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Lessons Learned by Los Angeles Business Attorneys

October 8, 2019

With access to skilled talent, and seemingly unlimited venture-funding, it is no surprise that California leads the nation in the number and successful launching of companies.  Over the last several years, California healthcare and technology startups have raised almost $10 billion annually.  California has Silicon Valley, Silicon Beach, incubators, accelerators, coworker spaces, and leading venture capital firms.  Each week, business attorneys are busy guiding entrepreneurs from idea to implementation and from startups to emerging growth companies.  They connect creative individuals with savvy consultants and corporate strategists.  At Citron & Deutsch, we pride ourselves on being the go-to law firm for technology and healthcare startups for local entrepreneurs.  Having provided effective, timely, and comprehensive counsel to 1,000s of companies, our startup attorneys are able to leverage that experience to guide and connect nascent companies en route to successful funding rounds and sustainable expansion.  Through our decades of representation, we noticed trends and learned lessons.  Now, we embark to offer some of those to our clients. (1) Business Plans: Critical Component of a Promising Startup As one of the first critical steps in any startup endeavor, business plans and decks should be carefully crafted.  Founders should be continuously involved in the drafting and polishing of these plans and solidify their “elevator pitch.”  Our firm is often used as a sounding board to review business plans, draft business plans, and provide early-stage advice. The process of drafting the business plan is crucial because it forces the participants to look at the business in an objective, critical, and unbiased manner. Entrepreneurs must analyze all the elements, from different angles, that are necessary to make the business successful.  They must then articulate the need that the product or service aims to meet or the problem that it seeks to solve – preferably in a straight-forward and concise manner.  The process of preparing the business plan will showcase missing components in the organizational structure, require a deep analysis of competitors and the market, and project expenditures, such as for selling, general, and administrative (SG&A), research and development (R&D), and intellectual property protection. The process of creating and refining the plan of the owners or founders of the business leads to a realistic appraisal of the business’s chance of success before committing time and money to it. (2) Importance of Compensation Allocation: Set Reasonable Salary and Equity Expectations Compensation decisions may have a serious impact on a startup’s ability to attract investors and raise capital. Based on our experience, most founders of startups are paid less than $100,000 in annual salary, with many receiving $50,000 or less.  Therefore, those who start companies should bear in mind the savings required to adequately sustain the early phase of a company’s evolution.  To lead by example, lower salaries for founders and senior executives set similar expectations for other employees. Before any substantial fundraising may start, business owners should determine the nature and amount of compensation for founders and management executives, considering that the lower salaries and overhead will be more attractive to investors.  At the same time, what attracts talent are equity grants, incentives compensation based on milestones, and other […]

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California Adopts Stricter Test for Independent Contractors

April 1, 2019

On April 30, 2018, the California Supreme Court, in the c a s e Dynamex Operations West, Inc. v. Superior Court, adopted a new, stricter test for determining whether workers are employees or independent contractors under California wage orders. Under the new standard (the “ABC test”), workers are presumed to be employees unless the employer demonstrates each of the following factors:

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AVOIDING LIBEL & SLANDER IN THE WORKPLACE

April 1, 2019

A California employer who terminates an employee may face, among other things, a lawsuit from the terminated employee in the form of an action for libel or slander, or for violation of the California Labor Code. Libel and Slander. In the employment context, “libel” is a false and unprivileged writing which has a tendency to injure the person in his occupation; and “slander” is a false and unprivileged oral statement which imputes a general disqualification of the person’s capacity in his office, profession, trade or business.

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LIE DETECTOR TESTING OF EMPLOYEES

April 1, 2019

The right of an employer to conduct lie detector tests is controlled by the federal Employee Polygraph Protection Act of 1988 (“EPPA”) and by the California Labor Code. Since the EPPA generally imposes greater obligations on employers seeking to engage in polygraph testing than the California Labor Code, this Newsletter shall focus exclusively on the EPPA rules. The EPPA makes it unlawful for an employer to require, request, or suggest that any job applicant or employee submit to a lie detector test. However, security guards, employees with direct access to controlled substances, and employees of federal, state, and local governments, are exempt from the EPPA, and are subject to pre-employment polygraph testing. An employer may not discharge, discipline, discriminate against, or deny employment opportunities to, or threaten any job applicant or employee who refuses to take a lie detector test.

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THE U.S. FAMILY MEDICAL LEAVE ACT AND THE CALIFORNIA FAMILY RIGHTS ACT

April 1, 2019

The U.S. Family and Medical Leave Act of 1993 (“FMLA”) and the California Family Rights Act (“CFRA”) provide rules governing the rights of employees to take time off from work for family medical reasons. This Newsletter shall briefly discuss the employees’ rights under these laws. Covered Employers. Both FMLA and CFRA apply only to private employers with 50 or more employees and public agencies regardless of the number of employees.

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