Blog No 159

January 17, 2023

By Mack W. Borgen

Author (7 Books): The White Binder – Your Personal Data and Information Book (2022); The Writings of a Lifetime (2021); Dead Serious and Lighthearted – The Memorable Words of Modern America (Three Volumes) (2018-2019); and The Relevance of Reason – The Hard Facts and Real Data about the State of Current America (2 Volumes) (2013). As advertised in The New York Review of Books. Recipient of Eight National Book Awards.

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 Looking Back at the Year 2022

A Few of the Important, or at least Curious, Numbers

    2      Job Openings. Number of job openings per job seeker for the first time in two decades.

  8    Federal Student Loans. Number of times federal student loan payments has been extended.

  25      Gun Carry Rights. Number of U.S. states where it is now legal to carry a gun without a license. In 2010, there were only two such states – Vermont and Alaska. However, in the last three years, 11 more states have joined the list of states which no longer require a license, a permit, or even any gun safety knowledge or training.

  29^th    US Life Expectancy. U.S. life expectancy ranking amongst all 44 OECD developed nations. The U.S. life expectancies are, respectively, 76.1 years for men (at birth) and 81.1 years for women (at birth). Compare the U.S. life expectancy with, for example, Monaco (89.4 years!), Japan (86.1 years), and Singapore (85.4 years).

129th   “Safest Nation” Ranking.  U.S.’ sadly low “safest nations” ranking. The U.S. ranks just below Azerbaijan and just above Brazil. Iceland, New Zealand, Ireland(!), Denmark, and Austria are the five safest nations in which to live.

11.9MM   Poverty Line. Estimated number of U.S. children living in households below the poverty line.

$       0 Change in Real Wages. Despite the highest pay raises for workers in seven (7) years, $0 is the average amount of inflation-adjusted dollars that workers received in 2022.

$3.5BB    Financial Institutions Reform. Aggregate amount consumers will start “saving” every year from their banks as the result of regulators pressuring or requiring financial institutions to curtail overdraft fees and certain other fees and charges. 

14 Months  Family “Excess Savings.” Average length of time that a family’s “excess savings” from the pandemic were likely to last before inflation and the cessation of pandemic-related payments forced people to dip into their cash reserves.

Overall, 2022 was another confusing year with the following:

Record High Corporate Profits

Unprecedented Levels of Corporate Concentration

Highest-Ever Levels of CEO Compensation

Steadily Increasing Levels of Wealth Disparity in the U.S.

Maybe even more long-term troublesome for our country and our children, since 2010 the median pay for U.S. teachers has decreased — Down 4.4% for high school teachers and down 8.4% for elementary and middle school teachers!

Recent Business, Contract,

and Real Estate Cases and Developments

General Sources: Daily or Periodic Judicial and Legislative Reports from various sources including the California Lawyers Association Daily Reports, the CLA’s Monthly Business Law News, and Announcements and Press Releases from the (California) State Attorney General’s Office. 

1. Contracts – More States Block Non-Compete Agreements. For many years, employers have used non-compete and non-solicitation agreements to stop former employees from competing with a company or from soliciting the company’s customers for a specific period of time after their departure from the company. Increasingly, state legislatures and court rulings have limited or wholly invalidated such agreements. Some states, like California, have entirely banned such agreements (with narrow exceptions). Nine (9) states prohibit such agreements unless the worker earns above a designated income level. Other states have restricted their enforceability if they do not, for example, have tightly defined geographical/territorial restrictions. Because of these growing restrictions and because companies have valid reasons for assuring that a former employee does not inappropriately compete with his former employee, it may be prudent to use other types of post-employment protection agreements by using, for example, carefully drafted trade secrets or confidentiality agreements. Note: According to a 2021 article in the Journal of Law and Economics, about 18% of American workers have noncompete agreements (as compared with an earlier study showing 38%).

             Update Alert: On January 5, 2023, the FTC announced a sweeping new proposed rule banning nearly all non-compete agreements between employers and workers in the U.S. The rule, if finally adopted, would supersede all state laws and prohibit the use of nearly all forms of non-compete agreements in the U.S. The proposed rule is based upon the FTC determination that such agreements inherently constitute an “unfair method of competition.” The rule would also prohibit such agreements with respect to both employees and all other associated workers of a corporation including, for example, even independent contractors. Lastly, the proposed rule (a) would apply to both new and existing employees and (b) would require corporations to provide notices of rescission with respect to all existing non-compete agreements. The only narrow exception relates to sale-of-business situations where the party is a “substantial owner” (i.e., holding at least 25% interest) of the business being sold.

2. Employment Law – California’s New Transparency and Disclosure Requirements. Effective January 2023, all California employers with 15 or more employees* are now required to include a pay scale in every open job posting. The California Labor Commissioner has clarified that these requirements would also be applied to postings for remote workers if the position may “ever” be filled in California. Persons claiming violation of any such required pay transparency have one year to either file a complaint with the Labor Commissioner or initiate a civil action for retaliation. In addition, all employers must maintain (and keep for three years after such employees’ dismissal or retirement) records of job title and salary history for all employees, and all private employers with 100 or more employees must submit pay data reports to the CA Civil Rights Department.

* Caution: Even smaller companies are required to provide pay scale information upon the reasonable request from any job applicant. 

3. Corporations – New California Warranty Law. Although seemingly a minor and “technical” change in California’s warranty law (effective July 1, 2023), the new warranty law should be noted by California corporations which sell products with written warranties. Normally, warranties measure their duration from the date of the sale of the product. However, due to recent changes in the Song-Beverly Warranty Act, warranties may now only commence upon the delivery date of the product. Almost more importantly – failure to make this warranty duration clear in the written warranty documents can give rise to penalties, damages, fees, and costs. 

4. Corporations – SEC Adopts Final Clawback Rule. The SEC is now effectively requiring publicly-traded corporations (i) to adopt a written clawback policy and (b) to file such clawback policy as an exhibit to their annual report. Under the Clawback Rule, the policy must provide for recovery of incentive-based compensation erroneously received by current and former executive officers during the three (3) fiscal years preceding a required accounting restatement. Basically, the amount subject to such clawback is the excess of the compensation received over the amount which would have been received based upon the restated corporate income amounts. 

5. Real Estate – Landlord-Tenant Law – Landlord Obligation to Conduct Specific Background Checks for Their Apartment Employees. Florida recently enacted legislation requiring landlords of “non-transient” apartments to conduct specific background checks for all employees hired to work in such apartment buildings. While the legislation obviously applies only to Florida properties, it serves as a good reminder for prudent California-based landlords to consider using articulated procedures and conducting document background checks for all employees of such properties. 

6. Contracts – The Exercise of “Sole Discretion.” A recent Delaware Supreme Court decision held that even when a contractual provision vests in a person the absolute right to make a contractual determination, such person is still required to exercise such right “in good faith.” In this LLC case, the Court held that even though an Operating Agreement granted full designated rights to the “holders of the majority of the outstanding (LLC) units,” such majority must exercise those rights subject to an implied covenant of good faith and fair dealing.” 

7. Commercial Leases – Renewal of Lease May Be Implied by Parties’ Conduct. If a lease contains renewal provisions, there is normally a required time for delivery of written notice by the tenant to the landlord of the tenant’s election to renew the lease. However, despite even express renewal requirements in the lease, the landlord may be later estopped from denying the renewal if, as occurred in several recent cases, (a) the tenant remains in possession and pays rent, and (b) the landlord continues to accept such rent. In these types of instances, the court may find that regardless of express renewal requirements set forth in the lease, the landlord may be estopped from terminating the lease due to the parties acting as if the renewal had occurred.

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