Alternatives to Foreclosure for Homeowners Facing Foreclosure Who Do Not Qualify for Assistance
The housing legislation passed the House and the Senate and is expected to be signed into law by President Bush very shortly. While that new law may help as many homeowners avoid foreclosure by enabling them to refinance into more affordable government-backed loans, not all homeowners will qualify. Thus, homeowners facing foreclosure should learn about other options like the “short sale” and “deed in lieu of foreclosure” transactions.
The short sale. A borrower sells the house at fair market value, less than the amount owed on the home. The lender in turn usually agrees to forgive the remaining debt. The deed in lieu of foreclosure. The borrower gives the property to the lender with the lender’s consent “in lieu of” waiting for foreclosure. The Lender then sells the home and, as in a short sale, usually agrees to forgive the difference between the amount owed by the borrower and the home’s ultimate re-sale amount.
Neither of these options will keep a homeowner from losing his or her home and/or damage to one’s credit. However, both offer advantages: (1) they allow the homeowner to walk away from their house free of mortgage debt, (2) the homeowners will generally face a shorter waiting period before they can obtain another mortgage.
In contrast, in foreclosure proceedings, the waiting period to obtain another mortgage is at least twice as long and the lenders can pursue the difference owed to them depending on applicable State law. Most lenders do not pursue this debt, but sometimes do.
A homeowner interested in pursuing a short sale or deed in lieu of foreclosure should immediately contact their lender or loan servicer before attempting to sell their home. Both alternatives require the homeowners to provide a “letter of hardship’ to the lender or loan servicer explaining why they cannot pay their mortgage payments. Short sales are considered preferable, because they save lenders the hassle of selling the home. Before undertaking any of these proceedings, homeowners should contact a certified public accountant and/or a tax attorney to determine any potential tax consequences that could result.
Are Individual Defendants, or Simply the Employer Entity, Liale for Wages and Penalties Arising from Labor Code Violations?
Three individual defendants owned three garment manufacturing companies that experienced financial difficulties, leaving them unable to meet payrolls. During this period of time, the individual owners told employees to continue working until their company, Win Corporations, could meet payroll. When employees complained of unpaid wages, the Dept. of Labor filed suit, closed Wins Corporations, and seized its assets. The California Labor Commission then sought to hold the individual defendants personally liable for unpaid wages owed the employees.
The Trial Court ruled in favor of Wins Corporations. The California Appeals Court affirmed, holding that while the Industrial Welfare Commission Wage Order relevant to the garment industry defines “employer” as the one who “exercises control” over employees’ wages, hours or working conditions, Reynolds v. Brement precluded application of the definition to Wins Corporations alleged Labor Code Violations because its failure to pay the employees wages must be interpreted under the common law definition of “employer.” Under the common law definition of employer, defendants were not personally liable for the wages and penalties since defendants did not require that the employees work for them personally or take their money directly.
Update on Enforceability of Mandatory Arbitration Clauses in the Context of Employment Law
While arbitration successfully reduced lengthy litigation and enabled employers to avoid unpredictable juries, in recent years the doctrine of unconscionability has placed potential limitations on the enforceability of arbitration agreements. Forcing an employee to sign an arbitration agreement may render it procedurally unconscionable. Employers have responded by allowing the employee to “opt out” of the agreement. While the 9th Circuit Court of appeals has repeatedly upheld arbitration agreements as long as the employee had a meaningful opportunity to “opt out,” a recent California Supreme Court ruling has confused this issue by refusing to enforce an arbitration agreement despite the employee’s ability to “opt out.” Gentry v. Superior Court, 42 al. 4th 443 (2007).
The Gentry Court also blurred the distinction between procedural and substantive unconscionability. Pursuant to Gentry, an employer should provide the employee with the choice to accept or reject the arbitration agreement without overt or subtle pressure and, if the employee accepts the agreement, require the employee to affirmatively “opt in” (i.e. to sign it). Further, because Gentry blurs the line between procedural and substantive unconscionability, the employer must be sure to remove all unfair provisions or the court may not enforce the arbitration agreement at all, $even if the employee has opted in.
