Thoits, Love, Hershberger & McLean Law Blog

Stop Light Texting a No-No

California law prohibits anyone driving on public roadways from using a wireless telephone unless the phone is configured for hands-free listening and talking, and is used in that manner while driving.  Carl Nelson is one person who would not willingly accept the ticket he received for using his phone while stopped at a stop-light.  And, Mr. Nelson was unfortunate to have a police-officer on a motorcycle stopped next to him.  (It is interesting to note however that he may not have been as confident in his position when he was ticketed, as he seemed in court thereafter:  When the officer stopped next to him, he immediately removed the flip-type cell-phone from his ear and closed it.) 

Mr. Nelson challenged the citation in traffic court, where he testified he was “checking his email and pushing some buttons on his phone” but only while stopped, waiting for a green light.  He lost. He then appealed to the Superior Court, and lost.  Finally, he appealed his citation to the California Court of Appeal, where he argued that he was not “driving,” and therefore the law did not apply to him. 

If you love texting while driving, don’t get your hopes up.  Even though it took the California Court of Appeals 24 pages to explain its ruling, it was clear:  when one is stopped at a stop light, he or she is still “driving.”  The ticket was confirmed, and a perceived loophole closed by a thorough Court of Appeal.  

One of the three justices wrote a concurring opinion, and while he applauded the majority’s “scholarly analysis of legislative history,” he did not think it was necessary or warranted and in less than one page concluded “…all of us are expected to stop for red lights, stop signs, crossing trains, and funeral processions.  In short, all drivers may, and sometimes must, stop.  But they do so while ‘driving.’  Just like defendant.”  Here is the decision.

Don’t text and play with your smart phone while “driving.”  (Unless, of course, the exception applies.)

Stephen C. Gerrish, Litigation Group

 

AB 1396: Commission Agreements, Grammar, and Legislative Pollution

A new California law (AB 1396) requires that all employment relationships that involve payment of commissions “shall be in writing and shall set forth the method by which the commissions shall be computed and paid.”  The employee must be given a signed copy, and the employer must obtain a signed receipt from each employee.  The contract and the commission terms “are presumed to remain in full force and effect until the contract is superseded or the employment is terminated by either party.”  This new law will have a dramatic impact on any employer whose compensation arrangements involve commissions.  At a minimum, the customary annual commission plans published for such employees will need to be incorporated into a contract format and written receipts obtained.  Whether the employer routinely uses commissions or does so only on an intermittent or anecdotal basis, the new law requires new procedures and new written contracts.

Curious legislative drafting makes uncertain the effective date of the law.  So, now, let us have some fun with the legislature’s grammar and syntax.  Should we assume the law goes into effect January 1, 2013?

The only reference in the new statute to any effective date states that “[B]y January 1, 2013, whenever…” an employer enters into such a contract, it must be in writing.  Does this mean that starting immediately and only until January 1, 2013, all such contracts must be in writing; or does it mean that “after” January 1, 2013” such contracts “shall be in writing?”  It cannot mean the latter, because the word “after” was not used.  Even the Legislative Counsel’s digest avoids answering the question.  It states, “[T]his bill would, by January 1, 2013, make this contract requirement applicable to all employers entering into a contract…”  This implies that something must occur between now and then – without explanation.  Maybe the legislature intended to say, “This law takes affect January 1, 2013.”  But, it didn’t.  Maybe it meant to say, “We would like to say this law takes effect on January 1, 2013, but we also would like to say that we want employers to comply with it by January 1, 2013.”  Finally, we should ask the question begged by this semantic construction…what about commission arrangement that are made after January 1, 2013 – are they not covered by this new law?  The preposition “by” in this context means “before or no later than.”  Strict construction of the statutory words then requires that the statute means no later than January 1, 2013, employment relationships must comply by the indicated date – logically that can only include employment relationships now existing or created between now and that date. Even if equal interpretive weight is given to the word “whenever,” it seems to conflict with “by” instead of clarifying its use, i.e. “before January 1, 2013, whenever…” or “no later than January 13, 2013, whenever…” “By” is sometimes confused with “until” but neither application in this sense helps clarify the meaning.  Other commentators suggest the effective date is January 1, 2013.  And, if something is to be done between now and January 13, 2013, it must be using written contracts for commission arrangments, which means the law is not effective January 1, 2013, but sooner.  Maybe the legislature will clear this up with an amendment.

