On September 30, 2023, Governor Gavin Newsom signed California Senate Bill 553 (“SB 553”) into law. Among other things, SB 553 added section 6401.9 to the California Labor Code, which requires that virtually all employers, implement a workplace violence prevention plan by no later than July 1, 2024.
The California Occupational Safety and Health Act of 1973 (“Cal-OSHA”) already imposes many safety-related obligations on employers, including the requirement that they establish, implement, and maintain an effective injury and illness prevention program (“IIPP”). SB 553, which is the first law of its kind in the nation, now requires that employers in non-healthcare settings take additional steps to address the specific threat of workplace violence. As mentioned above, this new law covers virtually all employers. However there are some exceptions, including: places of employments with fewer than 10 employees—these locations must not be accessible to the public; teleworking employees; healthcare facilities already covered by Cal/OSHA’s Workplace Violence in Healthcare Standards; law enforcement agencies; and certain public entity employers.
Starting July 1, 2024, covered employers must establish, implement, and maintain a Workplace Violence Prevention Plan and must meet four broad categories of obligations: (1) the creation of a workplace violence prevention plan; (2) the creation of a workplace violence incident log; (3) employee training requirements; and (4) recordkeeping requirements.
Creating a Workplace Violence Prevention Plan
The intention of this violence prevention program is to provide a roadmap to both employees and employers to address actual and potential incidents of workplace violence. By July 1st, employees and employers should be able to identify and mitigate against workplace violence incidents or threats. Labor Code section 6401.9 defines “workplace violence” as any action of violence or threat (excluding lawful acts of self-defense and defense of others) that occurs at a worksite. The Labor Code further provides definitions for four types of “workplace violence” that employers must be able to recognize and identify in its incident log and train employees to recognize these specific types of workplace violence:
“Type 1 Violence”—workplace violence committed by a person who has no legitimate business at the worksite, including violent acts by anyone who enters the workplace or approaches workers with the intent to commit a crime.
“Type 2 Violence”—workplace violence directed at employees by customers, clients, patients, students, inmates, or visitors.
“Type 3 violence”— workplace violence against an employee by a present or former employee, supervisor, or manager.
“Type 4 violence”— workplace violence committed in the workplace by a person who does not work there, but has or is known to have had a personal relationship with an employee.
The Workplace Violence Prevention Plan must include the following:
Names or job titles of individuals responsible for the plan;
Procedures to obtain the active involvement of employees and employee representatives in developing and implementing the plan, including hazard identification and evaluation, training, and incident reporting;
Methods the employer will use to coordinate implementation of the plan with other employers, when applicable, to ensure that those employers and employees understand their respective roles, as provided in the plan;
Procedures for the employer to accept and respond to reports of workplace violence and to prohibit retaliation;
Procedures to ensure that supervisory and non-supervisory employees comply with the plan;
Procedures to communicate with employees regarding workplace violence matters, including how employees can report violent incidents, threats, or other workplace violence concerns, how employee concerns will be investigated, and how employees will be informed of investigation results and corrective actions;
Procedures to respond to actual or potential workplace violence emergencies, including how employees will be alerted, evacuation and sheltering plans, and how to obtain staff and law enforcement assistance;
Training procedures;
Procedures to identify, evaluate, and correct workplace violence hazards, including periodic inspections;
Procedures for post incident response and investigation; and
Procedures to review the effectiveness of the plan itself, including potential revisions.
For convenience, Cal-OSHA has released a model Workplace Violence Prevention Program for employers to use. This can be found directly on Cal-OSHA’s website.
Violent Incident Log Requirements
Employers must document and maintain a log of all incidents of workplace violence, even if the incident did not result in an injury. The log record must be based on information solicited from the employees who experienced the workplace violence, witness statements, and investigation findings. Further, the log must be anonymous and must be periodically reviewed.
The log must include the following information:
Incident date, time, location.
Workplace violence “Type” (1, 2, 3, and/or 4).
Detailed description of the incident.
Classification of who committed the violence.
The circumstances at the time of the incident.
Where the incident occurred.
Specific incident characteristics, such as physical attacks, weapon involvement, threats, sexual assault, animal incidents, or other events.
What the consequences of the incident were, including any involvement of law enforcement.
What steps were taken to protect employees from further threat or hazards.
Who completed the log, including their name, job title, and the date completed.
Employee Training
Employers must also provide employee training regarding the hazards specific to that employer’s workplace by July 1, 2024 and annually thereafter. The training must address all of the following:
The Company’s plan and how to access it at no cost.
How to participate in development and implementation of the employer’s plan.
The “definitions and requirements” in SB No. 553.
How to report workplace violence incidents or concerns to the employer or law enforcement without fear of reprisal.
Workplace violence hazards specific to the employees’ jobs, the corrective measures the employer has implemented, how to seek assistance to prevent or respond to violence, and strategies to avoid physical harm.
Details about the violence incident log, and how to obtain copies of records (described below).
An opportunity for interactive questions and answers with a person knowledgeable about the employer’s plan.
Recordkeeping Requirements
Finally, employers must also comply with certain recordkeeping obligations and retention periods as follows:
Records of workplace violence hazard identification, evaluation, and correction: 5 years.
