Insights

Brendan Lund & Eber Terceros
October 17, 2023
The Food Institute

Beginning on Jan. 1, 2024, businesses across all industries will need to file a Beneficial Ownership Information Report (BOI Report) with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Enacted by Congress in 2021, the Corporate Transparency Act (CTA) requires private companies, who have historically kept the identity of their owners or those who control the organization private, to disclose this information to a national online database.

The CTA will usher in a new era of transparency and disclosure for legal entities operating within the U.S. Because so many food and beverage businesses are privately owned, the industry will be particularly impacted by this new reporting regime.

The purpose of the CTA is to combat financial crimes, money laundering, and corruption. The reality is that completely legitimate companies engaging in legal activities are required to file the BOI Report.

Who Needs to Report?

The CTA requires privately owned corporations, LLCs, partnerships, limited partnerships, and other legal entities formed by a filing with a Secretary of State, such as a general partnership (Reporting Companies), to disclose information about their beneficial owners and/or controlling members. Reporting is required for individuals who have “substantial control” over the company or own at least 25% of the entity. All reporting must occur through an online portal called BOSS (Beneficial Ownership Secure System).

What Information Needs to be Reported?

Reporting companies must disclose their legal name, any trade name or “dba” name, street address, state of formation, and Taxpayer Identification Number.

Each beneficial owner must report their full legal name, date of birth, business (or residential) address, and a scanned copy of either a passport or state driver’s license. As ownership of the entity changes, the BOI Report must be updated, creating an ongoing CTA reporting requirement for the owners.

When to Report?

Companies formed after Jan. 1, 2024, must report the identities of their beneficial owners within 30 days of formation. Companies formed before Jan. 1, 2024, have until Jan. 1, 2025, to report their current beneficial owners. Any changes to the BOI Report after Jan. 1, 2025, must be reported within 30 days of the change.

Exemptions

While the CTA casts a wide net, there are certain exemptions in place. The CTA exempts 23 categories of entities from its definition of “reporting company,” mostly due to these entities being subject to other federal regulations (e.g., banks, credit unions, insurance companies).

The exemption most applicable to the food industry would be “large operating companies,” which are companies with over 20 full-time employees in the U.S., have an operating presence at a physical office in the U.S., and filed a federal income tax return for the prior year reporting more than $5 million in gross receipts or sales.

Reporting Violations

Compliance with the CTA is not optional; failure to comply with the reporting requirements can lead to substantial penalties. The CTA provides civil and criminal penalties for a person who either “willfully provides false or fraudulent beneficial ownership information to FinCEN” or “willfully fails to report complete or updated beneficial ownership information to FinCEN.” The person may be subject to a civil penalty of up to $500 per day the violation continues or criminal penalty of up to $10,000 and up to two years of prison.

Food and Beverage M&A Transactions

The implications of the CTA are significant for the food and beverage industry. Food businesses should consult with their attorneys for initial reporting advice and review. Partnership or operating agreements should be amended to give the general partner or manager enough control to obtain required information from partners or members.

Food businesses acquiring other companies will also need to change their practices. As part of the due diligence process, potential buyers in M&A transactions should confirm whether the target entity is a Reporting Company and if so, whether it complies with the CTA reporting obligations or if it qualifies for an exemption. CTA compliance or exemption qualification should be included in the seller’s representations and warranties section of the Purchase Agreement or disclosed in the disclosure schedules.

The CTA’s imminent arrival brings a new level of accountability and transparency to the food and beverage industry. Amid the changing regulatory landscape, companies must adapt their practices and processes to ensure compliance.

Editor’s note: Brendan Lund is the co-chair of Hopkins & Carley’s Corporate Practice. He has a hybrid corporate and tax practice, with a specific focus on matters involving the food and beverage industry. Brendan serves as a strategic business advisor while providing a tax perspective to the overall business goals. He can be reached at blund@hopkinscarley.com.

Eber Terceros is a member of Hopkins & Carley’s Corporate Practice. He primarily focuses on entity formation, debt and equity financing, and commercial and technology transactions. Eber can be reached at eterceros@hopkinscarley.com.

