Mary Siceloff, Author at Weintraub Tobin

The U.S. Supreme Court Has Decided: LGBTQ Employees are Entitled to Protections under Title VII

Published: June 16, 2020

by Lizbeth (Beth) V. West
The Labor & Employment Law Blog

In the midst of the COVID-19 pandemic, an economic crisis that is predicted to be as bad as the great depression, and unrest over racial inequality and police brutality that is giving birth to a global movement for social change, the U.S. Supreme Court issued a landmark decision in Bostock v. Clayton County, Georgia (Case No. 17–1618) on June 15, 2020 and announced with finality that an employer who fires an individual merely for being gay or transgender violates Title VII. The decision was a shock to some and long overdue for others. Regardless of one’s political or social leanings, it is without question that the decision is an important one that will have far reaching consequences throughout the country.

Summary of Facts and Lower Court Rulings.

The Bostock case is actually a consolidation of three separate cases. In each of these cases, an employer allegedly fired a long-time employee simply for being homosexual or transgender. Clayton County, Georgia, fired Gerald Bostock for conduct “unbecoming” a county employee shortly after he began participating in a gay recreational softball league. Altitude Express fired Donald Zarda days after he mentioned being gay. And R. G. & G. R. Harris Funeral Homes fired Aimee Stephens, who presented as a male when she was hired, after she informed her employer that she planned to “live and work full-time as a woman.” Each employee sued, alleging sex discrimination under Title VII of the Civil Rights Act of 1964 (“Title VII”). The Eleventh Circuit held that Title VII does not prohibit employers from firing employees for being gay and so Mr. Bostock’s suit could be dismissed as a matter of law. The Second and Sixth Circuits, however, allowed the claims of Mr. Zarda and Ms. Stephens, respectively, to proceed. The Supreme Court granted review of the cases and its decision puts to rest the split of authority between the Circuits as to whether Title VII protects LGBTQ employees from discrimination in the workplace.

Supreme Court Analysis.

Justice Neil Gorsuch wrote the majority opinion (joined by Chief Justice John Roberts and Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan). In a direct and no-nonsense fashion, Justice Gorsuch said that few facts were needed to appreciate the legal question the Court faced:

Each of the three cases before us started the same way: An employer fired a long-time employee shortly after the employee revealed that he or she is homosexual or transgender—and allegedly for no reason other than the employee’s homosexuality or transgender status.

The Court said that with this in mind, their “task is clear.” The Court had to determine the ordinary meaning of Title VII’s command that it is “unlawful . . . for an employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” To do so, the Court said it had to orient itself and examine the key statutory terms in Title VII when adopted in 1964, and examine the impact of those terms on the cases before them considering the Court’s precedents.

The only statutorily protected characteristic at issue in the cases and which the parties dispute was based on, is “sex.” The employers claimed that the term “sex” in 1964 referred to “status as either male or female [as] determined by reproductive biology.” The employees countered by submitting that, even in 1964, the term bore a broader scope, capturing more than anatomy and reaching at least some norms concerning gender identity and sexual orientation. However, candidly, the Court said that the parties’ debate over the meaning of “sex” in 1964 is not the real focus of the analysis. According to the Court, the question isn’t just what “sex” meant, but what Title VII says about it. Most notably, the statute prohibits employers from taking certain actions “because of” sex but it doesn’t matter if other factors besides sex contribute to the action. Also, when analyzing a discrimination case under Title VII, the focus is not on class or group (men v. women) treatment, but rather individual treatment.

Prior precedent has made clear that Title VII’s message is “simple but momentous”: An individual employee’s sex is “not relevant to the selection, evaluation, or compensation of employees.” (Price Waterhouse v. Hopkins, 490 U. S. 228, 239 (1989) (plurality opinion). The Court said that the statute’s message for the cases before it was equally simple and momentous: “An individual’s homosexuality or transgender status is not relevant to employment decisions. That’s because it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.”

To help illustrate its reasoning, the Court provided a number of hypotheticals.

