A recent New York Times article points to signs that the lending environment is improving for small business. According to Keri Gohman, an Executive Vice President and head of small business banking for Capital One who is quoted in the article, “It’s actually a really great time to access small business capital.”
The article notes that the banks have been easing credit terms for smaller businesses since mid-2012 and now seem more eager to loan than small businesses are to borrow. Demand for small business loans is still only about 50% of what it was before the Great Recession.
Nevertheless, if you own a small business and need some operating capital, this is good news. Now may be the best time in years to apply for a small business loan.
You can find the full New York Times article here.
Yesterday, the California Supreme Court ruled in Salas v. Sierra Chemical Co. that an employee who uses a false Social Security number to fraudulently obtain his job may still sue his employer for discrimination and recover damages.
At issue was whether a California state statute granting employment law rights to all California residents “regardless of immigration status” conflicted with — and, thus, was preempted by — federal immigration law. The Supreme Court ruled that the California state statute was not preempted because complying with both laws was possible up to the time when the employer discovered the employee’s fraud.
So now in California an employee can obtain a job using false and fraudulent means…but after he’s terminated he can sue his employer for employment discrimination…and he can recover lost wages from the time of termination up to the point where the employer discovered the fraud. Plus, the employee can recover emotional distress damages, penalties, and attorneys fees. All this is possible even though the employee admitted to using false and fraudulent documents to get his job and, thus, never had the legal right to work in the first place.
You can find the California Supreme Court’s opinion in Salas v. Sierra Chemical Co. here.
Note: In reaching its result, the California Supreme Court explicitly reversed the Court of Appeal’s prior ruling that the employee’s claims were barred by the after acquired evidence doctrine and the unclean hands doctrine. You can find my blog post about the Court of Appeal’s ruling here.
In 2007, the California Supreme Court ruled in Gentry v. Superior Court that class action waivers in employment arbitration agreements are invalid under certain circumstances. Four years later, however, the United States Supreme Court reached a seemingly opposite conclusion in AT&T Mobility LLC v. Concepcion, holding that “requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the [Federal Arbitration Act].”
As a result of these two decisions, employment lawyers across California have been asking since 2011 — does the Gentry ruling and rationale survive in light of Concepcion? That is, are employment arbitration agreements that contain mandatory class action waivers still illegal in California, or do they fundamentally interfere with the Federal Arbitration Act (“FAA”) such that they must be enforced?
Yesterday, the California Supreme Court answered that question in Iskanian v. CLS Transportation. Continue reading
Yesterday, the federal government announced several regulatory changes that extend marriage benefits to same-sex couples. This announcement — and the legal changes that come with it — are the result of last year’s historic Supreme Court decision in U.S. v. Windsor striking down Section 3 of the Defense of Marriage Act (“DOMA”) which previously prohibited the federal government from recognizing the validity of same-sex marriages.
As a result of the Windsor decision, President Obama ordered Attorney General Eric Holder to review the government’s regulations to ensure that same-sex married couples were being treated similarly to opposite-sex married couples across the broad spectrum of federal benefits. Yesterday, Attorney General Holder issued a formal memorandum summarizing the many ways in which the Windsor decision had been implemented throughout the federal government to ensure the equal treatment of same-sex married couples. You can find the Attorney General’s memorandum here.
Most relevant to California employers, the Department of Labor announced yesterday a proposed rule that would change the definition of “spouse” under the federal Family & Medical Leave Act (“FMLA”). This change will allow gay or lesbian employees in California (and all 50 states) to take a family leave of absence under FMLA to care for their same-sex spouse or other family member. You can find yesterday’s announcement about the proposed new FMLA rule here.
This decision by the Department of Labor comes after similar decisions by other federal agencies. These include the IRS allowing same-sex married couples to file joint tax returns; the Department of Defense allowing same-sex spouses of military service members to receive the same benefits as opposite sex spouses; the Department of Justice allowing same-sex couples to refuse to testify against each other and to file joint bankruptcy petitions; the Department of Homeland Security treating same-sex marriages identically to opposite-sex marriages for purposes of immigration; and the same-sex spouses of all federal employees now being eligible for health insurance and other benefits to the same extent as opposite-sex spouses.
