TLD's General Counsel Blog

Compliance with Orders to Withhold, Wage Garnishments and Levies

Many employers and financial institutions are frequently forced to deal with Orders to Withhold (Wage Garnishments) and Levies resulting from tax deficiencies, judgments and support orders against their employees or clients. Failure to comply with the Order to Withhold or levy can result in financial penalties against the employer or financial institution, which essentially shifts the debt from the employee/client to the employer or financial institution. However, there can also be issues with compliance.

First, very specific rules and limitations apply to all Orders to Withhold and Levies. Some of these rules, such as the withholding periods and notice requirements are set forth on the Order or Levy. However, many of these rules are not provided directly to the employer or financial institution at the time the Order or Levy is received. Rather they are hidden within the California Code of Civil Procedure.

Recently, Tredway, Lumsdaine & Doyle successfully represented a financial institution from liability stemming from the company’s compliance with an Order to Withhold after their customer sued them for allegedly mishandling an Order to Withhold. Although the Court ruled in favor of the financial institution, the Court also held that the company had acted wrongly in submitting their customer’s monies to the State of California as demanded by the Franchise Tax Board. The Court found that, under the Code of Civil Procedure, the type of account was not subject to the Order even though the Order to Withhold clearly stated that the account was subject to the Order. Tredway, Lumsdaine & Doyle was only able to prevent the financial institution from liability by directing the Court's attention to an indemnity provision within the Code.

Every Order to Withhold and Levy thus needs to be handled carefully and with full knowledge of all laws related to the enforcement of debts.

Article Submitted By: Attorney Jennifer Lumsdaine

Businesses and Individuals Interest Provision

Last month I blogged to remind businesses and individuals to write in an attorney's fee provision in all of their contracts, so that if there is a need to hire an attorney, then the fees would be recoverable along with the principal due in the contract.  Another issue that goes hand in hand with an attorney's fee provision is an interest provision.  Unless an interest provision is included in a contract, interest will not be recoverable until after there is a judgment.  There are some exceptions for fraud and consumer matters, but the general rule is that pre-judgment interest is not recoverable along with the principal amount unless the contract so provides.  The legal rate of interest is 10% per annum.  At a minimum, an interest provision should be in all your contracts, along with an attorney's fee provision.  That way, businesses and individuals will not lose money in time and collection efforts, giving you more time and money to focus on building your business.

Article Submitted By: Attorney Min N. Thai

Individuals Defaulting On Loans And Accounts-Payable

The downturn of the economy has resulted in both businesses and individuals defaulting in loans or accounts-payable.  Not only have banks been suffering from the repercussions, but also small businesses and individual lenders as well.  Unfortunately, our firm has been consulted by a significant number of clients who have contracts, promissory notes, or invoices with out an attorney's fee provision.  While the economy was booming, and while optimism was high, the terms of contracts were not a focus during negotiations.  Now, however, as borrowers or customers default on those contracts or accounts, the terms become essential as they govern the rights and remedies between the parties.   Without an attorney's fee provision, the party trying to collect must pay for the legal fees involved out of its own pocket and is unable to recover the amounts expended from the debtor.  It is imperative that in any exchange of money, goods, or services, there is a contract in writing with an attorney's fees provision requiring that any attorney's fees or costs expended in any attempts to collect are recoverable.  If you are unsure if your current contracts or invoices contain a sufficient provision, our firm can review your documents for a low fee.  This could save you a significant amount of money in the event that you have to initiate a lawsuit to collect.

Article Submitted By: Attorney Min N. Thai

When Can an Employer Terminate a Disabled Employee After Leave is Exhausted?

As the Federal District Court stated in the case Garcia-Ayala v. Lederle Parenterals, Inc., an employer under certain circumstances can terminate a disabled employee after legal and/or company policy leaves expire.  The factors that will be taken into consideration are:

1.  Whether the time allowed for leave under the law or company policy has expired and prior extensions have been exhausted (the more extensions granted, likely the more legitimate the termination);

2.  Whether the employee has given a definite date for return (generally, termination in the face of a return date certain will be less reasonable than termination in the face of an uncertain return date);

3.  The length of that anticipated return date beyond the original or extended date of leave expiration (if the anticipated return date is a short time vs. a longer time, then there will be heavier burden on the employer to justify a termination);

4.  Whether the length of additional leave requested, or the absence of the disabled employee, will cause undue hardship on the employer based on statutory factors.

The general rule is that the employer cannot have blanket termination policy after leave is exhausted but must consider each case on an individualized, interactive basis. 

2006 Employment Law Cases Affecting Employers in 2007

The following article is a listing of pertinent cases in 2006 that will have an affect on employers in the upcoming year, 2007. Listed in the article is the case name and a brief outline of the courts rulings in those cases . These cases cover a wide range of topics, from civil rights violations to sexually explicit material on employee computers.

Happy Holidays!

The holiday season is upon us, and the holiday season brings holiday parties. Office festivities are a great way to boost morale and thank employees for their hard work throughout the year. Yet, some employers worry about liabilities that may arise with employer-sponsored events, while others may not know of issues that can arise with these same events. 

Employee or Independent Contractor: Why does it matter?

All businesses operated by persons other than their owners face potential liability for misclassification of those third-party workers as “independent contractors” when they are really employees.  Oftentimes, business owners are not even aware of a problem until they are served with a lawsuit or wage claim by a disgruntled worker.  Depending on the size of the business, misclassification can result in devastating damages awards including overtime and minimum wages, penalties, interest and attorneys’ fees.  Further, the putative employer may be penalized for failing to do payroll withholding and purchase workers’ compensation insurance.