Training records shall be created and maintained and include training dates, contents or a summary of the training sessions, names and qualifications of persons conducting the training, and names and job titles of all persons attending the training sessions: 1 year.
Violent incident logs: 5 years.
Records of workplace violence incident investigations: 5 years.
Records must be available not only to Cal/OSHA but also to employees or their representatives upon request and free of charge, within 15 days of their request.
Conclusion
California’s new Workplace Violence Prevention Program is a landmark initiative aimed at enhancing worker safety and reducing the risk of violence in the workplace. As the July 1, 2024, implementation date approaches, employers must prepare to comply with the new regulations by developing comprehensive and effective Workplace Prevention Plans. This proactive approach not only protects employees but also fosters a culture of safety and respect in California’s workplaces, setting a precedent for other states to follow.
On January 1, 2024, the federally enacted Corporate Transparency Act (“CTA”) came into effect. The CTA requires certain entities to disclose information regarding their beneficial owners to the Financial Crimes Enforcement Network by the end of the year. These reporting requirements seek to prevent private use of shell entities as a tool to facilitate money laundering and other financial crimes.
As the deadline quickly approaches, closely held businesses should examine their reporting requirements.
Who is required to report?
Reporting companies are corporations, limited liability companies, limited liability partnerships, and other similar entities created by, or registered to do business under, “the filing of document with a secretary of state or similar office under the law of a State or Indian Tribe.”[1] This definition includes non-profit corporations and trusts that have secretary of state filings.
What companies qualify for exemption?
The CTA provides several exemptions which generally cover entities already subject to other federal reporting requirements.[2]
Public companies that issue securities registered under the Securities Exchange Act.
Any entity registered with the Securities Exchange Commission, such as brokers, exchange dealers, investment companies, investment advisors, and clearing agencies.
Pooled investment vehicles that are operated or advised by an entity exempt from the CTA.
Any company registered under the Commodity Exchange Act.
Any government agency established under federal, state, or tribal laws.
Registered public utility companies and designated market utility companies.
Banks, federal and state credit unions, bank holding companies, and other money transmitting businesses registered with the Secretary of Treasury.
Public accounting firms registered under the Sarbanes-Oxley Act.
Insurance companies.
Entities that (1) employ more than 20 full-time employees within the United States, (2) demonstrate more than $5,000,000 in aggregate gross receipts or sales in the previous year federal income tax return, and (3) has physical operating presence within the United States.
Subsidiaries of other entities exempt from the CTA.
Certain inactive entities.
What must be reported?
A reporting company, unless exempt, must provide (1) its full legal name, (2) any trade or “doing business as” names, (3) a complete current street address of its principal place of business, (4) its jurisdiction of formation, and (5) its taxpayer identification number.[3]
A beneficial owner of a reporting company must provide his or her (1) full legal name, (2) date of birth, (3) current residential or business street address, and (4) copy of a current U.S. passport, state identification, driver’s license, or foreign passport if no other document is available.[4]
Entities formed after January 1, 2024 must provide information about its “Company Applicant” – this is the same information required of beneficial owners.[5]
Who is a beneficial owner?
A beneficial owner is an individual who, directly or indirectly, owns or controls at least 25% of the ownership interests of the entity or exercises substantial control over the entity.[6] An individual exercises “substantial control” over a reporting company if the individual (1) serves as a senior officer of the entity, (2) has authority over the appointment or removal of any senior officer or a majority of the board, (3) directs, determines, or has substantial influence over important decisions made by the entity, such as decisions regarding the sale, lease, or transfer of any principal assets, the reorganization, dissolution, or merger of the entity, major expenditures or investments of the entity, the selection or termination of business lines or ventures, compensation schemes and incentive programs for senior officers, the entry into or termination of significant contracts, and amendments of any substantial governance documents.[7]
This definition expressly excludes minor children, individuals acting as nominees, custodians or agents, employees who are not senior officers, and creditors of a reporting company.[8] The parent or legal guardian of a minor child will be required to disclose instead.[9]
Who is a Company Applicant?
A Company Applicants is an individual who files, or is primary responsible for the filing of, the document creating the reporting company.[10] This definition includes the business owner, the entity’s hired lawyer or agent acting on the client’s directions, and employees designated to file the formation documents. Although many may fall within the definition only a maximum of two individuals will be considered the Company Applicant.[11]
Entities existing before January 1, 2024 are not required to designate a Company Applicant.
When is the deadline to file?
Entities formed before January 1, 2024 will have until January 1, 2025 to file the report. Entities formed between January 1, 2024 and December 31, 2024 will have 90 days from incorporation to file the report. Entities formed after January 1, 2025 will have 30 days from incorporation to file the report.
Where will the disclosures be filed?
Filing will be done through the Financial Crimes Enforcement Network’s website.
Estate Planning Implications
Reporting Company
Entities formed for the purpose of estate planning are not exempt from reporting requirements if formation required the filing of a document with the secretary of state, or other similar government agency. Although trusts generally do not require secretary of state filings, estate plans formed under limited liability companies may trigger reporting requirements.