In yet another example of the challenges and difficulties involved in using independent contractors, today the Ninth Circuit ruled in Ruiz v. Affinity Logistics that delivery drivers for Affinity are employees rather than independent contractors.
In reaching this decision, the Ninth Circuit reversed the lower court’s ruling which concluded that the drivers were employees. The lower court based its decision on the fact that the drivers (a) established their own individual businesses with their own federal employee identification numbers, (b) could hire helpers or secondary drivers, and (c) signed independent contractor agreements.
But that wasn’t enough for the Ninth Circuit. Relying on the landmark 1989 California Supreme Court case, S.G. Borello & Sons, Inc., the Ninth Circuit concluded that the “right to control work details” is the most important consideration. The Court then cited the list of “secondary factors” that must also be considered, including:
- whether the one performing services is engaged in a distinct occupation or business;
- the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
- the skill required in the particular occupation;
- whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
- the length of time for which the services are to be performed;
- the method of payment, whether by the time or by the job;
- whether or not the work is part of the regular business of the principal; and
- whether or not the parties believe they are creating the relationship of employer-employee.
The Affordable Care Act requires employers with 50 or more employees to provide health coverage for their employees or face stiff fines. To comply with the new law, many employers were canceling their group health plans, dumping their employees into the health exchange (which is Covered California in this state), then reimbursing those employees for some or all of the employee’s cost of purchasing individual coverage, and then claiming a tax deduction for the amount of the reimbursement.
This practice is now illegal, according to a new ruling from Internal Revenue Service (“I.R.S.”), and could subject employers to a penalty of $100 a day — or $36,500 per year — under Section 490D of the Internal Revenue Code for each affected employee.
When an employer reimburses an employee for individual health coverage, that employer creates an “employer payment plan.” The new I.R.S. ruling concludes that all “employer payment plans” will be considered “group health plans” subject to all of the provisions and requirements of the Affordable Care Act, including the requirement to provide certain preventive care (like mammograms and cancer screenings) without co-payments or other costs. Obviously, employer reimbursements plans do not meet these requirements because they are not providing any care at all.
As a result, any employer who is currently covered by the new healthcare law and who is also reimbursing its employees for some or all of their insurance costs should contact their accountant or legal advisor for more information. If you are interested in reading the I.R.S. notice, you can find it here.
Peer-to-peer (“P2P”) lending started about a decade ago to allow individuals and other small investors to lend money to each other over the internet. By going P2P, banks were cut out of the process, resulting usually in lower interest rates and more funds available for the small businesses looking for cash. In return, individual investors earned single-digit returns, which were often higher than what they could have earned elsewhere in the market. As envisioned, it was a true win-win: a way for individual investors to make a local, real-world impact while also making some money.
However, yesterday the New York Times reported that the P2P industry has been infiltrated by the very institutions it was designed to shut out. Today, major financial institutions have invaded the space and are using their massive resources and sophisticated technologies to suck up the best deals.
But is their presence necessarily bad? Maybe not. These institutions respond by pointing to the benefits of scale. They claim they are providing much-needed scale to the market — that is, making more funds available, with faster deal close times and more transparency, than would otherwise be possible in a market of individuals. On the other hand, the defenders of classic P2P claim the massive Wall St. presence makes the P2P market have less “resonance with the public.” It also makes the P2P market less stable, they say. In short, critics claim, P2P is now a different animal entirely — more akin to “online consumer finance.”
In any event, it’s an interesting article that discusses the P2P industry, its players, and how it’s changing. It also discusses how small investors are trying to claw their way back into the P2P game. You can find the article here.
Silicon Valley Bank, the Angel Resource Institute, and CB Insights just released their Q3 2013 “Halo Report.” This report generally confirms that angel investment is increasing, but the median round size ($520K) is down from the Q1 2013 peak ($700K). Other notable findings include:
- Healthcare deals enjoyed the largest increase in round size, increasing to $1.50M from $1.10M in 2012;
- The median pre-money valuation of early-stage angel deals held steady at $2.5M;
- Most angels invest close to home, with 74% of all deals closing in their home state;
- Internet, healthcare, and mobile deals constitute the “lion’s share” of all deals closed;
- The New England region leads all other regions in total angel dollars invested; and
- California leads all other regions in terms of the overall share of angel deals closed.