August 2023

Earlier this month the National Labor Relations Board (“NLRB”) issued a ruling in Stericycle Inc. which adopted a new, stricter legal standard for evaluating whether a company policy or rule that does not expressly restrict employee concerted activity is “facially unlawful” under the National Labor Relations Act (“NLRA”). You may wonder what an NLRB case has to do with your company if your employees are not in a union. The NLRB is the federal agency that is responsible for determining violations of the NLRA, which applies to virtually all employers, irrespective of whether the employer’s employees are unionized.

The policies at issue in the Stericycle case pertained to personal conduct, conflicts of interest, and confidentiality of harassment complaints. Ultimately, the NLRB held that any employment policy that has a “reasonable tendency” to dissuade workers from engaging in organizing activity violates the NLRA. This includes, for example, discouraging employees from discussing their workplace concerns with other coworkers.

Notably, based on Stericycle, the NLRB will now review employer policies from the perspective of an employee who is subject to the rule, who is economically dependent on the employer, and who also contemplates engaging in protected concerted activity. Consistent with this perspective, the Board will consider the employer's intent in maintaining a rule to be immaterial. Rather, if an employee could reasonably interpret the rule to have a coercive meaning, the NLRB will carry its burden, even if the employer sets forth a contrary, non-coercive interpretation of their rule that is also reasonable. 

That said, the Stericycle standard explicitly permits an employer to rebut the presumption that a rule is unlawful by proving that the rule advances a legitimate and substantial business interest that cannot be achieved by a more narrowly tailored rule. To state the obvious, this new ruling tips the scales of justice in the employee’s favor.

To put the Stericycle decision in context, some companies maintain policies that require confidentiality with respect to investigation of workplace complaints, and such policies may now run afoul of the NLRA under the Stericycle ruling. For example, if a company’s anti-retaliation policy contains language that requires all parties involved in an investigation into a complaint of unlawful behavior such as discrimination or harassment to keep that complaint, the investigation, or the resolution of that complaint confidential, that policy could be read to forbid an employee from engaging in protected concerted activity.

Other policies that should be examined in light of this decision include, but are not limited to, those relating to an employee’s technology/electronic device use; personal conduct; conflicts of interest; harassment complaint, investigation, and prevention; electronic communications; use of camera and video recording; and discrimination.

Notably, the Stericycle decision will be applied retroactively, meaning that current employment policies that violate the ruling must be revised immediately.

What Should Employers Do Now?

• Review your employee handbook and policies: Employers should review their Employee Handbooks and standalone employee policies in order to ensure that they do not have the unlawful effect of dissuading employees from engaging in organizing activity. Handbooks and policies should be read broadly, and from the perspective of the affected employee, to ensure compliance with the NLRB’s new ruling.

If you have questions regarding your Employee Handbook, or other policies, or any other issue related to employment law, please contact one of our attorneys:

August 2023

The Americans with Disabilities Act (ADA) requires employers to provide reasonable accommodations to employees with a disability. The ADA does not, however, consider pregnancy to be a disability, so federal law has not required employers to provide accommodations to employees who are unable to work, or limited in their ability to work, due to pregnancy. The Pregnant Workers Fairness Act (PWFA)—which went into effect on June 27, 2023 and applies to violations occurring on or after that date—was enacted to fill this gap in the ADA.

The PWFA requires employers with 15 or more employees to provide reasonable accommodations to qualified applicants or employees who have communicated that they have a physical or mental condition related to pregnancy, childbirth, or associated medical conditions, unless the accommodation would impose undue hardship on the company. The PWFA covers all pregnancy-related known limitations, including those not considered a disability under the ADA.

As is true under the ADA, the PWFA requires covered employers to engage in a good faith, interactive process to identify potential accommodations for the employee. Under the PWFA, employers cannot require an employee to take a leave of absence if another accommodation can be made. Additionally, the PWFA prohibits employers from denying employment opportunities based on the need to make accommodations, and prohibits employers from taking adverse employment actions against employees who requesting an accommodation.

The Equal Employment Opportunity Commission (EEOC) is developing regulations to enforce the PFWA and will issue a proposed draft of the regulations for public comment.

