When considering options, look carefully at whether the landlord will pay for utilities, maintenance, repairs, security, janitorial services, parking, taxes and insurance, or whether you will be paying for such amounts as “additional rent.” These costs can potentially be significant and increase dramatically over the term of the lease, especially if exclusive systems (e.g., HVAC for IT equipment) are required for your business. Paying higher rent that covers these costs will eliminate expensive surprises down the road.

Tenant Improvements – If significant improvements to the space are required, you may want to use most of your bargaining power to have the landlord provide them at no cost to you. If you’re willing to sign a longer-term lease, the landlord will be more willing to pay for the desired improvements. It is also important to understand the tenant’s obligations to remove any specialty improvements at the end of the lease term before those improvements are installed to avoid unexpected expenses or disputes in the future.

Subleases and Assignments – Make sure you have the right to sublease or assign your leased space. These provisions, along with options to renew or lease additional space, provide flexibility as your business needs change. If you rent more space than you currently need to allow for expansion, you can sublease some of the space until you’re ready to use it. On the other hand, if you need to move out before the lease is over, you’ll have the option of finding another tenant to take some or all of your space and pay the rent, without having to negotiate an early termination or break the lease.

Give Yourself Time – Allow for three to six months to identify a property, agree upon important lease terms and negotiate a lease. The less time you have to make a move, the more leverage the landlord has to dictate terms and avoid the tenant concessions discussed above.

Find a Broker (and an Attorney) – Leasing commercial property can be a complicated process and should never be undertaken without knowledgeable parties explaining each step of the way and working to get you the best deal possible. A commercial real estate broker familiar with your business and locations of interest can help you focus on available and best options for your business, now and for the future.

Startups typically have very little leverage with landlords, but a good broker and attorney can help negotiate the best terms possible. Lease forms are almost always provided by, and favor, the landlord. An attorney can help explain the critical provisions of the lease and identify terms where the landlord will more likely make concessions.

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 this or any other real estate issue.  If you wish to consult with the author of this post, please contact Scott Page by email at spage@clarktrev.com or telephonically by calling him at (213) 629-5700.

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Can I Use My Spouse’s Estate Tax Credits? What is Portability and Why Does It Matter to Me?

By Tiffany A. Halimi 

Have you had an estate plan check-up recently?  If you or a client of yours has not had your trust reviewed by an estate planning attorney recently, your trust may be structured in a way that may be more complicated and cost your surviving spouse and your beneficiaries more than what might be necessary.

Current Transfer Tax Exemptions:

In 2016, each individual has a $5.45M exemption from federal transfer tax that they can apply to transfers of assets made during life or upon death.  Any transfer made in excess of the exemption will result in a 40% transfer tax (also known as an “estate tax” for transfers at death or “gift tax” for transfers during life).  A married couple can apply both spouses’ $5.45M exemption towards their joint estate, for a total exemption amount of $10.9M.

As of this year, an individual can transfer up to $14,000 to any number of recipients without using any of their gift or estate transfer tax exemption.  However, any transfers in a calendar year that exceed $14,000 to the same individual will result in the using of a person’s lifetime transfer tax exemption.

Prior to 2010, an individual’s exemption was personal to that individual  — either they would use it during life or use it at their death.  Either way, their exemption could not be transferred to any other individual’s use, not even their spouse.

Because an individual’s exemption needed to be used upon their death, at the very latest, in order for a married couple to take advantage of using their joint exemption amount, they would need to establish a trust with subtrusts.  The subtrusts may have required a separate tax identification number for each subtrust, a separate tax return filed annually and care by the surviving spouse  not comingle assets between the subtrusts.

Portability is Changing the Way Individuals Can Take Advantage of Their Spouse’s Unused Exemptions.

A concept called “portability” was adopted effective January 1, 2010 and made permanent by the 2012 American Taxpayer Relief Act.  With portability,  the surviving spouse can use the deceased spouse’s unused exemption against the surviving spouse’s future gift or estate taxes.  This allows trusts to be more simply constructed, as the surviving spouse can utilize the entire unused exemption amount of the deceased spouse without necessarily creating a subtrust (often called a Bypass Trust, Credit Shelter Trust or Exemption Trust).

Today, spouses can enjoy the simplicity and flexibility of just one trust while still taking advantage of their joint transfer tax exemption through the use of portability.

This structure has advantages and disadvantages that should be discussed in detail with your estate planning attorney to determine if it is compatible for your situation.

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 this or any other trust and estate issue.  If you wish to consult with the author of this post, please contact Tiffany Halimi by email at thalimi@clarktrev.com or telephonically by calling her at (213) 629-5700.

Circular 230 Disclaimer: To comply with IRS requirements, please be advised that, any tax advice contained in this article is not intended or written to be used, and cannot be used, by the recipient to avoid any federal tax penalty that may be imposed on the recipient, or to promote, market or recommend to another any referenced entity, investment plan or arrangement. For more information, please go to www.ClarkTrev.com