If anyone, grammar nerd or not, has any thoughts on what this phrase means, please comment, for fun, if for no other reason.

Stephen C. Gerrish, Employment Group

Renovating pre-1978 Housing? Beware the Lead-Based Paint Rule

On July 15, 2011, minor amendments to the Lead Renovation, Repair, and Painting Program (“RRP”) rule became final, making this a good time to revisit that rule, which became effective last year.  Published by the U.S. Environmental Protection Agency (“EPA”), the RRP rule establishes training, certification, and work practice standards for persons performing renovations that disturb lead-based paint in pre-1978 housing and child-occupied facilities.

The RRP rule is certainly far-reaching and important for almost anyone in the construction industry.  Requirements covered by the rule include:

• •    pamphlet distribution (provide owners and occupants with Renovate Right before work commences);
  •    individual training (completion of 8-hour course given by accredited trainer);
  •    firm certification (application to EPA, with $300 fee for standard certification);
  •    job-site training (for non-certified workers);
  •    paint-testing or assumption that paint is lead-contaminated (in California, only State Certified Lead Inspector/Risk Assessors permitted to test for lead-contamination – thus, contamination must be assumed absent a certified inspector’s finding to the contrary); and
  •    lead-safe work practices.

The rule’s requirements are complex, and applicability may be sometimes hard to determine.  A useful rule of thumb, however, is found in the EPA’s (Small Entity Compliance Guide to Renovate Right), which states:  “In general, anyone who is paid to perform work that disturbs paint in housing and child-occupied facilities built before 1978 (is subject to the RRP rule).”

Contractors are obviously the group most affected by the RRR rule, but it doesn’t end there. For example, an individual who does handyman work on covered property is subject to the both the firm certification and individual training requirements.

The possible penalties for failing to follow the RRP rule?  According to the Small Entity Compliance Guide (p. 15), the EPA “may file an enforcement action against violators seeking penalties of up to $37,500 per violation, per day. The proposed penalty in a given case will depend on many factors, including the number, length, and severity of the violations, the economic benefit obtained by the violator, and its ability to pay.”

Whether you consider it an overly-intrusive regulation or a welcome public health measure, the RRP rule is something that anyone who is compensated in connection with work on housing and child-occupied property built before 1978 should be familiar with.

Scott M. Toussaint, Real Estate Group

Meal Periods and Rest Breaks, Again

Another California Court of Appeal has concluded that while employers must provide employees with meal and rest breaks, they do not need to ensure that employees actually take them.  In the Lamps Plus Overtime Cases, the court denied class certification and, more importantly for this discussion, ruled against the plaintiffs' on the merits of their claims.  Two cases that raise meal and rest break issues are presently pending before the California Supreme Court, and rulings of other California Courts of Appeal cases have been similar to that of Lamps Plus.  The trial court in Lamps Plus denied plaintiffs' request that the court delay its ruling until the Supreme Court rules on the matter.  

Lamps Plus maintained policies on breaks that parallel California statutory law.  The court summarized those policies as follows:

Lamps Plus has an employee handbook that includes a policy requiring meal and rest breaks.  Its meal and rest break policy provides that its nonexempt employees “must” take an uninterrupted meal period of at least 45 minutes after not more than five hours of work. Employees are “entitled” to take a second meal period if they work more than 10 hours.  “Employees are required to take [unpaid] meal periods, and should not eat at their desks or work stations.”  Nonexempt employees are “authorized and permitted” to take a 15-minute paid rest period “for every four hours, or major fraction of four hours, that they work.” The policy also provides for written waiver of the meal periods for employees working a shift of six hours or less, as well as written waiver of the second meal period for those employees working between 10- and 12-hour shifts.  Employees are required to sign an acknowledgment providing:  “I acknowledge that I have received a copy of the Company‟s meal and rest break policy, and I acknowledge and I agree that I will comply with the policy.  I further agree that if I am not provided with the meal and rest periods specified in the policy, I will contact Human Resources . . . .” 

