Paycheck Protection Program (“PPP”) Loan Update

By Nicholas Grether, Esq., The Maloney Firm, APC

Note: This article was posted on August 7, 2020 at 12:21pm PDT. Because the COVID-19 situation is rapidly changing as the federal government and State of California continue to fight this pandemic, individuals and businesses should consult with counsel for the latest developments and updated guidance on this topic.  Specifically, the federal government continues to update the regulations related to PPP Loans.  The federal government may create additional exemptions and procedures that affect forgiveness.

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If your business was fortunate enough to receive a Paycheck Protection Program (“PPP”) loan, you likely have questions about what to do next.  We’ve provided several resources to assist you in applying for forgiveness and some updates on the process of applying for PPP loan forgiveness.  

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Pending Legislation May Ease Forgiveness

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Currently pending in the U.S. Senate, is Senate Bill 4321 , which provides that loans made to eligible recipients for under $150,000, will be forgiven if the borrower submits a one-page form attesting that the borrower complied with the PPP requirements.  The Senate also proposes easing forgiveness requirements on for loans between $150,000 and $2,000.  The bill would also establish provisions to protect lenders that rely on the documentation and certifications provided by the borrower.  It also proposes limiting enforcement actions to borrowers who commit fraud or spend the loan proceeds improperly.  If and until the bill is passed and signed, we will not know the exact details, but the bill has bipartisan support and it is expected to pass in some form.

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Resources to Help Apply for PPP Loan Forgiveness

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The Association of International Certified Professional Accountants (AICPA) had created a downloadable tool to estimate loan forgiveness. 

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If using one of the forms created by the Small Business Administration (“SBA”), the SBA has provided instructions on filling out the Form 3508 or 3508 EZ.  If the borrower did not reduce any employee’s pay more than 25% and did not reduce the number of employees, they will likely be able to use the EZ version.  Review the instructions for the Form 3508 EZ to find out if you are eligible.

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Link to the SBA Form 3508 here and instructions here.

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Link to the SBA Form 3508EZ here and instructions here.

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Some Borrowers May Choose an 8-week or 24-week Period for PPP Loan Forgiveness

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The amount of the loan forgiven depends on how the funds have been spent during a certain time period after receiving them.  If the borrower received their PPP loan funds prior to June 5th, 2020, the borrower can choose between an 8-week period or 24-week period.  The borrower should calculate potential forgiveness amounts for both periods and select the period that is more beneficial.  Use a tool like the AICPA calculator to assist in that process.  Please note that if the borrower received the PPP loan funds after June 5th, 2020, they must use a 24-week period.

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 If you have questions regarding your PPP loan or this article, contact The Maloney Firm at 310.540.1505.


Sometimes Zealous Advocacy Requires Helping Your Adversary

By Carl I. S. Mueller, Esq. and Sam Fogas, Esq., The Maloney Firm, APC 

Although it may seem counterintuitive, certain situations may require an attorney to advocate to a court on behalf of the due process rights of an adversary. In June 2020, the California Court of Appeal published its opinion, Davis v. Superior Court (Sathre) (2020) 50 Cal.App.5th 607, emphasizing that indigent, pro-per judgment debtors have the same access to the courts as litigants represented by an attorney and encouraging the superior courts to embrace remote appearances, particularly during the COVID-19 pandemic era. The opinion encourages attorneys to consider when to treat adversaries combatively versus when to look out for adversaries’ rights.

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In Davis, Plaintiff Curtis Sathre attempted to enforce an almost $160,000 judgment against Defendant Jamie Davis, an indigent, pro-per judgment debtor, and conduct a judgment debtor examination. A 16-month battle ensued in which Davis filed multiple ex parte applications, motions to quash service, and a motion to stay proceedings pending appeal. At their crux, Davis’s motions centered around the fact that she lived too far away to be compelled to come to Los Angeles for a judgment debtor exam because she was indigent and unable to afford to travel. Many of Davis’s efforts were thwarted as the trial court’s department rules did not allow a pro per litigant to appear telephonically, even though Davis claimed she could neither travel to Los Angeles or afford counsel for the hearings. When Davis was finally able to hire an appearance attorney, the trial court denied Davis’s request for a court appointed court reporter, despite the fact that the court had previously granted Davis’s request for a waiver of court reporter fees.

