Business legal services in Silicon Valley

Who Owns a Patients’ Medical Records When a Physician Leaves a Practice?

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Physicians have an ethical and professional duty to manage medical records properly. To start, the HIPAA Privacy Rule requires doctors, health care providers, and other parties to protect the confidentiality of sensitive patient medical records. When a doctor moves on from a practice group, it is crucial that all patient medical records are handled in an appropriate manner.

This raises an important question: How should patient medical records be handled when a physician leaves a group medical practice?  The Medical Board of California and the American Medical Association (AMA) provide some important guidance. In this article, our Fremont business lawyer explains the key things to know about who owns a patient’s medical records in California.

Background Ownership of Medical Records in California

Medical record ownership varies by state. In California, medical records belong to a hospital or a doctor. With this ownership comes certain ethical and professional obligations to patients. Patients have the right to access their medical records in certain circumstances. Under California Health & Safety Code 123100, patients have a general right to access their medical records and/or summaries. Further, the AMA Code of Ethics 1.1.3(f) states that patients should have the right “to obtain copies or summaries of their medical records.” To comply with statutory and regulatory obligations, group practices must handle medical records properly.

A Note on Professional Courtesy: California law does not require group practice to transfer records between providers. However, the Medical Board of California considers this a “professional courtesy.” The possible cost of copy and/or clerical fees depend on the specific situation.

Medical Board of California: Patient Records When a Doctor Leaves a Practice

The California Medical Board advises practitioners that patients should be notified regarding certain fundamental changes to the structure of a group medical practice. When a doctor leaves a medical practice in California, their patients should be notified and given a chance to make provisions for their medical records.

The AMA has also issued ethical guidance on this matter. Under AMA Code of Ethics Opinion 7.03, patients should be notified when their doctor is leaving a practice group. Further, they should be given the chance to have their medical records retained or forwarded to the doctor’s new practice group based on their preferences.

Medical Practice Agreements Should Address Patient Medical Records

Medical records should be addressed in agreements between doctors. You are always better off discussing and handling this matter at the beginning of a commercial relationship rather than the end of a commercial relationship. Any contracts that your medical practice relies on should have provisions for who owns patient medical records when a doctor leaves the practice. Agreements should include clear instructions for patient notification, including who is responsible for:

  • Sending out notices to patients
  • Bearing the cost of sending out notices to patients

Schedule a Confidential Consultation with a California Business Lawyer

Lynnette Ariathurai is a business lawyer with extensive experience working with doctors and other medical professionals. Contact us today to set up a confidential initial consultation. From our Fremont law office, we work with medical practices throughout the San Francisco Bay Area.

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Business legal services in Silicon Valley

The Importance of Having an Attorney Draft a Contract (IT Industry)

Professionally Drafted IT Contracts

Information technology (IT) remains one of the fastest-growing large industries. According to data from Statista, the total value of global IT companies now exceeds $5.2 trillion. Similar to other industries, contracts are at the basis of most commercial relationships in information technology. It is crucial that all businesses operating within the space have well-drafted contracts. Here, our Fremont business contract attorney explains why it is so important to have your contract drafted by a lawyer—especially if you are in the IT space.

Many Companies Need Professionally Drafted IT Contracts

Information technology is an incredibly complex field. Not only regarding the work that is being done, but also in terms of the structure and layering of the business. Along with other types of California companies, your business needs well-drafted IT contracts if:

  • You are an employer who provides on-site IT services for end-user companies
  • You are an employer that provides remote IT services for end-user companies
  • You operate a company that locates and recruits qualified IT professionals

It is especially important to have well-crafted contracts in place if you own and operate a recruiting company that finds IT professionals for end-users for a fee. Likewise, end-user companies that work with IT recruiting firms must ensure that their best interests are properly protected by the terms of the contract.

Companies that provide direct IT services to end-users can benefit from customized contracts. These IT firms may be located within the United States, outside of the United States, or a combination of both. There may be situations in which one company has access to the job opening and another company has access to the IT talent. Contracts govern these commercial relationships.

