Should Your Business Avoid Having Workers Based In California?

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california ab5 workers regulationsUnless your company already does business in California, you should avoid having workers based in that state.

Here’s why…

California AB 5  – Many Contractors are Reclassified as Employees

California Assembly Bill 5 (AB 5) essentially shifted the burden to business owners to prove a worker isn’t an employee. And made it hard to meet that burden.

The law provides in part, “a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

Why is that important?

Because if you’ve got an employee working for you in California, you get all of the regulatory and tax baggage that comes with that.

If your company is located elsewhere, you get to register as a foreign entity doing business in California (and pay taxes accordingly).

You also are likely to get hit with penalties for the years you’ve been doing business in the state but didn’t register your entity.

Plus you’ll get to deal with employer withholdings for Social Security, worker’s compensation, unemployment compensation, and any “entitlements” the State of California decides to impose on your company.

At some point, you can expect California’s government to mandate you fill your management positions based on “social justice “ criteria unrelated to skill or performance.

Of course, the government also has no problem stopping workers at the drop of the hat for COVID-19. Who knows what the next reason will be to shutter business? And you can’t count on being exempt from whatever comes down either.

In short, it’s just not worth the downside of using California-based workers unless you’re already stuck in that trap by doing business in the state.

Exemptions From California AB5 For Some Workers

In September 2020, California’s Governor signed a new law that carved out exemptions for freelance writers and certain other workers (e.g. youth sports coaches) from AB5. It’s California Assembly Bill 2257 (AB2257)

But you can’t rely upon piecemeal exemptions like this to protect your company when it’s the policy of the state to loot your business (no matter where you’re based) in order to prop up a social welfare state that’s insolvent.

An experienced business contracts lawyer can help you avoid traps like the ones California sets by preparing the right type of worker agreements that protect your company. And advising you on business-friendly jurisdictions where it’s okay to get the workers you need.

Flat Fee Contract Drafting And Revisions

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flat fee contract draftingOver half of Business Lawyer Mike Young’s practice involves flat fee contract drafting or revisions for clients. Why a flat fee instead of charging by the hour? Because it makes sense for the client to know ahead of time the amount they’re investing in legal protection so there are no surprises.

Phone Consultation

During the initial phone consultation, Attorney Young and the client discuss the agreement(s) to be prepared or revised. After the consult, the client will receive a firm quote for either drafting the new contracts or revising existing ones.

In some cases, it’s more cost-effective to have a new agreement prepared than to revise an existing contract that has major flaws in it. Because it takes time to identify and fix problems in an existing agreement, particularly those that have been “borrowed” from another source by the client.

What if additional work needs to be done? Flat fee quotes for contract drafting include one set of complimentary revisions within 10 days of the client receiving the agreement from Attorney Young.

Hourly Billing As An Alternative

What about hourly rates?

Attorney Young will prepare or revise agreements at an hourly rate. However, most clients prefer to pay a flat fee instead.

When hourly rates are charged, it’s typically when the amount of time involved is clearly an unknown. For example, when a client wants Attorney Young to negotiate the contract’s terms with the other party’s lawyer there’s no way to know how time-consuming that will be. So, the standard hourly rate is charged and billed in 1/10th hour increments.

How To Get Started

If you need help with an agreement, your first step is booking a phone consultation with Attorney Young.

Boilerplate Contract Abuse: Are Your Business Agreements Enforceable?

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boilerplate contract abuse and enforceabilityJust because you’ve got signed business contracts doesn’t mean they’re enforceable. In fact, there’s a good chance that one or more provisions of each of your legal agreements can be set aside by a judge as boilerplate contract abuse.

And in some cases, that means the entire agreement is voided if you’re missing some key clauses designed to prevent that from happening.

This is particularly true where a judge believes there’s been unequal bargaining power, i.e. your company had an unfair advantage in contract negotiations or even forced a take-it-or-leave-it agreement on an individual without any modifications. In other words, the court perceives the other party (employee, independent contractor, small supplier, etc.) as being a victim you took advantage of to reach an “unconscionable” agreement.

Such unfairness is typically determined based on clauses concerning non-competition, dispute resolution, intellectual property ownership, and the like…especially if those provisions are drafted totally one-sided in your company’s favor.

Fortunately, there are things an experienced business attorney can do to make your contracts at least partially enforceable.

Now a good agreement favors your business but doesn’t put the other party in such a deep hole that they can’t dig out of it if something goes wrong. In other words, you’re not forcing them to agree to terms that on their surface are so objectionable that the first word that comes to mind when reading them is “ridiculous.”

