Author: Alissa Allen

Business legal services in Silicon Valley

Legal Needs in Setting Up a Successful Construction Company in California

Are you preparing to set up your own construction company? It is imperative that you have the right structure in place. Here, our Fremont lawyer for starting a business highlights the key things to know about setting up a successful construction company in California.

Know the Licensing Requirement: CSLB Contractor’s License

To start a construction company in California, you must have the proper license. If you already have a California State License Board contractor’s license, you can start a construction company right away, regardless of whether you have any prior history owning your own business. In other words, you can start your own construction company today if you have a CSLB contractor’s license, but you have only ever worked for other employers.

We Help CSLB Contractors With their Application for an Entity License

Companies providing contractor services will need a CSLB license. Navigating the complexities of obtaining an entity license can be daunting for CSLB contractors who are preparing to start their own company. Our team can help. We are committed to simplifying the process and providing comprehensive assistance tailored to the unique needs of each contractor. With in-depth knowledge of the requirements, we ensure your application is complete and accurate. For construction companies in California, bonds are generally required. Of course, obtaining the proper insurance coverage is also incredibly important. For some types of entity licenses, workers’ compensation coverage is required even if the company has no employees.

Other Important Legal Needs for Starting a Construction Company in California

Beyond obtaining the CSLB contractor’s license and the business entity license, there are several other key considerations that you need to address when starting a construction company. Some other notable legal needs for setting up a construction business in California include:

City business license (business permit): Most cities in California have their own regulations regarding business operations. Before you can legally run a construction company in a local area, it is essential you secured any required business license/business permit. The permit legitimizes your operations within the city.
Legal structure for business (sole proprietorship, LLC or corporation): A construction company needs the proper legal foundation. While some construction companies are established as sole proprietorships or corporations, some entrepreneurs in the construction industry opt for a limited liability company (LLC) structure. Notably, a properly formed and operated corporation or LLC can provide owners with personal liability protection.
Compliance with California employment laws: California has stringent employment laws designed to protect workers. As a construction company, it is crucial to understand and adhere to these laws. Notably, construction businesses should pay close attention to the regulations regarding employees and independent contractors.
Properly drafted contracts: Contracts form the backbone of most construction projects in California. These contracts define the scope, payment terms, responsibilities, and potential liabilities among other things. CSLB also requires certain language to be included in contracts for construction services. To protect your company from future disputes and comply with CSLB, a construction company’s contracts should be drafted and/or reviewed by an attorney.

Contact Our Bay Area Business Lawyer for Construction Companies Today

Lynnette Ariathurai is an experienced, solutions-driven business lawyer. We help clients set up successful construction companies. Contact us right away for a fully confidential appointment. We provide business law services to construction companies throughout the Bay Area.

construction business insurance, construction business legal advice, construction business legal entity, construction business regulations, new construction business

How the New California Privacy Rights Act (CPRA) Compliance Law Impacts Businesses

The California Privacy Rights Act (CPRA) is a state statute that went into effect on January 1st, 2023 and is now officially being enforced. It is imperative that all companies in California understand their responsibilities under the CPRA and its parent law, the California Consumer Privacy Act (CCPA). In this article, our Fremont business attorney provides an overview of the key things that companies should know about compliance with the CPRA.

Background: The CPRA Clarifies a 2018 California Privacy Law

The California Consumer Privacy Act (CCPA) is a state law that was passed to provide consumers with control of the personal information that businesses collect. The California Privacy Rights Act (CPRA) is a law that significantly amends the CCPA. Notably, the CPRA was passed through a ballot initiative in 2020. At that time, it was known as Proposition 24. As noted above, enforcement of the CCPA/CPRA officially started on July 1st, 2023.

Which Businesses are Required to Comply With the CPRA?