When Disputes Arise, the Terms of the Contract Matter

There are several reasons why well-drafted contracts are especially important for IT industry companies. When a contract dispute arises, the specific terms of the contract will, in large part, determine your company’s liability risk. A poorly drafted contract could dramatically increase your company’s liability in a dispute. Among other things, IT-related disputes arise over:

  • Serious professional errors by IT professionals
  • Alleged non-payment of fees to one or more companies involved in the chain of workflow
  • Employee is hired directly by the end user or one of the other companies in the many layers

One of the challenges faced by IT industry employers—whether contracting with an end-user for on-site or remote services—is that it can be difficult to stay on the same page. For example, problems could arise if an IT employee puts in overtime hours without the proper authorization. Also, if the employee is hired by the end user or another company to provide services to the end user, you are essentially cut out of the deal. Without a well-drafted contract, an IT employer could end up on the hook for additional costs or loss of income.

IT Companies Without Strong Contracts Risk Higher Costs, Decreased Revenue

Ultimately, it is the contract that will, in large part, determine each company’s liability risk. Imagine that an IT employer is not promptly advised of changes regarding a particular employee’s schedule. Payment for their services could prove to be complicated. The ability to invoice another company for work provided depends on the terms and conditions of the contract.

Another similar situation could arise when an end-user believes that an IT professional was working on the wrong tasks and/or the end-user is dissatisfied with an IT professional’s skills. Each party’s financial responsibility for any work performed will depend on the contract. The right contract puts your company in the best position to get paid (or avoid paying) for certain work.

Disputes over total payment for work provided is one risk that employer companies face in the IT industry. An even greater risk is if another company or the end user steals your employee. It is expensive and time-consuming to locate and retain skilled IT professionals. Employer companies could be stuck with major losses of revenue if they do not have well-drafted contracts in place. 

A Contract Should Be Structured to Meet Your IT Company’s Unique Needs

When a business law attorney drafts a contract, they do so with the rights and interests of their client in mind. As every situation is different, it is crucial that IT companies retain a lawyer who can draft a contract that is well-tailored for their specific circumstances. Information technology companies that don’t understand the importance of having an attorney draft a contract sometimes use formulaic contracts from the internet, taking on significant risk. They may be unknowingly shifting a large amount of liability risk back to their firm or not protecting themselves from other losses. An experienced California business attorney can draft a contract that effectively minimizes liability risks and ensures that your IT business is in the best possible position.

Contact Our Fremont, CA Business Contract Attorney for Help

Lynnette Ariathurai is a business law attorney with extensive experience drafting, negotiating, and reviewing contracts. Call us now or send us a message for a confidential consultation. From our Fremont law office, we help clients with business contracts throughout the Bay Area.

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Business legal services in Silicon Valley

Navigating Leases for a Medical Practice

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A commercial lease is the legal foundation of a relationship between a business and a landlord. If you own and operate a medical practice in the Bay Area, navigating a lease agreement can be especially complicated. There are some unique issues that should be considered and addressed as part of your commercial lease. In this article, our California contract review attorney highlights some of the key issues to consider when drafting and negotiating a lease for your medical practice.

Key Commercial Leasing Issues for Medical Practitioners

Any successful medical practice needs an appropriate space to operate. The commercial property that you set up shop in should be well-suited for the particular needs of your practice. Additionally, the commercial lease that you operate under should provide an appropriate amount of legal protection. Some of the key issues that should be addressed in a commercial lease for a medical practice in California include:

  • Cost: You should have a clear definitions of the costs associated with your commercial lease. As a starting point, there must be a clear structure for how rent is calculated—either as a fixed monthly rate or as a percentage of revenue/profits. Additionally, a lease usually specifies responsibility for utilities, taxes, common area expenses, and other costs.
  • Liability: Liability is an important issue in a commercial lease — particularly for medical practitioners. A commercial landlord may try to include terms that shift liability towards your medical practice. Be sure to carefully review and fully understand liability risks.
  • Tenant improvements: In many cases, a medical practice needs to make certain improvements and alterations to a commercial space to operate. The lease should clarify two key things:
    • Your right to make improvements
    • Financial responsibility for any improvements
  • Weekend/night operations: Medical needs can arise at any moment. Many practices operate outside of normal working hours, including on nights and weekends. Make sure that your lease allows for weekend/night operations and ensure that the property is prepared. For example, the heat/air conditioning should be running.
  • Privacy (landlord access): Privacy is a major concern for medical practices. There are many state and federal privacy regulations in place to ensure that health care providers protect the sensitive health information of patients. It is a best practice to address landlord access to the property and other privacy concerns in a commercial lease agreement. 
  • ADA compliance: The Americans with Disabilities Act (ADA) is a federal civil rights law that puts certain responsibilities on property owners, as well as businesses and business owners. Leases often include waiver of ADA compliance by landlord, and the burden shifts to the tenant to comply. A commercial space may need to be upgraded to ensure that your practice is in full compliance with the ADA. ADA complaints for non-compliance can be expensive.
  • Duration (termination and renewal): A commercial lease should always have a well-defined duration. Beyond that, the lease should clarify your rights and responsibilities regarding leaving the property before the lease ends and remaining in the property once the lease expires. Among other things, your lease should address forced moves to substitute premises, subletting rights, early termination options, and renewal rights.