Naturally, you’ll want your business contracts lawyer to include provisions that protect you too.

For example, there should be a severability provision that makes the rest of the agreement enforceable if the court strikes part of it down as unconscionable or for some other reason.

And if it’s a B2B deal, you want the contract to avoid language that makes it look like the other party is a consumer (instead of a business) because there are consumer protection laws that make it harder to enforce boilerplate agreements.

In addition, you may want to have your agreements reflect that both parties have had the opportunity to have the agreement reviewed by their respective legal counsel before signing. And that the contract shouldn’t be construed against either party as the drafter of the agreement’s language.

Choice of law, methods and location of dispute resolution, and who pays for what in a dispute are other terms your business lawyer can craft to maximize enforceability.

If you’re using a template for your agreements prepared by your legal counsel, that’s okay. To avoid unenforceability because of boilerplate contract abuse, just make sure that it makes sense to use the template in each deal. Have it tweaked as-needed to prevent fundamental unfairness that jeopardizes enforcement. In other words, don’t assume your standard “boilerplate” language that’s fair in Deal A will be automatically enforceable in Deal B, Deal C, etc. where the parties and other details can be substantially different.

How Do You Comply With Texas Gym Coronavirus Orders?

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texas gym coronavirus orders complianceIf you own a Texas gym or martial arts studio, you’re probably trying to sort out which government mandates to obey so that you can keep your doors open. Here’s a quick overview of Texas gym coronavirus orders and protocols owners need to know.

1. Texas Governor’s Executive Orders

Unless they’re overturned in court, the Texas Governor’s executive orders are the first thing you’ll want to read and understand how they apply to your fitness center or martial arts studio. As a general rule, anything issued by a county or city has to be consistent with the governor’s orders.

If there’s a dispute between the governor and local officials, chances are the governor will ultimately win because the governor’s political party also holds all state supreme court justice positions (Texas Supreme Court Justices are elected by party too).

2. Texas Department of State Health Services Minimum Standard Health Protocols

These coronavirus health protocols (with checklists) were developed per the governor’s executive orders. There are two types of protocols you’ll want to read and follow.

  • First, there’s the protocols for your business (e.g. equipment cleaning) and your workers (e.g. instructors).
  • Second, there’s protocols for your members and guests to follow when they visit your facility.

3. Texas County COVID-19 Orders.

Your Texas County Judge may also issue orders that contain additional requirements. The office of “County Judge” is actually a political post (not a judge sitting in a courtroom) that speaks on behalf of your County Commissioners.

There’s a lot of confusion at this level because many county judges issuing orders are of a different political party than the governor. So, what you’re seeing come from the county judges (like the governor) is often about partisan politics as much as it is about public safety. Unfortunately, this doesn’t help you comply but it does give you some background as to why things seem intentionally confusing instead of easy to understand and follow.

In theory, a county judge’s order can only complement the governor’s order but can’t contradict it. For example, the governor has said that his orders permitting additional hygiene measures would be consistent with local orders mandating businesses require face mask use…and fining a gym that didn’t comply.

However, a county judge couldn’t order that an individual be fined or imprisoned for not wearing a mask because the governor’s orders expressly prohibit that from happening.

4. City Coronavirus Orders.

Your local mayor or city council may issue orders (or even pass ordinances) that contain additional requirements.

Like county judges, most large city officials of the opposite political party as the governor. And for the same partisan reasons, you may see orders issued locally that are not clear on what you’re supposed to do when you read them in context of the governor’s orders and the state health protocols.

As a general rule of thumb, a local order can complement but not contradict coronavirus orders issued at the state level.

5. How to get started complying with Texas gym coronavirus orders

In a nutshell, here’s what to do.

First, review the governor’s latest executive orders that address COVID-19 coronavirus and gyms/martial arts studios.

Second, read the state’s two minimum standard health protocols for gyms and their patrons — and use the checklists they contain to comply with the governor’s orders.

Third, see if your county has issued a local order with additional requirements (e.g. face mask use).

Fourth, see if your city has issued a local order (or passed an ordinance) with additional coronavirus safety requirements.

Fifth, determine if there are any exceptions to the government mandates that may apply to your gym staff, members, and visitors.

Questions About Texas Gym Coronavirus Orders

If you’re an owner and have any questions, speak with an experienced Texas business lawyer who represents gyms and martial arts studios. Note that in addition to complying with coronavirus orders and protocols, you may want to update your legal documents to provide additional protection (e.g. a COVID-19 liability waiver tailored for gyms and martial arts studios).