The plaintiffs alleged that Lamps Plus violated a variety of California's labor laws, including statutes and regulatons affecting breaks, off-the-clock work, itemized wage statements, and payment of wages on termination.  The Court of Appeal disagreed with the merits of these claims, but also found that there was not sufficient commonality to justify a class action.  At the heart of plaintiffs' case was the theory that employers must ensure that employees take meal and rest breaks, and that Lamps Plus maintained a companywide practice of requiring off-the-clock work and not paying wages timely upon termination. The court rejected these contentions.

This is yet another in a growing list of California cases rejecting the idea that employers must ensure that employees actually take breaks.  A series of federal decisions interpreting California law also agrees.  The court in Lamps Plus summarized the current state of California law:

The two cases presently before the Supreme Court (Brinker Restaurant v. S. C.,review granted Oct. 22, 2008, S166350 (Brinker), and Brinkley v. Public Storage,review granted Jan. 14, 2009, S168806 (Brinkley)) will address the “proper interpretation of California statutes and regulations governing an employer‟s duty to provide meal and rest breaks to hourly workers.”  While these cases have been pending before the Supreme Court, review has been granted for a number of appellate decisions addressing the meal and rest period issue, including this division‟s opinion in Hernandez v. Chipotle Mexican Grill, Inc., review granted January 26, 2011, S188755 [finding that employers must only provide breaks, and need not ensure they are taken], as well as Faulkenbury v. Boyd & Associates, review granted October 13, 2010, S184995 [addressing meal and rest period violations], among others.  Another decision by this division, Tien v. Tenet Healthcare Corp. (2011) 192 Cal.App.4th 1055, concluded there is no obligation to ensure that breaks are taken.  (Id. at pp. 1066-1067.)  Appellant in that case has petitioned for review, and as of the time of the filing of this opinion, the Supreme Court has taken no action on the petition.

The court noted that Brinker and Brinkley have been pending for some time, and that "it would hardly be efficient to stall resolution of all class actions claiming meal and rest period violations in the interim." Whether plaintiffs will seek review of Lamps Plus by the Supreme Court remains to be seen.  The decision on the interpretation of the meal and rest break statutes and regulations is ultimately in the hands of the California Supreme Court.

Stephen C. Gerrish, Employment Group

Avoid Delays in Deed Recording

Though it is not well-publicized, the Santa Clara County Recorder’s Office has a policy of delaying the recordation of a Deed where the transferor claims a transfer tax exemption under subsection (d) of section 11925 of the California Revenue & Taxation Code (i.e., the transfer “results solely in a change in the method of holding title … and in which proportional ownership interests … remain the same immediately after the transfer.”).  To the unaware, this policy could have significant consequences.

As described in an April 25, 2007 Memorandum issued by the County, due to the complexity of subsection 11925(d) transfers, the County advises submission of certain supporting documentation 5 days in advance of the recording date.  Of course, those poor souls who have not read this Memo and are otherwise uneducated about this process will be caught unaware … then be forced to gather the required documentation, supply it to the Recorder, and wait. Such delays can have real consequences.