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The Court of Appeal vacated the trial court’s rulings, ordered that Davis’s motions be reheard, and ordered that Davis be allowed to appear telephonically and without counsel, if so desired. The Court of Appeal emphasized three points in its opinion. First, court rules and policies should be consistent with increasing access to the courts by indigent and pro-per litigants. Rules functionally requiring pro-per litigants to hire appearance attorneys or restricting indigent, pro-per litigants from appearing telephonically are inconsistent with this principle. Second, trial courts need to embrace remote appearances by everyone, particularly during the COVID-19 pandemic. Third, and finally, indigent litigants must be provided a court reporter at hearings, given a timely request.

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Attorneys are trained to continuously push their adversaries, challenge them, and take advantage of any possible leverage over an opponent. However, as the Davis Court instructed, this strategy can sometimes backfire. Attorneys cannot take a blanket combative approach in litigation if it means their adversary is denied basic rights. While it is unclear what exactly Sathre’s attorney could have done differently, the trial court’s rulings blocking Davis’s access to the courts resulted in increased costs, appearances, an appeal, and sixteen months the client will never get back. Attorneys should endeavor to remind all courts to protect the minimum rights and access of all litigants, when possible. Failure to account for your adversary’s rights may ultimately cost your client additional time and money.

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About the Authors:
 
Carl Mueller is a business litigation attorney and represents clients in attorney-client disputes of all kinds. Sam Fogas is a civil litigation attorney. If you have questions regarding this article, contact Carl Mueller at cmueller@maloneyfirm.com or Sam Fogas at sfogas@maloneyfirm.com
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The State Bar of California’s confused crusade against LegalMatch.com

By Carl I. S. Mueller, Esq., The Maloney Firm, APC and Ellen A. Panksy

Maloney Firm business litigation attorney Carl Mueller and Ellen Panksy, Principal at Pansky Markle Attorneys at Law, co-author an editorial for the Daily Journal discussing the ongoing struggle between the California State Bar and LegalMatch.com, a prominent online attorney matching service. Read the full article here.

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Carl Mueller is a business litigation attorney that represents clients in all phases of civil litigation. Mr. Mueller’s practice has a focus on attorney-client disputes of all kinds. If you have questions regarding this article contact Carl Mueller at cmueller@maloneyfirm.com.

California Civil Statutes of Limitations: Are Further Tolling Rules Coming Tomorrow?

By Gregory M. Smith, Esq., The Maloney Firm, APC

Under most circumstances, missing the opportunity to file an action within the statute of limitations deprives a party of their right to seek redress.  But on April 6, 2020, as part of a sweeping rules package to deal with the impacts of the COVID-19 pandemic, the Judicial Council of California adopted Emergency Rule 9 which tolls statutes of limitations in all civil actions from April 6, 2020 to “90 days after the Governor declares that the state of emergency related to the COVID-19 pandemic is lifted.” Many attorneys, judges, and commentators expressed concern at the vague and open-ended nature of the rule, with some recommending that potential plaintiffs simply ignore it and timely file less the tolling later be found to be ineffective or impermissible. 

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However, by way of a far less reported Circulating Order Memorandum on May 29, 2020, the Judicial Council amended the Emergency Order to close the indefinite tolling.  Under the Amended Emergency Rule 9, the statute of limitations for most civil actions are tolled from April 6, 2020 to October 1, 2020.  The (few) causes of action with statutes of limitations of less than 180 days are tolled from April 6, 2020 to August 3, 2020. 

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As we are now a little more than a week away from the August 3, 2020 deadline, it remains to be seen if the Judicial Council will again amend Emergency Rule 9 in light of the pandemic which is still very much ongoing.  The Judicial Council has a public meeting set for July 24, and although the agenda for that meeting is focused on Court budgets and Court appearances by video, it would not be surprising if the tolling period is continued.  Either way, potential plaintiffs and their attorneys must be vigilant to ensure that they comply with all statutes of limitations and properly calculate the applicable tolling period.  When in doubt, file early!

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About the Author:

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Greg Smith represents attorneys in disputes over legal fees and legal malpractice. If you have questions regarding this article contact Greg Smith at gsmith@maloneyfirm.com.