It is important to emphasize that not every business is required to comply with the CPRA. It applies to all companies that are either based in California or sell products/services in California and meet one of the following three criteria:

The business has gross annual revenue of $25 million or more
The business generates at least 50 percent of its annual revenue from selling or sharing the personal information of consumers
The business buys, sells, or shares the personal information of residents of at least 100,000 households in California during the year

While the first criterion is relatively straightforward—larger businesses ($25 million in annual revenue) must comply—it is the third that could affect many smaller or mid-sized businesses under the scope of the CPRA.

Note: The CPRA does not apply to non-profit organizations or government agencies.

How to Comply with the New California Privacy Rights Act

Is your company covered by the scope of California’s revised consumer privacy law? It is crucial that you are in full compliance with the regulations. Here is the key thing to know about compliance: California businesses that are covered by the new CPRA need to have a comprehensive written privacy policy in place. That policy must meet all the requirements of the law. Among other things, a written privacy compliance policy should address:

The process for disclosing that your business collects personal information about a consumer at or before the point of data collection.
A clear statement that consumers have the right to request that information that you collected about them as well as your CPRA privacy policy.
An acknowledgment of and process for addressing the fact that consumers have the “right to be forgotten” under California’s privacy law—meaning they can request that you delete personal data.
A process for allowing consumers to “opt-out” of having their personal information sold to or shared with third parties.
A statement affirming compliance with the “right to fair treatment”—as California law holds that consumers cannot face unfair treatment for restricting access to their personal data.

Schedule a Confidential Consultation with Our California Business Lawyer Today

Lynnette Ariathurai provides solutions-focused guidance and support to business owners and entrepreneurs. If you have any questions about the new California Privacy Rights Act or CPRA compliance, we are here to help. Contact us today for a confidential consultation. We serve businesses throughout the Bay Area, including in Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, San Jose, and Santa Clara.

business attorney, california privacy rights, compliance law, consumer privacy law, privacy policy

Minimizing Debt Transfer When You Purchase a Business

Are you considering buying a business in California’s Bay Area? If so, it is imperative that you ensure the transaction is properly structured. A well-structured purchase agreement is especially important if the target company has a considerable amount of debt. With the right approach, you may be able to minimize the debt that you take on as part of the transfer. Here, our California attorney for buying a business highlights some of the key things that you should know about minimizing the debt transfer when you purchase a company.

Why It Matters: Buying a Business Could Mean Taking on Its Outstanding Debt

Buying a business in California is about more than just about acquiring its assets. You also inherit outstanding liabilities, including unpaid debts. The amount of debt held by the business that you are looking to acquire can significantly impact the investment value. There are strategies that entrepreneurs can use to help minimize debt transfer.

Four Key Strategic Considerations to Minimize Debt Transfer When You Buy a Business

When buying a business, a proactive approach can make all the difference. It is crucial to protect your rights and interests. Here are four key strategic points to keep in mind when working to minimize the amount of debt that you take on when you acquire another business:

Do your due diligence (know what is owed): Before finalizing a business purchase, be sure to conduct a thorough review of its financial records. It is vital to understand the full extent of its assets and liabilities. You need to accurately evaluate the business’ true value and potential risks.
Negotiate with the seller to focus on reducing debts: Once you fully inform yourself about the actual assets and the outstanding debts, use this knowledge as a bargaining tool. It may be possible to negotiate the price downwards or require the seller to clear the liabilities before you close.
Consider an asset purchase: Instead of buying the business entity itself, contemplate purchasing its individual assets. An asset purchase approach is one that allows you to handpick the assets you want and avoid taking on a majority of unwanted liabilities.
Beware of successor liability risks: Even with an asset purchase, the purchaser of a business may still be held responsible for the previous owner’s liabilities under California’s ‘successor liability’ laws (Cal. Code Regs. Tit. 18, § 1334). Always consult with experienced legal counsel.

An Attorney Can Help You Structure a Business Purchase to Best Minimize Debt

The purchase of a business is an incredibly complex transaction—particularly so when that company still has outstanding liabilities. You do not have to figure out everything on your own. Engaging an experienced Bay Area business acquisition attorney is vital. Not only can your lawyer bring legal expertise to the table, but they are also able to review the proposed deal, negotiate on your behalf, help you evaluate all your financial risks, and take action to protect your rights and interests.