“Consider, for example, an employer with two employees, both of whom are attracted to men. The two individuals are, to the employer’s mind, materially identical in all respects, except that one is a man and the other a woman. If the employer fires the male employee for no reason other than the fact he is attracted to men, the employer discriminates against him for traits or actions it tolerates in his female colleague. Put differently, the employer intentionally singles out an employee to fire based in part on the employee’s sex, and the affected employee’s sex is a but-for cause of his discharge.”
“Or take an employer who fires a transgender person who was identified as a male at birth but who now identifies as a female. If the employer retains an otherwise identical employee who was identified as female at birth, the employer intentionally penalizes a person identified as male at birth for traits or actions that it tolerates in an employee identified as female at birth. Again, the individual employee’s sex plays an unmistakable and impermissible role in the discharge decision.”

As the Court pointed out, homosexuality and transgender status are inextricably bound up with sex. Not because homosexuality or transgender status are related to sex in some vague sense or because discrimination on these bases has some disparate impact on one sex or another, but because to discriminate on these grounds requires an employer to intentionally treat individual employees differently because of their sex. Also, it doesn’t matter that when an employer treats one employee worse because of that individual’s sex, other factors may contribute to the decision. For example, the Court said consider this hypothetical:

“Consider an employer with a policy of firing any woman he discovers to be a Yankees fan. Carrying out that rule because an employee is a woman and a fan of the Yankees is a firing “because of sex” if the employer would have tolerated the same allegiance in a male employee.”

The Court said the same is true in the cases before it. “When an employer fires an employee because she is homosexual or transgender, two causal factors may be in play – both the individual’s sex and something else (the sex to which the individual is attracted or with which the individual identifies). But Title VII doesn’t care. If an employer would not have discharged an employee but for that individual’s sex, the statute’s causation standard is met, and liability may attach.”

Finally, an employer musters no better a defense by responding that it is equally happy to fire male and female employees who are homosexual or transgender. According to the Court, “Title VII liability is not limited to employers who, through the sum of all of their employment actions, treat the class of men differently than the class of women. Instead, the law makes each instance of discriminating against an individual employee because of that individual’s sex an independent violation of Title VII.”

The Bostock decision ends years of conflicting decision between federal Circuit courts as to the coverage of Title VII protections against discrimination for LGBTQ employees. For those employers who are not located in a state that already provided those protections under state law, now is the time to ensure that policies, practices, and trainings address these protections.

The employment lawyers at Weintraub Tobin have years of experience counseling, training, and defending employers in all areas of employment law, including harassment and discrimination under Title VII and California law. Please reach out to us if we can assist you in your employment law compliance.

WEBINAR: Main Street Lending Program

When: Jun 30, 2020
Where: Webinar

What is the Main Street Lending program, and how is it different than the PPP and other business loans?

On June 30, 2020, Justin Borrowdale and Dan Franklin of River City Bank discussed the Main Street program – what businesses are eligible, unique program features, and documentation needed.

Topics:
• Program Overview
• Borrower Eligibility
• Loan Terms and Documentation
• Borrower certifications, covenants, and restrictions

A recording of this webinar can be viewed on the Weintraub Tobin YouTube page. Please keep in mind that the COVID-19 pandemic is a fluid situation and information is constantly being updated. We recommend that you check with your professional advisors to make sure you have the most current information.

Opportunity Zone Funds and Investors Get Relief in Light of COVID-19

Published: June 12, 2020

On June 4, 2020, the Internal Revenue Service published Notice 2020-39 (Notice) which provides relief to qualified opportunity funds (QOFs) and their investors in light of the COVID-19 pandemic. Here is a summary, and more details follow below:

Investors who otherwise would be required to reinvest capital gains into a QOF any time this year on or after April 1 now have until December 31, 2020 to reinvest such gains.
A QOF’s failure to hold at least 90% of its assets in “QOZ property” on any semi-annual testing date from April 1, 2020 through December 31, 2020 will not cause the entity to fail to qualify as a QOF.
Qualified Opportunity Zone Businesses taking advantage of the working capital safe harbor can add an additional 24 months to their working capital safe harbor period.
The period between April 1, 2020 and December 31, 2020 is disregarded for purposes of the 30-month “substantial improvement” period.
QOFs that received proceeds from the disposition of QOZ property have up to 12 additional months to reinvest those proceeds in QOZ property.