Double-Fault Default: Attorneys Trip Over the Low Bar of CCP § 473 Motion

By Carl I. S. Mueller, Esq. and Nicole A. Poltash, Esq., The Maloney Firm, APC 

In a continuation on a theme, the California Court of Appeal issued another ruling emphasizing that lawyers must exercise care in all aspects of litigation, even in trying to correct mistakes.

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All humans err. To that end, the California legislature enacted California Code of Civil Procedure (“CCP”) § 473 to allow trial courts to forgive litigants and attorneys who acknowledge their errors.  But as the Court of Appeal noted on June 15, 2020 in the decision, Pacifica First National, Inc. v. Abekasis (2020) 50 Cal.App.5th 654, the right to a pardon under Section 473 is not limitless.

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In Abekasis, Arie Abekasis (“Abekasis”), failed to respond to a cross-complaint. Cross-complainant Pacifica First National, Inc. (“Pacifica”) purported to serve the cross-complaint on Abekasis’s attorney at that time, Leslie Richards (“Richards”). Richards did not file responsive pleadings on behalf of Abekasis, and Pacifica took Abekasis’s default.

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Represented by new counsel, Abekasis moved to set aside the default, claiming that cross-complaint was not served on Richards. Abekasis’s new counsel did not include a declaration from prior counsel, Richards, as to either service or any potential attorney error. Thus, neither the trial court nor the Court of Appeal had admissible evidence that the cross-complaint had not been properly served, nor did either tribunal receive a declaration wherein Richards acknowledged the default was her fault.   Rather, the motion relied on only a declaration from Abekasis’s new counsel, who lacked the necessary foundational knowledge to testify that “the service was bad.” As a result, Abekasis’s motion to set aside the default on the grounds of bad service was fatally flawed. Compounding matters, Abekasis’s new counsel failed to retain a court reporter for the hearing on the motion to set aside the default.

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Significantly, the Court of Appeal noted that while Abekasis argued on appeal his entitlement to mandatory relief under Section 473, that argument had been waived because Abekasis had only sought discretionary relief under Section 473 in the trial court. Had Abekasis’s new counsel correctly prepared the motion, including a declaration from Richards admitting fault and seeking absolution for the benefit of the client, Abekasis may have been successful in obtaining relief from the default.  In other words, an argument for relief under Section 473 at the trial would have likely won the day, but Richards failed to admit her errors and ask the trial court for absolution for the benefit of her past client.

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In addition to the failure to submit adequate evidence with his moving papers, Abekasis’s new counsel failed to obtain a transcript of the hearing to set aside default. As to the transcript, the Court of Appeal gave a wise warning:

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There is no transcript of this hearing. When appreciable sums are in play, it is mysterious why lawyers on both sides think the small cost of court reporting is a good cost to avoid. We publish this opinion in part to discourage misplaced thrift.

The Court of Appeal made clear in its opinion that Abekasis’s attorneys’ multiple failings, including failing to submit the necessary declarations in support of their motion and failing to obtain a hearing transcript, cost their client the chance to litigate claims: “Because he chose not to retain a court reporter, the slim text of that motion is what we have to go on, and that motion lacked merit.”

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The Abekasis decision serves as a reminder for all attorneys to exercise due care at all stages of litigation. Many of the civil procedure statutes, coupled with applicable case law, provide guidance on the proper course of action.  Attorneys must take steps to know and understand the rules applicable to the matters they are handling. 

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About the Authors:
 
Carl Mueller is a business litigation attorney that represents clients in all phases of civil litigation. Mr. Mueller’s practice has a focus on attorney-client disputes of all kinds. Nicole Poltash is a civil litigation attorney. If you have questions regarding this article contact Carl Mueller at cmueller@maloneyfirm.com or Nicole Poltash at npoltash@maloneyfirm.com.

Patrick Maloney Appointed to LACBA Mediation and Arbitration Advisory Committee for 2020-2021 Term

Congratulations to Patrick Maloney, founding partner of The Maloney Firm, APC, who has been appointed to the Los Angeles County Bar Association’s Attorney-Client Mediation and Arbitration Services Advisory Committee for the 2020-2021 term.