Contact Our California Business Acquisition Attorney Today

Lynnette Ariathurai has deep experience handling complex business transactions. If you have any questions about minimizing debt transfer when buying a business, we can help. Contact us now for a confidential, no obligation initial appointment. With an office in Fremont, our firm serves clients across the area, including in Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Santa Clara, and San Jose.

acquisitions attorney, business attorney, buy business, reduce debt transfer

Legal Structures for Veterinarians in California

For so many people, their pets are cherished family members. Their local veterinary practice helps to keep dogs, cats, and other animals safe and healthy. It is a competitive and highly regulated industry. Every veterinary practice in the Bay Area needs the right legal structure to thrive. Here, our veterinary business lawyer provides an overview of the key things to know about legal structures for veterinary practices in California.

California Veterinary Practices: You Should Form a Professional Veterinary Corporation

In California, a veterinary practice cannot operate as a limited liability company (LLC), partnership, or general stock corporation. Under the California Veterinary Medicine Practice Act, a veterinary practice should be formed as a professional veterinary corporation. It is a unique type of legal entity that offers several advantages, including compliance with state regulations, limited liability, and tax advantages. A business formation attorney can help you set up your practice. Notably, a professional veterinary corporation may qualify to be taxed as S-corporations (S-corps) in California.

Key Steps to Form a Professional Veterinary Corporation in the Bay Area

Forming a professional veterinary corporation in California requires several key steps to ensure compliance with both state law and the regulations of the veterinary profession. Here are five key things that you should do when forming a veterinary practice in the Bay Area:

File the articles of incorporation: The first step to establish your professional veterinary corporation is to file the articles of incorporation with the California Secretary of State.
Appoint directors and draft bylaws: After filing the articles, you must then appoint your corporation’s board of directors and draft bylaws. The bylaws lay the groundwork for how your corporation will operate, including details of meetings, roles, and responsibilities of directors and officers.
Notify the California Veterinary Medical Board (VMB): The next step involves notifying the California Veterinary Medical Board about your new corporation. The board requires a Notice of Veterinary Corporation and a fee to register your practice.
File form 2553 for S-corporation taxation: As part of managing your corporation’s financials, you should consider filing IRS form 2553 for S-corporation status. It is a type of business taxation that allows income, losses, deductions, and credits to pass through to U.S. resident shareholders for federal tax purposes, thereby avoiding double taxation.
Pay the California Franchise Tax Board: Finally, the professional veterinary corporation must register with the California Franchise Tax Board and pay the required minimum franchise tax annually.

Veterinarians do not have to navigate the business formation process alone. An experienced attorney can help you ensure that your professional practice has the right legal structure in place.

Contact Our Bay Area Business Lawyer for Veterinarians in California

Attorney Lynnette Ariathurai has the professional skills and legal expertise to help veterinarians and their partners set up successful professional practices. If you have any specific questions about the legal structure for a California veterinary practice, please do not hesitate to contact The Law Office of Lynnette Ariathurai today. With a legal office in Fremont, we serve veterinary businesses throughout the Bay Area.

California veterinarian practice regulations, professional veterinary corporation, veterinary practice legal advice, veterinary S-corporation

Apply for your Home Health Care License before Purchasing a Home Health Care Company

Home health care is a rapidly expanding industry in California. The Employment Development Department (EDD) notes that the home health care industry already generates more than $10 billion in annual revenue in our state. You may be thinking about purchasing a home health care company—either to add to your existing business or to get into the industry.

When buying or acquiring a home health care agency in California, it is imperative you understand the licensing requirements. You should apply for your license before you purchase the company. Our Bay Area home health care agency attorney explains what you need to know about home health organization licenses and purchasing these businesses in California.