A recent California Court of Appeal decision held an arbitration agreement unconscionable, despite a provision providing the arbitrator the exclusive authority to determine enforceability of the arbitration agreement. Ontiveros v. DHL Express (USA) Inc., C.A. 1st/2 No. A114848, June 30, 2008. A t the time employee Gina Ontiveros was hired by Airbourne Express, she was provided with a binder of employment materials which included an arbitration agreement. She was advised she needed to sign it in order to start her new position, but was not provided any real time to review the documents she was provided or signed. The arbitration agreement provided that it covered all claims between the parties and that she gave her right to a jury trial.
Airbourne Express was subsequently acquired by DHL Express Inc., and Ontiveros remained an employee of DHL Express. Ontiveros filed a complaint for sexual harassment in 2005. DHL filed a motion to compel arbitration, but the trial court denied it holding that the arbitration agreement was unenforceable because, inter alia, the clause providing that the arbitrator must decide disputes relating to applicability, enforceability or formation of the agreement is not sufficient to require the Court to compel arbitration if the contract is unconscionable. The Trial Court found that it is required, as a threshold issue, to determine whether the arbitration contract is unconscionable, despite any provision requiring arbitration of issues relating to enforceability. The Trial Court then held that the agreement was unconscionable because the employee did not even know she had signed an arbitration agreement until after she filed suit and, further, the agreement was an adhesion contract in that the employee did not have the opportunity to review it or negotiate it.
The California Court of Appeals affirmed, stating that the reasoning and holding of the court, in Bruni v. Dideon, 160 Cal. App. 4th 1272 (2008) and Murphy v. Check ‘n Go of California, Inc., 156 Cal. App. 4th 138 (2007), supports the Trial Court’s conclusion that it had the authority to determine the unconscionability issues raised by the employee. The Court of Appeal also affirmed the trial court’s ruling that the arbitration agreement was unconscionable. Ontiveros v. DHL Express (USA) Inc., C.A. 1st/2 No. A114848, June 30, 2008.
Proposed Legislation re Enforceability of Mandatory Arbitration Clauses
Proposed legislation aims to curb mandatory arbitration clauses in contracts. In mid July, 2008, the House of Representatives’ Judiciary Subcommittee on Commercial and Administrative Law approved three arbitration-related bills, including the Arbitration Fairness Act which, if passed, would ban pre-dispute arbitration clauses outright. The other two bills would ban mandatory arbitration agreements in contracts involving automobile sales and nursing homes. The Senate Judiciary Committee is considering its own legislation concerning nursing home arbitration.
Enforceability of Choice of Law Provisions
A recent California Appeals case held that a out-of-state choice of law provision is not enforceable where California has a greater interest in the parties’ transaction. Since the California loans were made to California consumers, secured with collateral located in California, provided cash that was likely spent in the California, and deprived California competitors of the opportunity to make those loans, the Appeals court held that California had a greater interest in the parties’ transaction and, thus, the Nevada choice of law provision was unenforceable.
Omni Loan Company is a Nevada corporation, with its principal place of business also located in Nevada; it is in the business of providing consumer loans to members of the military. Omni opened loan offices in Oceanside and San Diego, California. Joshua Brack was a nonresident member of the military stationed at Camp Pendleton. Brack applied for a loan with Omni, and his loan agreement included the Nevada choice of law provision. Brack filed a class action suit against Omni, alleging that Omni’s practices violated the borrower’s rights under the California Finance Lenders Law. The trial court held that Nevada had a substantial relationship to the loan contracts because Omni incorporated in Nevada and the loans were approved in Nevada, entering judgment in favor of Omni. The California Appeals Court reversed. While California Courts will generally enforce a contractual choice of law if he state whose law was has an interest in the parties’ controversy, if California’s interests are materially greater than the interests of the state whose law was contractually chosen by the parties, California State law applies. Here, the Appeals Court found the Nevada choice of law provision unenforceable because the application of Nevada law conflicts with the fundamental policy set forth in the Finance Lenders Law and California has a greater interest in the parties’ transaction. Brack v. Omni Loan Company, CA Court of Appeal - 4th District, No. D049198, July 16, 2008.
