Significant New Laws for California Businesses in 2014

Quite often new laws go into effect on January 1. This year was no different with several new laws on the books that may concern your business. Here is our list of some of the most important new California laws for 2014.

New Laws for Limited Liability Companies

There were significant revisions to California’s rules concerning the formation and management of limited liabilities companies. The new law greatly expands the consent rights of members. Depending on the language in the operating agreement, the new law may effectively limit the authority of a manager to take actions that the manager could have taken prior to 2014. For example, a new default rule is that if an LLC is managed by managers, the manager may not take any action “outside the ordinary course of business” without obtaining the consent of all the members. If you are operating an LLC, check in with us to see if your company will be affected.

Corporations May Take Actions When Quorum Is Impracticable Due To Disaster

Corporations Code sections 207, 212, 5140, 5151, 7140,7151, and 9140 were revised to give directors and officers of for profit and nonprofit corporations various powers and immunities in order to carry out their operations during an emergency that preclude a quorum of the corporation’s board of directors from being readily convened. The new rules allow for modified notice to directors, appointing officers as directors to reach a quorum, modifying corporate lines of succession, making donations, and entering into contracts, security agreements, and partnerships, among other things. “Emergencies” include natural catastrophes, attacks by enemies of the United States, and acts of terrorism or other extraordinary manmade disasters.

Do Not Track Software - Website Disclosures Required

Business & Professions Code section 22575, the statute governing commercial websites and services that collect personally identifiable information, was amended. These websites are now required to disclose how they respond to “do not track” signals sent by web browsers. Such websites must also disclose whether third parties may collect personally identifiable information when a consumer uses the site. If your website is collecting personal information, make sure to confirm your compliance.

Sellers Must Disclose Construction Defect Claims

Civil Code section 1102.6 makes explicit the requirement that sellers disclose any construction defect or breach of warranty claims brought by them in connection with the sale of residential property.

The Minimum Wage Is Going Up

Assembly Bill 10, passed and approved in 2013, raises the California minimum wage to $9.00 starting July 1, 2014. The law provides for a second increase to $10.00 on January 1, 2016.

Worker Protections Against Immigration Reporting

Assembly Bill 263 adds Labor Code section 1019 and establishes certain “unfair immigration-related practices.” Prohibited practices include requesting additional or different documents than what is required under federal I–9 rules, refusing to honor documents that appear genuine on their face, using federal E-verify to check status in a manner not required or authorized under the program, and threatening to file or filing a false police report. This new law expands protected conduct to include a written or oral complaint by an employee that he or she is owed unpaid wages and prohibits employers from preventing an employee from providing information to or testifying before any public body conducting an investigation, hearing, or inquiry, and prohibits retaliation based on such conduct. Now is a good time to audit your procedures with respect to verification of citizenship and completion of I–9 forms.

Employee Time Off to Testify About Serious Crimes

Under the new Labor Code section 230.5, it is unlawful for an employer to discharge or otherwise retaliate against an employee who is a victim of certain serious crimes for taking time off to testify in proceedings related to the crime. Requests for time off for this purpose must be honored by the employer upon reasonable advance notice.

Retaliation For Complaints Of Unpaid Wages Prohibited

Labor Code section 98.6 now specifies that an employee’s complaint that he or she is owed unpaid wages is an activity protected against employer discrimination or retaliation, and adds that an employer who engages in prohibited discrimination or retaliation is liable for a civil penalty of up to $10,000 in addition to other existing remedies. The amendment also expands the scope of conduct prohibited by section 98.6 to include retaliation in addition to discrimination, which was already prohibited.

Sexual Harassment Need Not Be Motivated By Sexual Desire

Government Code section 12940, The Fair Employment and Housing Act, has been amended to specifically state that prohibited sexual harassment need not be motivated by sexual desire. California law continues to strictly prohibit sexual harassment and employers should take all necessary steps to eliminate it from the workplace.

Reporting Violations of Local Law, Internal Complaints Protected From Retaliation

Various procedural amendments have been made to clarify the procedures applicable to whistleblower claims. Most notably, the State Personnel Board must render a decision on consolidated complaints no later than six months after the order of consolidation, and such claims are now explicitly made exempt from ordinary government claims procedures. In addition, Labor Code section 1102.5, relating to retaliation against whistleblowers, has been strengthened to: (a) protect complaints about alleged violations of local law, as well as internal complaints, and (b) prohibit persons acting on behalf of an employer (in addition to the employers themselves, who were already included) from committing prohibited retaliation.

Prevailing Employers Must Show Bad Faith To Recover Fees In Actions For Non-Payment Of Wages And Benefits

Labor Code section 218.5 provides for an award of attorney’s fees to the prevailing party in actions for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions. This amendment to section 218.5 provides that an award of fees to a prevailing employer shall be conditioned on a finding that the employee brought the action in “bad faith”. This significantly reduces the likelihood that employers will recover attorney fees on wage claims.

Criminal History on Job Applications

Assembly Bill 218 prohibits requesting criminal background information on the initial employment application for local and state government employees, with the goal of reducing unnecessary barriers to employment for the one in four adult Californians who have an arrest or conviction record. California joins nine states and over 50 cities and counties across the United States that have adopted similar legislation. AB 218 does not, however, apply to law enforcement positions or positions where the applicant will work with children, the elderly, the disabled or other sensitive positions.

Prelawsuit Warning and Opportunity to Correct Before Proposition 65 Claims

Assembly Bill 227 is intended to decrease frivolous lawsuits under The Safe Drinking Water and Toxic Enforcement Act of 1986, popularly known as Proposition 65 or “Prop 65.” Prop 65 currently allows for penalties of up to $2,500 per day that an individual is exposed to a listed chemical without being provided a clear and reasonable warning about the presence of the chemical. One of Prop 65’s most unusual features is that it provides private citizens with the power to enforce the law once the California Attorney General, California district attorneys, and certain California city attorneys are notified of the alleged violation. With this amendment, alleged violators are provided notice and an opportunity to cure before a party may make a claim.