Beneficial Ownership
A revocable or irrevocable trust may be implicated if it has a beneficial ownership interest in a reporting company. In these situations, beneficial ownership reporting is required (1) by the trustee if the trustee has the authority to dispose of the trust assets, (2) by the beneficiary if the beneficiary is the sole permissible recipient of income and principal from the trust, or has the right to withdraw or cause distribution of substantially all the trust assets, and (3) by the grantor or settlor of a revocable trust.[12]
Current Status
On March 1, 2024, a federal district court in Alabama ruled that the CTA is unconstitutional, citing lack of Congressional authority. As part of the judgment, the court issued a limited injunction, preventing enforcement against the only case plaintiffs. At this time, the U.S. government has filed an appeal.
In light of the ruling, the Financial Crimes Enforcement Network has announced that it will comply with the court’s order. Meaning, other than named plaintiffs in the court case, CTA enforcement will continue.
If you have more questions regarding your CTA reporting requirements, contact a counselor today.
Wilke Fleury LLP is delighted to announce the addition of its newest partner – Islam M. Ahmad. Mr. Ahmad is a talented addition to the firm’s leadership. He brings with him a wealth of experience, and is a forward-thinking leader who will be invaluable to the firm’s leadership. His practice focuses on real estate and business law with a specific focus on litigation and insurance coverage matters.
“We are incredibly excited to welcome Islam to the partnership. He is tireless in pursuit of our clients’ goals, and in doing so employs both creative legal tactics and common sense. He is an asset to our firm and his admission to the partnership is well-deserved,” said Steve Williamson, Managing Partner.
Wilke Fleury LLP is a thriving mid‐sized general practice law firm located in California’s capitol. Our attorneys offer broad expertise, creativity, and strong ties to local businesses, families, and individuals, making Wilke Fleury LLP one of the region’s most respected and long‐standing law firms. Our support of local charitable organizations, universities, law schools, political interests and the community reveals the character of the firm and our sincere commitment to the Sacramento region.
Wilke Fleury is excited to announce that it has promoted two associates to the position of Senior Counsel — Mena Arsalai and Jizell Lopez. Mena and Jizell have demonstrated professional excellence and contribute greatly to the firm’s multi-generational leadership.
“Promoting Mena and Jizell to Senior Counsel is a reflection of the skill and dedication they bring to the practice of law, and an acknowledgement of their value to the firm. They understand our clients’ needs and work incredibly hard to achieve their goals. We are fortunate to have them on our team, and I congratulate them both!” – Steve Williamson, Managing Partner.
Senior Counsel at Wilke Fleury have at least six years of experience delivering high-quality legal services, collaborate with partners on the development and management of key practice areas, and actively mentor junior lawyers.
Mena Arsalai‘s practice focuses on supporting health care providers in regulatory and transactional matters. She has experience in drafting purchase agreements and ancillary transaction documents, healthcare facility licensing, healthcare acquisitions, physician contracting, and compliance. Prior to joining Wilke Fleury, Mena was an associate attorney at a Sacramento-based boutique law firm specializing in health law, mergers and acquisitions, and securities law.
Jizell Lopez is a civil litigation defense attorney who primarily represents employers in federal and state court litigation and before administrative agencies regarding all manner of employment claims, including single-plaintiff lawsuits, class action lawsuits, and wage and hour representative lawsuits. Jizell’s practice includes regularly defending employers against allegations of harassment, discrimination, wrongful termination, retaliation, wage and hour non-compliance, and more. In addition to her litigation experience, Jizell regularly counsels employers regarding the full range of California employment law compliance and litigation prevention. A large part of her practice also includes negotiating and drafting employment agreements, separation and severance agreements, and working closely with employers to develop effective personnel policies. Prior to joining Wilke Fleury, Jizell has represented both employers and employees. This has allowed her to utilize unique perspectives when counseling and defending employers, particularly with the ever-changing nuances of California employment law. Jizell chose to focus her practice on labor and employment defense because even when employers have the best intentions, there are far too many instances that result in costly and time-consuming litigation that could have been prevented or mitigated.
The worker classification of relief veterinarians has been a hot button issue for many years. Traditionally, relief veterinarians and veterinary practices have preferred the classic independent contractor arrangement. However, given recent changes in worker classification laws and the legal risks associated with misclassification, it is a good time for both relief veterinarians and veterinary practices to revisit their independent contractor agreements to determine whether currently classified independent contractors are, in fact, properly classified.
As a brief background, on April 30, 2018, the California Supreme Court issued its opinion in Dynamex Operations West, Inc. v. Superior Court (“Dynamex”), adopting new standards for determining whether a California worker should be classified as an employee or an independent contractor for the purposes of wage orders adopted by California’s Industrial Welfare Commission. On January 1, 2020, California Governor Gavin Newsom signed AB 5, expanding the application of Dynamex and making it more difficult for California workers to qualify as independent contractors. While this new standard has upended many traditional independent contractor industries, the California legislature acknowledged that some industries should be exempt from the AB 5 standard and, instead, the traditional analytical standard (known as the “Borello” test) should apply. Thus, AB 5 may have codified the Dynamex ruling, but it also carved out several exceptions, including for veterinarians.