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As part of the Los Angeles County Bar Association’s Dispute Resolution Services, the Advisory Committee oversees arbitrations and mediations of attorney-client fee disputes pursuant to Business and Professions Code Sections 6200-6208, as well as other fee disputes initiated by attorneys against clients, or attorneys against attorneys. 

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LACBA was founded in 1878 and is one of the largest voluntary metropolitan bar associations in the country, with more than 20,000 members.  LACBA serves attorneys, judges, and other legal professionals through 27 sections, committees, networking events, live and on-demand CLE programs, and pro bono opportunities, as well as public service and informational resources.

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For more information about the Los Angeles County Bar Association (LACBA) and its committees, please visit https://www.lacba.org.

Employer-Required Travel Time Must Be Paid

By Nicholas Grether, Esq., The Maloney Firm, APC

For this edition of Employment Law Insights, we analyze a recent California appellate court opinion on whether a collective bargaining agreement (“CBA”) allowed an employer to avoid paying employees for employer-required travel time.  Carlos Gutierrez v. Brand Energy Services of California, Inc.,(June 16, 2020) Appellate No. A154604, Alameda County Super. Ct. No. RG17846239.  A copy of the opinion can be found here.  The Court held that the applicable Wage Order and the California Labor Code do not permit an employer to agree in a CBA not to pay employees at least minimum wage for all time worked, including required travel.

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Plaintiff was Required to Ride the Employer’s Shuttle Bus

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Plaintiff Carlos Gutierrez (“Plaintiff”) worked at gasoline refineries owned and operated by defendant Brand Energy Services (“Brand”).  Plaintiff was a union member and his employment was subject to a CBA.  Brand was contracted to erect and dismantle scaffolding at various refineries in Northern California.

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During one assignment, Plaintiff arrived to the work site approximately 45 minutes before his scheduled start time.  After parking his vehicle, he would walk to the refinery gate, scan his badge, and then wait for a shuttle bus to take him to the lunch tent.  While at the lunch tent, Plaintiff put on his safety gear and proceeded to a mandatory safety meeting.  Plaintiff was required to take the shuttle bus; he was not allowed to take his vehicle to or be dropped off at the lunch tent.

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Brand considered the start of a shift to be when the safety meeting began.  After the workday was completed, Brand paid employees for the time spent traveling from the work site to their vehicles at the end of a shift.  This policy was referred to as “in on the employee’s time, out on the Company’s,” was adopted in a Letter of Understanding (“LOU”) and became part of the CBA.1  Plaintiff sued, alleging he should be compensated for the time spent scanning his badge, walking to and waiting for the shuttle bus, traveling by shuttle bus to the lunch tent, and donning his safety gear.

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The Wage Order for Construction Employees Requires Payment of Minimum Wage For Travel Time

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Brand countered that Plaintiff’s claims were barred under Industrial Welfare Commission Wage Order No. 16-2001, Section 5(D), which allows for an exemption to Section 5 if employees are covered by a valid CBA.  At issue was section 5(A), which provides, “All employer-mandated travel that occurs after the first location where the employee’s presence is required by the employer shall be compensated at the employee’s regular rate of pay or, if applicable, the premium rate . . . .”  Accordingly, Brand argued that the CBA exempted it from having to pay the employees for their travel between their parking site and the lunch tent where they attend safety meetings. 

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Plaintiff argued that the right to receive a minimum wage was governed by Section 4 and the presence of an otherwise valid CBA made no difference.  The trial court agreed with Brand and granted summary judgment in favor of Brand.  Plaintiff appealed. 

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Travel Time on the Shuttle Bus Should be Paid

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The appellate court (“Court”) explained that, as a general rule, employer-mandated travel time is compensable because an employee is under the employer’s control during that travel.  Morillion v. Royal Packing Co., (2000) 22 Cal.4th 575, 587-88.  This is consistent with California case law, which focuses primarily on whether an employee is under the employer’s control in determining what time is considered “hours worked” and when employees must be compensated.  Here, Plaintiff had to ride the shuttle bus from the refinery entrance to the lunch tent.  He was not permitted to be dropped off or use any other form of transportation.  The Court thus held that Plaintiff was under Brand’s control, and this time should be compensated as “hours worked.”

