Stubbs Alderton & Markiles’ Client New Form Announces $18M Funding

new-form-logoSAM Client and Digital-video studio New Form announced this week that it has raised $18 million in second-round funding from the U.K.’s ITV and Discovery Communications, with ITV taking a minority stake in the company. In addition, with its investment ITV entered into a strategic partnership with New Form, which includes a multiyear commercial agreement that will bring New Form content to the ITV Hub starting in 2017.  Congratulations to New Form on this success!

Stubbs Alderton attorneys representing New Form in this transaction were Greg Akselrud and Kelly Laffey.

To read the full feature in Variety Magazine, click here.

For more information about our Internet, Digital Media & Entertainment Practice, contact Greg Akselrud at gakselrud@stubbsalderton.com or (818) 444-4503.

 

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Indemnification and Advancement of Directors and Officers for a Utah Corporation Doing Business in California

Corporate counsel is asked to make many decisions on behalf of a corporate client. A corporate client may seek advice on choice of law selection or where it should incorporate. At the initial founding stages, many clients do not consider that the place of incorporation and choice of law will affect the corporation’s obligations to indemnify and advance expenses to directors and officers.sealofutahstateseal

For this analysis, even if the client chooses to incorporate in Utah, if most of its business is being performed in California, it will be deemed a “quasi-California” corporation pursuant to California Corporations Code section 2115 and will be made subject to several California laws regulating corporations.[1] If the corporation wants to initiate a lawsuit against a director or officer that has failed to act in the best interest of the corporation, counsel must consider where the corporation should file the lawsuit. Crucial to this consideration is that California and Utah have different standards for granting indemnification and advancement of expenses. The choice of forum will dictate the requirements and obligations of the corporation to advance and indemnify its officers and directors.

Indemnification:

A Utah corporation that meets the requirements set forth in California Corporations Code section 2115 will be deemed a “quasi-California” corporation and will be subject to a host of expressly delineated laws regulating out-of-state corporations. Included in the list of applicable provisions is California Corporations Code section 317, California’s law on indemnification and advancement. Section 317(e) provides the law on indemnification:

“any indemnification under this section shall be made by the corporation only if authorized in the specific case, upon a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of conduct …”

The indemnification provision of section 317 is limited by a standard of conduct determination, meaning that the corporation will have some ability to control who receives indemnification and who does not. The standard of conduct set forth in section 317(b) requires a determination that the person to be indemnified “acted in good faith and in a manner the person reasonably believed to be in the best interest of the corporation…” By comparison, the indemnification statute in Utah operates the same way, requiring the corporation to make a determination that the person to be indemnified has met the applicable standard of conduct and has taken action in good faith and in a manner he or she reasonably believed was in the best interest of the corporation.[2] With little variance between the indemnification provisions in California and Utah, it could be expected that the law on advancement would also be similar. But that would be an incorrect assumption.

Advancement:

The Utah statute on advancement is similar to the indemnification statute, requiring that, “a determination is made that the facts then known to those making the determination would not preclude indemnification…”[3] However, unlike the Utah statute, the advancement provision in California is not limited by a standard of conduct determination, or any determination at all. Instead, the California advancement statute states:

“Expenses incurred in defending any proceeding may be advanced by the corporation prior to the final disposition of the proceeding upon receipt of an undertaking by or on behalf of the agent to repay that amount if it shall be determined ultimately that the agent is not entitled to be indemnified as authorized in this section.”

See Cal. Corp. Code § 317(f).

The only requirement for advancement under California law is that the person seeking advancement deliver an undertaking to repay the amount advanced if it is ultimately determined that he or she is not entitled to be indemnified. It is unclear whether the delivery of an undertaking requires anything more than a written promise to pay back any amounts advanced.

This is an important and interesting distinction between California and Utah law, and one that counsel must consider in evaluating disputes between a Utah corporation and its officers and directors. The result of choosing to apply California law is that the corporation might be obligated to provide advancement to its directors and officers without any determination of whether that person meets the applicable standard of conduct, limiting its ability to deny advancement those who have acted outside the best interests of the corporation.