Contact Our Fremont, CA Commercial Lease Lawyer Today

Lynnette Ariathurai has deep experience negotiating, drafting, and reviewing commercial leases. If you have any questions about navigating a lease for a medical practice, we are here to help. Contact us now for a confidential consultation. Our firm serves clients from our offices in Fremont throughout the Bay Area including Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, and Santa Clara.

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Steps to Defend a Claim When an Employee Sues

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Owning and operating a successful business is challenging in the current economic environment. No business owner wants to face a lawsuit—especially a legal claim from one of their own employees. If your company is facing a complaint from an employee, it is imperative that you know what to do to protect the best interests of the business. Here, our Fremont employment law attorney for employers highlights five key steps to take to protect yourself and your business against an employee claim.

1.     Understand the Nature and Scope of the Claim

First and foremost, it is crucial that you take the time to understand the nature and scope of the claim. Did the employee actually file a lawsuit or did they initiate a claim with state or federal regulators? In employment law cases, many claims go through a regulatory agency before any lawsuit is filed. You may be facing a claim with the:

  • California Labor Commissioner’s office
  • California Department of Fair Employment and Housing (DFEH)
  • United States Department of Labor (DOL)
  • Equal Employment Opportunity Commission (EEOC)

2.     Do Not Take It Personally, Do Not Punish the Employee

As challenging as it can be, it is important to remember that employment law claims are not personal. These complaints should be handled in a professional manner. If the employee still works for your company, do not take any adverse action against them—even if you believe that they filed a false claim in bad faith. You do not want to expose your company to liability for retaliation. The EEOC notes that retaliation is the most common basis for employment claims nationwide.

3.     Identify and Preserve Relevant Documents and Record

Employers can effectively protect their interests by identifying, gathering, and organizing all documents and records that may be relevant to the claim. Not only do employers have a general obligation to save information once a claim has been filed, but these records can form evidence to help protect your business against liability.

4.     Notify Your Insurance Carrier (If Applicable)

Does your company have employment practices liability insurance or another type of related insurance coverage? If so, it is crucial that you notify your insurer once a claim has been filed. In general, insurance policies require that businesses/organizations provide timely notice of a legal claim. Failure to tell your insurance carrier that a claim has been filed could undermine your coverage.

5.     Consult With an Employment Attorney for Employers

Employment law is complicated. There are many specialized rules and regulations in place under both federal and state law. Employers facing a lawsuit (or formal claim) from a current or former employee can benefit from consulting with an experienced employment law attorney. A lawyer will be able to review the specific circumstances of the case and help you determine the best course of action—whether that is building a strong defense or working towards a solution in mediation.

Schedule a Confidential Consultation with a California Employment Lawyer

Lynette Ariathurai is an experienced employment law attorney for employers. If you have questions about defending an employee claim, attorney Ariathurai can help. Contact us now for a confidential consultation. We represent employers in Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, and Santa Clara.

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Business legal services in Silicon Valley

Should Attorneys Speak for Employers During Employee Disputes?

To be successful, businesses and organizations need strong relationships with their employees. A legal dispute with an employee can cause serious headaches for a business owner or manager. Even worse, it could put the company or organization at a liability risk. A lawyer with experience representing employers can help your business navigate a conflict. 

This raises an important question: Should an attorney speak on behalf of an employer during a dispute? The answer depends on the circumstances — though it is always important to consult with a lawyer as early in a dispute as possible. Here, our California employment law attorney for employers explains what you can expect from your lawyer during a dispute with an employee. 

Preventing Claims through Proactive Guidance

It is important to emphasize that a dispute with an employee is not the same thing as an employment law claim. An attorney can help your business take proactive measures to prevent employee claims. This starts with putting the right practices and structure into place. By doing so, your business can go a long way towards reducing the risk of a dispute. Even if a dispute has already arisen, it may be possible to resolve the matter before a formal claim is filed. 