Understanding the Licensing Requirement: Home Health Care Agencies in California

As of January of 2016, all home health care agencies that operate in California must comply with the Home Care Services Consumer Protection Act. Among other things, the law requires that all home health care organizations in the state must be properly licensed. If you do not have the appropriate home health care license, it is unlawful for you to operate the business. Licensing is a major consideration when you buy/acquire a home health care business.

You Cannot “Buy” a Home Health Care License in California

In California, obtaining a license to operate a home health care service is not as simple as purchasing an existing business. Buying a home health care business in California does not mean that you automatically get access to its license to operate.

All individuals interested in entering this industry must be prepared to apply for their own license or be prepared to complete a required waiting period. Licensing is an issue that you should address before you finalize the purchase of a home health care business.

You do not want to end up in a situation whereby you effectively buy the debt of a home health care business and a few relatively low value assets, without getting access to the license that you need to operate the company.

Protect Yourself: Consult with a Business Lawyer who has Home Health Care Experience

Buying a business is complicated—especially so in California’s highly regulated home health care industry. It is imperative that any deal that you enter is structured properly—with licensing sorted out before the transaction is finalized. Do not go it alone. When venturing into the home health care industry in California, it is crucial to engage a knowledgeable business lawyer with industry-specific experience. Your attorney will understand the complexities of licensure, issues of regulatory compliance, and the ins and outs of the business transfer processes.

Contact Our Bay Area Home Health Care Business Law Attorney Today

Lynnette Ariathurai is a commercial lawyer with the unique skills and experience to handle the issues facing home health care agencies. If you have any questions about health care licenses and the purchase of a home health care company, please contact us today for a fully private consultation. From our Fremont office, our firm serves home health care agencies across the Bay Area.

California home health care licensing, home health care agency, home health care licensing

Securing your Medi-Cal License before you Purchase a Medical Practice

Are you preparing to purchase or acquire a medical practice in California? It can be a fruitful business decision—but it is crucial that all aspects of the transaction are handled properly. Health care is a highly regulated industry. You need to obtain a Medi-Cal license—and there are certain steps that you should take to help ensure your application is approved in a timely manner. Our Bay Area business law attorney explains why it is so important to secure your Medi-Cal license before you purchase a medical practice in California.

Background: The Importance of a Medi-Cal License

Medi-Cal is California’s Medicaid program. The public health insurance program provides coverage for health care services for low-income individuals and other qualifying people with significant financial or medical needs. As explained by the California Department of Health Care Services (DHCS), a medical practice must apply to enroll in the Medi-Cal program to be an eligible provider. It is a big market and medical providers that are not enrolled cannot be reimbursed by Medi-Cal.

A Premature Medi-Cal Application Will Result in Denial

The Medi-Cal application enrollment process you must undertake when buying a medical practice in California is complicated. Timing is a key issue. Submitting your application too early—prior to fully establishing the business—can result in denial. Medi-Cal stipulates that before applying, practices must meet several requirements, including securing a lease and fulfilling other preconditions, defined as “establishing the business” under CCR Title 22, Section 51000.60. The proper sequence of steps is crucial when applying for a Medi-Cal license. An experienced attorney can help you navigate this procedure and with other matters related to the purchase or acquisition of a medical practice.

You May Qualify as a Transferee Applicant if You Buy a Medi-Cal Enrolled Medical Practice

If you are planning to purchase or acquire Medi-Cal enrolled medical practice, you could potentially qualify as a “transferee applicant”. It is a classification that is applicable to individuals or entities acquiring a business already enrolled with Medi-Cal. Notably, the transferee application is a distinct process that can help streamline the transition and speed up Medi-Cal enrollment. However, not all purchasers will qualify. It depends on your specific situation. There are several different requirements that must be met. Among other things, you will need a valid Successor Liability with Joint and Several Liability Agreement. A Bay Area business lawyer with experience handling medical practice transitions in California can help you understand all your options and ensure that your purchase is structured in the manner designed to best protect your interests.