[1] For the full list of provisions quasi-California corporations are made subject to, see California Corporations Code § 2115(b).

[2] Utah Revised Business Corporation Act 16-10a-902(1).

[3] Utah Revised Business Corporation Act 16-10a-904(1).

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For more information about this topic, contact Gina Correia at (818) 444-4500 or gcorreia@stubbsalderton.com.  Gina Correia is a litigation associate of the Firm. Gina’s practice focuses on all stages of business litigation. Prior to joining the firm, Gina worked in-house as a business affairs law clerk for HBO. Gina’s prior experience in the entertainment industry focused on talent engagement negotiations including drafting contract request, calculating actor, producer, and writer fees for top-tier talent, and evaluating comprehensive deal points. Gina also previously worked for The Los Angeles Office of the District Attorney in the Consumer Protection Division where she researched and analyzed wire-tapping violations under Penal Code and Federal Trade Commission guidelines.

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Stubbs Alderton & Markiles’ client TeenSafe featured on Today Show

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SAM client TeenSafe was featured on the Today Show as one of the most advanced systems for overseeing teen’s cell phone activity. TeenSafe is a monitoring service that allows parents to discreetly monitor their child’s iPhone or Android smartphone activities, including texts, web searches, and phone location without violating the phone’s warranty. TeenSafe has been used by more than 500,000 parents to help keep their teens safe.

To read the full article on the Today Show website click here.

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SAM Alert – “The Final Rule – United States DOL Regulations Regarding Overtime Pay”

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The Obama Administration and the Department of Labor (DOL) enacted the “Overtime Final Rule” regulation 6 months ago, which was supposed to be effective as of December 1, 2016.  However, in the recently consolidated pending cases Nevada v. U.S. Department of Labor and Plano Chamber of Commerce v. Perez, on November 22, 2016, the United States District Court, Eastern District of Texas enjoined enforcement of the Final Rule.  The Court upheld the challenges against the Final Rule based on arguments in support of the 10th Amendment – limiting the power of the federal government over the states.  It appears the DOL’s regulation will note be enforced as of December 1, however the ultimate outcome and the timing as to whether the Final Rule will be enforced is unknown.  The uncertainty has several employers scrambling for immediate answers and for good reason.

By the Final Rule, 4.2 million workers nationwide currently not eligible for overtime pay will automatically qualify as “non-exempt” employees entitled to overtime pay.  If effective, California employers will be required to align their policies with the Final Rule.  This includes approximately 400,000 employees in California.

What Happens.

Previously, California employees who worked at a managerial or other executive level and were paid a base annual salary higher than $23,660 were exempt from overtime.  The Final Rule establishes a bright-line divide between exempt and non-exempt employees by placing all employees making less than $47,476 annually or $913 per week into the non-exempt category – which means they are entitled to overtime.  This is over a 200% jump from the standard salary set in 2004.  Literally, any employee making under $22.85 per hour would be entitled to overtime regardless of his or her position.

Essentially, the Final Rule forces employers to either increase the gross salaries of all exempt employees making less than the new threshold, or in the alternative to ensure all employees under the threshold are paid overtime.  However, it gets trickier.  In California, if an employee works 9 hours in one day and 7 the next day, that employee is still likely entitled to an hour of overtime even if the work week balances at 40 hours – this depends on the “regularly scheduled” work week, and whether it is a 3 or 4 day work week rather than a 5 day work week.

What To Expect.

Employers were given a chance to change their overtime policies well in advance of the effective date of this new regulation.  As the grace period ended, the District Court prolonged it – but for how long?  As of today, employees who were not properly compensated would have had the right to sue for failure to pay overtime.  Certainly, several attorneys are already searching for employers not currently in compliance with the Final Rule.  If the regulation remains in effect, employers should be prepared to face widespread litigation – potentially class actions depending on the size of your company or quasi-class actions, such as Private Attorney General Act of 2004 (PAGA) complaints regardless of the company’s size.  Employers not already adjusted for the upcoming overtime policy should monitor the recent developments knowing a potential tidal wave of lawsuits may come.