If your Bay Area business is already locked in a dispute with an employee, a lawyer can help you take the appropriate action to resolve it. What exactly this entails depends on the specific situation, including the ultimate objectives of your business. In some cases, the best path forward is to take time to understand the employee’s concerns and look for a mutually workable, low-conflict solution that avoids a claim with the Labor Commissioner, Equal Employment Opportunity Commission (EEOC) or the California Department of Fair Employment and Housing (DFEH). 

Defending Employment Law Claims

Not all employee claims are preventable. Even if your company does everything right, there is still a risk that you could face legal action from a current or former employee. Our experienced California employment law attorney for employers can defend your business or organization in an employee claim. 

Once a formal claim is filed with the Labor Commissioner, EEOC, DFEH, or any other agency, it is best to let your employment law attorney speak on behalf of your business. It is still possible that the matter could still be resolved outside of court. Nonetheless, it is best practice to work with an employment lawyer for employers who can ensure that the rights and interests of your business are protected. 

Get Help from an Employment Lawyer for Employers in California

Attorney Lynette Ariathurai is an experienced, results-driven employment lawyer for employers. If you have any questions about defending your business or organization against an employment dispute, we are more than ready to help. 

Contact us now for a strictly confidential initial consultation. We represent employers throughout the Greater Bay Area, including in Fremont, near Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, and Santa Clara. 

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Business legal services in Silicon Valley

Things to Consider for Commercial Real Estate Leases – for Landlords

Lynnette Ariathurai, Bay Area Business Attorney, Fremont, Hayward, CA

Owning commercial property in California can be lucrative, especially when that property is located in an area that is highly trafficked and desirable for businesses in the region. At the same time, it is important to recognize that the value of a commercial property investment depends on having a strong, well-drafted lease agreement.

The lease is the basis of your relationship with a commercial tenant. It is crucial that a lease effectively protects your interests in all possible scenarios. Here, our Fremont commercial real estate lawyer highlights six important issues that landlords should consider when negotiating and drafting a commercial lease in California.

Commercial Rent (Base Rate, Utilities, Percentage Leases)

It is no secret that the most important thing for landlords is collecting rent. Rental payments are the lifeblood of commercial real estate investment. A well-drafted commercial lease will help you ensure that you are in the best position to get full and fair market value rent for your property and that you can actually collect the rent.

A commercial lease should clarify exactly who is responsible for all costs—it should specify the amount of base rate, the date it is due, and payment of utilities. In some cases, commercial rent is based, in part, on business revenue. Often referred to as a “percentage lease”, it may be a good option for some California landlords.

Duration of the Lease (Early Termination/Renewal Rights)

A commercial lease should always have a well-defined duration. Both parties need to know exactly how long their current obligations will last. Beyond that, commercial landlords should also consider including provisions that clarify what will happen at the end of the lease. Among other things, you may want to consider:

  • Automatic renewal rights (first refusal rights);
  • The ability to extend the lease; and
  • Early termination options.

At the end of the current commercial lease term, the landlord-tenant relationship will either be extended or it will terminate. It is useful to operate under an initial commercial lease that helps facilitate a smooth transition, whatever the parties decide to do.

Alterations, Improvements, and Maintenance During the Tenancy

Commercial leases should have clear information about the commercial tenant’s ability to make any alterations to the premises during the terms of the lease, as well as information about whether you or the commercial tenant will be responsible for necessary improvements or maintenance during the tenancy.

Insurance and Indemnity

A commercial lease should always prepare for the possibility of unexpected loss—whether because of property damages or a lawsuit from a third party. This starts with insurance. While a commercial landlord will typically maintain their own insurance policy, it is important to consider whether a commercial tenant will be required to have a liability policy or another type of insurance policy as well. Additionally, commercial landlords may also want to consider some type of indemnity clause. As defined by the Cornell Legal Information Institute, an indemnification clause is a contract provision that shifts a liability risk from one party to another.

Collection of Overdue Rent and Evictions for Non-Payment

Unfortunately, not all commercial tenants live up to their responsibilities. You may run into a problem collecting rent. If so, you have the right to take immediate action against the business, potentially including initiating eviction proceedings. Your commercial lease is the basis of your ability to collect rent and evict a tenant for non-payment. A properly drafted commercial lease will ensure that you are in the best position to collect, even if a commercial tenant files for bankruptcy.