Overview of Opportunity Zones. Congress created opportunity zones in 2017 to encourage investments in economically distressed communities.

The Opportunity Zone program provides taxpayers the opportunity to defer gain on the sale or exchange of an asset if the gain is reinvested in a Qualified Opportunity Zone Fund (a “QOF”) within 180 days. Note that the entire proceeds from an asset sale need not be invested in a QOF; rather, only the portion of the proceeds that represent gain must be invested in a QOF. The gain is deferred until the sooner of (i) the date the taxpayer sells its investment in the QOF or (ii) December 31, 2026. If the taxpayer invests in the QOF in 2020 or 2021, the amount of gain that will ultimately be recognized is reduced by 10%.

Additionally, if the taxpayer holds its QOF interest for 10 years, the taxpayer will recognize no taxable gain when they sell that investment. In order to be a QOF, an entity must be organized for the purpose of investing in QOZ Property and 90% or more of its total assets must be QOZ Property. QOZ Property includes both new and substantially improved tangible property, including commercial real estate (e.g., offices buildings, apartment complexes, etc.) and equipment located in qualified opportunity zones. These investments can be direct or through subsidiary corporations or partnerships that operate businesses in qualified opportunity zones. Each U.S. state has its own qualified opportunity zones.

Relief regarding 180-day investment requirement for QOF investors.

Background

If a taxpayer has gain from the sale or exchange of property with an unrelated person, the taxpayer can elect to exclude from gross income the amount of such gain that the taxpayer invests in a QOF during the 180-day period following the date of such sale or exchange (“180-day investment requirement”).

Relief

The Notice states that if a taxpayer’s 180th day to invest in a QOF falls on or after April 1, 2020, and before December 31, 2020, the taxpayer now has until December 31, 2020 to invest the gain in a QOF.

III. Relief regarding 90% investment standard for QOFs.

Background

For an investment vehicle to qualify as a QOF, it must be corporation or a partnership organized for the purpose of investing in QOZ property (other than another QOF). The QOF must satisfy the 90% investment standard, meaning it must hold at least 90% of its assets in QOZ property, determined by the average of the percentage of QOZ property held by the QOF measured semi-annually on (i) on the last day of the first 6-month period of the QOF’s tax year (June 30 for calendar year taxpayers), and (ii) on the last day of the QOF’s tax year.

If the average of the percentages of the QOZ property held by a QOF on the semi-annual testing dates fails to meet the 90% investment standard, the QOF must pay a penalty for each month that the QOF fails to meet the standard. However, no such penalty is imposed “with respect to any failure if it is shown that such failure is due to reasonable cause.”

Relief

The Notice provides relief by stating that, in the case of a QOF whose (i) last day of the first 6-month period of the tax year or (ii) last day of the tax year falls within the period beginning on April 1, 2020, and ending on December 31, 2020, any failure by that QOF to satisfy the 90% investment standard for that tax year is disregarded for purposes of determining whether the QOF meets the 90% investment standard rules. This prevents QOFs from being held liable for the statutory penalty.

Relief regarding working capital safe harbor for QOZ businesses.

Background

An entity must meet certain requirements to be a “QOZ business,” including the requirement that less than 5% of the average of the aggregate unadjusted bases of the entity’s property be attributable to “nonqualified financial property” (as defined in the Internal Revenue Code — essentially cash and cash equivalents). However, if the QOF satisfies the “working capital safe harbor”, the QOF may hold an unlimited percentage of its assets in cash and short-term instruments.