While the duties imposed by the PWFA may be new to federal law, California law already requires employers to provide reasonable accommodation to pregnant employees and employees affected by pregnancy, and similarly prohibits discrimination and harassment of employees who are pregnant or affected by pregnancy. To the extent that employers have employees outside California, however, the PWFA creates new obligations and employers should update their policies and practices accordingly.

Pregnancy and reasonable accommodation can present challenging issues for employers. If you have questions about these issues, or any other issues relating to employment law, please contact one of our attorneys:

August 2023

In its decision released on June 29, 2023, the United States Supreme Court unanimously held that U.S. trademark protections under the Lanham Act are not extraterritorial. The court was divided, however, on the appropriate standard for determining whether a trademark owner’s infringement claims involve a domestic “use in commerce.”

Background

The recent decision, in Abitron Austria GMBH v. Hetronic Int’l, Inc., No. 21-1043, aimed to resolve the long-standing issue of the extraterritorial reach of the Lanham Act (i.e., the U.S. comprehensive trademark statute). Prior to the Abitron decision, the 1952 decision of Steele v. Bulova Watch Co. – some 70 years ago – held that U.S. courts have jurisdiction to award relief to an American corporation against acts of trademark infringement and unfair competition consummated in a foreign country by a citizen of the United States and that reached U.S. consumers. In other words, the Steele decision introduced the idea that the Lanham Act could reach beyond the borders of the United States, but nevertheless left some unresolved questions. Consequently, the decision resulted in a circuit split on the extraterritoriality reach of the Lanham Act.

The Facts

The case centered on a trademark dispute between Hetronic (a U.S. company) and its former foreign distributors (collectively, “Abitron”). After reverse engineering Hetronic’s products, Abitron began to sell Hetronic-branded products that incorporated parts sourced from third parties. Abitron mostly sold its products in Europe, but it also made some direct sales into the United States. Hetronic sued Abitron in the Western District of Oklahoma, claiming trademark violations under Sections 1114(1) and 1125(a) of the Lanham Act. As a defense, Abitron claimed its foreign sales did not violate the Lanham Act because the statute did not have extraterritorial reach. A jury awarded Hetronic $96 million in damages, largely based on Abitron’s foreign sales. The Tenth Circuit upheld the award, concluding that the Lanham Act extended to Abitron’s foreign conduct because the “impacts within the United States [were] of a sufficient character and magnitude as would give the United States a reasonably strong interest in the litigation.” 

The Supreme Court then granted certiorari on the distributors’ question of “whether the court of appeals erred in applying the Lanham Act extraterritorially to petitioners’ foreign sales, including purely foreign sales that never reached the United States or confused U.S. consumers.” The Court vacated the Tenth Circuit’s judgment and remanded for further proceedings.

The Court’s Ruling

Under modern statutory construction principles, courts apply a two-step framework to determine whether a statute can be applied to conduct outside of the United States. The first question is whether there is a “clear, affirmative indication” that the law was intended to apply abroad. If not, there is a presumption against extraterritorial application. Here, the Court unanimously agreed that the statutory language does not provide such a clear statement and thus the Lanham Act provisions are not extraterritorial.  

Turning to the second question, the Court considered whether the claims involve a permissible “domestic application” of the statute. This is where the justices were divided, issuing three opinions: a majority (5-4) opinion by Justice Alito and two separate concurring opinions by Justice Sotomayor and Justice Jackson. The majority ruled that these provisions apply only when the infringing “use in commerce” occurs in the United States. In other words, a claim may advance if the pertinent “commercial use” took place within the United States, but it cannot if that is not the case. 

In Justice Sotomayor’s concurrence, joined by Justices Kagan and Barret, and Chief Justice Roberts, she identified a consumer-confusion focus where the Lanham Act would govern “foreign infringement activities if there is a likelihood of confusion in the United States.” Justice Jackson’s concurring opinion adopted the federal government’s position as amici curiae, stating that even if a foreign company sells products in a foreign country, it could still be subject to the Lanham Act. This could be the case if the purchaser resells the products in the United States, or if the foreign company participates in other actions over the internet that could be deemed “use in commerce” within the United States, even without a physical presence in the United States. As the concurrences demonstrate, open questions remain about how lower courts should interpret the “use in commerce” standard.