The Ever-Changing Meal Break Issue
Recently, the 4th District Court of Appeal struck down class status for approximately 60,000 California restaurant workers who sued over rest and meal breaks. This ruling is the first time an appeals court has defined the legal requirements for employee rest and meal breaks. The Appellate Court concluded that while employers cannot discourage or keep employees from taking rest periods, “they need only provide, not ensure, that rest periods and meal breaks are taken;” employers must only authorize and permit rest breaks during a set time, but they do not have to occur in the middle of the work period; employers are not required to provide a meal break for every five consecutive hours worked (instead employees may take their first meal break right away, and the second meal period need not occur within five hours of the end of the first five hour period but is due only after 10 hours of total work, even if the first meal period occurs very early in the shift); and employers can be held liable for employees working off the clock only if the employer know or should have known the employees were doing so. The Appellate Court further concluded that “the off-the-clock claims are also not amendable to class treatment as individual issues predominate” on the issue of whether an employer forced employees to work off the clock, whether the employer changed the time records, and whether the employer knew or should have known that employees were working off the clock. Brinker Restaurant Corp. v. Sup. Ct. of San Diego County, D049331.
Subpoenas Don't Trigger Anti-Slapp
Plaintiff obtained a pre-filing discovery order in Ohio to aid in his effort to learn the identities of the anonymous individuals who had posted statements about him on the Internet that he believed were defamatory. Defendants, who we will refer to as the Does, are the anonymous individuals who posted those statements. When Google, the subject of Tendler's discovery order, refused to comply with Ohio subpoenas, Tendler filed a request for subpoenas in Santa Clara County Superior Court premised on the Ohio discovery order. The Does filed a motion to quash and a Code of Civil Procedure section 425.16 motion to strike (anti-SLAPP motion). The threat of having to pay defendants’ attorney fees was sufficient for him to withdraw his request for subpoenas. Nonetheless, the Does proceeded on their section 425.16 motion to strike.
The trial court granted the Does' anti-SLAPP motion to strike, and awarded them their attorney fees. The trial court concluded that a request for subpoenas was sufficient to trigger the anti-SLAPP procedure. The Court of Appeal disagreed, and concluded that a request for subpoenas does not fall within section 425.16, and therefore the trial court erred in granting the motion and in awarding attorney's fees.
This was another example of a trial court misusing the anti-SLAPP procedure to try to clear its trial docket. In a standard action, where defendant tries to strike the complaint by way of an anti-SLAPP motion, the trial court must afford reasonable discovery so that plaintiff can try to find sufficient evidence to create a prima facie case. If a plaintiff could be subjected to an anti-SLAPP motion from the mere request for discovery, that would greatly reduce his ability to defend his reputation.
Tendler v. jewishsurvivors.blogspot.com (2008) 164 Cal.App.4th 802
Six Ways to Keep Your Business Out of Court
An unplanned tour of our judicial system can be financially devastating to a business. Upon being sued, the business becomes an unwilling participant in costly and often inescapable legal proceedings. The fact that the suit may be groundless is of little comfort. Long before any court looks at the relative merits of the plaintiff's claims, the business will be running up legal fees answering the complaint, responding to discovery requests, attending depositions, and having its attorney attend innumerable court appearances. Some businesses end up in bankruptcy from the process alone.
While law suits are seemingly unavoidable in our litigious society, a business need not wait helplessly for the process server to arrive. The best course of action for any business is to take affirmative steps now that will maximize the chances of avoiding a sustainable court action.
This week we look at your dealings with both prospective and current employees. And while no advice can protect you from your intentional acts, the following tips may keep your innocent acts from landing you in court.
Check your hiring procedure.
With no evil intent, many businesses adopt discriminatory hiring practices. Here is a common scenario:
You have decided that your business really needs a part-time "gofer" to run miscellaneous errands. Since the job does not pay very much and you are located near campus, you decide to run a classified ad asking for college students to apply.