AB 5 requires the application of the “ABC Test” to determine if workers are employees or independent contractors for purposes of the Labor Code, the Unemployment Insurance Code, and the Industrial Welfare Commission’s wage orders. Under the ABC Test, a worker is considered an employee and not an independent contractor unless the hiring entity satisfies all three of the following conditions: (A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
By contrast, the Borello test relies on multiple factors, including whether the potential employer has all necessary control over the manner and means of accomplishing the result desired (although such control need not be direct, actually exercised, or detailed). This factor must be considered along with other factors, including but not limited to: (1) whether the worker performing the services considers themselves as being engaged in an occupation or business distinct from that of the employer; (2) whether the work is a regular or integral part of the employer’s business; (3) whether the employer or the worker supplies the instrumentalities, tools, and the place for the worker doing the work; (4) whether the worker has invested in the business; (5) whether the worker hires their own employees; (6) whether the employer has a right to fire at-will; and (7) whether or not the worker and the potential employer believe they are creating an employer-employee relationship. Under Borello, no single factor controls the determination. Instead, the test relies on 13 different factors requiring consideration of the totality of circumstances attending the relationship. Accordingly, relief veterinarian classification can be complex, and subject to a case-by-case determination.
Both the Borello multifactor test and the ABC Test create a rebuttable presumption that the worker is an employee, and the hiring entity thus bears the burden of establishing that the worker is an independent contractor. The ABC Test is designed to be more predictable than the multifactor approach used under Borello. While AB 5 itself may not have changed the classification test applicable to veterinarians, the analytical landscape has shifted, and there are practical implications to understand for relief veterinarians.
You may ask, what is the big deal? Particularly if the worker wants to be classified as an independent contractor and the parties have agreed to this classification, and little to no risk flows to the worker. The party that bears the risk is the employer. In the event the worker is in fact misclassified, the employer could face significant liability—even if both the employer and employee both agree to the classification. Employees are entitled to certain rights that independent contractors do not typically enjoy, such as overtime, benefits, meal and rest breaks, and more. Furthermore, federal and state agencies may look back to determine if employers correctly withheld taxes, disability, and other payments, and paid for workers’ compensation benefits.
In the veterinary industry, many practices rely on relief veterinarians and the classification of these relief veterinarians as independent contractors. This article does not conclude that all relief veterinarians must be employees. Instead, it is a reminder to review any and all independent contractor agreements and their performance to determine whether these veterinarians may be classified as independent contractors. With recent legislation adversely impacting independent contractor designations in multiple industries, many current independent contractors have been given a moment to pause and ask whether they are in fact properly classified. Again, the penalties associated with misclassification can be high and can lead to significant employer liability.
The bottom line is that although AB 5 has been in effect for nearly three years, California veterinarians are still largely left guessing whether their classification is proper under the Borello standard. Given the trends discussed above, it will likely become increasingly difficult and risky to classify workers as independent contractors. Consequently, it is important for practitioners utilizing relief veterinarian assistance to revisit their relationships to determine whether an independent contractor classification is correct. In uncertain cases, consult qualified legal counsel!
The nature of business is personal. Changes in personnel, project outlines, or business models cost businesses time and money to bring about, ward against, or stop. Any individual involved in business will likely have seen claims for interference with relationships, either prospective or contractual. But, what do those claims really mean and how viable are they in a capitalist society where free markets are held in such high esteem?
Defendants in lawsuits will typically see these claims pleaded as one of three major categories: intentional interference with prospective economic advantage, intentional interference with contractual relations or contract, or negligent interference with prospective economic advantage. As the name would suggest, the first two are more concrete and require a showing that the bad actor was aware of the existence of a contract or relationship and took affirmative steps to interfere with that relationship. The latter is more nebulous and looks at business relationships that were likely to occur and are based on a “should have known” standard.
The Framework
California Courts apply a careful analysis when considering each of the aforementioned claims. As set out in Jenni Rivera Enterprises, LLC v. Latin World Entertainment Holdings, Inc. (2019) 36 Cal. App. 5th 766, 782, the elements of a cause of action for intentional interference with contractual relations are “(1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant’s knowledge of that contract; (3) the defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.”
The court in Rand Resources, LLC v. City of Carson (2019) 6 Cal. 5th 610, 628-629 discussed the similarities between intentional interference with contractual relationship and intentional interference with prospective economic advantage:
The two intentional interference claims share many elements—principally, an intentional act by defendant designed to disrupt the relationship between plaintiff and a third party. (Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 944 [81 Cal. Rptr. 3d 282, 189 P.3d 285] [stating that an intentional interference with prospective economic advantage claim requires, among other…]things, “an intentional act by the defendant, designed to disrupt the relationship”]; Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 55 [77 Cal. Rptr. 2d 709, 960 P.2d 513] [laying out the elements of an intentional interference with contract claim, one of which is that the defendant undertook “‘intentional acts designed to induce a breach or disruption of the contractual relationship’”].)
One key distinction between claims for interference with contractual relations and prospective economic advantage is the requirement of an “independent wrongful act.” (Crown Imports, LLC v. Superior Court (2014) 223 Cal. App. 4th 1395, 1404, citing to Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1158–1159 and Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 392–393.) An “independent wrongful act” requires a showing that “the alleged interference must have been wrongful by some measure beyond the fact of the interference itself.” (Ibid.) This means there must be some other wrong, separate and apart from the interference.