You can find the full report here.
Earlier today, the National Labor Relations Board (“NLRB”) Regional Office 13 issued a groundbreaking decision in Northwestern University v. College Athletes Players Association (Case No. 13-RC-121359) which could fundamentally alter the relationship of college football players to their schools and to the N.C.A.A.
The NLRB’s Regional Office ruled that:
(1) College football players on scholarships at Northwestern University are “employees” within the meaning of the National Labor Relations Act; and
(2) As a result of being “employees,” these college football players are entitled to hold a secret-ballot election, under the direction of the NLRB’s Regional Director for Region 13, on whether or not to form a union.
The NRLB’s decision was based on a simple and indisputable premise — that college football players perform valuable services for their universities. These valuable services generated revenues of approximately $235,000,000 from 2003-2012 through ticket sales, television contracts, merchandise sales, and licensing agreements. The universities were able to capture this revenue and utilize it in any manner they saw fit. In return, the players receive scholarships that function essentially as “compensation,” thus confirming the employer-employee relationship.
You can read the NLRB’s decision here. Northwestern University will now have until April 9, 2014 to request a review of the decision by the full NLRB in Washington, D.C.
Note: Interestingly, today’s decision comes only a week after a federal lawsuit was filed alleging that the N.C.A.A. and the five “power conferences” have made billions of dollars off college athletes by effectively restraining their compensation and competition. You can read more about this lawsuit, filed by famed sports lawyer Jeffrey Kessler, here.
The Sarbanes-Oxley Act of 2002 (“SOA”) included protections for whistleblowers at public companies. Section 806 of the SOA states that no publicly-traded company, or any officer, employee, contractor, subcontractor, or agent of such public company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee for whistleblowing or engaging in other protected activities. See 18 U.S.C. §1514A.
But this language left open a very big question — that is, are the employees of privately-owned “contractors” and “sub-contractors” of the public company also protected by §1514A’s whistleblower protections? The answer is “Yes,” according to the U.S. Supreme Court in its 6-3 decision in Lawson v. FMR LLC (Case No. 12-3, 2014 BL 57948).
The Facts of the Case
The plaintiffs in Lawson were employed by an investment advising firm (“FMR”) that provided advisory and management services to the Fidelity family of mutual funds. The Fidelity funds were publicly-traded companies; however, they had no employees of their own because they contracted with investment advising firms (like FMR) to handle their day-to-day operations.
One plaintiff worked for FMR for 14 years. She alleged that, after she raised concerns about certain cost accounting methodologies (believing that they overstated expenses associated with operating the mutual funds) she suffered a series of adverse actions, ultimately amounting to constructive discharge. A second plaintiff worked for FMR for 8 years. He alleged that he was fired in retaliation for raising concerns about inaccuracies in a draft SEC registration statement concerning certain Fidelity funds.
Both plaintiffs sued FMR alleging illegal retaliation in violation of §1514A.
The Lower Courts’ Decisions
FMR moved to dismiss the case, arguing that plaintiff could not bring an action because she was not an employee of a “public” company as required by SOA. The District Court rejected FMR’s interpretation of §1514A and denied FMR’s motion. The First Circuit Court of Appeals then reversed the District Court’s decision, ruling that only employees of a public company are protected by §1514A.
Well, we’re going to have the answer to that question soon from the California Supreme Court.
The case is entitled Salas v. Sierra Chemical (Case Number S196558). The issue in Salas is whether an employee’s claims for discrimination under California’s FEHA can be dismissed on grounds of “after-acquired evidence” and “unclean hands” when that employee provided false documentation in order to get hired.
Back in 2011, the California Court of Appeal issued its decision in the case, ruling that the employee’s discrimination claims were, in fact, barred. You can read the appellate court’s opinion here.
The California Supreme Court set oral argument in the case for Wednesday, April 2, 2014 at 9:00 a.m. in Los Angeles. I expect the Court’s decision in Salas around July 1, 2014 — so stay tuned!
For more information about the case and its docket in the California Supreme Court, go here.