Termination of the Lease for Other Types of Contract Breaches

As a tenant, the primary obligation a business owes to its commercial landlord is a timely rental payment. Of course, that is not typically the only obligation. Landlords also need a commercial tenant who will treat their property well. In a commercial lease, you should strongly consider including a clear definition of what constitutes a breach of contract sufficient to justify termination of the lease and removal of the tenant. For instance, a commercial tenant may be removed for creating a nuisance or engaging in unlawful activity on the property.

Contact Our California Commercial Real Estate Attorney Today

Are you planning to rent commercial property to a new business tenant? You should seek advice about your commercial real estate lease from an experienced Fremont business law attorney. Attorney Lynnette Ariathurai is committed to serving commercial real estate landlords in California and can discuss the issues you should be considering in your commercial lease. Contact us to learn more about the services we provide. We serve clients in Fremont, Hayward, Milpitas, Union City, Newark, and throughout the East Bay.

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Business legal services in Silicon Valley

Common Mistakes Made in Contract Agreements

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Contract agreements are the basis of most commercial transactions in California. Whether you are starting a business, buying or selling a company, entering an agreement with a vendor/distributor, or hiring a new employee, you will benefit from a professionally drafted agreement that establishes and protects your rights and interests.

A proper contract is all about the small details. Even a relatively minor error could cause serious headaches for you or your business. With guidance and support from a local contract attorney, you can help avoid the most common mistakes. Here are four common mistakes made in contract agreements to watch out for:

1.      Failing to Draft a Written Contract

You can enter a contract agreement without writing anything down. Oral contracts are (often) enforceable in California. Under Cal. Civ. Code § 1622, “all contracts may be oral, except such as are specially required by statute to be in writing.” That being said, it is almost always a mistake to rely on an oral agreement. Not only does a written agreement clarify expectations and avoid misunderstanding, but it will make it much easier to protect your rights should a dispute arise. 

2.      Copying and Pasting a Template Agreement from the Internet

It does not take much internet research to find some basic contract templates. The ‘copy and paste’ approach to contract drafting is not good enough for you or your business. When parties rely on a pre-built template agreement, they frequently run into problems. A proper contract is one that is customized to meet your specific agreement. Copy/paste language is often inapplicable and inadequate.

3.      Signing an Agreement that You Do Not Fully Understand

Do not sign a business or employment contract unless you fully understand the terms. In far too many cases, people run into problems because they signed an agreement they simply did not understand. Before you finalize an agreement, take the time to carefully read it over. Pay close attention to all the specific terms. 

4.      Not Working with a Local Business Contract Lawyer

Contracts are complicated. You do not need to negotiate and draft an agreement alone. Professionals and business owners can benefit from the guidance of an experienced California business contract lawyer. Among other things, your business attorney will:

  • Understand your purpose and objectives
  • Review the specific terms and conditions of the agreement
  • Fix any ambiguities or errors in the contract, and
  • Negotiate any terms that are unfavorable

It is important to remember that business contracts are fundamentally negotiable. You have the right and ability to seek better terms. Do not finalize an agreement until you are satisfied with the contract. 

Contact Our California Business Contract Attorney for Help 

Attorney Lynette Ariathurai is an experienced, reliable contract lawyer. If you have any questions or concerns about business or employment contracts, our team can help. Contact us now for a completely confidential initial consultation. From our office in Fremont, we serve communities throughout the East Bay, including Hayward, Milpitas, Union City, San Leandro, and Newark.

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Ways to Resolve Disputes Between Businesses

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When you are facing a business dispute, it is important to consider your options for a cost-effective and timely resolution. When businesses are engaged in disputes with one another—particularly when those businesses are located in different areas of the country—forms of alternative dispute resolution (ADR) can be particularly useful. By using ADR, you can avoid costly litigation, and you may be able to avoid multiple trips to another region of the country for court hearings. To be sure, you do not want to spend money on multiple trips for court hearings when you could resolve your business dispute quickly and efficiently. At the same time, employing methods of alternative dispute resolution can allow businesses to avoid complications concerning jurisdiction and choice of law matters.

Mediation and arbitration are two commonly used forms of alternative dispute resolution under California law. Our experienced business attorney can help you understand the benefits and limitations of each type of ADR.