For example, suppose a group of individual investors get a great price on a large commercial property in Sunnyvale in a quick-turnaround, all-cash deal.  Next, the group wants to pull the majority of their money out, so they obtain a commitment on favorable terms for a non-recourse loan to an LLC they’ve formed to hold the property … and the commitment is good through Friday.  The investors don’t submit the Deed for the individuals-to-LLC transfer to the Recorder until the Wednesday before, and since they have (properly) claimed an exemption under subsection 11925(d), the Recorder places a hold on the Deed.  This leaves the group with a choice from the following unenviable alternatives:  (i) pay the tax ($1.10 per $1,000 of value transferred) and later try to secure a refund from the County, (ii) cancel the transfer and take out the loan in their personal capacities, or (iii) lose the loan. The obvious solution:  submit the Deed and required documentation well in advance.  But what does “well in advance” mean?  And what is the required documentation?

Those answers will depend on the situation.  The County’s Memorandum is extremely vague about the required documentation.  It indicates a 5-day review period, but that cannot be relied upon in a situation where it is uncertain exactly what documentation is required.

The best advice may be as simple as this:  submit the Deed with the appropriate documents to demonstrate that the 11925(d) exemption applies, whatever those documents may be, and accompany those documents with an explanatory cover letter, or “roadmap”.  The cover letter should also give a contact with whom the Recorder can follow up for additional information.  Of course, title companies will already be involved in many cases, and parties should look to them for guidance in such cases.

Scott M. Toussaint, Real Estate Group

 

What Happens to Charitable Pledges on Death?

Charitable pledges can present a real problem after a person’s death if the pledge is not specifically dealt with in the person’s estate planning documents so that the donor’s true intent is made clear.

A charitable pledge must have all of the elements of a contract (offer, acceptance and consideration).  Consideration is typically the missing element.  Consideration has been found when the charity agrees to name a building after the donor in exchange for the pledge or where the pledge will be used to secure gifts from others.  While California Civil Code Section 1614 provides that “a written instrument is presumptive evidence of consideration” in a trust context the trustee (or executor) must make a determination that the pledge is a valid and enforceable debt of the decedent.  As a result, it may be that only a large pledge will satisfy the consideration requirement, placing the fiduciary and the charity in a difficult situation absent a clear statement of intent in the decedent’s trust or Will.  The trustee may be required to obtain court authority to honor the pledge, which will increase the cost of administration.  Or the charity my consider bringing an action to enforce the pledge, which may be undesirable from a public relations point of view.  This is truly a “lose – lose” situation.

In a recent estate, the client died without having discussed the charitable pledges that he had made during his lifetime with his attorney and the charities to which the pledges were made never advised the donor to make certain that the satisfaction of the pledges were set forth in his estate planning documents.  The bulk of the client’s estate was left to several charities, which included certain of those charities for which there were balances due under pledges made by the decedent.  For each pledge it was clear that the form provided by the charity, which was clearly completed in the decedent’s handwriting and acknowledged by the charity, easily satisfying the offer and acceptance requirements.  However, it was also clear that the charities had not agreed to take any particular action in reliance on the pledge.  And it was not clear whether the decedent had taken the outstanding balances due on his pledges when determining the percentage of his estate that he was leaving to the various charities under the terms of his trust.  The trustee ultimately decided that it was necessary to file a petition with the Probate Court to obtain instructions concerning the enforceability of each separate pledge as a debt of the decedent.

This case is an excellent example of why charities should advise their donors of the need to provide for the satisfaction of any outstanding pledge in their estate planning documents and estate planners should add this to their list of issues to discuss with clients.  It is now on my list.

Michael Curtis, Trusts and Estates Group

Whatever Happened to That New Mold Law?

In 2001, in the wake of increased concerns over deleterious health impacts of multicellular fungi, or mold, found in indoor environments, the California Legislature enacted a comprehensive protection scheme called the Toxic Mold Protection Act of 2001 (“the Act”).  The law directed the former Department of Health Services (now the Department of Public Health, or “DPH”) to investigate the feasibility of establishing permissible mold exposure limits in indoor environments, which would potentially then lead to remediation requirements, disclosure obligations and lawsuits.  The mysteriousness of mold and its rumored potential to cause severe health impacts caused nervous anticipation among real estate professionals.