Contact Our California Business Lawyer for a Confidential Consultation

Lynnette Ariathurai is a business lawyer with experience helping clients purchase medical practices. If you have any questions about Medi-Cal licenses and the purchase or acquisition of a medical practice, we can help. Call us now or contact us online to set up a confidential consultation. With an office in Fremont, our firm serves communities throughout the San Francisco Bay Area.

California Medicaid, Medi-Cal licensing

Considerations When Buying an In-Home Health Care Company

Home health care is one of the fastest growing industries in California. The Centers for Disease Control and Prevention (CDC) estimates that there are nearly 12,000 home health agencies nationwide. If you are considering purchasing a home health agency, it is crucial that you know how to protect your legal rights and financial interests. Here, our Fremont lawyer for buying a business highlights key considerations to know when buying an in-home health care company in California

Important Issues to Review When Buying an In-Home Health Care Agency in California

Health care is a large, highly regulated industry. There are many unique considerations that you need to be aware of if you are purchasing a home health care business. Here are some key things to keep in mind when assessing an in-home health care company in California:

Accreditation: Review the agency’s current accreditation status and verify whether it’s up to date. Accreditation is essential for reimbursement from Medicare and Medicaid, and it’s a key factor in the agency’s overall credibility. The most common accreditation organizations for home health agencies are The Joint Commission, CHAP, and ACHC.
Employees: In-home health care companies are only as strong as their human capital. Staff matters. Evaluate the current employees and their qualifications. Verify that all staff members are licensed and certified, and, if applicable, review any employment contracts.
Medicare eligibility: Under federal law (42 CFR § 424.550), a home health care agency that has enrolled in Medicare within the last 36 months generally cannot be transferred/sold. If it is sold, the company may be barred from Medicare. This could effectively destroy the business, but there are some exceptions to the federal rule. A business lawyer can help you evaluate any specific situation.
Franchise relationship: Many home health care companies in California are franchise businesses. If you are considering purchasing a home health company and becoming a franchisee, you need to understand the benefits and drawbacks that come from the franchise relationship. The franchise agreement should be reviewed by a lawyer.
Buy-Sale Agreements: A well drafted agreement to purchase or sell the business is critical, to minimize the risks of liability. It should be drafted or reviewed by an attorney.

Of course, all the other issues that you would need to consider when buying a business still apply. For example, it is imperative that you take a careful look at a home health care company’s balances—all assets and all liabilities—before finalizing any purchase agreement.

Comprehensive Due Diligence is a Must When Buying a Bay Area Business

When buying a business in the Bay Area, it is imperative that you conduct thorough due diligence to avoid potential pitfalls. Among other things, due diligence should include a review of legal, financial, and operational aspects of the business. An in-home health agency is no exception to the rule. As this is a complex industry, comprehensive due diligence is especially important. You do not have to figure everything out alone. Buyers should be prepared to work with an experienced business lawyer.

Get Help from a California Business Lawyer for In-Home Health Care Companies

Lynnette Ariathurai is a top business lawyer with deep experience working with home health companies. If you have questions about buying an in-home health business in California, we can help. Contact us now for a confidential consultation. Our firm works with home health companies in Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, San Jose, Santa Clara, and throughout the region.

health care company, home health care, home health care agency, in-home health care agency

CA Assembly Bill 890 – What it Means to Nurses and Questions that Remain

Nursing is one of the most important occupations in our region. According to data from the California Board of Registered Nursing, there are nearly 500,000 actively registered nurses (RNs) in the state. In September of 2020, Governor Gavin Newsom signed a law—California Assembly Bill 890—which has important implications for Nurse Practitioners and their employers. Here, our Bay Area business attorney for nurses explains the key things that you need to know about AB 890.