What To Do.

Employers used the “exempt” classification as an excuse to work its employees late-nights and on weekends, without keeping track of their hours.  That luxury no longer exists.  If an employee makes less than the threshold, an employer needs to have records to challenge an employee’s potential overtime claim.   Employers should immediately implement a system to monitor the hours each employee works, whether it be enacting a policy prohibiting employees from working more than 8 hours in a day and 40 hours in a week, or requiring timesheets or clocking in-and-out.

Don’t subject your company to attorneys’ fees, statutory penalties, possible class actions and not to mention your own litigation costs.  It’s simply not worth it.  Keep track of your employees’ hours, and if your pay period begins before December 1, 2016, pro-rate the increase in salary or make sure you pay overtime.

Also, the recently enacted Labor Code Section 558.1 holds individuals liable for a company’s failure to pay overtime.  These individuals include managing agents, owners, directors or officers.  For more information on Section 558.1, stand-by for further analysis from Ryan C. C. Duckett and Jeffrey F. Gersh.

Now What.

The far-reaching implications of the recent November 22, 2016 ruling by the District Court raises many concerns that cannot yet be answered, such as: If the rule is enforced, will it be retroactive as of December 1st? or, How are employers and employees affected if this ruling is appealed? or, What do employers do who have already promised overtime pay or an increase in salaries to its employees? or, Should I start paying overtime, to play it safe?

For help on complying with the Final Rule and following the developments of District Court’s decision, contact Ryan C. C. Duckett (rduckett@stubbsalderton.com) or Jeffrey F. Gersh (jgersh@stubbsalderton.com) at (818) 444-4500.  Please note that nothing herein constitutes legal advice.

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Preccelerator Program Company Ballerz World’s Version 2.0 is a Slam Dunk

ballerzworld-logoStubbs Alderton & Markiles’ Preccelerator Program company Ballerz World announced today that it has launched its version 2.0 in the iOS App Store.  Founded by Navy veterans Kyle E. Cox and Nicholas Damuth, Ballerz World is the single largest marketplace that is dedicated to all things basketball. They help their worldwide users find basketball courts, as well as connect and play basketball with one another using their geo-location technology and over 12,000 pre-loaded basketball courts in every country, all while providing their users an opportunity to view and share content, in addition to buying discounted basketball gear via the in-app store portal.

During their beta phase, the Ballerz World basketball app received more than 10 awards, including the People’s Choice Award at the CES Mobile Apps Showdown, and the Best GPS-Enabled App at the Mobile App Awards.

Version 2.0 of Ballerz World includes additional aggregated content from top Basketball creators such as trainers, leagues, highlights, news and lifestyle influencers, as well as the expansion and official debut of their in-app store portal.

“Man, I wish I’d had this type of app when I was playing pickup,” Co-Founder Kyle E. Cox stated. The Ballerz World brainstorm came to him while driving around Los Angeles thinking about basketball. “What if there was an app that tells you where the courts are, all around you? That would be so cool!”

To check out and download the Ballerz World App, click here.

For more information about the Preccelerator Program, contact Heidi Hubbeling at (310) 746-9803 or hhubbeling@stubbsalderton.com.

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Doing Business in California: “Quasi-California” Corporations Made Subject to California’s Corporate Laws

smallerMany, but not all, provisions of the California Corporations Code expressly apply if a private, out-of-state corporation has a sufficient “presence” in California (called a “quasi-California” corporation.) An out-of-state corporation is treated as a “quasi-California” corporation, and thus subject to specified provisions of California Corporations Code, if (1) more than half its business (based upon a three-factor formula including property, payroll, and sales) is done in California (the “doing-business” test); and, (2) more than half of its voting securities are held of record by persons having addresses within the state of California (the “voting-shares” test).[1]

For analysis, hypothetical SmallCorp, Inc. is incorporated outside of California with substantially all of its business performed inside California.