Looking back now, 10 years later, the Act looks like much ado about nothing.  Though the most recent update found on the DPH website is dated July 2008, it looks as though the Act remains stuck in the research stage, far from implementation, with inadequate funding to perform adequate additional research.  Aside from lack of funding, the underlying roadblock to Act implementation seems to be the inherent difficulty of acquiring adequate scientific data.

According to reports published by the DPH on its website, the scientific results have not yet adequately shown the relative role played by mold versus the various other contaminants that are common in complex damp indoor environments (such as bacteria, dust mites, cockroaches, and irritant chemicals released by degradation of wet building materials).  As for funding, in its latest-published implementation update (July 2008), the DPH stated, “DHS will proceed with implementation when funding is in place to address the bill requirements.”  Considering the state of the economy in general and the State budget specifically, it seems unlikely that there has been much movement in Act-implementation since this update was published.

Scott M. Toussaint, Real Estate Group

California Law Now Requires Carbon Monoxide Detectors

Owners of California dwelling units, especially rentals, that have (i) a fossil fuel-burning heater, appliance or fireplace (for example, a gas stove or water heater) or (ii) an attached garage, need to be aware of a new law passed in 2010 regarding carbon monoxide devices.  Under newly-enacted sections 17926, 17926.1, and 17926.2 of the Health & Safety Code (part of Senate Bill No. 183), owners of all such properties (excepting properties that are, generally-speaking, owned by or leased to the government) must install carbon monoxide alarms by the following deadlines:  (1) July 1, 2011, as to single-family dwellings, or (2) January 1, 2013, as to all other dwellings.

(The deadlines are subject to extension for up to 6 months if the State decides more time is necessary to make approved alarms available; if such postponement were made, the Department of Housing and Community Development must post a public notice on its website).
 
To satisfy the requirements of the new law, alarms must be approved by the State Fire Marshal.  The State Fire Marshal’s web site maintains a listing of carbon monoxide alarms and detectors; it appears as though the alarms and devices on this listing meet the requirements of the new law, but this should be confirmed by owners.  The new law imposes a $200 maximum fine on owners for each violation of the installation requirements, provided that a 30-day notice must be provided to cure the violation.  Perhaps more important, however, would be the implication or presumption of negligence created by a violation of the new law in any case where persons or property are injured or damaged as a result of a carbon monoxide leak.

Health & Safety Code section 17926.1 covers requirements specific to rental units, including the owner’s (or owner’s agent’s) maintenance requirements.  Also covered are permission-to-enter and device-failure notification requirements imposed on tenants.  With the law now clear on the required presence and maintenance of carbon monoxide alarms in qualifying rentals, it is critical for any rental unit owner to meet all applicable requirements of this new law.

Scott M. Toussaint, Real Estate Group

Default Law Requires Commercial Tenants to Pay Bank, Not Landlord

It’s no secret that, these days, many commercial property owners are having trouble meeting their mortgage payments.  If you are a tenant of such an owner in California, you should know about section 2938 of the California Civil Code (“Section 2938”).
 
Section 2938 requires, under certain circumstances, a commercial tenant to pay rent to its landlord’s creditor rather than its landlord.  This requirement may arise when the landlord has conditionally assigned the right to receive such rent to the creditor - normally a bank, with repayment of its loan secured by a deed of trust against the leased property.  When the landlord defaults under its obligation to the creditor - normally nonpayment on the loan – then, provided the creditor has followed the proper Section 2938 procedures, the creditor may compel the tenant to make rental payments directly to the bank.

The triggering procedures are spelled out in Section 2938.  While the statute covers a variety of remedies to enforce an assignment of rent, the focus of this discussion is the direct demand remedy – compelling a commercial tenants, upon the receipt of a simple notice from a creditor with whom it has likely never dealt before, to pay the rent to that creditor, rather than the landlord.