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The Wage Order Does Not Exempt Employers from the Requirement of Paying Minimum Wage 2

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The Court’s analysis turned on whether Wage Order No. 16-2001, Section 5(D) allowed an employer to agree in a CBA not to pay for employer-required travel time.  The Court found that nothing in the Wage Order allowed employees to waive their rights to minimum wages for time that is considered “hours worked.”  Noting that the CBA exception was limited to Section 5 of the Wage Order, the Court found that a CBA could only relieve an employer from paying for required travel time at the overtime rate.

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The Court then noted the inherent conflict between Brand’s interpretation of the Wage Order and Labor Code Section 1194, which prevents employees from working for a rate below the minimum wage.  When a conflict occurs between the Wage Orders and the Labor Code, the Labor Code controls.  Thus, the Wage Order cannot relieve an employer of its minimum wage requirements.  Lastly, the plain language of the CBA exemption did not explicitly apply to Section 4, which requires the payment of minimum wages.  For these reasons, the Court ruled that Brand was required to compensate its employees at least the minimum wage for all “hours worked,” including the time Plaintiff spent traveling between the refinery gate and the lunch tent.3

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What Can Employers Do?

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This opinion is another example of how California applies its control test to require compensation of employees.  Employers should be aware that California courts have consistently applied these laws in favor of employees.  Take care to ensure that employees are compensated for every minute they are under your control.  Ask yourself who the policy benefits?  Here, Brand’s policy requiring the use of shuttle buses benefited Brand since it made it more likely that employees were on time for the start of their workday and did not require Brand to pay the employees for traveling from the parking lot to the lunch tent.  If the policy benefits the employer, courts are more likely to find that the employees are not free of the employer’s control.  See our recent article on the requirement to pay employees for employer-mandated bag checks for additional discussion of these topics.  

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In addition, do not assume that a CBA or employment agreement will come to your rescue.  Make sure that employees comply with your requirements to clock in and clock out as soon as they begin and end work.  If you require your employees to use employer-provided transportation, that time must be compensated.  Lastly, review your employee handbooks to make sure they are up to date and provide the most accurate information to your employees.

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Notes:

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1 Interestingly, the LOU was agreed to after the lawsuit in this case was filed and Brand filed an answer claiming the CBA provided an affirmative defense.  The Court did not consider that fact in its analysis, but it may have appeared to the Court that Brand was trying to cover up a violation by amending the CBA.

2 Wage Order 16-2001 applies to employees in certain on-site occupations in the construction, drilling, logging, and mining Industries.

3 In contrast, public employment allows for a valid waiver of the requirement to pay at least the minimum wage when the CBA is approved by the State Legislature and signed by the Governor.  The CBA would then be considered a “legislative enactment” approving the agreed-upon terms that is chaptered into law.  Stoetzl v. Department of Human Resources, (2019) 7 Cal.5th 718.

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About the Author:

Nicholas Grether is an employment attorney in the Employment Law Department at The Maloney Firm, APC.  If you have questions regarding this alert, you may contact Nicholas Grether at 
ngrether@maloneyfirm.com.


Clients, Potential Legal Claims Against Your Former Attorney May Expire Sooner Than You Realize

By Sam Fogas, Esq., The Maloney Firm, APC

A client generally has one year from the time her attorney ceases representation to bring a legal malpractice and/or breach of fiduciary duty claim against said attorney. But when did the representation end? As the California Court of Appeal recently explained in Nguyen v. Ford (2020) 49 Cal.App.5th 1, it is up to you, the client, to see the writing on the wall and know when your attorney has stopped representing you. While knowing when your attorney has ceased representing you may seem like a simple matter, Nguyen muddies the waters. Consider that even if your attorney has not formally withdrawn from every matter in which she represents you, withdrawal in one matter may begin running the statute of limitations on any claims you have against your attorney in any matter.

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In Nguyen, attorney Karen Ford and her law firm, Ford & Associates, LLC, represented client Huyen Nguyen in a discrimination lawsuit against her former employer in federal district court. Ford’s retainer agreement with Nguyen specifically excluded work to potentially be performed during the appeals process. After Nguyen’s former employer won summary judgment in the district court, Nguyen asked Ford to appeal to the Ninth Circuit; and she then signed a separate retainer agreement with Ford for the appeal. However, the attorney-client relationship broke down during the appeal and the Ninth Circuit granted Ford’s motion to withdraw as counsel. Nguyen obtained new counsel and ultimately lost the appeal.