Next Steps

The Abitron decision underscores the importance of U.S. companies operating internationally to consider the trademark law of the countries in which they do business in order to develop strategies to protect their trademarks in those countries. Companies with commercial activities outside the United States should thus consult with trademark counsel about ways to protect their brands in other countries.

Please reach out to us if you need any assistance in implementing new brand protection, developing trademark enforcement strategies or would like assistance in registering your trademarks (domestically or internationally).

For more information, please contact Lynn M. Humphreys or Jeffrey M. Ratinoff.

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July 2023

As a general rule, non-exempt employees in California are not entitled to be compensated for their regular commute to and from the workplace. Non-exempt employees are entitled to payment for all hours worked, however, which includes all the time an employee is “suffered or permitted to work, whether or not required to do so,” and the time during which the employee is subject to the control of their employer. In order to comply with the law, employers must be familiar with the various exceptions to the general rule and the circumstances in which non-exempt employees must be paid for time spent traveling. 

Let’s look at the federal laws first. Under federal law, regular commuting to and from work is ordinarily not compensable working time. However, employers must pay their non-exempt employees for travel time in these situations:

• One-day jobs: Employers must pay non-exempt employees for travel time for a one-day assignment in another city if the time the employee spends in transit exceeds the employee's usual commuting time.

• Travel time from job to job: Employers must pay non-exempt employees for travel time spent traveling during an employee's regular working hours, such as from job site to job site, or for travel after the first principal activity of the day.

• Overnight work: Employers must pay non-exempt employees for travel time that keeps the employee away from home overnight if the travel time occurs during the employee's normal working hours, or during those same hours on days, such as weekends, when the employee does not ordinarily work.  

• Work performed while traveling: Employers must compensate non-exempt employees for all work that an employee is required to perform while traveling.

In California, many employers provide optional employee ridesharing. When an employer offers employees the opportunity to use company-provided transportation to and from the worksite, such as a commuter bus, the time spent commuting is not compensable if the rideshare is purely voluntary.

While regular commute time to and from the workplace is generally not compensable, California law requires employers to pay their non-exempt employees’ travel time in the following scenarios:

• Starting the day at a Company-owned facility: When a company requires an employee to report to the employer's business premises before heading to an off-premise worksite, the time from when an employee reports to the company facility until the employee is released from duty constitutes hours worked. 

• Mandatory bussing: California employers must pay their non-exempt employees for the time they spend traveling between a company-controlled departure site and a remote job site because employees are subject to their employer's control while traveling between the company site and the remote work site. Notably, travel time from the employee’s home to the company site is not compensable.

• Out-of-town work events: California employers must also pay non-exempt employees for all time spent traveling to and from out-of-town events, including the time spent waiting to purchase tickets, check baggage, or board a flight, bus, train, etc. However, employers are not required to pay employees for time spent eating meals, sleeping, or engaging in purely personal pursuits which are not connected with traveling.

What Should Employers Do Now?

• Review your policies and practices related to travel time for non-exempt employees: California employers should review their policies and practices related to travel time to assure that non-exempt employees are paid in accordance with current law.  Given the impact of the COVID pandemic on “regular” business operations, non-exempt employees whose primary or official workplace is their home may be entitled to be paid for time spent traveling to the employer’s facility on those occasions when they do so.
   
• Remember that exempt employees are not entitled to additional pay for time spent traveling: Exempt employees receive a fixed salary that compensates them for their work, regardless of the number of hours they work, so they are not entitled to additional compensation for travel time, including travel time outside normal business hours. Exempt employees, like all employees, are entitled to reimbursement for expenses incurred in the course of business travel, however. 

If you have questions regarding travel time or any other issue related to employment law, please contact one of our attorneys:

July 2023

If you own an interest in a legal entity, you will likely need to comply with new reporting requirements, in some cases as early as January 1, 2024. In 2021, Congress enacted the Corporate Transparency Act (“CTA”), which tasked the U.S. Treasury Department with developing a system of standardized reporting for companies (including LLCs and partnerships) being formed in the U.S. and the disclosure of their beneficial ownership information. Failure to comply with these new obligations brings potential civil and criminal penalties to individual business owners.