Direct demand notices must be in a statutorily-prescribed form. Upon receipt, the tenant is required by law to begin making rental payments to the creditor, and this obligation typically continues until receipt by the tenant of another written notice from a court or the creditor.  To provide a measure of protection to the tenant, the statute makes exceptions, such as where the tenant has previously received a Section 2938 notice from another creditor or the tenant has made a legitimate, good faith payment to the landlord within 10 days following receipt of the notice.  The statute also makes it clear that the tenant’s rental obligations are satisfied to the extent paid to a creditor in accordance with Section 2938.

Bottom line:  it is critical that any commercial tenant receiving a notice to pay rent to a 3rd-party take that notice seriously, and consult with legal counsel if there is any uncertainty about what to do next.

Scott M. Toussaint, Real Estate Group

Facebook Privacy Privilege Rejected

There are no secrets.  Perhaps a wise rule to live by in an age of instant and gratuitous sharing of personal information, reinforced by a shifting culture where the boundaries of trust, privacy and discretion are fluid, and sensitivities to, and definitions of, what is "confidential" varied, and set by self-interest more than traditional community norms.  It is this latter perception that may cause many to think that the information they post on social networking sites is somehow special, protected, or private, or not part of their "real life."  Anyone that harbors such views should consider the caution of two commentators, whose work was recently cited in a judicial decision:  "...in this environment privacy is no longer grounded in reasonable expectations, but rather in some theoretical protocol better known as wishful thinking."  (Fleming and Herlihy, Department: Heads Up: What Happens When the College Rumor Mill Goes Online? Privacy, Defamation and Online Social Networking Sites, 53 B.B.J. 16 (January/February, 2009)). 

And so, as so often happens, dreams of wishful thinkers are dashed, sometimes in rather inglorious circumstances.  Take, for example, Bill McMillen, Sr., who claimed damages for personal injuries resulting from an accident he had when he was rear-ended in a stock car race.  He sued the speedway.  The speedway demanded that Bill turn over all his passwords and user names to Facebook and MySpace because it had reason to believe that information had been posted that suggested he was not injured as claimed.  Bill claimed his Facebook and MySpace passwords and user names were confidential and, more importantly, that his communications with friends on Facebook and MySpace were privileged from disclosure, much like a confidential communication between an attorney and his or her client.  The court in McMillan v. Hummingbird Speedway, Inc. (Pennsylvania Court of Common Pleas 9/9/10) rejected his contention.  After reviewing each site's terms of use and their basic structure and purpose ("...their ilk are social network computer sites people utilize to connect with friends and meet new people...they do not bill themselves as anything else."), the court noted that while millions of people join social networks, "more than a few use those sites indiscreetly" and the if they do, and those "indiscretions are pertinent to issues raised in a lawsuit in which they have been named, the search for truth should prevail."  Where there is an "indication" that relevant information may reside on a social network site, "access to those sites should be freely granted."  Bill McMillan was ordered to turn over user names and passwords to opposing counsel, who were granted free access to the contents of his accounts. 

The court pointed out that social networks are a "communication forum" useful in fostering relationships - but that confidentiality is not essential to maintain those relationships, and "while one may expect that his or her friend will hold certain information in confidence" the maintenance of the friendship does not depend on it.  A friendship is not like a relationship with a doctor, lawyer or priest.  And, when one posts information on a social network, given their terms and how they operate, he or she cannot reasonably expect that communications would remain confidential - such an expectation may be wishful thinking. 

In short, a member of Facebook or MySpace cannot maintain that his or her account is confidential.  So, anyone who claims to be injured, and is seeking compensation for those injuries, should realize that videos they post on Facebook of them jumping off cliffs, playing softball, wrestling with alligators, surfing big waves, etc. will be discovered and used to impeach their claims.  Revealed content may have other consequences, more or less consequential.  Social networking can be a wonderful way to maintain relationships and pass on information instantaneously - but if you have a secret to keep, do it the old-fashioned way. 

Stephen C. Gerrish, Employment Group