One of the safe harbor requirements is that the business keep a written schedule consistent with the ordinary start-up of a trade or business for the expenditure of the working capital assets within 31 months of the receipt by the business of the assets. A QOZ business can extend the working capital safe harbor period to a maximum of 62 months. If a QOZ business is located in a QOZ within a presidentially declared disaster area, then the QOZ business may receive an additional 24 months to expend its working capital assets.

Relief

The Notice provides relief by stating that, as a result of the emergency declaration by President Trump on March 13, 2020 regarding COVID-19, all QOZ businesses covered by the working capital safe harbor before December 31, 2020 now will receive up to 24 additional months to expend the working capital assets of the QOZ business (i.e., the QOZ business now has up to 86 months to expend working capital).

Relief regarding 30-month substantial improvement period for QOFs.

Background

QOZ Property includes tangible property acquired after 2017 if (i) the entity puts the property to its original use in the QOZ (“original use requirement”), or (ii) the property is substantially improved (“substantial improvement requirement”).

The substantial improvement requirement is met only if, during any 30-month period beginning after the date of acquisition, there are “additions to basis with respect to such property” that, in the aggregate, exceed the adjusted basis of that property as of the beginning of that 30-month period (“30-month substantial improvement period”).

Relief

The Notice provides relief by stating that, for purposes of the substantial improvement requirement, the period beginning on April 1, 2020 and ending on December 31, 2020 is disregarded in determining any 30-month substantial improvement period.

Relief regarding 12-month reinvestment period for QOFs.

Background

If a QOF sells or disposes of some or all of its QOZ property or if a distribution with respect to the QOF’s QOZ stock is treated as a return of capital, and if the QOF reinvests some or all of the proceeds in QOZ property by the last day of the 12-month period beginning on the date of the distribution, sale, or disposition, then the reinvested proceeds are treated as QOZ property for purposes of the 90% investment standard.

To qualify for such treatment, the QOF needs to hold such proceeds continuously in cash, cash equivalents, or debt instruments with a term of 18 months or less. If the QOF’s plan to reinvest some or all of such proceeds in QOZ property is delayed due to a presidentially declared disaster, then the QOF may receive up to an additional 12 months to reinvest the proceeds, provided that the QOF invests the proceeds in the manner originally intended before the disaster.

Relief

The Notice provides relief by stating that if any QOF’s 12-month reinvestment period includes January 20, 2020, then that QOF receives up to an additional 12 months to reinvest the proceeds in QOZ property.

New Cares Funding Available For Medicaid Providers

Published: June 12, 2020

by Jeanne L. Vance
The Healthcare Law Blog

On June 9, 2020, the U.S. Department of Health and Human Services (HHS) announced that it will allocate approximately $15 billion to providers who participate in state Medicaid program and Children’s Health Insurance Program (CHIP) and who did not receive payments from the initial $50 billion in general allocations from the Provider Relief Fund under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This funding is intended to provide relief to Medicaid and CHIP providers experiencing lost revenues or increased expenses due to COVID‑19.

Navigating the Hazy Intersection of Federal and State Law on Cannibis and Advising Clients on Protecting Their Trademarks

Published: June 11, 2020

The IP Law Blog

What was once illegal is now a thriving industry. That’s right—I’m talking about cannabis. But my initial statement isn’t entirely accurate. Although Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington have legalized cannabis, the drug remains a Schedule I narcotic under the federal Controlled Substances Act. While buying, selling, and using cannabis is legal under state law in certain jurisdictions, such conduct is arguably a federal crime in every jurisdiction due to the Controlled Substances Act. It’s a lot to take in, and it gives rise to numerous issues and questions concerning our government’s federalist system. But you all know this blog focuses on intellectual property, so by now I’m sure you’re wondering: what’s the significance to intellectual property of the dichotomy between the way federal and certain state law treats cannabis? Well, to oversimplify the problem, it means that businesses in the cannabis industry are without federal intellectual-property rights, which are by far the most powerful and expansive intellectual-property rights in the country.

