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What California Employers Should Know to Comply with the New Coronavirus Emergency Paid Leave Laws

March 23, 2020

By: Ofer Barlev On Wednesday, the President signed the emergency paid leave law after it expeditiously moved from the U.S. House of Representatives to the Senate without much opposition.  The legislation provides much-needed help to those affected by the crisis.  Aside from providing free testing for the Coronavirus, the new law provides paid sick leave and paid family leave for workers.  In addition, the Treasury Department will also propose a direct cash payment to taxpayers, $300 billion in small business loans, $50 billion for the airline industry, and $150 billion to other distressed industries. The new law’s Paid Sick Leave component will require employers with fewer than 500 employees to provide their employees with two weeks (10 work days) of emergency paid sick leave pay resulting from Coronavirus absences.  If the employee is part-time, the wages paid will equal the number of hours the employee works on an average two-week period.  The employers may not require their employees to first exhaust other forms of paid leave (such as sick leave or paid time off) before allocating this Coronavirus paid sick leave. There are specific payment structures and caps attached to the law that must be examined for each situation.  Importantly, the law does not carry-over and will terminate on December 31, 2020.   Please note, the law allows the Secretary of Labor to exempt health care providers, emergency responders, and employers with less than 50 employees.  Such entities must wait until the Secretary of Labor provides this exemption through additional regulations. Posting Requirements, Compliance, and Caps The law also requires employers to post a notice in the workplace of the paid sick leave rights (and the Secretary will provide language for the notice within seven days).  If employers fail to comply with this new law, they will be subject to penalties similar to those issued for minimum wage violations.  Any employer who provides the paid sick leave wages to its employees due to the Coronavirus will receive payroll tax credits quarterly if they are above the required Social Security taxes the employer ordinarily owes.   The paid sick leave wages are capped at $511 per day (or $200 per day if the leave is to care for a child or family member) for up to 10 days per employee in each calendar quarter. Employers who must also offer emergency Family and Medical Leave Act (“FMLA”) wages would be entitled to tax credits equal to the entire amount paid per calendar quarter.  Such Emergency FMLA tax credits are capped at $200 per day for each individual up to $10,000 in the aggregate per calendar quarter.  Please note that regular FMLA applies to private employers with 50 or more employees and the employees are eligible (eligibility for benefits requires that the worker has worked for the employer for at least 12 months, has worked at least 1,250 service hours for the employer during the 12-month period immediately preceding the leave, and works at a location with at least 50 employees that is within 75 miles.)  California’s Family Rights Act provides additional protections. If the Employer Closes the Office, What Legal Requirements Must be Followed? If […]

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Protecting your Separate Property

February 25, 2020

Often, we have clients who desire to protect their separate property before a marriage, or their gifts from parents later in life. One way to do this is with a prenuptial or postnuptial agreement. These agreements are difficult to do, for all of the obvious reasons. Another way to maintain separate property is to create Separate Property trusts to hold assets that are separate property. Separate property assets are those assets that you owned before marriage and have not been commingled, and also any inheritance that is received as separate property. This can be accomplished as a part of overall estate planning using a three-trust setup, two Separate Property Trusts and a Community Property Trust to hold jointly owned assets. The benefit is that the Separate Property trust assets are not subject to division in the event of a dissolution of the marriage. The income and value from the assets may be used to determine the ability to pay spousal and child support, but the assets continue to be separate property. In this trust, you can still fulfill your bequests upon passing. Usually, the desire is to give the assets to your surviving spouse and/or your children, but it could also be to share certain Separate Property Assets with others. An added benefit is that separate property of one spouse is not liable for the obligations of the other spouse. It can be quite effective for asset protection. Also, Community Property may be converted to Separate Property with a fair and equitable Transmutation Agreement between the parties. If you are married, at some point before passing away, it is advisable to place all of your accumulated assets into the Community Trust in order to obtain a full step-up in basis on the entire value of the property upon the passing of the first spouse. Similarly, if property is held in Joint Tenancy, it is advisable to change title to the Community Trust to obtain the full step-up in basis upon the passing of the first spouse. With a full step-up in basis, the surviving spouse can sell the property, after the first passing, for its value at the date of death without paying income taxes on the sale.

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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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CAPITAL STRUCTURE OF A NEW CORPORATION

April 5, 2019

The founders of a new corporation must address the crucial issue of structuring the capitalization of the corporation. After determining the amount of money the corporation will need for fixed assets, materials and operating expenses, the founders must then decide whether to finance the corporation with debt or equity, the proportion of debt and equity, and the rights, preferences, privileges and restrictions of the stock. This Newsletter shall discuss the advantages and disadvantages of debt vs. equity, and the various features of each.

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TO LITIGATE OR NOT TO LITIGATE?

April 5, 2019

That is the question most frequently pondered in the area of dispute resolution. Litigation is an imperfect process at best. Winners are often left with pyrrhic victories; losers sometimes lose that which they have struggled to achieve over the course of a lifetime. This Newsletter explores the considerations that are taken into account when deciding whether to litigate; in future Newsletters we will explore alternatives to litigation and preventive measures by which disputes can be resolved before the question of litigation ever arises.

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