Hypothetical Illustration: Does SmallCorp, Inc. Satisfy the Requirements of § 2115(a) to Qualify as a “Quasi-California” Corporation?

 A.    The “Doing-Business” Test

To satisfy the “doing-business” test, a corporation must do more than half of its business in California. The three “doing-business” factors are: (1) property, (2) payroll, and (3) sales. The first question is whether the proportion of a company’s property, payroll, and sales in California compared to the company’s total property, payroll, and sales is more than 50 percent during its latest full income year. (See Corp. Code §2115(a)(1).)

To determine whether the factors meet the one-half doing business requirement, sections 25129, 25132, and 25134 of the Revenue and Taxation Code define the factors as follows and provide the necessary equations:

· the property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used during the taxable year;

· the payroll factor is a fraction, the numerator of which is the total amount paid in this state during the taxable year by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the taxable year; and

· the sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this state during the taxable year, and the denominator of which is the total sales of the taxpayer everywhere during the taxable year.

Thus, if the average of the property factor, the payroll factor, and the sales factor is greater than 50 percent during its latest full income year, the “doing-business” test is satisfied.

Assume SmallCorp owns property such as products, machinery, office equipment, and also rents office space in California. SmallCorp does not own or rent any property in any other state. So, the equation is as follows:

(1) Property —-> property in CA / all property    =   1/1       = 100%

SmallCorp has several employees, 90% of whom live and work in California. Accordingly, SmallCorp pays 90% of total compensation paid to all SmallCorp employees to those who live and work within California, as demonstrated below:

(2) Payroll —>   amounts paid in compensation in CA / total amounts paid in compensation =  9/10  = 90%

For this hypothetical, because the first two factors result in 100% and 90% of business performed in California, even if 0% of sales, the next factor, occurred in California, SmallCorp would still do more than one-half of its business in California, satisfying the “quasi-California” requirements. Assuming SmallCorp has no sales in California, the equation is as follows:

(3) Sales —>  ​sales in CA / all sales   =  0/1   =    0%

This conclusion is reached by taking the average of 100%, 90%, and 0%, then dividing the total sum (190%), by the count (3) which equals 63.3% of SmallCorp’s business is done in California.

For a more representative hypothetical, assume that SmallCorp does 70% of its sales in California. If sales are 70% in California, the amount of total business performed in California is 86%, using the same formula: (total sum ÷ count). Accordingly, the proportion of a SmallCorp’s property, payroll, and sales in California compared to the company’s total property, payroll, and sales is more than 50 percent and the “doing-business” test is satisfied.

B.     The “Voting-Shares” Test

The second test is whether the corporation’s outstanding voting securities held of record by persons with California addresses is greater than 50 percent. (See Corp Code §2115(a)(2)).

Assume there are two voting shareholders in SmallCorp: Arnold and Ford. Arnold’s address is in Hermosa Beach, California. Ford’s address is in Orange County, California. Thus, both shareholders of voting securities have addresses in California. The “voting-shares” test is satisfied because 100% of SmallCorp’s shareholders have addresses in California.

​SmallCorp will qualify as a “quasi-California” corporation under section 2115(a) because more than 50 percent of its business is done in California and more than 50 percent of its voting shares are held by shareholders with addresses in California. As such, corporate counsel should consider the additional requirements that California will place on a corporation that is “doing business” in California pursuant to section 2115(b), including the imposition of specific sections of the California Corporations Code.[2] For that reason, this long-arm statute’s constitutionality has been called into question by courts of other jurisdictions.

gina-correia_092-2-300x200Gina Correia is a litigation associate of the Firm. Gina’s practice focuses on all stages of business litigation. Prior to joining the firm, Gina worked in-house as a business affairs law clerk for HBO. Gina’s prior experience in the entertainment industry focused on talent engagement negotiations including drafting contract request, calculating actor, producer, and writer fees for top-tier talent, and evaluating comprehensive deal points. Gina also previously worked for The Los Angeles Office of the District Attorney in the Consumer Protection Division where she researched and analyzed wire-tapping violations under Penal Code and Federal Trade Commission guidelines.