Who needs to Report?

The CTA requires privately owned corporations, LLCs, partnerships, and other legal entities formed by a filing with a Secretary of State (“Reporting Companies”), to disclose information about their beneficial owners and/or controlling members. Reporting is required for individuals who have “substantial control” over the company or control at least 25% of the entity. All reporting must occur through an online portal to be established on Treasury’s Financial Crimes Enforcement Network (“FinCEN”) website.

What Information needs to be Reported?

Reporting companies must disclose: (a) the name of the reporting company, (b) any trade name or “doing business as” name, (c) the business street address, (d) the state of formation, and (e) the Taxpayer Identification Number (TIN) under which the reporting company reports to the IRS. Each beneficial owner must report the individual’s: (i) full legal name, (ii) date of birth, (iii) business (or residential) address, and (iv) either Passport or state driver’s license number (including a scanned copy of the document). As ownership of the entity changes, the beneficial ownership information must be updated, so this creates an ongoing CTA reporting requirement.

When to Report?

Companies formed or registered to do business in the U.S. after January 1, 2024, must report the identities of their beneficial owners within 30 days of formation. Companies formed before January 1, 2024, have until January 1, 2025, to report their current beneficial owners. Any changes to beneficial ownership after January 1, 2025, must be reported within 30 days of the change.

Reporting Violations

The CTA establishes penalties for failing to provide accurate and up-to-date information to FinCEN. Violators may face (a) civil penalties of up to $500 per day for each violation or (b) criminal penalties of up to $10,000 and imprisonment for up to two years.

We would be pleased to assist you in matters concerning the CTA, including any reporting obligations that you may have. Hopkins & Carley will not, without being engaged in writing specifically for this purpose, take any action on your behalf concerning the CTA.

Please contact your Hopkins & Carley attorney should you have any questions or wish any assistance regarding the CTA.

July 2023

Enforcement of the California Consumer Protection Act, as amended by the CPRA (collectively, CCPA), officially began on July 1, 2023 with one wrinkle. While the CCPA itself can now be enforced by both the California Attorney General and the California Privacy Protection Agency (CPPA), in addition to the private right of action for individuals, its regulations are not complete on all aspects of the law. Thus, the Superior Court of California of Sacramento County last week barred enforcement of the regulations that were issued in March 2023 until 2024. However, businesses must comply with all of the requirements of the CCPA now, taking guidance from the regulations as they now exist on 12 of the 15 areas of the CPRA and businesses must keep an eye out for the regulations to come in other areas of the law.

From inception to enforcement, the California Consumer Protection Act, as amended by the CPRA (collectively, CCPA), has presented unique characteristics that were either emulated or eschewed by other state legislatures in the recent uptick of comprehensive privacy laws passed by state legislatures across the United States the past couple of years. One such unique characteristic is the enactment of a state privacy agency (i.e., the CPPA) to enforce violations of the law in addition to enforcement by the California Attorney General.

Now with two enforcement entities, and no longer having the benefit of a 30 day cure period, if you are subject to CCPA, businesses must pay particular attention to: (i) robust security measures to ward off security breaches which raise the specter of individual and class action lawsuits and (ii) issues that the Attorney General has highlighted with its recent enforcement actions or press releases. Note that the Attorney General and the CPPA have discretion to offer offenders a cure period, depending on the offender’s lack of bad intent and voluntary efforts to comply with the law. Thus, good faith efforts to comply with provisions of the CCPA can go far in terms of gaining a potential cure period and mitigating risk overall.

For clarity, the CPPA has administrative authority, while the California Attorney General retains its civil authority, but only one may take action at a given time for a particular violation. Both the Attorney General and the CPPA have the authority to enforce provisions of CCPA, including the power to issue subpoenas, conduct investigations, and impose penalties. At the same time, CPRA provides a limited private right of action in limited cases of a data breach, meaning an individual can sue in their own capacity.

Penalties for violations of CCPA are $2,500 per violation or $7,500 for violations that are intentional or involve children. It is worth highlighting that these violations are per individual not per occurrence. Thus, penalties can add up for one incident where each adversely impacted individual would be a violation.