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Six months after the Ninth Circuit ruled on Nguyen’s appeal, Nguyen sued Ford for breach of fiduciary duty and legal malpractice, among other things. In turn, Ford objected to the lawsuit on statute of limitations grounds, arguing that the one-year statute of limitations, or time in which Nguyen’s claims must be filed, had expired. In Nguyen’s opposition to the objection, she argued that despite withdrawing from her appeal, Ford remained attorney of record in the district court and had not followed the district court’s formal procedures to withdraw from the district court proceeding, thereby tolling the statute of limitations. The unpersuaded trial court agreed with Ford and dismissed Nguyen’s complaint without leave to amend.

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In affirming the trial court, the Court of Appeal noted, “whether termination of representation has ended for purposes of [the statute of limitations] does not depend on whether the attorney has formally withdrawn from representation, such as by securing a court order granting permission to withdraw.” Further, “the inquiry into when representation has terminated does not focus on the client’s subjective beliefs about whether the attorney continues to represent him or her in the matter. Instead, the test is objective and focuses on the client’s reasonable expectations in light of the particular facts of the attorney-client relationship.” Ultimately, it was up to Nguyen to know when Ford had ceased representing her and the statute of limitations on Nguyen’s claims began to run.

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Nguyen presents an unsurprising yet potentially problematic result: whether an attorney continues to represent a client is determined objectively from the facts of the particular attorney-client relationship and whether a reasonable person under the circumstances would believe that the attorney continues to represent her. With the benefit of hindsight, it may seem apparent that Ford’s representation of Nguyen ended when Ford withdrew from the representation in the Ninth Circuit. However, understanding when your attorney has withdrawn and the statute of limitations on your claims against your attorney has begun to run will likely take a more nuanced analysis. Even a short email, call, or text can potentially affect the status of the representation and the statute of limitations.

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Accordingly, if you think you have a claim against your former attorney for legal malpractice, breach of fiduciary duty, or similar grounds, do not delay. Besides prolonging a potential recovery, your claims may be expiring. If you have any concerns about the statute of limitations on your claims against your former attorney or any other questions about your claims, seek help from a competent legal professional immediately.

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Greg Smith represents attorneys in disputes over legal fees and legal malpractice. Sam Fogas is a civil litigation attorney. If you have questions regarding this article contact Greg Smith at gsmith@maloneyfirm.com or Sam Fogas at sfogas@maloneyfirm.com.

Checking Employees’ Bags Must Be Done on the Clock

By Nicholas Grether, Esq., The Maloney Firm, APC

For many years, courts have attempted to define exactly what time spent by an employee before and after the workday must be compensated.  While the courts have provided a number of illustrative decisions, bright-line rules tend to be in short supply.  For example, the following must be paid: time spent putting on and taking off employer-required protective gear (IBP, Inc. v. Alvarez, 546 U.S. 21 (2005)); time spent traveling in company vehicles to the worksite when required by the employer (Morillion v. Royal Packing Co., 22 Cal.4th 575 (2000)); and time spent performing tasks for the benefit of the employer on a regular basis, no matter how short the time (Troester v. Starbucks Corp., 5 Cal.5th 829 (2018)).  By contrast, using a commuting option provided by the employer as an optional benefit does not have to be paid (Overton v. Walt Disney Co., 136 Cal.App.4th 263 (2006)).  

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But what about an employer-required check of an employee’s bag, purse, or backpack in order to deter theft?  Employers have argued there is no need to bring a bag, while employees have argued they were under the control of their employers and should be paid.  In Frlekin v. Apple Inc., 8 Cal.5th 1038 (2020), the California Supreme Court ruled that the time employees spend waiting for a bag check must be paid even if the bag was brought purely for personal convenience.  This time is considered “hours worked” and therefore compensable in California.  The ruling will directly impact employers who utilize bag checks and requires employers to modify their policies and procedures to ensure that employees are paid while waiting for their bags to be checked.