One court defined the distinction between intentional and negligent interference with prospective economic advantage as one that boils down to an evaluation of the defendant’s intent. (Crown Imports, LLC v. Superior Court, 223 Cal. App. 4th 1395, 1404, fn. 10.) In contrast, a claim for negligent interference with prospective economic advantage is established when a plaintiff demonstrates:
(1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship.
(Venhaus v. Shultz, 155 Cal. App. 4th 1072, 1078.)
Competing Policy Considerations
When evaluating these claims, Courts weigh other policy considerations as well. When found in the context of an employment case, Courts give credence to the well-respected American value that employees are free to move between employers. (Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989 (overturned on other grounds in Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130).) Stated another way, a former employee of a company has the right to engage in competitive business for themselves and enter into business in competition with the former employer, provided it is fairly and legally conducted. (Reeves v. Hanlon (2004) 33 Cal.4th 1140.) As a rule, Courts disprove of efforts by employers to squelch this freedom of movement.
For both negligent and intentional interference with contractual relationships, Courts are understandably protective of the rights of contracting parties. The right to contract freely is another right enjoyed by society and those without legitimate social or economic interests should not interfere in the expectations of contracting parties. (Applied Equipment Corp. v. Litton SaudiArabia Ltd. (1994) 7 Cal.4th 503.)
These policy considerations comprise the basis for the defenses of these types of claims. While wrongful conduct that amounts to interference in contracts or business relationships can be inappropriate, these causes of action can prove to be amorphous because there are special considerations afforded to defendants, which are not considered in a stricter breach of contract or defamation-type claim.
Using the Framework
The causes of action are inextricably intertwined and, without counsel to assist in guiding a defense, these claims can often blend together. Small business owners looking for the first time at a lawsuit alleging these claims will undoubtedly see many of the elements amongst them on repeat and have questions. Looking at some recent examples of how courts are evaluating these cases can be helpful. In Richards v. Farmers Ins. Exch. (2023) 2023 Cal.Super. LEXIS 42051, a Court found a demurrer to claims for intentional interference with an economic relationship with a probable economic benefit was inappropriate. The Richards court found the Complaint adequately stated an intentional interference in a discrimination case that alleged supervisors at Farmers had taken the plaintiff’s clients from her and gave them to younger agents of a different race; in so ruling, the Richards court found a likely economic advantage because of the length of time the Plaintiff had them as clients. (Id. at *10.)
In Yang v. Paz Am 1300 (2023) 2023 Cal.Super. LEXIS 40196, a motion for summary judgment was granted when the Yang plaintiff could not demonstrate an independent wrong; even though the plaintiff argued the defendants had separately breached a fiduciary duty to a third party. (Id. at *14.)
Defenses
In crafting a defense to the family of interference claims, there are two common types: 1) the Anti-SLAPP Motion and 2) an argument no independently wrongful conduct took place. An Anti-SLAPP motion is used to attack meritless causes of action that are inappropriately based on acts of freedom of speech. (Baral v. Schnitt (2016) 1 Cal.5th 376.) As discussed above, there are competing interests when evaluating intentional or negligent interference claims. To the extent the alleged improper conduct arises from a protected freedom of speech act (e.g., advertising, working as an employee, or soliciting business), a business owner who finds themselves a defendant in cases with these claims should look first at whether an Anti-SLAPP Motion to strike that cause of action is appropriate.
In addition, a defendant in an interference with prospective economic advantage (either intentional or negligent) claim must have committed some independent tort, separate and apart from the interference. Oftentimes, plaintiffs make tenuous claims about the existence of the independent tort. If the conduct alleged is not sufficient as a matter of law, a well-timed demurrer early on can serve to narrow the issues and get rid of frivolous interference claims. Be sure to retain qualified counsel early on to have sufficient time to evaluate whether one of these defenses will protect your business.
Wilke Fleury is extremely proud to have two attorneys recognized in The Best Lawyers in America and three attorneys recognized in the Best Lawyers: Ones to Watch in America! Best Lawyers has been regarded by lawyers and the public for more than 40 years as the most credible measure of legal integrity and distinction in the United States. Congratulations to this talented group!
Since 2003, the Centers for Medicare & Medicaid Services (“CMS”) has conducted the Recovery Audit Contractor (“RAC”) program. As the program has expanded, provider audits have increased significantly.
What is a RAC audit and who is subject to it?
RACs are private entities that CMS contracts with to identify underpayments and overpayments to providers. RACs have a primary objective to recoup overpayments by reviewing claims submitted by providers for “which payment may be made under the State Plan or a waiver of the State Plan to identify overpayments and underpayments.”
This means, if you are a healthcare provider, you may be subject to a RAC audit when you submit a claim to Medicare or Medicaid. Physicians, DME suppliers, hospitals and other facilities are all potentially subject to RAC audits, Currently, these audits are performed by large contractors like Performant, Cotiviti, and HMS Federal Solutions, depending on which region you are located in
How is Performant compensated and how often are audits conducted?
