Effective January 1, 2013, every employee in California who is compensated, entirely or partially, by commission must have a written employment contract that states the method by which commissions will be computed and paid.
Labor Code Section 2571(a) says:
By January 1, 2013, whenever an employer enters into a contract of employment with an employee for services to be rendered within this state and the contemplated method of payment of the employee involves commissions, the contract shall be in writing and shall set forth the method by which the commissions shall be computed and paid.
In Doing Business in CA? Be Sure to Register, I wrote that an out-of-state corporation that “enter[s] into repeated and successive transactions of its business in [California] other than interstate or foreign commerce” must register with the Secretary of State as a foreign corporation, and that a penalty for failing to do so is being precluded from maintaining actions in California courts. A recent case in the US District Court for the Northern District of California (Jarzab v. KM Enterprises) provides an example of what does not constitute “repeated and successive transactions”.
This post is adapted from a question I answered on OnStartups. Q. I’ve been working for a large private company, and my offer letter said I would receive X number of options as long as the board approved it. It’s been a year and I’ve been stonewalled on the option plan. I’ve sent multiple emails to HR and the controller and the CFO. HR has gotten back to me, but their hands are tied. Can I send a letter and a check to the CFO with $100 to force the issue of exercising some amount of shares and determining the strike price that way?
A. Unfortunately, “subject to board approval” is a common contingency for stock option grants. At this point, I’m not sure there is much you can do about it.
Although I’ve written quite a few posts about employee handbooks, I just realized that I never have explicitly stated why an employer should have one – thus, the topic of this post.
An employee handbook is a collection of policies, procedures and other important information that is provided to every employee. Reasons for having an employee handbook include:
- To let every employee know what is expected of him or her on the job
- To help ensure that employees are treated equally and appropriately
- To reduce employee morale problems and complaints related to unstated policies or procedures
- To reduce the risk that employees will allege unfair practices or unlawful discrimination
- To enhance the perceived authority and appropriateness of employer decisions that are based on the handbook
The CEO of a client with a half-dozen employees recently asked, “We are about to start hiring again. I would like to add language regarding a 90 day probationary period. Is this a good idea?” My answer was “No.” Here’s why.
I had prepared a form of employment offer letter and an employee handbook for the client. Both of these documents state that employment is at-will – i.e., either party may terminate the employment relationship at any time for any (non-discriminatory) reason or for no reason. As a result, at-will employment, by itself, allows a company to terminate the employment of an individual whose performance is inadequate during the first 90 days. A probationary period is not necessary.
California courts are known for not enforcing non-compete provisions except under narrowly-defined circumstances (see “California doesn’t *always* prohibit non-compete provisions”). In a case last year (Silguero v. Creteguard, Inc.), the Court of Appeal for the Second District held that an employer may not terminate an employee because of another company’s unenforceable non-compete agreement.
In 2003, Rosemary Silguero began working for Floor Seal Technology, Inc. (“FST”). In 2007, FST threatened Silguero with termination if she did not sign a confidentiality agreement that included an 18-month post-employment non-compete provision. Two months later, FST fired her.
A recent court decision held that an employee in California has the right to file a wage claim and to have a hearing on that claim before the Labor Commissioner, even if the employee has signed an arbitration agreement.
In California, employees who are not paid what they are owed can file wage claims (see Wage Claims – Nasty but [Sometimes] Necessary). Because the employee need not retain legal counsel, and because the Labor Commissioner may help the employee, a wage-claim hearing provides to the employee benefits and leverage that are not available in other venues, such as litigation or arbitration.
In “Inspection of Employee Text Messages – Be Careful“, I described provisions concerning company-provided technology that every employer should include in its employee handbook. A recent California Court of Appeal case, Holmes v. Petrovich Development Co., shows that such provisions are strong enough to defeat a claim of attorney-client confidentiality!
Gina Holmes brought suit against her former employer, alleging sexual harassment, wrongful termination and other causes of action. The employer presented as evidence e-mails between Holmes and her attorney – e-mails sent from her employer’s computer – that supported the employer’s case.
Many companies – especially startups – like the idea of using interns as free labor. This post discusses whether and how a California company can use unpaid interns.
If individuals are interns under California law (as discussed below), then they need not be paid, and they are not subject to other employment protections, because they are not employees. If, on the other hand, individuals are determined to be employees, then they must be paid at least minimum wage.
This post is adapted from a question that I answered on Quora. Q. How can an acquirer make an employee with single-trigger vesting commit to a “lock-up” period to receive all his shares? Say you’re an engineer at a just-acquired startup with 0.5% of the old company, and your shares fully vested upon acquisition. The acquirer’s terms were that current employees get 50% of their payout up front, and 50% if they stay on board for 5 years. How is that possible, legally?
A. It is difficult to provide a definitive answer without looking at the relevant documents. However, I suspect that this situation is possible because 50/50 pertains to shares in the acquiring company rather than the acquired company.
In my experience, acquired companies will put some effort into converting employee equity interests directly into comparable interests in the acquiring company, but there is no guarantee this will happen.
So you may (I can’t be sure, not having reviewed the documents) have a choice: Keep your 0.5% fully-vested interest in the acquired company (which is likely to have little, if any, market value in the foreseeable future), or accept the 50/50 conversion to an equity interest in the acquiring company.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.