Mediation to Resolve a Business Dispute

Mediation is a form of ADR that requires the disputing parties to engage in communication with one another, with the aim of reaching a resolution to their dispute. In mediation, you meet with the other party and a neutral third party (the mediator). Your attorney, as well as the other party’s attorney, can also be present.

Mediation cannot be compelled, both sides must consent to mediation.  Mediation is much different from a court hearing in which a judge hears both sides of a dispute and makes a ruling or decision. In mediation, the mediator’s job is to facilitate communication between the parties. The mediator does not issue a decision about the dispute. If you cannot reach an agreement with the other party, then your case can move onto arbitration or litigation. If you can reach a decision, then you can enter into a formal agreement with the other party to officially resolve the dispute.

There are both benefits and limitations to mediation. An obvious benefit is that the process is much faster and less expensive than litigation. You may need to attend mediation only once before reaching an agreement. Another benefit is that the discussions during mediation are confidential. As such, any confidential matters pertaining to your business will not become public record. Nor can the statements made and documents presented through mediation be used in a subsequent arbitration or litigation. Finally, mediation can allow you to play a key role in resolving your own dispute, and it may improve communication between you and the business with which you had a dispute. The major limitation of mediation is that you cannot compel the other side to produce evidence you may need to prove your claim.  Also, if you cannot reach an agreement, the mediation may not be a good use of your time or money.

Using Arbitration for Disputes Between Businesses

Many businesses rely on arbitration to resolve disputes with customers, employees, and vendors, but arbitration can also allow you to resolve a dispute with another business.

Like mediation, the key benefits of arbitration are that it is quicker than litigation and more cost-effective. Unlike mediation, an arbitrator—a neutral third party (arbitrator(s))—hears the dispute and can issue a binding decision. Unlike mediation, arbitration can be compelled if there is a signed written agreement between the parties to arbitration.  One of the key limitations of arbitration. If you don’t like the outcome, your options for appeal are much more limited than they might be if you had chosen litigation.

Seek Advice from our Fremont Business Lawyer

If you need assistance resolving a business dispute, our Fremont business law attorney can help. We serve businesses in Fremont, Hayward, Union City, Milpitas, and Newark, CA. Contact the Law Firm of Lynnette Ariathurai online today or call us at 510-794-9290 for more information.

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Can California Employers Still Have Mandatory Arbitration Agreements with Employees?

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Business owners and employers in Fremont and throughout Northern California should know that they may not be permitted to require employees to agree to arbitration clauses or agreement under particular circumstances, according to a new law in the state. The new law, Assembly Bill 51, limits the ways an employer can use an arbitration clause. In brief, you may not be able to require new employees to sign employment contracts that contain arbitration clauses. We want to provide you with more information about the new law, which was supposed to take effect in early 2020, and to explain what its implications might be for California businesses.

Understanding California Assembly Bill 51

California Governor Newsom signed Assembly Bill 51 into law in October 2019, to commence in January 2020. The law is designed to prohibit employment discrimination, and one aspect of the bill is that it prohibits employers from requiring job applicants or current employees, as a condition of their employment, to enter into arbitration agreements. The legislative reasoning behind this part of the bill was that arbitration agreements can unnecessarily silence employees and can prevent them from making concerns about sexual harassment at work, public.

Under the new law, it is unlawful (and actually criminal) for an employer to require a job applicant or an employee to agree to an arbitration under the California Fair Employment and Housing Act (FEHA) or the California Labor Code, as a condition of that person’s employment. The law does not invalidate currently existing arbitration agreements. Yet business advocates have filed a lawsuit to prevent the new law from taking effect, arguing that the Federal Arbitration Act (FAA) preempts AB 51. The U.S. District Court for the Eastern District of California recently issued a preliminary injunction that prevents California from enforcing the terms of AB 51. Until the case is ultimately decided, what should your business do?

Impact of AB 51 on Businesses in California

For many businesses in California, arbitration—including mandatory arbitration—can help to keep business costs down and can prevent costly business litigation in the event of an employment or other contract dispute. As such, it is in the interest of many small businesses in Northern California that the law be preempted by the FAA.

In the meantime, what should you, as a business owner in the Fremont area, do to ensure that you are in compliance with existing law? Most importantly, you should know that any arbitration agreement that existed prior to January 1, 2020—when AB 51 was supposed to take effect—does not fall under the new law at all. Even if it were to take effect, arbitration agreements in force prior to this date will remain lawful. Next, you should keep in mind that AB 51 only applies to claims under the FEHA or the California Labor Code. Accordingly, it is certainly lawful to require employees to agree to arbitration for disputes that would not arise under either of these laws.