Payment to RACs are made on a contingent basis for collecting overpayments or underpayment from the amounts recovered. Historically, the contingency fee rate for individual contractors has been anywhere from 8 to 12 percent. Performant, specifically, has been awarded a renewed 5-year contract in 2022 and has increased its audit sector.. Public data from CMS indicates an upward trend in RAC audits.
Limitations on the number of records audits can request.
Providers under RAC audits need not be passive: contractors like Performant have a limited number of records they can request in a 45-day period. A RAC may only request records on 10 percent of all paid claims within a 12-month period, every 45 days.
Defenses to RACs
Providers under audit may also challenge certain RAC findings by arguing:
Audit Scope: The auditor does not have authority to audit the claims at issue under either the Medicare reopening regulations or the RAC Statement of Work, both of which set timeframes for reopening paid claims.
Waiver of Liability: Even if payment for claims is deemed not reasonable or necessary, payment may be rendered if the provider did not know and could not have been reasonably expected to know that the payment would not be made.
Treating Physician Rule: The provider is in the best position to determine the applicable Medicare billing rule.
Provider Without Fault: A provider is “deemed to be without fault” with respect to an overpayment if the overpayment is made “subsequent to the fifth year following the year” of initial determination.
Errors in Process and Procedure for Estimating Overpayments: Complex audits require a rigorous degree of planning to determine precise results. Nonconformance to such guidelines can cast doubt on the accuracy of contractor estimates.
If you are experiencing an RAC audit by Performant, or another audit contractor, you should take care to consult an experienced healthcare attorney to help you identify defenses and strategies.
Earlier this month, employers across this state were able to breathe a sigh of relief due to a long anticipated California Supreme Court ruling. On July 6, 2023, the Court held that employers do not owe a duty of care to prevent the spread of COVID-19 to employees’ household members.
In Kuciemba v. Victory Woodwork, Inc., Robert Kuciemba was a worker who claimed he had contracted COVID-19 while at the workplace. As a result of the alleged exposure, Mr. Kuciemba alleged he subsequently transmitted COVID-19 to his wife, who was later hospitalized and placed on a ventilator. As a result, in late 2020, Mr. and Mrs. Kuciemba filed a lawsuit in state court against the employer. Mr. Kuciemba’s wife asserted claims for negligence, negligence, per se, premises liability, and public nuisance. Mr. Kuciemba asserted a claim for loss of consortium. The case was removed to federal district court where it was dismissed in May of 2021. The 9th U.S. Circuit Court of Appeals took the case on appeal before posing its questions to the California Supreme Court.
After nearly three years since the initial filing of the case, the Court determined that Mr. Kuciemba’s wife could not proceed with her claims. The Court reasoned, “although it is foreseeable that an employer’s negligence in permitting workplace spread of COVID-19 will cause members of employee’s household to contract the disease, recognizing a duty of care to nonemployees in this context would impose an intolerable burden on employers and society in contravention of public policy.” The Court focused its ruling on the potentially negative consequence of imposing such a duty on employers. The Court ultimately reasoned that the negative consequences would outweigh the benefits by creating an enormous burden, on not only employers, but the court system and the community.
Although the COVID-19 state of emergency in California has ended, the Court was also concerned with what its decision could mean in the future stating, “… if a precedent for duty is set in regard to COVID-19, the anticipated costs of prevention, and liability, might cause some essential service providers to shut down if a new pandemic hits.” That is, if employers who provide essential services knew they could be liable for employees’ household COVID-19 claims, they could be reluctant to provide those services in the future.
Employers should be relieved that this long awaited liability question has been put to rest for now. Employers should still adhere to and maintain all safety protocols mandated by state and local law.
The fourth appellate district published an opinion earlier this year in Smalley v. Subaru of America, Inc. (2022) 87 Cal.App.5th 450 that serves as an excellent refresher on requirements of the “998 Offer,” or a statutory offer to compromise pursuant to Code of Civil Procedure (“CCP”) §998.
In Smalley, set in the context of a Lemon Law action, Defendant Subaru made a 998 Offer for $35,001.00, together with attorneys’ fees and costs totaling either $10,000.00 or costs and reasonably incurred attorneys’ fees, in an amount to be determined by the Court. (Smalley, supra, 87 Cal.App.5th at 454.) Plaintiff objected that the offer was not reasonable and the case proceeded to trial. At trial, a jury found in favor of Plaintiff and awarded him a total judgment award of $27,555.74 – far short of the $35,001.00 offer. The trial court found Plaintiff had failed to beat the 998 at trial and that Subaru’s earlier 998 offer was reasonable. Plaintiff appealed the post-judgment order awarding Plaintiff pre-offer costs and Defendant post-offer costs on the grounds that the 998 was not reasonable in that it did not specify whether Plaintiff would be deemed the prevailing party for purposes of a motion for attorneys’ fees. The fourth district affirmed the trial court’s order and engaged in a helpful review of 998 requirements.
A statutory offer to compromise has three basic requirements:
(i) must be in writing
(ii) must contain the terms and conditions of the settlement
(iii) must include a provision allowing a plaintiff to indicate his or her acceptance. (Smalley, supra, 87Cal.App.5th at 455, citing Code of Civ. Proc., §998(b).)