An Overview of California Assembly Bill 890 (AB 890)

AB 890 is a California state law that is designed to grant Nurse Practitioners additional autonomy to provide services to patients. The law creates two new categories of nursing professionals:

103 NP (Cal. Bus. & Prof. Code § 2837.103): A Nurse Practitioner who can work in a group setting with at least one physician present.
104 NP (Cal. Bus. & Prof. Code § 2837.104): A Nurse Practitioner who can work independently in certain circumstances.

In other words, Bill AB 890 gives Nurse Practitioners in California who meet pre-established professional requirements more authority to practice independently.

Bill AB 890 Imposes Peer Review Reporting Requirements on Many Nurses

Beyond granting additional autonomy to qualified Nurse Practitioners, AB 890 includes a provision that requires these professionals to adhere to the peer review reporting requirements outlined in Section 805 of California law. The bill amends the definition of the statutory term “licentiate” to include nurses. In effect, this means that some mandatory reporting requirements are triggered when a nurse faces professional disciplinary action.

Many Nurses Have Questions About AB 890—Our Legal Team Can Help

If you are a nurse who has questions about the implications of CA Assembly Bill 890, you are certainly not alone. It is a complex piece of legislation. Despite being signed into law more than two years ago, many questions surrounding its interpretation remain, because AB 890 only took full effect on January 1st, 2023. Our law firm provides legal guidance to nurses. Some common questions that you may have include:

What types of training are required for Nurse Practitioners to gain additional autonomy to practice independently under AB 890?
What additional types of practice are available to Nurse Practitioners since AB 890 has taken effect?
How can Nurse Practitioners who have opened their own practice take advantage of new opportunities to provide care while ensuring full AB 890 compliance?
What are some business strategies that NP 104 entrepreneurs can implement to develop and grow their professional practice in the new regulatory environment?
How can Nurse Practitioners in California effectively start the business?

Contact Our California Business Lawyer for Nurses Attorney Today

Lynnette Ariathurai is an experienced business law attorney for nurses, doctors, and other medical professionals. If you have any specific questions or concerns about CA Assembly Bill 890, please do not hesitate to contact us. We provide legal services throughout the Bay Area.

California nursing categories, Nursing practitioners, registered nurses

Forming a Professional Nursing Corporation in CA

Nursing is one of the most important occupations and the workplace environment is changing rapidly. According to data from the California Board of Registered Nursing, there are more than 487,000 active registered nurses (RNs) in the state. If you are considering starting a nursing company in California, it is crucial that your business has the right legal structure. A nursing corporation is a specialized type of business entity designed for firms offering services within the nursing profession. Here, our Fremont business formation lawyer highlights the key things to know about professional nursing corporations in California.

Know the Law: Professional Nursing Corporations in California

In California, a professional corporation (PC) is a specialized type of legal entity through which certain licensed professionals can conduct their business operations. Under California law (Cal. Corporation Code § 13401(b)), PCs are required to register with the state agency that is responsible for regulating the specific profession in question. A professional nursing corporation is required to register with the Board of Registered Nursing. Notably, not just anyone can form a professional nursing corporation in California. There are strict ownership requirements. At least 51 percent of the corporation must be owned by registered nurses in California. The remaining 49 percent can be owned by other specific licensed professionals in the health care field.

What are the Benefits of Forming a Nursing Corporation?

A PC is generally the most efficient and effective way to operate a nursing business in California. Some key advantages of operating a nursing services business as a professional nursing corporation include:

Tax savings—a professional corporation can reduce a nurse’s self-employment taxes
Liability protection—PCs are designed to provide additional legal liability protection

Important Considerations When Forming a Professional Nursing Corporation

Are you a registered nurse who is considering forming a business in California? It is imperative that your business is set up properly. Mistakes could cause you serious problems. Here are some of the most important considerations when setting up a professional nursing corporation in California.