Your innocent ad could lead to a suit for age discrimination. Since you have limited the possible applicants to college students, you may be creating the impression that you are discriminating against retirees, for example. You may be guilty of race discrimination as well, since the percentage of minority college students is probably not reflective of the population as a whole.
Ads that seek a "gal Friday" or "housewives looking for extra income" are equally unacceptable since they carry gender-bias overtones and thus may appear to discriminate on the basis of gender.
Just advertise the job description and let the candidates decide if they are interested. This will not only avoid claims of discrimination, it will expand your pool of qualified candidates.
Check your interviewing procedure.
Having written the perfect, nondiscriminatory job ad, don't undue your good work once you start interviewing.
Don't ask any question that isn't somehow job related. Even seemingly harmless small talk during the interview can get you in trouble. For example, asking a woman about her plans for marriage and children smacks of gender discrimination. These questions are frequently asked by interviewers who are afraid the candidate will take a maternity leave right after she is trained. Just as it is usually illegal to fire a woman because she is pregnant, hiring decisions cannot be based on a woman's intent to have children.
Even questions concerning education may be improper if the job does not require any special schooling.
To be safe, make a list of the questions you intend to ask, and then review your list to make certain all the questions are justifiable as being job related and neutral in tone.
Check your employment contracts.
Now that you've decided to hire someone, what are the conditions of their employment? Are they guaranteed employment for a specific period of time, or can you terminate them "at-will?" How much will they be paid? If an employee works for a commission, how are unpaid commissions handled if the employee leaves? Were any benefits promised?
If you don't have a contract specifying these points, you may end up litigating them. As the old saw goes, "oral contracts aren't worth the paper they're written on." If you're not using employment contracts, start. Keep the agreement simple, but make sure it covers the main points.
A very important issue is the grounds for termination. Unless industry standards or corporate philosophies mandate otherwise, your employees should be terminable at-will. Absent a bad economy, no rational employer is going to fire an employee that is doing a good job. But too many employers unnecessarily limit their options by promising to keep an employee "as long as they do a good job." That should go without saying, but having said it, at-will status may be defeated. If it later becomes necessary to fire the employee, he or she can bring an action for wrongful termination, claiming the termination was without good cause and therefore a breach of the promise not to fire.
For the same reason, don't use a probationary period for new employees. To do so implies that the employee will obtain "permanent" status once the probationary period is over. Keep your employees "at-will," and make sure that status is reflected in the employment contract.
Check your employee handbook.
If your company rules and policies are set forth in a handbook, they will be considered a part of your employment contracts. It is therefore essential to make certain that the wording of your handbook isn't negating the intent of your contracts.
Employee handbooks are fertile ground for finding that an employee cannot be terminated at-will. A recent court decision held that a basketball coach, hired on a one-year contract, could not be fired at the end of that year except for good cause. The court's decision was based on the school's handbook, which imposed such a condition.
If you have a handbook -- follow it.
Having reviewed your company's handbook, make sure it is followed. A common mistake is to discipline an employee without first following the review procedure contained in the employee handbook. Even if caught committing murder and mayhem, the employee is contractually entitled to whatever review process that has been established. While a snap disciplinary decision may later be vindicated, the point here is to stay out of court altogether. That can only be accomplished by following procedure, regardless of how egregious the employee's conduct may seem.
Document, document, document.
Document all employment matters, from hiring to termination. If the day comes that you need to justify a hiring, promotion or firing, you will want written documentation to support your decision.
When hiring, be prepared to justify why you hired one candidate over another. That will require keeping on file the applications and/or resumes of all the candidates. You will be at a serious disadvantage in court if you can't remember why you failed to hire a particular candidate.
Current employees should receive written evaluations at least every year, and any interim problems or kudos should also be documented. All evaluations should be signed by the employee, acknowledging receipt.
Supervisors understandably hate to give bad evaluations since it is confrontational and hurts morale. But such reluctance frequently results in a file with nothing but glowing evaluations. Supervisors should always give scrupulously honest reviews.