Since I deal mostly with trademarks, I’ll address the Lanham Act for purposes of this discussion. The USPTO Trademark Manual of Examining Procedure (“TMEP”) Section 907 explains that “[u]se of a mark in commerce must be lawful use to be the basis for federal registration of the mark.” Section 907 also states, “Generally, the USPTO presumes that an applicant’s use of the mark in commerce is lawful and does not inquire whether such use is lawful unless the record or other evidence shows a clear violation of law, such as the sale or transportation of a controlled substance.” (Emphasis added.) The same section further states that “[r]egardless of state law, the federal law provides no exception to the above-referenced provisions for marijuana for ‘medical use.’” (See TMEP § 907 [citing Gonzales v. Raich, 545 U.S. 1, 27, 29 (2005) and United States v. Oakland Cannabis Buyers’ Coop., 532 U.S. 483, 491 (2001)].) Thus, any attempt to register a trademark relating to the sale or production of marijuana will be refused on the grounds that the applicant’s use of the mark in commerce is unlawful.

Therefore, since members of the cannabis industry are unable to register their marks with the United States Patent and Trademark Office, they are also unable to bring suit for trademark infringement under the Lanham Act. Section 32 of the Lanham Act (15 U.S.C. § 1114) only creates a cause of action for infringement of federally registered trademarks. Additionally, while Section 43 of the Lanham Act (15 U.S.C. § 1125) generally creates a federal cause of action for owners of unregistered trademarks, many believe the federal courts will refuse to permit those in the cannabis industry to avail themselves of this protection. Notably, Section 1125 makes no reference to the claimant’s “use in commerce,” thereby avoiding incorporation of the Lanham Act’s definition of commerce, which is “all commerce which may lawfully be regulated by Congress.” As such, there is an argument that members of the cannabis industry should be permitted to bring suit under Section 43 of the Lanham Act. But until the case law becomes clearer, this may be a risk unworthy of your client’s resources since it may result in a dismissal of your client’s claim after costly motion practice that puts you right back where you started.

Considering the inability to obtain a federal registration and the uncertainty, and partial inability, that creates with respect to policing the subject trademark under the Lanham Act, how can members of the cannabis industry protect their marks? There are two ways and one is certainly more favorable than the other. First, the company can rely upon state trademark laws. While they aren’t as powerful and expansive as the rights provided to holders of federally registered trademarks under the Lanham Act, state registration and trademark laws provide the trademark user with reasonably adequate protections. For example, under California’s Model State Trademark Law (Bus. & Prof. Code § 14200, et seq.), a registered trademark owner obtains trademark rights and the ability to enforce the mark throughout the state. This is a marked improvement over common-law rights, which are geographically restricted to the area where the user conducts business. Thus, under the common law, a Sacramento-based cannabis producer, who only sells product in the Greater Sacramento Area, could only enforce its rights in the same region. As a result, a cannabis producer in Los Angeles could potentially use the same or a confusingly similar mark as the Sacramento-based producer without consequence. That’s not a desirable outcome, and as such, state registration is preferable.

Since federal law prohibits the players in the cannabis industry from engaging in interstate commerce, state-law trademark protection is probably adequate for now. The competition is likely to be the heaviest within the state and therefore being able to enforce trademark rights statewide is probably most important. However, such rights and enforcement mechanisms won’t protect a trademark user in California from a party using a confusingly similar trademark in a neighboring state like Nevada or Oregon. In those instances, the trademark user would likely have to risk relying upon Section 43 of the Lanham Act to bring their claim, but such a claim would likely be futile because the claimant would have to rely upon their common-law rights, which are geographically restricted, and would likely be unable to demonstrate out-of-state use of the relevant trademark. Thus, relying upon the trademark law of the state is clearly an imperfect fix.

It’s evident that the incongruity between federal and state law on cannabis has created significant obstacles to registering and enforcing intellectual-property rights. However, until the Controlled Substances Act is amended, this is the world we live in. Although the uncertainty gives rise to stimulating questions of law, it also creates massive frustration and risk for clients seeking to protect their interests. With that said, with legalization continuing to grow, I suspect the federal courts will provide greater clarity before Congress amends the Controlled Substances Act. It is imperative that intellectual-property attorneys advising clients on these issues keep themselves apprised of such developments.