Name: You need to select a name for your professional nursing practice. California law requires you to include the term “nursing” or “registered nursing” in the official name.
Tax implications: Taxes matter. In California, a professional nursing corporation can be taxed as a standard corporation (C Corporation), or it can be taxed as a pass-through business entity (S Corporation).
Ownership structure: The ownership structure of your professional nursing corporation must be set up properly. Make sure you have the right documents in place. You must file articles of incorporation with the state. You can also benefit from a comprehensive bylaws. There are several other documents needed to be a professional nursing corporation.

Forming a new business is complicated—especially when you are in a highly regulated industry such as health care. You do not have to have to navigate the business formation process alone. An experienced California business formation lawyer for nurses can help.

Call Our California Business Formation Attorney Today

Lynnette Ariathurai is a business formation lawyer with the skills, knowledge, and legal expertise to help you form a professional nursing corporation in CA. If you have any questions about your rights, responsibilities, or options, please do not hesitate to contact us for a confidential consultation. From our offices in Fremont, near Newark, we serve clients in Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, Santa Clara, and throughout the entire Bay Area.

Can a Business Steal Your Employee?

Employers invest a tremendous amount of time, money, and other resources into recruiting and training their employees. A competitor targeting your qualified employees could cause harm to your business. This raises an important question: Can another business poach your employees? In California, the answer is “it depends”—poaching employees is generally lawful, but there are limits on what another employer can do. In this article, our Fremont business lawyer highlights the key things to know about another company’s ability to steal your employees in California.

Background: California is an At-Will Employment State

As a starting point, it is important to emphasize that California is an at-will employment jurisdiction. The National Conference of State Legislatures (NCSL) explains that at-will employment is a doctrine whereby either—employer or employee—has the right to end the relationship at any time and for any reason, except for an illegal reason. In other words, in the absence of an employment contract, an individual employee is free to leave your company.

Employee Non-Compete Agreements are Unenforceable in California

Some states allow employees to get their employees to sign non-compete agreements that, at least temporarily, prevent them from working for a direct competitor. Employee non-compete agreements are not enforceable in California. However, non-solicitation agreements may be upheld.

Businesses in California Have Rights and Options for Protecting their Interests

Simply put, California law protects an employee’s right to leave their employer for a competitor. It also protects the right of a business to try to recruit qualified employees—including those actively employed at competing businesses. Poaching of employees is generally lawful in California. However, there are some limitations that prevent competitors from “stealing” your employees. Here are some of the key things that employers in California should understand about their rights and options for keeping competing businesses from poaching their employees:

Employees Owe a Basic Duty of Loyalty: A worker who is actively employed at your company owes it a basic duty of loyalty. An employee could announce that they are leaving to join a competing company, but they generally cannot actively solicit their co-workers to join them while still in your employ.
Employment Agreements May Offer Protection: One strategy that businesses can use to protect their staff from poaching is an employment agreement. An employee who signs a valid and well-tailored employment agreement could face a breach of contract claim if they do not abide by the terms—such as if they leave for a competitor before the contract ends. Though, it is important to emphasize that non-compete clauses cannot be included in an employment agreement in California. However, the competitor may be liable for interfering with that employment contract.
California Law Prohibits “Workforce Raids”: While general “poaching” of employees is not barred in California, there are some restrictions on “raids.” In effect, the law prohibits competitors from using bad faith practices to intentionally solicit a large number of your employees to damage your business. If your employees are “raided” by a competitor, you could have a tortious interference claim under California law. Generally, an employment contract is required to successfully pursue this type of claim.

How Businesses Can Protect Confidential Information When Employees Leave

While businesses in California have limited options to prevent their employees from leaving to take a position at a competing company, employers do have options for protecting their confidential information. A properly drafted and well-tailored non-disclosure agreement that protects proprietary business information, including trade secrets, may be enforceable in California.

Contact Our Fremont, CA Business Law Attorney Today

Lynnette Ariathurai is an experienced, solutions-driven business lawyer. If you have any questions about another company stealing your employees, we are here to help. Contact us today for a strictly confidential consultation. We provide business law representation throughout the Bay Area.

business contracts, Business Formation & Planning, Contracts