To learn more about CCPA, you can click here to read our other Client Alerts.

Please reach out to us if you need any assistance in implementing opt-out mechanisms, updating your privacy policies, or have other privacy concerns related to your business.

For more information, please contact Chiara Portner and Kenny Gutierrez.

July 2023

As we reported previously, California’s Senate Bill 1162 now requires private employers with 100 or more employees to submit pay data reports to the Civil Rights Department (formerly known as the Department of Fair Employment and Housing). If a company hires 100 or more workers through labor contractors, it must submit a separate pay data report.

The required reports concerning pay data must include:

• the number of employees by race, ethnicity, and sex in ten defined job categories;
• the number of employees by race, ethnicity and sex whose annual wages fall within each pay band used by the United States Bureau of Labor Statistics in its Occupational Employment Statistics survey; and
• the mean and median hourly rate of pay for each combination of race, ethnicity and sex within each job category.

Many companies have requested pay data from their vendors or sub-contractors, prompting confusion and questions about the definition of a “labor contractor.”

SB 1162 defines a “labor contractor” as an individual or entity that supplies a client employer with workers to perform labor within the client employer’s usual course of business. Government Code Section 12999(k)(2). A client employer’s “usual course of business,” in turn, means the regular and customary work of the client employer. “Regular and customary work” consists of work that is performed on a regular or routine basis that is either part of the client employer’s customary business or necessary for its preservation or maintenance, but does not include isolated or one-time tasks.

In response to questions and continued confusion about the definition, the Civil Rights Department has published examples that illustrate its interpretation of SB 1162 and the definition of a “labor contractor” that is required to disclose pay data. The examples include:

• Example 1: Farmworkers contracted seasonally to pick fruit for a client employer’s farm would be performing work within the client employer’s usual course of business because the work is performed on a routine basis and is part of the client employer’s customary business.
• Example 2: Janitorial staff performing nightly cleaning and general maintenance of a client employer’s premises would be performing work within the employer’s usual course of business because the work is performed on a regular basis and is necessary for the maintenance of the client employer’s customary business.
• Example 3: Catering staff contracted to serve food at a trucking company’s tenth anniversary party would not be performing work within the client employer’s usual course of business, assuming catering a party is an isolated occurrence for the company.
• Example 4: Accountants hired to perform an external audit of a fitness company’s financial statements would not be performing work within the client employer’s usual course of business, assuming financial auditing is an isolated occurrence for the company.

An individual performing work within the client employer’s usual course of business is a labor contractor employee if that individual is on a labor contractor’s payroll and the labor contractor withholds Social Security taxes from that individual’s wages.

The Civil Rights Division’s FAQs concerning the pay data reporting obligations created by SB 1162 may be found here.

SB 1162 imposes extensive new obligations on many employers, and the confusion surrounding it can create friction between companies that operate as business partners. If you have questions regarding SB 1162 or any other issue related to employment law, please contact one of our attorneys:

June 2023

Severance agreements are legal contracts between an employer and a former (or soon-to-be former) employee that provide compensation and/or benefits to the employee in exchange for certain promises and obligations, usually including a release of the employee’s potential claims against the employer.

Despite the fact that severance agreements are commonly used in organizations of all types, employers frequently make mistakes in preparing severance agreements, and their errors can cause an employee’s release of claims to be unenforceable, leaving the employee with severance benefits in hand and the employer without protection against a potential suit.

From a big picture standpoint, the most common mistake employers make is treating severance agreements like generic, “one-size-fits-all” documents, ignoring differences in state laws, changes in the law that occur frequently, and the unique circumstances of each employee. While some language is suitable for use in most severance agreements, employers should treat each agreement with care and thoughtfully consider the terms they include in it.

Some of the more specific errors that occur frequently and can render a severance agreement wholly or partially unenforceable include:

• Failing to provide adequate consideration - In order to create an enforceable contract, each party must receive some form of “consideration,” or value it was not otherwise entitled to receive. Employers sometimes ask departing employees to sign a release of claims without receiving any consideration in exchange. In other cases, an employer may promise in a severance agreement only to pay the employee’s final wages (which it is already legally obligated to pay) in exchange for a release of claims. In neither of these scenarios does the employee receive valid consideration, and the employee’s release of claims will be unenforceable in both scenarios.