California Supreme Court Rules That There Is No Right to a Jury Trial for Claims Brought Under California’s Unfair Competition Law and False Advertising Law

Published: June 10, 2020

by David A. Diepenbrock
The Litigation Law Blog

As the State of California looks to plug a massive hole in its budget, the regulated community can expect agencies with the authority to generate revenue by imposing civil penalties to become even more active. Those sued for the first time by agencies seeking to recover civil penalties sometimes assume their case will be decided by a jury. A recent decision by the California Supreme Court demonstrated the complexity of the issue.

In Nationwide Biweekly Administration, Inc. v. Superior Court, 9 Cal.5th 279 (2020), the court considered whether claims brought under California’s Unfair Competition Law (“UCL”) and the False Advertising Law (“FAL”) must be tried to a jury. The Court granted review to decide the issue after the intermediate court of appeal created a split of authority on the subject, and reversed the lower court’s decision, which had held that there was a right to a jury on the claims for statutory damages.

Statutory claims can engender disputes over the right to a jury trial because California’s Constitution essentially preserves the right to a jury for legal claims for which there was a right to a jury at common law when the state Constitution was adopted in 1850. When a claim is based on a statute, courts must determine whether the claim it authorizes is comparable to a common law cause of action. If the claim is comparable to those adjudicated by the English courts of equity, there is no right to a jury. Based on its thorough review of the legislative history of the UCL and FAL, the Nationwide court concluded that they are equitable in nature.

Because the UCL and FAL provide for monetary penalties and injunctive relief, the court analyzed how to classify statutory claims that involve legal and equitable elements that cannot be separated. In such situations, courts must decide whether the “gist” of the action is equitable or legal. The Court observed that California appellate courts had routinely concluded that the UCL and FAL are equitable. The Court also found that the bulk of the remedies available (e.g. injunctive relief and restitution) under the UCL and FAL are equitable. With respect to the civil penalties authorized by the UCL and FAL, the Nationwide court explained that they are preventive, and designed to secure compliance, rather than compensatory. Id. at 326. Finally, the Court concluded that the “expansive and broadly worded substantive standards that are to be applied in determining whether a challenged business practice or advertising is properly considered violative of the UCL or the FAL call for the exercise of the flexibility and judicial expertise and experience that was traditionally applied by a court of equity.” Id. at 327. For all these reasons, the Court concluded that the “gist” of the actions authorized by the UCL and FAL are equitable.

In its decision, the Nationwide court took pains to distinguish Tull v. United States, 481 U.S. 412 (1987), where the U.S. Supreme Court held that a jury must decide the amount of civil penalties that may be imposed for violations of the Clean Water Act. Nationwide distinguished Tull on several grounds, including the following: (1) Tull was based solely upon the right to a jury provided under the federal constitution, which applies only in federal courts; and, (2) civil penalties authorized by the Clean Water Act are authorized under statutory provisions distinct from those authorizing injunctive relief. The Nationwide court also noted that the Tull did not engage in the “holistic gist of the action” analysis California courts have long applied. The Nationwide court also noted that the liability determination under the Clean Water Act involved the type of factual determination traditionally made by juries. Id. at 333. Finally, the Nationwide court observed that the Tull court was not called upon to decide whether a jury trial is constitutionally mandated whenever a statute permits the recovery of civil penalties. Nationwide, therefore, highlights the differences in the right to a jury under California and federal law.

In summary, while Nationwide provides definitive authority regarding the equitable nature of claims brought under the UCL and FAL, the court pointed out in its conclusion that it “had no occasion in this case to decide how the California constitutional jury trial provision applies to other statutory causes of action that authorize both injunctive relief and civil penalties.” Id. at 327. The concurring opinion by Justice Kruger underscored the limited scope of the decision by noting that “government actions seeking civil penalties, generally speaking, sound in law rather than equity and thus carry with them a constitutional right of jury trial under both” the federal and California constitutions. Id. at 335 (Kruger, J. concurring in the judgment.) Whether that general rule applies will, of course, depend on the statutory framework at issue, and other pertinent facts and circumstances unique to the case.