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Apple’s Bag Check Policies

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Employees who worked at Apple, Inc. (“Apple”) retail locations were subjected to a bag check if they brought a bag and/or personal Apple device to work.  The policy applied equally to briefcases, purses, and backpacks.  The employees claimed that they waited 5 to 20 minutes, and on occasion, up to 45 minutes to have their bags checked.  Employees were required to clock out, stay in the store, find a manager or security guard to perform the bag check, open bags for inspection, and remove Apple devices for inspection.  Apple did not compensate its employees for this time and acknowledged that the purpose was to prevent theft. 

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The employees argued they were under the control of their employer and were entitled to be paid.  Apple argued that employees could choose not to bring a bag and/or Apple device to work, and thus would not be subject to the check.  Since the time spent waiting for and undergoing the bag check was considered voluntary, Apple argued that it did not control the employees. 

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A class action lawsuit was filed in federal court, claiming the employees were not paid at least the minimum wage for the time spent waiting for, and undergoing bag checks.  The trial court ruled that the time was not compensable and granted Apple’s motion for summary judgment.  On appeal, the 9th Circuit asked the California Supreme Court to decide as a matter of California law if the time spent waiting for, and undergoing “required exit searches of packages or bags voluntarily brought to work purely for personal convenience by employees compensable as ‘hours worked’”?

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The Court Focused on the Benefits to the Employer

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Apple tried to analogize its bag checks to the rule for commuting to and from work.  While commuting, if required to meet at a certain place or time and use a certain method of transportation, time must be paid once you are subject to the employer’s control.  However, if a transportation option is voluntary, such as allowing employees the option to use a company vehicle or a shuttle to transport the employee from the parking lot to the worksite, that time may not need to be paid.

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The Court disagreed, noting the inherent differences between commuting to work and an employer-mandated bag check.  For the former, the only arguable interest of the employer during the commute is that the employee arrives to work on time; the employer does not particularly care how an employee gets to work or if she stops somewhere else on the way.  For the latter, the employer has the interest of deterring theft and the employee is not free to pursue their choice of activities while waiting for the bag check.

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Providing an Option to Avoid the Bag Checks is Not a Deciding Factor

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The Court was not persuaded by Apple’s argument that bringing a bag and/or Apple device to work for personal convenience was similar to choosing to use employer-provided transportation.  The Court noted that 70% of employees brought bags, that employees were required to cover their Apple clothing while on breaks (necessitating employees to bring extra clothing to be able to leave the store), and that employees were required to wait for a bag check even if an employee only brought a personal Apple device.  The Court explicitly stated that the ability to avoid an employer-controlled activity is not the only factor that determines whether the employees’ waiting time has to be paid. 

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What Should Employers Do?

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Now the Court has made clear that time waiting for a bag check must be paid, examine the reasons behind bag-check policies and determine if those goals can be accomplished in other ways.  It is certainly understandable for a business to try to limit theft by employees and customers.  However, now is a good time to audit your practices to see if they are even effective at deterring theft. 

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Apple required not only backpacks to be checked, but also small purses and personal Apple devices.  Limiting the size/type of bag that must be searched will allow some employees to leave right away without additional cost to the employer.  Providing employees with smaller, clear bags may be an option for some businesses.  Be aware that if the employer wants to have an employee verify that they have no bags that must be searched, this should also occur while the employee is on the clock.  The key component for determining hours worked in California is control, and until an employee is free of the employer’s control they must be paid.

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If bag checks are necessary, make sure the employee stays clocked in until their bags are checked.  A machine for clocking out near where the search will be conducted could allow the employee to clock out immediately after being searched.  If you utilize non-exempt employee to conduct bag checks they must complete the bag checks while on the clock.

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Employers should update their policies to reflect the fact that non-exempt employees will be compensated for time spent on personal bag checks and that disciplinary consequences will be imposed for employees who clock out prior to a bag check.  Similar to employees who fail to clock out for lunch breaks, employees who clock out before getting their bags checked should face discipline to ensure compliance with the policy as well as be paid for the time. 

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About the Author: Nicholas Grether is an employment attorney in the Employment Law Department at The Maloney Firm, APC.  If you have questions regarding this article, you can contact Nicholas Grether at ngrether@maloneyfirm.com.