If you want to require an employee or prospective employee to agree to arbitration for claims that could potentially be covered by AB 51, it is important to recognize that you are taking a risk as a business. If AB 51 is ultimately determined to be lawful and not preempted by the FAA, then any arbitration agreements you make after January 1, 2020 could result in both civil and criminal penalties. However, if AB 51 ultimately cannot take effect, an arbitration agreement that would otherwise be prohibited by AB 51 could be enforceable in California. If you have questions about your business’ situation, you should speak with a business lawyer as soon as possible. 

Contact a Fremont, CA Business Law Attorney

If you have questions or concerns about how the new limits on arbitration could impact your business, it is important to speak with an experienced Fremont business law attorney as soon as possible. The law will have significant practical considerations for many small business owners, tech companies, and other businesses in the region.

 Contact the Law Office of Lynnette Ariathurai online today or call us at 510-794-9290 to learn more about whether California employers can still have mandatory arbitration agreements with employees. We represent business owners across Northern California in Fremont, Hayward, Union City, Milpitas, and Newark.

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Top 5 Business Contracts Mistakes

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Contracts and contract reviews are part of everyday life for Bay Area businesses.  However, many business owners and managers make mistakes when creating, considering or approving a business contract that can have catastrophic ramifications on your business.  Here are five common mistakes in business contracts and how to avoid them.

1.   Using Internet or Ready-Made Contract Forms

There are several reasons a ready-made contract form will not work for you and your business. They include:

  • Contracts must be relevant in your locality. A form contract from Michigan may not contain clauses that are standard in California contracts.
  • State laws are varied. The law could be different from where and when the contract was originally drafted. You must review borrowed language from such a contract for amendments to relevant state law, including additions and subtractions to the various codes at play in the agreement.
  • Contracts are drafted from the perspective of one side over the other; is the form contract you are reviewing beneficial or detrimental to your deal?
  • Contracts for one type of entity may not be relevant for other types of entities

2.   Seeking Legal Advice After Signing the Contract

Even if your deal is relying on a generic contract template you pulled from the Internet, have a business contract lawyer review it before you sign it to make sure it protects you and includes all of the terms it should and does not put your business at risk.

3.   Forgetting the Recitals

A recital, in legal terms, is a preamble to the contract. It provides a general idea to the reader about who the parties are, what the contract is about, and why the parties are signing the contract. Often overlooked during the contract drafting and negotiation phases, when a dispute arises over contractual interpretation, the court or arbitrator may use the recitals as an aid to interpretation of the contract. Focus on the operative provisions of the commercial contract, but do not forget to set the scene and provide the reader of the contract with background information.

4.   Not Knowing Which Clauses to Include and Which to Leave Out

Not understanding boilerplate (standard contract clauses) can come back to bite you when a dispute arises. A business lawyer provides advice as to which clauses should be included in your contract and which clauses should not.

For example, an assignment clause should be included in a commercial contract. An assignment clause will permit you to assign the contract to another entity (someone who buys your business). Without an assignment clause, the contract may not be sold or transferred should you sell your business after the commercial contract is signed.

Another issue that can be addressed by a business attorney is whether a contract should include an arbitration clause.  The arbitration clause must also contain information about the impact of any decision by an arbitrator.  With no or weak arbitration clause included, the statement may be advisory and not enforceable.

5.   Forgetting That Words Have Meaning

Form contracts are notorious for containing vague and ambiguous language. Using words without clear definitions is dangerous to contracting parties because it places the interpretation of such language in the hands of someone else. Ambiguities are normally construed against the drafter of the contract. It is possible then that ambiguous language will have at least three interpretations – yours, the other party’s, and the court or arbitrator’s. A court or arbitrator may be bound to interpret such a clause using the custom and practice of your locality, which can be different from the custom and practice of your industry and even your intent at contract formation.

Ask Us to Review Your Business Contract

Make sure that your commercial contract is in writing and reviewed by an experienced and knowledgeable business contract attorney who can provide you with actionable advice and counsel to protect your business.

Avoid these and other common business contracts mistakes. Contact us now about reviewing your commercial contract before you sign it. We represent and counsel clients in Fremont, CA and the surrounding communities of Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, and Santa Clara, CA.

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