Webinar: Inoculating Against the Coming Spread of Employee Lawsuits Related to COVID-19

When: Jun 17, 2020
Where: Webinar

On June 17, 2020, employment attorneys Brendan Begley and Shauna Correia recorded this webinar discussing the different kinds of employment-related lawsuits that business owners may face as businesses reopen and employees return to work, including disability claims, wrongful termination claims, leave claims, and discrimination claims. They provided examples of personnel decisions that could increase the spread of each type of legal ailment, as well as prescriptions for best practices that employers may implement to inoculate themselves against such lawsuits.

Tara Sattler and Jessica R. Corpuz Selected for Inclusion in 2020 Southern California Super Lawyers® Rising Star List

Published: June 9, 2020

Los Angeles, CA (June 9, 2020) – Weintraub Tobin, a leading California full-service law firm, is pleased to announce that Tara Sattler and Jessica Rankin Corpuz have been recognized as 2020 Southern California Rising Stars. To be eligible for inclusion in this list, candidates must be 40 or younger or have been in practice for less than 10 years. Each year Super Lawyers selects only 2.5 percent of lawyers in California for this honor.

Tara is a shareholder in the firm’s Entertainment & Media group. Tara specializes in representing production companies, producers, financiers and content creators in the film, television and digital spaces. Her expertise encompasses all of the phases of development, financing, production, and distribution of scripted and non-scripted content for all budget levels.

Jessica is an associate in the firm’s Litigation Group. Experienced in handling complex business and commercial disputes, she has also handled intellectual property, fraud, business tort, and contract matters in both federal and state courts. Jessica has been engaged in high-stakes litigation in multiple jurisdictions, representing both plaintiffs and defendants.

Super Lawyers recognizes outstanding attorneys who have attained a high degree of peer recognition and professional achievement in more than 70 practice areas. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates, and peer reviews by practice area.

Post Moratorium Evictions

Published: June 5, 2020

by Louis A. Gonzalez, Jr.

As the first of the rent moratoriums are expiring, landlords throughout California are eager to file unlawful detainer actions to obtain possession of their properties from tenants who have failed to pay rent or comply with repayment obligations. While it is natural for landlords to want to immediately initiate unlawful-detainer proceedings, they should proceed with caution. Landlords who issued 3-day or 30-day notices to their tenants for failure to pay rent during the moratorium period would be wise not to rely on those notices as the basis of an unlawful detainer action.

Many of the moratoriums specifically prohibit the issuance of those notices during their operative period. For the overly eager landlord filing a prompt unlawful-detainer action, that action may fail because it is based on a defective notice issued at a time when it was specifically prohibited by a moratorium.

While it is understandable that landlords want to recoup their rents and obtain possession, care must be given to ensure that the unlawful detainers are based on enforceable notices, which do not violate the moratoriums. Only valid notices will permit landlords to obtain possession and judgments for past rent as expeditiously as possible. Proceeding on the basis of an invalid notice will be counterproductive and delay matters further.

The lawyers of Weintraub Tobin are able to discuss any notices a landlord may have provided to confirm their appropriateness for an unlawful-detainer proceeding to avoid newly enacted defenses.

Paycheck Protection Program Flexibility Act of 2020

Published: June 5, 2020

On June 5, 2020, President Trump signed into law H.R. 7010 – the Paycheck Protection Program Flexibility Act of 2020 (“PPPFA”). The PPPFA makes significant borrower favorable amendments to the Paycheck Protection Program (“PPP”).

Background.

As our readers know, the PPP loan program was enacted pursuant to the CARES Act as a tool to help small businesses keep employees on their payroll. The draw of the program is the ability for borrowers to have the loans forgiven. In other words, the loans can be essentially converted into tax-free grants. One caveat is that borrowers are permitted to spend PPP loan proceeds on very limited types of expenditures. PPP loans may only be spent on payroll, rent, utilities and interest on certain pre-existing obligations.