The 998 offer must be unconditional, but may include non-monetary terms as well. (Smalley, supra, 87Cal.App.5th at 456.) The terms of the settlement must be sufficiently specific to allow the recipient to evaluate it and make a reasoned decision as to whether to accept the offer or the risk of not accepting. (Ibid.) In addition, the 998 offer must be sufficiently clear that the recipient of the offer can “clearly evaluate the worth of the extended offer.” (Id. citing McQuiddy v. Mercedes-Benz USA, LLC (2015) 233 Cal.App.4th 1036, 1050.) The Smalley court observed there is no rule that a 998 offer identify who is to be the prevailing party; further, a court may not impose additional requirements or limitations that do not appear on the face of the statute. (Id. citing Rowland v. Pacific Specialty Insurance Company (2013) 220 Cal.App.4th 280, 288.) For this reason, the failure to include costs and expenses in a 998 offer does not necessarily invalidate it. Nor does the law require a response by an offering party when the offeree raises objections about the offer.
Once it is determined the 998 offer was valid, the burden shifts to the offeree to demonstrate the offer to compromise is nonetheless unreasonable or was not made in good faith. In a situation where the actual judgment is more favorable to the offeror than the offer to compromise, it is prima facie evidence of the reasonableness of the offer. In considering reasonableness, the Smalley court looked at two questions:
1. Was it in the realm of reasonably possible results at trial?
2. Did the offeror know the offeree had sufficient information to assess the reasonableness of the offer?
In assessing these two questions, the Smalley court noted later discovery of facts known to the offeror at the time of the offer which shed additional light on the value of the case could potentially affect a court’s evaluation of the reasonableness of the offer. As no such facts were discovered in the case before the court, it was comfortable affirming the order.
The Smalley case is an excellent refresher on the use of these statutory offers and stands to reinforce the underlying takeaways surrounding how to make effective use of this powerful litigation tool. Always make offers to compromise clear and sufficiently detailed such that the offeree can make an adequate assessment of the value of the offer and the risk involved in not accepting it.
Wilke Fleury is extremely proud that 18 of its incredible attorneys have been selected as 2023 Northern California Super Lawyers or Rising Stars! Super Lawyers rates attorneys in each state using a patented selection process and publishes a yearly magazine issue that produces award-winning features on selected attorneys. Congratulations to this talented group:
The California Board of Pharmacy (the “Board”) is a member of the National Association of Boards of Pharmacy (the “NABP”), and as a member of the NABP the Board has certain reporting requirements to the NABP. This article sheds light on why you should care about the Board reporting to the NABP.
● What is the NABP Clearinghouse?
The NABP Clearinghouse “is a national database of disciplinary and administrative information from NABP’s member states and jurisdictions. It houses information reported by the member boards of pharmacy on actions taken against wholesale distributors, pharmacies, pharmacy owners, pharmacists, pharmacy technicians, and interns. That information is used to:
[1] Determine the acceptability and qualifications of pharmacists who request the transfer of examination scores and licenses into other states or jurisdictions; and
[2] Screen applicants for [NABP’s] Drug Distributor, Digital Pharmacy, and DMEPOS Pharmacy Accreditation programs.”
● When is the Board required to report a licensee to the NABP?
Therefore, if you are currently licensed in multiple states or may want to become licensed in multiple states in the future, the NABP reports are vital to the licensure process as reports may affect your license eligibility in other jurisdictions. Furthermore, understanding the Board’s reporting requirements and the impact of that reporting to other boards of pharmacy is critical in determining whether to pursue an appeal.
If you find yourself needing help, you may wish to contact an experienced healthcare attorney to help navigate this difficult terrain.
Complex laws and regulations provide employees with certain rights and options during medical leave. It is the employer’s responsibility to ensure they understand the nuances of medical leave law to ensure not only compliance, but an easy transition for a medical concern the employee may face in their life. The laws related to medical leave have developed over time and cannot be found in a single statute. Instead, there are numerous applicable and overlapping statutes at both the state and federal level.
The Family Medical Leave Act (“FMLA”) is administered by the U.S. Department of Labor and provides job protected leave to an employee who is absent from work because of the employee’s own serious health condition or to care for specified family members with serious health conditions, as well as for the birth of a child and to care and bond for a new child. In order to be eligible for FMLA leave, an employee must: (1) work 1,250 hours during the 12 months prior to the start of leave; (2) work at a location where 50 or more employees work at that location or within 75 miles of it; and (3) have worked for the employer for 12 months.
The California Family Rights Act (“CFRA”) is administered by the California Civil Rights Department. The CFRA provides up to 12 weeks of unpaid leave in a 12 month period. The CFRA allows eligible employees to bond with a new child, or to care for themselves, a family member, or a designated person with a serious health condition. In order to be eligible for CFRA leave, an employee must: (1) work 1,250 hours during the 12 months prior to the start of leave; (2) work at a location where 5 or more employees work; and (3) have worked for the employer for 12 months.