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Stubbs Alderton & Markiles, LLP Announces New Class of Preccelerator® Program Companies

Stubbs Alderton & Markiles, LLP is pleased to announce the admission of a new group of companies to join the fifth class of its Preccelerator® Program.  The Preccelerator® is a novel platform offered to select start-up companies out of the Stubbs Alderton & Markiles, LLP Santa Monica office that provides interim office space, sophisticated legal services, education, networking, mentorship and access to a strategic perks portfolio worth over $200,000 with the objective of helping grow a founder’s idea from business concept to funded startup.

The new participants include:

ballerzworld-logoBallerz World is the single largest marketplace that is dedicated to all things basketball. Their worldwide market of 500 million ballerz, and 30 million in the US, can connect and play basketball with one another using our geo-location technology, and their 12,000 pre-loaded courts in every country. They have successfully aggregated the top basketball content on the web allowing our users to share and watch content, in addition to buying discounted basketball gear via the in-app store portal. Ballerz World will feature courts, players, leagues, training, multimedia, and e-commerce all through our digital platform. During its beta phase, the Ballerz World app received more than 10 awards, including the People’s Choice Award at the CES Mobile Apps Showdown, and the Best GPS-Enabled App at the Mobile App Awards. Available in the iOS App Store.

style-md-logo StyleMD is the smartest way to find a fashion stylist that will help you look and feel more confident on any budget. They curate talented stylists from across the country that help you save time and money to achieve your style goals. Whether you’re looking for a simple consultation, an online shopper, or closet assessment StyleMD has got you covered. Available in the iOS App Store.

playspace-preccelerator-landing
Virtual Reality represents a creative revolution. Humans have always told stories with words and pictures. Now PlayspaceVR is creating the next generation of graphic storytelling by bringing comic books to Virtual Reality. Their team has domain expertise in VR/AR, media/entertainment, intense work ethic, and a true love for what they do. http://playspacevr.com/

“The Stubbs Alderton & Markiles Preccelerator® Program is committed to continuing to support the Los Angeles technology scene and provide a platform for early stage companies to gain momentum and secure a solid foundation to build their businesses,” says Heidi Hubbeling, Co-Director of the Program.

Led by Stubbs Alderton Partner Louis Wharton and Heidi Hubbeling, the Preccelerator® Program has had great success with its classes, which has resulted in a majority of the companies being accepted into larger accelerator programs and incubators or successfully raising their seed funding round.

About Stubbs Alderton & Markiles, LLP

Stubbs Alderton is a business law firm with robust corporate, public securities, mergers and acquisitions, business litigation and intellectual property practice groups focusing on the representation of venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Their mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of their Firm.

For more information about the Preccelerator® Program and to fill out an application, visit www.preccelerator.com or contact Heidi Hubbeling at (310) 746-9803.

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Preccelerator® Program Company Napkin Finance Featured in PopSugar Article

Image result for napkin finance

Congratulations to SAM Preccelerator® Program’s company Napkin Finance for being featured in a PopSugar article this week. The article, entitled “American Hustle: How the Next President Will Affect Your Finances” uses Napkin Finance’s easy to understand charts to explain how the upcoming election results will affect your personal finances.

To view the full article click here.
To learn more about Napkin Finance click here.

For more about the Preccelerator Program, contact HeidiHubbeling, Director at (310) 746-9803 or hhubbeling@stubbsalderton.com

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SAM & Traklight present: “IP Basics” with Tony Keats & Mary Juetten

 

 

Join Stubbs Alderton & Markiles, LLP &

Traklight for this exclusive event!