In order to obtain loan forgiveness additional conditions must be satisfied. The CARES Act permitted loan forgiveness only to the extent the loan proceeds were spent during an eight-week period following loan origination (the “Covered Period”). The Small Business Administration (“SBA”) added a requirement that payroll expenses constitute at least 75% of Covered Period expenditures to achieve full loan forgiveness. Moreover, subject to one large exception, a portion of loan forgiveness will be lost for borrowers who reduce the number of full-time equivalents on their payroll OR reduce the average hourly wage or annual salary of an employee by more than 25%. The aforementioned exception to loan forgiveness reduction applies (in its original form) where (i) reductions in full-time equivalents or average hourly wages and salaries took place between February 15 and April 26, 2020 and (ii) the number of full-time equivalents and compensation are restored by June 30, 2020.

PPP Flexibility Act Changes.

Longer Covered Period, Reduced Payroll Costs Requirement. The most significant changes are an increase in the Covered Period to 24 weeks from 8 weeks; and the replacement of the 75% payroll expenditure requirement with a reduced 60% payroll expenditure requirement. In other words, borrowers now have 24 weeks to spend their PPP loan proceeds and can spend up to 40% of the loan amount on rent, utilities and interest on pre-existing debts without forfeiting any loan forgiveness.

Borrowers with existing PPP loans can choose to stick with the original 8-week Covered Period. Such borrowers will be obligated to maintain payroll levels only through their original 8-week Covered Period in order to qualify for maximum loan forgiveness (or qualify under the Restoration Rule described below). On the other hand, borrowers using the new expanded 24-week covered period will need to maintain payroll levels for the full 24 weeks in order to avoid reductions in their forgivable loan amounts (or qualify under the Restoration Rule).

Restoration Rule. As noted above, a reduction in payroll levels during the Covered Period would result in a reduction in the amount of the PPP loan forgiven unless the payroll levels were restored by June 30, 2020. The PPPFA replaces the June 30, 2020 date with December 31, 2020. Accordingly, if the borrower cuts the number of full-time equivalents or the salary or wages of its employees between February 15, 2020 and April 26, 2020, those reductions will not result in a loss of loan forgiveness if those cuts are restored by December 31, 2020.

Maturity. After enactment of the PPPFA, PPP loans with any unforgiven loan amounts will have a minimum maturity of 5 years (previously 2 years). The PPPFA states that lenders and borrowers will not be prohibited from mutually agreeing to modify the maturity of pre-PPPFA PPP loans to conform to the new 5-year minimum maturity date provided by the PPPFA.

Loan Payment Deferral. The PPPFA extends the loan payment deferral period. Originally, borrowers were not required to make any loan payments for six months. Now PPP loan repayment will be deferred until the date on which the SBA remits the loan forgiveness amount to the lender. PPP loan recipients who do not apply for forgiveness will not be required to make loan payments until 10 months following the close of the Covered Period.

Rehiring, Employee Availability. Additionally, the borrower will not suffer a reduction of its loan forgiveness amount due to reductions in the number of full-time equivalent employees IF the borrower is able to document EITHER:

(A) The borrower was both unable to rehire individuals who were employees on February 15, 2020 AND unable to hire similarly qualified employees on or before December 31, 2020;

(B) The borrower was unable to return to the same level of business activity as of February 15, 2020 due to compliance with requirements or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.

Payroll Tax Deferral. PPP borrowers are now permitted to delay paying the employer’s share of 2020 payroll taxes. One-half of the employer’s share of payroll taxes are now due December 31, 2021 and remaining half will be due December 31, 2022. PPP borrowers can now enjoy this deferral even if they have their PPP loan forgiven. Previously, PPP borrowers were denied this benefit once their loans were forgiven.

The new PPPFA changes will benefit some PPP borrowers more than others. The SBA and Treasury Department will likely provide additional guidance soon.