Many employees and employers assume that because the basic principles of FMLA and CFRA are alike, they should be administered the same. However, this is a common misconception. While both FMLA and CFRA provide up to 12-weeks of job-protected leave and have nearly identical eligibility requirements, there are significant differences that employers and employees should be aware of.
The CFRA provides protections to a larger portion of the workforce and leave will be granted for more familial relationships, including to care for a domestic partner, a grandparent, a grandchild, sibling, or designated person with a serious health condition. Under the FMLA, a covered family member is limited to a spouse, child, or parent.
The CFRA has strict limitations regarding employer requests to medical providers. Under the CFRA, medical certification forms cannot seek the identification of symptoms or diagnosis of an employee’s serious health condition from the healthcare provider. Whereas under the FMLA, employers may request a diagnosis of an employee’s serious health condition when necessary.
Under both the CFRA and FMLA, certifications from a medical provider may be requested considering the above caveats. Under the FMLA, employers may require second and third medical certifications for employees or family members if the employer has a “reason to doubt” the validity of a certification. FMLA recertification may also be required every six months, even if the original certification has not expired. Whereas under the CFRA, employers may require certification for a employee’s medical condition only and may only require recertifications when the original certification expires.
The nuances associated with CFRA and the FMLA are vital for both employers and employees to understand and, as such, should consult with an experienced employment attorney to navigate the complex laws associated with medical leaves.
Selling a California pharmacy is significantly more complicated than the sale of other businesses. In addition to all of the typical business sale considerations, pharmacy sales require approval from the California Board of Pharmacy (the “Board”) of any transfer of 50% or more of the beneficial interest in that license prior to the closing. Additionally, due to the highly regulated nature of pharmacies, both on a state and federal basis, the pool of prospective buyers is dramatically smaller than with other businesses. Below are a few of the most important areas to be considered by pharmacy owners before moving forward with selling their business:
● Timing
It is critical for sellers to leave themselves a long runway to complete their transaction. Licenses are not transferable to new owners. Therefore, buyers must seek a new license before the close of a transaction. The Board requires approval of changes in ownership before the change occurs. Additionally, change of ownership applications must be filed with the Board at least 30 days prior to closing. If a change of ownership application is not approved by the Board pre-closing, the Board may impose fines and issue citations to the parties. A temporary license should be considered where closing timelines are compressed and may be issued at the discretion of the Board based on the specific facts of the transaction.
● Structure
The sale of a pharmacy corporation can be structured as either an asset sale or a stock sale. An asset sale is where certain business assets are acquired by the buyer and the seller maintains ownership over the corporation and the remaining assets. In a stock sale the buyer acquires all of the shares of the corporation and takes over complete ownership of the business. In general, a stock sale is preferrable to a seller because the buyer takes over responsibility for the entire business. Conversely, buyers generally favor asset sales because they can pick and choose the assets they want and the seller remains responsible for any skeletons in the closet. In either a stock or an asset sale, the parties will need to work together to clarify who is responsible for what after the sale.
● Liability
It is important for sellers to understand that they remain on the hook for any pre-closing licensing issues with the Board. For example, if a seller had failed to satisfy a required notification requirement to the Board and this failure comes to light post-closing, the Board may impose a fine on the seller. Therefore, a careful review of any potential license issues is critical prior to any sale.
● Tax and Legal Advisors
Sellers can find themselves with a surprise tax bill where taxes are not a primary focus of the transaction. Experienced tax advisors can be invaluable when sellers evaluate potential deal structures. Tax advisors should be brought into the mix early so that sellers can make fully informed decisions relative to the tax impact of the sale of their business. Additionally, sellers should retain their own, independent legal advisors to guide them through the complex selling process. Too often sellers rely solely upon the buyer’s advisors for crucial legal advice. It is a mistake to assume that buyer-paid attorneys, no matter how well-meaning, can fairly, and aggressively, represent sellers’ interests as well.
● Transition
Like many businesses, a successful pharmacy is the result of years of work and relationships that the business owners and their teams have cultivated over time. Because of this, the hand-off period can be critical to the ongoing success of the business. The parties should work closely to clearly determine the post-closing role, if any, of the seller. Moreover, considerations should be made on whether there will be a change to the Pharmacist-in-Charge (“PIC”) position post-closing. California law requires that the Board be notified within 30 days of when a PIC ceases to act as the pharmacist-in-charge, and a replacement PIC must be approved by the Board. Additionally, consideration should be made as to whether the buyer will continue operating at the same location, or if a change of location will occur. Under California law, a change of location must also be approved by the Board prior to any change. Therefore, it is important to have these discussions early as the ultimate decision may be based on a third-party landlord.
● Marketing
Who will buy your pharmacy? Current employees and business partners can make attractive prospective buyers as they already are up to speed on running the business. Marketing to employees and partners is generally permissible. Alternatively, you may consider selling to a large pharmacy chain. Business brokers can be helpful in identifying additional buyers outside of a seller’s network.
If you are considering selling your pharmacy, you are not alone. Contact an experienced healthcare attorney to help navigate you through the sale of your business.
This website uses cookies to improve your experience. We'll assume you're okay with this, but you can opt-out if you wish. Cookie SettingsACCEPT
Privacy & Cookies Policy
Privacy Overview
This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