 

“IP Basics”
with SAM Partner Tony Keats, and Traklight’s Marty Juetten

 

Learn about the differences between trademarks, copyrights and patents, and the steps that you need to take to protect the intellectual property of your business, including the introduction of a free business risk assessment.

 

 

Thursday, November 10th, 2016
5:30 PM – 8:00 PM

* Food, Drinks, and Networking Included *

Stubbs Alderton & Markiles, LLP
1453 3rd Street Promenade, Suite 300
Santa Monica, CA 90401

 

Parking
4th Street/Broadway ramp or in the Santa Monica Place Mall

 

Register!

 

Featuring 

 

 

Mary Juetten, Founder & CEO, Traklight
Mary Juetten, founder and CEO of Traklight, has dedicated her more-than-30-year career to helping businesses achieve and protect their success. Specializing in leading companies in transition or start-up phases and helping them create sustainable, operational, and financial growth. Using her extensive education including Bachelor of Commerce degree from McGill and a Juris Doctorate from Arizona State, as well as her US and Canadian accounting and public accountant certifications, Mary created the only self-guided software platform that creates a custom intellectual property (IP) strategy plus assesses business risk. Traklight Pro is lead generation or triage for companies; business, startup & venture, and IP attorneys; CPAs; and other professionals. Mary is an international author, blogger, speaker, and mentor. She previously represented entrepreneurs on the Board of the Crowdfunding Investment Regulatory Advocates and is currently on the Emerging Enterprise Committee of the Licensing Executives Society. In 2015 Mary co-founded Evolve Law, a sales and marketing channel for Traklight and speaks internationally on change and technology adoption in the legal industry. Mary was named to the American Bar Association’s Legal Resource Technology Center 2016 Women in Legal Tech list and the FastCase Class of 2016. She now serves on the Group Legal Services Association (GLSA) Board.

                                                                                                                                                        

Tony Keats, Partner, Stubbs Alderton & Markiles, LLP
Tony Keats is a partner of Stubbs Alderton & Markiles, LLP and Co-chair of the Trademark and Copyright Practice Group. He was a founding partner of Keats, McFarland & Wilson LLP, in Los Angeles, and intellectual property practice team leader for the national law firm Baker & Hostetler. Tony’s almost three decade legal career has focused on both the legal and business protection of brands and creative content from consumer products to entertainment, from designer goods to the Internet. Since he commenced practice, he has provided counsel and has litigated cases on behalf of many of the world’s largest consumer product and entertainment companies, as well as individual entrepreneurs, actors, and musicians. Tony’s litigation background also includes related commercial matters involving unfair competition, contract disputes, rights of publicity violations, business torts, domain name infringement, and idea submission claims.

 

 

Special Thanks to our Sponsors! 

 

Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions, entertainment, intellectual property, brand protection and business litigation practice groups focusing on the representation of, among others, venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of our Firm. www.stubbsalderton.com

Traklight is the only self-guided software platform to identify business risks and capture the value of ideas and intellectual property for small and medium sized businesses (SMBs). In addition to helping SMBs and investors accurately identify and minimize business and legal risks and maximize the value of intangible assets, Traklight licenses its platform to attorneys, other professionals, and software platforms to streamline the client intake process, prequalify and educate customers, and generate additional billable hours or revenue. The company’s leadership role in helping SMBs leverage their company value is supported by a Partnership Program that includes Federally sponsored organizations, trade associations, and industry. Traklight is privately held and headquartered in Arizona. Visit traklight.com to learn more.

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SAM Client Alert: “Time Off to Vote” Notices

635928989646379029-1077750017_headlinerCalifornia law requires employers to post a notice (available here) ten days before an election (which is tomorrow) advising employees of provisions for taking paid leave for the purpose of voting in statewide elections.

Thank you to Zoe J. Sussman, Esq. of Thomas Employment Law Advocates, APC for this update. For more information on this and other employment law matters, contact ZSussman@ThomasEmploymentLaw.com

 

 

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