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small business issues

CONTRACTS

Performance Excused

If my business was physically destroyed or damaged by the fires, do my contracts for goods and services need to be performed?

It depends. A party will be relieved from its obligation to supply goods or perform services if, without the party’s fault, performance of the contract has become impossible. However, the impossibility must be “objective,” in the sense that no one can perform the contract. For example, a contract to clean houses in Rancho Bernardo that burned to the ground would be impossible to perform. If reasonable alternative means for performance of the contract are available, impossibility likely will not apply. However, other legal doctrines, as described below, may apply.

My business is in the affected area and has not been physically affected by the wildfires; however, my business has deteriorated substantially after the wildfires. Do my contracts for goods and services need to be performed?

Yes. Typically, impossibility excuses a party’s performance only when the destruction of the subject matter of the contract or the means of performance renders performance impossible. In addition, a party may be excused from performing its contractual obligations if performance is found to be impracticable. However, if a party has a choice of ways to perform the obligations and only one option is precluded, that is not generally considered impracticable, even if the remaining option is more burdensome or more expensive.

If my business has been taken over by police/fire or other state agency for relief work, are contracts for future performance excused?

Generally, yes. When the government, through its sovereign power, intervenes for the preservation of the country or makes performance of a contract impossible, the contracting parties generally are relieved of further liability. Because the test is whether a change renders performance impossible, the mere fact that a contract has become more difficult or expensive to perform because of a new law or regulation does not excuse performance. In addition, government intervention may only provide for a delay in performance rather than a permanent excuse.

Does a “force majeure” clause in a contract that my business has with another party automatically relieve the other party of its liability under the contract?

No. A “force majeure” clause is a provision in a contract that excuses a party to the contract from performing under the contract because of the occurrence of an event beyond the party’s control. The other party may or may not be liable depending on the provisions of the force majeure clause. A party may excuse itself from liability under a force majeure clause only by showing that the event preventing its performance was contemplated by the force majeure clause. A force majeure clause may be drafted broadly (to include a few events such as an “act of war” and a catch-all phrase such as “or other events beyond its control” or “unavoidable causes") or more narrowly (listing the specific events that prevent performance and including only a narrow catch-all).

Even if the contract does not contain a force majeure clause, or if the clause is not broad enough to include the events surrounding the wildfires, it is possible that a contract will not be enforced due to “impossibility” and related doctrines discussed above.

If the business owner or key employee is dead (or sick), does the business still need to perform contracts of personal service?

No. If the primary purpose of a personal services contract is to permit a specified person to perform in a certain manner, there is an implied intent by the parties to hold each other liable only if the health and life of that person permits continued performance. To be covered under this general rule, the act or acts to be performed must be ones that can be performed only by the particular individual named in the contract.

What happens to advances received from third parties (or given to third parties) where the performance of the contract is excused?

If goods or services are not supplied, advances must be returned.

What if I can no longer deliver or accept goods under my contracts? Can someone else perform on my behalf?

Absent a provision in the contract prohibiting assignment, a party may be able to delegate or assign its duties or rights under a contract to someone else unless the other party has a substantial interest in having the original promisor perform the acts required by the contract. The rights of the buyer or seller also may be assigned unless the assignment would significantly change the duty of the other party, increase the burden or risk imposed on him by the contract, or significantly impair the chance of obtaining return performance. Parties delegating or assigning duties will still be liable under the original contract. Many commercial contracts provide that duties of the buyer and seller cannot be delegated or assigned without the prior written consent of the other party.

Liability for Damaged Property

What if goods that were paid for by the buyer were destroyed before they could be delivered?

In the absence of an agreement to the contrary, risk of loss of goods subject to sale passes in the following manner: 1) if a contract requires physical delivery of identified goods to a specific destination, title passes on tender of the goods at that destination; 2) if the contract does not specify a place of delivery, title passes at the time and place of shipment or if delivery is to be made without moving the goods, title passes at the time and place documents of title are to be delivered; and 3) if no documents of title are delivered, title passes at the time and place of contract. An insurance policy may cover damage to or destruction of the goods.

If I have equipment that was either leased or purchased on credit and is now destroyed or damaged, am I obligated to continue making payments on the equipment?

This question is usually governed by the terms of the specific contract, lease, or credit agreement. In addition, the loss of equipment could be covered by an insurance policy. If the equipment was not covered by an insurance policy, most likely payments must continue to be made.

See the information on real estate below for additional information on damage to real property.

Is my business liable for damage to a customer’s property caused by the wildfires? Is my dry cleaning or laundry business liable for damage to customers’ clothing that was in the store? Is my jewelry/TV/watch repair store liable for damages to customers’ property that was in the store for purposes of repair or maintenance?

Probably not. When the owner of personal property (a bailor) delivers the property to another (a bailee) for a particular purpose, with the understanding that the property must be returned to the owner, a bailment contract is formed. In each of the three situations above, a bailment relationship exists for benefit of both parties because the bailee receives compensation and the bailor receives a service. Therefore, the bailee would only be liable to the bailor for property damaged through the bailee’s negligence.

Because the relevant legal standard is the bailee’s negligence, it is necessary to consider how the property was damaged or lost and what actions the bailee took to protect it. Destruction caused by the fires would not likely be a breach of the bailment contract. However, if all of the other jewelry stores carried customer merchandise out of the store and one jeweler did not, then that one jeweler may be deemed negligent. In addition, if all dry cleaners except one locked the door when evacuating, that one dry cleaner may be deemed negligent if a customer’s clothes were stolen.

Lost Checks or Correspondence

Is there a contract if, in response to my offer, the offeree sends an acceptance by mail but I never received it because it was lost or destroyed?

Yes, there is a contract and thus an obligation to perform. Assuming that you, as the offeror, did not specify a mode of acceptance other than mail, acceptance of an offer is effective when the letter is dropped in the mailbox, and not upon receipt. The offeree has the power to accept and close the contract by mailing a letter of acceptance within a time specified in the offer (or within a reasonable time, if no time is stated).

If, for example, my insurance payment premium was due on October 25th and the payment was sent on October 22nd, would the policy cover damages that occurred on October 24th, even if the payment was not received on the actual due date or was destroyed in the mail?

The “mailbox rule” or “postal acceptance rule” described above also applies to insurance premiums. Assuming that the insurance company requested that the premium be mailed and the premium payment was mailed in a timely manner, the insurance company is obligated to defend and indemnify the insured party.

What if a check was mailed but it was not received?

There are different alternatives depending on the type of check that was lost:

Checks payable from debtor’s account:A bank customer has a right to stop payment of any item, including a check, drawn on that customer’s account. After the stop payment is made, the debtor may issue a new check without bearing the risk of loss should the bank fail to stop the original check.

Certified checks: Since certified checks are drawn by the bank, the bank is not required to stop payment on lost or destroyed checks and issue replacements unless an indemnity bond of twice the unpaid amount is posted. This serves to protect banks from potential double liability, should a holder of the lost check later present it for payment.

Business Licenses

My business was destroyed by the wildfires. Is my business license still in effect, and what do I do if it needs to be replaced?

For any issues relating to business licenses, contact the state or local authority that issued your license.

BUSINESS REAL ESTATE

The following questions are designed to provide general information for small businesses that rent their space from a landlord, and for landlords who rent space to small businesses. (For questions about landlord-tenant issues for a residence, please refer to the sections of this Handbook on Housing). As with other information in this Handbook, this is intended to provide general information that may be helpful in assessing the types of legal questions that may be faced by small businesses and landlords that rent space to small businesses.

Generally, the rights of both the tenant and the landlord will be determined by the provisions of your lease. There is no one single “standard” form of lease, even though many leases are based on preprinted lease forms. The provisions of a lease which cover these matters can vary significantly, even for different leases in the same building. A professional will need to check the provisions of your lease carefully to answer these questions for your particular case. The following is only general advice for tenants and landlords regarding property that is damaged or unusable as a result of accidental destruction relating to the wildfires and is based on general principles of state law in California and some of the form leases commonly used in those states.

Leases

What happens if the building or property that is leased is destroyed? Does the lease automatically terminate? Does the tenant have to pay rent?

To answer these questions, you will need to first check your lease to see if there is a specific written provision setting forth what happens if the leased premises are completely or substantially destroyed or partially damaged. Most business leases include this type of provision, and these provisions may include definitions that will help you to determine whether your building has been destroyed or partially damaged. If your lease contains such written provisions, those written provisions will govern and should provide the answer to your question.

If your lease does not contain specific provisions setting forth what happens when the leased premises are destroyed or partially damaged, or if you do not have a written lease, then this question will be answered based on general provisions of California state law.

Under California law, unless a lease contains specific provisions to the contrary, a lease automatically terminates only when the leased premises are either completely destroyed or “substantially damaged,” which is when the leased premises have been damaged to the extent that they are no longer fit for the use for which they were originally leased. This is a fact determination made on a case-by-case basis.

Whether the property is totally unfit for use will depend on several factors. The primary factor is the extent of damage. For example, a building that burns to the ground would likely be considered destroyed. But if the damage is limited (for example, if only the roof is damaged or smoke or water from firefighting only damaged the ceiling, floor, or carpet of a leased building), then the tenant probably cannot terminate the lease on the basis of that damage. Another factor is the landlord’s ability to repair the premises. If the landlord can repair the damage in a reasonable period of time, then the tenant may not be able to terminate the lease.

Once the lease is terminated, the tenant is relieved of any obligation to pay rent. But until the lease is terminated the tenant must continue to pay rent according to the terms of the lease. In some cases, depending upon the terms of the lease, the tenant may be able to pay an adjusted rent until necessary repairs are made, but the need for repairs does not automatically release the tenant from its obligation to pay rent.

What degree of damage to the premises constitutes “partially damaged” or “destroyed” or “substantially damaged”?

The answer depends on the individual facts involved. To be considered “destroyed” or “substantially damaged,” the premises must cease to be fit for the use for which they were rented. While major fire damage will almost always result in “total destruction,” more limited fire damage and damage from smoke and/or water may be considered only partial damage. However, in the case of a ground lease in which the tenant rents the underlying land and is responsible for all improvements upon the land, then damage to the improvements will generally not permit the tenant to terminate the lease.

Is the landlord obligated to rebuild the building?

Again, it is important to refer to your lease, as commercial leases generally have provisions dealing with the landlord’s obligations to rebuild.

Absent an express provision in the lease, the answer generally depends on the severity of the damage. If the building is so seriously damaged that the premises are totally damaged or rendered wholly unusable, the landlord may terminate the lease rather than rebuilding.

Does the tenant have the right to terminate the lease if the landlord plans to rebuild the building?

Tenants should consult their own lease.

Can the landlord terminate the lease if the premises are partially destroyed?

A landlord can terminate a lease when (1) the lease itself gives the landlord a right to terminate when a disaster renders the premises partially unusable or (2) the landlord and tenant mutually agree to terminate the lease.

If the landlord terminates the lease, is the tenant entitled to receive its security deposit?

Yes, unless the express terms of the lease make it nonrefundable. According to California law, the landlord must refund the security deposit (less any lawful deductions) within 30 days after the tenant vacates the premises.

Is the landlord required to repair and restore the tenant’s furniture and equipment?

Generally, the landlord is not required to repair any damage to the tenant’s furniture and/or furnishings or any fixtures or equipment, improvements, or appurtenances that are removable. This damage should be covered by the tenant’s insurance company.

Is the tenant obligated to pay rent during the time that the landlord makes repairs on the building?

Again, this depends on the severity of the damage. Determining whether premises are totally or partially destroyed is a fact determination made on a case-by-case basis. To be considered “destroyed” or “substantially damaged,” the premises must cease to be fit for use. In the event the premises are destroyed or substantially damaged, the lease terminates with no further liability on the part of the tenant or the landlord. The tenant does not have to continue rent payments from the time of the destruction or substantial damage. Extreme fire is likely to be considered “destruction,” while minor fire, water, or smoke damage is most likely only a partial damage. Under California law, rent reductions for partial damage will be governed by the terms of the lease.

Once the landlord completes the restoration of the premises, the tenant may still have work to do to repair installations, phones, office equipment, etc. The tenant will be obligated to pay rent during this time period, but may be able to cover the cost of that rent from proceeds of the tenant’s business interruption insurance policy.

Note, again, that generally commercial leases have specific provisions governing rent abatement in the event of destruction of the premises, and these provisions dictate the rights of the landlord or tenant. Refer to your lease.

How long can the landlord take to repair the premises?

If the landlord elects or is required to repair the premises under the terms of the lease, the landlord must do so reasonably expeditiously, subject to delays due to adjustment of insurance claims, labor troubles, and causes beyond the landlord’s control.

Can the tenant withhold rent if the landlord has failed to timely repair the premises after the disaster?

Generally, unless the lease provides otherwise, a tenant remains obligated to pay rent if the premises are usable and are not totally destroyed or made unusable, as discussed above. Thus, the requirement to pay rent is not generally dependent on whether the landlord makes timely repairs, unless the lease permits the tenant to terminate the lease on this basis. If the landlord fails to make repairs required under the terms of the lease, the tenant may sue for its economic damages resulting from the landlord’s breach of its contractual duties.

Remember, however, that commercial leases usually have specific provisions regarding repairs and that the lease provisions will dictate the rights of the landlord or tenant. Refer to your lease.

If the landlord elects to terminate the lease, is the landlord obligated to help the tenant find alternative space or reimburse the tenant for related costs?

No, unless the lease contains a specific provision that provides for this.

Can the landlord rent the premises to someone else while the tenant is gone?

No, unless the lease expressly provides otherwise, a landlord cannot rent the premises to another party unless the lease has been terminated. The landlord has an obligation to make the leased space available to the tenant as long as the lease is in effect. The landlord cannot impair the tenant’s “quiet possession” of the property unless there has been a default by the tenant and the lease has been terminated.

Condemned Buildings

Can the building be condemned?

Yes. Governmental agencies that have jurisdiction over a building may order it to be condemned if the building is not suitable for safe occupancy. Generally, either FEMA or the local building inspection department are the agencies that have jurisdiction to determine that a building cannot safely be occupied.

If the building is condemned, will the property owner be paid for the loss?

When the government condemns property based on a finding that it is no longer habitable or safe for occupancy, the government is not responsible for paying for the loss of the property. Generally, the government is only required to pay for the loss of the property when the property is taken by the government for a public use. Condemnation of property as unsafe generally is not a “taking” for public use. To the extent the owner can recover the lost value of the condemned property, the property owner might be able to recover all or part of the value of the property from the owner’s insurance (depending on the terms of that insurance) or from FEMA or other relief agencies.

Tax Relief

I own a small building in the area which was damaged. Is there any relief from my obligation to pay property taxes?

Taxpayers with taxable property that was damaged or destroyed by the wildfires in the counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara, and Ventura may be eligible for property tax relief. Applications for reduced assessments must be filed with the county assessor. Taxpayers should contact their local county assessor for more information.

Can I get an extension to file returns and pay my business taxes?

A one-month extension to file returns and pay business taxes is available to taxpayers who work or reside in the counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara, and Ventura, and who, as a result of the recent wildfires, cannot meet tax-filing and payment deadlines. This extension applies to sales and use taxes, fuel use taxes, alcoholic beverage taxes, cigarette and tobacco product taxes, timber yield taxes, interstate user taxes, energy resource surcharges, natural gas surcharges, emergency telephone user surcharges, electronic waste and integrated waste management fees, tire recycling fees, hazardous waste fees, underground storage tank maintenance fees, oil spill prevention and response fees, and occupational and childhood lead poisoning fees. The State Board of Equalization also may extend deadlines for filings delayed by the disruption of the mail. In order to qualify for the extension, the taxpayer must include a statement signed under the penalty of perjury stating the cause for the late filing.

Can I get relief from interest and penalties if I am late filing and paying various business taxes?

Taxpayers who are unable to file their returns and pay taxes and fees in a timely manner may receive relief from interest and penalties. Such relief is available for sales and use taxes, fuel use taxes, alcoholic beverage taxes, cigarette and tobacco product taxes, timber yield taxes, gasoline taxes, energy resource surcharges, emergency telephone user surcharges, hazardous waste fees, integrated waste management fees, occupational and childhood lead poisoning fees, underground storage tank maintenance fees, jet fuel taxes, diesel fuel taxes, interstate user taxes, insurance taxes, natural gas surcharges, ballast water management fees, tire recycling fees, and oil spill prevention and response fees. In order to qualify for relief from interest and penalties, the taxpayer must include a statement signed under the penalty of perjury stating the cause for the late filing.

Can I get copies of State Board of Equalization tax records lost in the fire?

Business owners and fee payers may obtain replacements of State Board of Equalization tax records lost in the fire, free of charge. To obtain copies of such records, including prior tax returns filed with the State Board of Equalization, audits and permit application forms, taxpayers should call (800) 400-7115.

employment

The answers to each of the following questions are based on the assumption that the affected employees are not covered by a collective bargaining agreement and do not have an employment contract with their employer. In the event that the affected employees are covered by a collective bargaining agreement or an employment contract, the employer should consult the terms and conditions of those agreements and contracts. Similarly, if the employer has certain established employment policies, the employer should consult and comply with its policies.

Salary and Leave

Does an employer have to pay its employees for the days that its business was closed as a result of the Southern California Wildfires?

The answer to this question depends on whether the employee is considered an “exempt” employee or a “non-exempt” employee for purposes of federal and state wage-and-hour laws. Every employee must be treated as either exempt (not entitled to premium pay for overtime hours worked) or non-exempt (entitled to premium pay for overtime hours worked) under federal and state wage-and-hour laws. The determination of whether an employee is “exempt” or “non-exempt” is a complicated, fact-specific determination. Generally speaking, an employee is considered a non-exempt employee if the employee is paid on an hourly basis and not on a salary basis. In contrast, to be considered an exempt employee, an employee must be paid on a salary basis and must have certain job duties and responsibilities that are executive, administrative, or professional (among others) as required under the applicable federal and state wage-and-hour laws.

An employer is not required to pay its non-exempt employees for any days or hours that the employees did not work because the business was closed during the Southern California Wildfires. On the other hand, an exempt employee should receive his or her full salary for any week in which he or she performed any work without regard to the number of days or hours worked. Thus, if an exempt employee worked on Sunday, October 21, 2007, but worked no other days during the week of October 21, 2007, then the employer should pay the employee his or her full salary for the week of October 21, 2007.

In addition, to the extent employees perform work for the employer during the Southern California Wildfires, employers should continue to pay such employees for such work on the days designated in advance by the employer (i.e., twice a month), whether or not the employer’s offices are closed due to the Southern California Wildfires.

Once an employer reopens its business, does the employer have to pay its employees for the days on which a transportation problem or some other obstacle prevented them from reporting to work?

This also depends on whether the employee is considered an exempt or non-exempt employee. For purposes of wage-and-hour laws, the employer is not required to pay a non-exempt employee for any days or hours that the employee was absent from work due to a transportation problem or some other obstacle that prevented him or her from reporting to work. An exempt employee should receive his or her full salary for any week in which he or she performed any work.

May an employer require its employees to use their accrued vacation or sick leave to cover their absences from work due to the Southern California Wildfires?

Once the employer reopens, if an employee is unable to report to work due to the Southern California Wildfires, the employer may require an employee to use his or her accrued vacation or sick leave to cover his or her absences, provided that this is consistent with the employer’s leave policies. If an employee’s absence qualifies as a leave under the federal Family Medical Leave Act (FMLA) or its California counterpart, the California Family Rights Act (CFRA), or pregnancy disability leave under the California Fair Employment and Housing Act (FEHA), employer-mandated substitution of vacation or sick leave may not be permitted. See below for discussion of the FMLA, CFRA, and pregnancy-related leave under the FEHA.

Does an employer have to provide an employee with either paid or unpaid leave if the employee is unable to work as a result of an injury suffered during the Southern California Wildfires?

Employers may be required to provide employees with unpaid leave (1) under the FMLA/CFRA if the employee or a member of his/her immediate family is suffering from a serious health condition; (2) under the California FEHA, for pregnancy, childbirth, or related medical conditions; or (3) under the Americans with Disabilities Act (ADA)/California FEHA if the employee is disabled and if the granting of leave would serve as a reasonable accommodation to the employee’s disability.

Leave Under the FMLA/CFRA. The FMLA/CFRA provides that a covered employee may take up to a total of 12 weeks of unpaid leave during any 12-month period for certain qualifying reasons. During the leave period, the employer must maintain the employee’s health benefits and must guarantee that the employee will be reinstated to the same or an equivalent position. FMLA/CFRA leave is unpaid, unless the employer has elected to pay employees during such leave.

The FMLA/CFRA applies to only those employers that employ 50 or more employees for each working day in each of 20 or more calendar work weeks in the current or preceding calendar year. An employee is entitled to FMLA/CFRA leave if the employee: (1) has been with the employer for at least 12 months; (2) logged at least 1,250 hours of services during the 12-month period immediately preceding the start of the leave; and (3) is employed at a worksite where 50 or more employees are employed by the employer or within 75 miles of that worksite. FMLA/CFRA leave may be taken to care for the employee’s spouse, child, or parent with a serious health condition or because of a serious health condition that makes the employee unable to perform the functions of the employee’s position.

For more information regarding compliance with the FMLA, check out the following website: http://www.dol.gov/esa/regs/compliance.

For more information regarding compliance with the CFRA, check out the following website: www.dfeh.ca.gov/publications.

Pregnancy-Related Leave Under California’s Fair Employment and Housing Act. Under the FEHA, employers with five or more employees must allow female employees to take up to four months of leave for periods of disability due to pregnancy, childbirth, or related medical conditions. The employee may elect to use accrued vacation leave, and may be required to substitute sick leave, or any other accrued leave which is made available by the employer to temporarily disabled employees. The employer must continue to provide the same benefits or privileges of employment granted by that employer to other employees.

Pregnancy-related leave under the FEHA is unpaid, unless your employer has elected to pay employees during such leave. As described below, you may also be eligible to receive disability benefits under the California SDI program during a qualifying pregnancy-related leave.

For more information regarding FEHA, check out the following website: www.dfeh.ca.gov/publications.

Leave Under the ADA/California FEHA. Under certain circumstances, an employer may be required to provide an employee with leave under the ADA/California FEHA. The ADA/California FEHA requires employers, in certain circumstances, to provide reasonable accommodations to employees who have a disability. Such a reasonable accommodation may include providing an employee with an unpaid or paid leave of absence.

The California FEHA generally provides broader protections than its federal counterpart, the ADA. Though the ADA applies to only those employers that employ 15 or more employees for each working day in each of 20 or more calendar work weeks in the current or preceding calendar year, the California FEHA applies to employers with five or more employees. In addition, under the ADA, an employee is “disabled” if the employee has a physical or mental impairment that substantially limits a “major life activity” of an individual, including activities such as walking, seeing, hearing, speaking, breathing, learning, working, sitting, standing, lifting, or reaching, whereas under the California FEHA, an employee is “disabled” if he or she has a physical or mental impairment that limits a “major life activity.” Generally, temporary impairments are not considered protected disabilities.

Is an employee entitled to either paid or unpaid leave so that he or she can care for children or family members injured by the Southern California Wildfires?

As described above, employees may be entitled to FMLA/CFRA leave, which they can use to care for children or family members injured in the Southern California Wildfires. If employees are entitled to FMLA/CFRA leave as described above, then the employer must allow them to take FMLA/CFRA leave. This leave does not have to be paid leave, but employees are entitled to use their accrued vacation or sick leave for the absence as well as unpaid leave. In addition, employees may also be eligible to receive benefits under the California Paid Family Leave program during a qualifying FMLA/CFRA leave if the leave is taken to care for a seriously ill family member. In addition, employers should be sure to comply with any specific policies providing for leave under such circumstances.

For more information regarding the California Paid Family Leave program, check out the following website: www.edd.ca.gov. To the extent employees request leave to care for a seriously ill family member, employers are required to provide such employees with the following pamphlet, which describes the California Paid Family Leave program: www.edd.ca.gov.

Is an employee entitled to either paid or unpaid leave if the employee is too afraid or emotionally traumatized to return to work as a result of the Southern California Wildfires?

If an employee is suffering from post-traumatic stress or some other mental condition, the employer may be required to provide the employee with unpaid leave under the FMLA/CFRA or as an accommodation under the ADA/California FEHA. However, the employee will have to meet the applicable requirements of the FMLA/CFRA and ADA, as set forth above. If the employer provides paid leave, the employee may be able to use his or her accrued vacation or sick leave for the absence.

If an employee does not qualify for the requirements of FMLA/CFRA or ADA/California FEHA leave, and does not return to work, employers can consider termination of employment, though consultation with legal counsel is recommended before doing so.

Where can an employer get more information about complying with the FMLA, CFRA, the ADA, and the California FEHA?

The United States Department of Labor’s website at http://www.dol.gov/esa contains detailed information about the FMLA, including a Fact Sheet, a Compliance Guide, the text of the statute and accompanying regulations, and relevant forms. For more information regarding compliance with the CFRA, check out the following website: www.dfeh.ca.gov/publications.

The Department of Justice has online information about the ADA at http://www.usdoj.gov/crt/ada/adahom1.htm. The California Department of Fair Employment and Housing provides online information regarding the FEHA at www.dfeh.ca.gov.

What can employers do to help their employees recover psychologically from the trauma of the Southern California Wildfires and their aftermath?

An employer’s health plan may experience an increase in mental health claims, as well as more requests for assistance under employee assistance programs (EAPs). Employers should advise their employees of both the availability and the importance of such counseling, both for themselves and their families. If an employer does not have an EAP, counseling and other related services are available on a fee-paying basis. If employees are veterans, assistance may be available from the Veteran Administration.

In addition, employers should consider telling their employees about the free counseling hotline established by United Health Group to help those coping with the emotional consequences of the Southern California Wildfires. The phone line will be open 24 hours a day, seven days a week, for as long as needed, at (866) 342-6892.

What should be done about Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage?

Employers having 25 or more employees who maintain health plans are required to offer continuation coverage under the federal COBRA to qualified beneficiaries (participating employees and/or their dependents) who lose health coverage due to a “qualifying event” (such as the death of the covered employee, termination of employment, or reduction of hours sufficient to cause the loss of medical coverage). Smaller employers (with 2 to 19 employees) who maintain health plans are required by the California COBRA (Continuation Benefits Replacement Act) to provide COBRA-like coverage to their eligible employees. Under both COBRA and California COBRA, employees must pay for this medical coverage themselves.

Once an affected employee loses coverage as a result of one of these events, the employer must take action to notify the plan administrator within the prescribed time period. Qualified beneficiaries must be informed of their right to continued health insurance coverage under COBRA within 44 days (the employer must notify the plan administrator within 30 days, and the plan administrator must then notify eligible dependents within 14 days) of a qualifying event. All required notices regarding COBRA should be carefully documented and timely. Generally, the qualified beneficiary has 60 days from the later of: (a) the date of termination of coverage or (b) his or her receipt of a COBRA notice to elect to continue coverage. COBRA coverage can continue for up to 36 months under applicable California law.

Employers, while not required to do so, have the option of extending certain non-mandated COBRA benefits in the wake of the Southern California Wildfires (such as offering to pay COBRA premiums for a certain length of time, etc.).

Damage to Office and Records

If an employer’s records were destroyed as a result of the Southern California Wildfires and their aftermath, what basic payroll records does the employer need to try to recreate?

Under applicable federal law, every employer must establish, maintain, and preserve weekly payroll records, including the following information for each employee:

Under applicable California law, payroll records must be maintained by the employer, who must make them available to the employee upon request. An employer’s failure to have such records in its possession may subject the employer to liability in the form of penalties under the California Labor Code, and possible civil liability. However, if such records have been destroyed due to the Southern California Wildfires, these and other circumstances suggesting impossibility of performance may be considered as an affirmative defense per the California Labor Code.

When must an employer pay its workers if the employer’s payroll records were destroyed?

California requires timely payment of wages according to a regularly-set schedule established by the employer, in compliance with the requirements of the California Labor Code. In most cases, employees must be paid at least twice per month, with payment for labor performed between the 1st and the 15th of the month paid for between the 16th and 26th day of the month during which the labor was performed, and payment for labor performed between the 16th and last day of the month, inclusive, paid for between the 1st and 10th day of the following month. If records are not available, the employer should make a reasonable effort to determine the hours worked by the employees, and make payment accordingly as promptly as possible.

If an employer has employees working from home because the employer’s offices were destroyed, what does the employer need to know and how does the employer get the needed information?

Generally speaking, the same rules apply when employees work from a remote location as when they worked in the office. For example, employees who are considered non-exempt under the wage-and-hour laws should be required to keep track of the hours of work for payroll and overtime purposes.

Does an employer have to reimburse its employees for the destruction or loss of any of their personal items, such as personal computers or cars that they may have used for business purposes?

You should consult with your insurance provider to determine whether loss of employees’ personal property is covered by any insurance policy. Ordinarily, employers are not responsible for reimbursing employees for the loss or damage to personal property an employee chose to bring to the worksite.

Are employers able to obtain extensions for filing payroll taxes with the State of California due to the Southern California Wildfires?

Employers in some areas may be able to request an extension to file their state payroll taxes and deposit state payroll taxes with the California Employment Development Department (EDD) without penalty or interest, where the employer’s delay can be attributed to the Southern California Wildfires. State payroll taxes include Unemployment Insurance, Employment Training Tax, State Disability Insurance, and California Personal Income Tax. For the most updated information regarding extensions, employers should contact the EDD by either visiting the EDD’s website at www.edd.ca.gov or by calling the EDD Taxpayer Assistance Center at (888) 745-3886.

Layoffs and Closing the Business

Does an employer have to provide its employees with any prior notice of termination if the employer determines that it is necessary to lay off employees?

No; if the employer does not have an established policy requiring that prior notice be given, the emergency circumstances of the Southern California Wildfires would relieve the employer of a notice obligation. Usually, employers with more than 100 employees may have an obligation to provide certain notice to its employees pursuant to the Worker Adjustment and Retraining Notification (WARN) Act. However, the WARN Act contains an “Act of God” provision if the layoff or shutdown is the result of a natural disaster. Note that employers with established policies requiring that prior notice be given may be required to comply with their policies.

Does an employer have to provide its employees with severance pay if the employer decides to lay off employees?

No, so long as the employer does not have a plan, policy, or practice providing for the payment of severance benefits. Neither California law, nor federal law, requires employers to provide severance pay to departing employees.

Is a self-employed, small business owner eligible to receive unemployment insurance benefits?

No. Self-employed, small business owners (sole proprietorships and members of a partnership or limited liability company) as well as independent contractors are not eligible for unemployment insurance benefits. However, persons denied unemployment insurance benefits may be eligible for disaster unemployment assistance (DUA). For more information regarding DUA, see the “Unemployment Benefits” section above.

Is an employer personally liable for its employees’ wages if the failing corporation is unable to make payroll?

Under California law, the shareholder of a corporation is not usually personally liable for the acts or debts of a corporation. In the case of employers who have failed to pay wages as required under California law, courts have found that though corporate agents cannot be held individually liable for unpaid wages, any person acting on behalf of an employer who violates a statute or wage order pertaining to working hours may be subject to a penalty in the amount of the unpaid wages (pursuant to the California Labor Code). In addition, under the federal Fair Labor Standards Act (FLSA), an employer is broadly defined as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” As a result, depending on the circumstances and applicable law, corporate agents may be held personally liable for unpaid wages.