Business Law Journal

The California homestead exemption has been amended effective January 1, 2021.  Under the new law, the homestead exemption now protects home equity equal to the median home price in the county where the debtor resides, not to exceed $600,000, or $300,000, whichever is greater.  The exemption adjusts annually for inflation.  The homestead exemption should be taken into consideration when the defendant may be personally liable for the judgment.

A California appeals court recently determined that debtors who attempt to avoid debt collection by moving their assets out of state and into a different legal form may be liable for fraudulent transfer under California law.  On January 7, 2021, the California Court of Appeals issued a decision in Nagel v. Western (2021) 59 Cal.App.5th 740.  In Nagel the court held that under California’s Uniform Voidable Transactions Act (the “UVTA”), “physically relocating personal property and transmitting or transporting sale proceeds out of state, then transmuting them into a different legal form, may constitute a direct or indirect mode of parting with assets or one’s interests in those assets.”  This means that such transfers would fall under the fraudulent transfer prohibitions of the UVTA.  In short, debtors can no longer feel safe trying to shield their assets from creditors by moving them out of state and changing their form.  And Creditors have a new mechanism at their disposal to try to access those assets despite such maneuverings on the part of the debtors.

In a recent letter to members of the U.S. Senate Finance Committee, dated February 18, 2021, the United States Treasury Inspector General for Tax Administration (the “Inspector General”) outlined a potential disagreement with the Criminal Investigations Division of the Internal Revenue Service (“Criminal Investigations”) regarding the need for a search warrant to utilize databases containing cell phone users’ GPS data.  On one hand, the Inspector General indicated that courts may use “similar logic” to expand a 2018 Supreme Court decision requiring a search warrant to access cell-site location information to likewise apply to GPS data provided to applications operated by third parties.  On the other hand, the letter provides the stated position of Criminal Investigations, which asserts that “Cell Site Location Information [] is distinct from [] opt-in app data,” in apparent reference to the division’s prior claim that GPS data collected by cell phone applications does not require a search warrant because it has been “voluntarily” provided to a third-party.

On January 6, 2021, the Department of Labor (“DOL”) announced the new final rule for worker classifications called the “economic reality” test. The new DOL final rule provided that two core factors were to be examined to determine whether a worker is properly classified as an independent contractor under federal law: (1) the nature and degree of control over the work; and (2) the worker’s opportunity for profit or loss based on initiative and/or investment. As previously discussed here, these requirements are much less stringent than the “ABC” test adopted by California, which requires that the worker perform work outside the usual course of the hiring entity’s business and that the worker is customarily engaged in an independently established business of the same nature.

According to a recent unanimous decision by the California Court of Appeal’s First District, an action alleging violations of California’s Private Attorneys General Act (“PAGA”) may be filed in any county where any allegedly aggrieved employee worked or alleges to have suffered violations of the Labor Code.  It does not matter where the employee suing the company worked or where the employer-company is located. 

The California Supreme Court has rejected an emergency constitutional challenge filed by drivers for Uber, Lyft and other app-based companies and various unions requesting that the Court declare the voter-approved Proposition 22 unconstitutional.  Proposition 22 (“Prop 22”) permits some app-based gig ride-hailing and delivery companies to continue to classify workers as independent contractors despite California’s adoption of the stringent ABC test for worker classification (discussed here).  The union-backed challenge to Prop 22 was not decided on the merits and continued legal activity challenging Prop 22 is expected.  The lawsuit is entitled Hector Castellanos, et al. v. State of California, et al., Case Number S266551.

In order to resolve a COVID-era class action lawsuit concerning its retail stores, Nike has agreed to provide all retail store employees with transparent, see-through face coverings to accommodate its customers who are deaf or hard of hearing and rely on lip reading. Nike’s new policy is part of a proposed settlement following a class action suit against the shoe company’s retail operations.

In a landmark decision issued on January 14, 2021, entitled Vazquez v. Jan-Pro Franchising Int’l Inc. (2021) (“Vazquez”), the California Supreme Court held that the State’s ABC test applies retroactively to cases that were pending at the time of its decision in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903 (“Dynamex”).  Vazquez v. Jan-Pro Franchising Int’l Inc. (2021) 2021 Westlaw 127201.   The Vazquez Court was asked by the Ninth Circuit Court of Appeals to answer the question of whether Dynamex applies retroactively.  In concluding that it does, the Court noted that Dynamex does not impact any settled law, the general rule that judicial decisions are given retroactive effect, and that public policy and fairness concerns favor applying Dynamex retroactively.  Vazquez, however, comes as a significant blow to businesses by making them potentially liable for lawsuits pending long before the ABC test existed.

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Drafting arbitration provisions in the employment context is becoming a form of art. Recent decisions issued by the California Courts of Appeal highlight to employers that even valid arbitration agreements are subject to the court’s scrutiny when it comes to representative actions under the California’s Private Attorneys General Act (“PAGA”), and may not achieve the intended result depending upon the language used in the arbitration agreement.