• Ignoring, or mis-applying, the rules applicable to employees 40 and older - As mentioned above, employers often treat severance agreements as “one-size-fits-all” documents, ignoring the special rules that apply to agreements with employees who are 40 or older. The Age Discrimination in Employment Act (ADEA) requires employers to allow employees to consider severance offers for 21 days (45 days if they are terminated in connection with a reduction in force), and employees 40 or older are also entitled to rescind severance agreements for seven days after signing them. Employers often fail to include language required by the ADEA or Older Workers Benefit Protection Act when creating severance agreements for employees 40 and older, and sometimes include a right to rescind the agreement when creating agreements for employees under age 40. Employers should also recall that California law requires them to allow employees under age 40 to consider a severance proposal for at least five business days.

• Including illegal terms - Some provisions that employers commonly include in severance agreements, such as covenants not to compete and broad non-disparagement clauses, are simply illegal and unenforceable under applicable law. Employers must be alert to restrictions that may exist under the law, such as California’s general prohibition of covenants not to compete and restrictions on non-disparagement clauses that exist under both state and federal law. Although severance agreements can create enforceable releases of most claims, they generally cannot operate to release claims for workers’ compensation benefits or unemployment insurance benefits.

• Overlooking the impact of the agreement on other contracts - Like most contracts, severance agreements typically include a clause stating that the agreement supersedes all prior agreements between the parties regarding the same subject matter. If an employee has executed a Confidential Information Agreement or arbitration agreement, however, the employer may want those agreements to remain in effect following the execution of the severance agreement. In such circumstances, the severance agreement should specifically identify any agreements that are intended to remain in effect.

As is true with all legal contracts, prudent employers should consult with an experienced employment attorney when preparing severance agreements in order to assure that they are enforceable and provide the employer with all of the benefits and protections available under the law.

If you have questions regarding severance agreements or any other issue related to employment law, please contact one of our attorneys:

May 2023

Federal law has long required employers to verify a new employee’s identity and right to work in the United States using the Employment Eligibility Verification form, commonly known as Form I-9. Employees must complete, sign, and date section 1 of Form I-9, and employers must complete, sign, and date section 2 of the form no later than the employee’s third day of employment. Employers must complete section 3 of the form only when they re-hire an employee or re-verify an employee’s right to work after a previous authorization has expired. Employers should generally accept documents offered by a new employee to demonstrate his or her identity and right to work unless they have a specific and substantial reason to believe the documents are invalid.

During the COVID-19 pandemic, the government excused employers from conducting inspections of I-9 documents in person, as the law generally requires, due to public health concerns. Earlier this month, however, the Immigration and Customs Enforcement (ICE) announced that employers must resume in-person physical inspection of I-9 documents this summer.

As of July 31, 2023, employers may no longer examine the I-9 documents of new employees remotely or virtually. Instead, employers must resume in-person physical inspections of I-9 documents within three days of hire. Notably, employers must also physically examine the I-9 documents of employees who were hired since March of 2020 and did not submit their I-9 documents for in-person examination previously. ICE has established a deadline of August 30, 2023 for employers to complete the in-person review of documents for employees who have not submitted their documents in person previously.

ICE has published an FAQ page that addresses several common questions about I-9 protocols, and the FAQ is available here.

What Should Employers Do Now?

• Require new employees to present I-9 documents in person. Employers should resume requiring new employees to present their I-9 documents in person. Although the requirement becomes effective on July 30, employers are wise to implement it immediately and avoid a need to re-verify employees later in the summer. If an employer does not have an employee available to examine I-9 documents for a new hire, the employer may designate a representative, such as a notary, to perform the task.
   
• Complete in-person review of I-9 documents by August 30, 2023 for employees who previously submitted their documents virtually. Employers should identify all employees who have not yet submitted their I-9 documents for in-person review and conduct the necessary examinations by the deadline.

If you have questions regarding I-9 compliance or any other issue related to employment law, please contact one of our attorneys: