It is May, 2012, and even though the politicians have declared that the economic disaster is over, America’s economy is still struggling.  Unemployment rates have been above 8% for much of the last three years, and GDP growth averaged a miserable 2.2% last year.  While our elected officials fight over which policies will get the economy going, many Americans know that any hope for an economic recovery rests on the backs and shoulders of small businesses.  For those who are brave enough to take the risk and start a new small business in today’s economic climate, the following tips are offered to help ensure the survival of your business.

1. Avoid Disputes: Read the Contract and Get The Deal in Writing.

One of the major principals of contract law is that a contract cannot be formed without “a meeting of the minds.”  This means that both parties must have a common understanding regarding the major terms of the deal. Business owners will have to deal with contract matters in the ordinary course of their business, whether the contract is with the business’ employees or with a manufacturer or supplier of goods.  It is important, not only to read the entire contract, but to understand the terms of the contract.  Doing so will allow the owner to know exactly what he or she is agreeing to, and such knowledge can help prevent the business owner from entering into a deal that may not be good for the business.  It will also ensure that the business owner will get exactly what he or she really wants because they can bargain to strike certain terms or add new terms.

On the other side of the coin, it is critical for business owners to put their deals in writing.  This will help keep disputes over the terms of the deal to a minimum, because those terms will in writing.  While oral contracts can be enforced in the court of law, their existence can be difficult to prove.  Even if the court accepts that an oral contract existed, there will still be an argument over the terms of the contract.  Putting the terms of the contract down on paper will allow a business owner to avoid the mess of proving the existence and terms of a contract to the court of law.  It will also increase the likelihood that the court will find the business owner has an enforceable agreement.

2. Give Structure to Your Business: Incorporate or Become a LLC.

Starting a business can be exciting, but it can also very risky.  One of the ways new business owners can protect themselves is by organizing their business in the form of a corporation or limited liability company (“LLC”).  Though there are other types of entities available to business owners, Corporations and LLC’s are the most popular forms of entity because they provide the business owner(s) (or shareholder(s)) the protection of limited liability.  The limited liability protection means that the corporation (or LLC) is treated as if it was its own person that is legally responsible for its own actions and debts.  Any debt or liability incurred by the entity is not passed down to the owner or shareholder (except in the case of piercing, which will be discussed later); instead, it remains solely with the corporation or LLC.  Creditors of the corporation or LLC will not be able to reach the personal property of the owner(s) or shareholder(s) to satisfy the outstanding debt.  They can only seek satisfaction of the debt through the repossession and sale of entity assets.

While the corporation and LLC provide limited liability protection, there are cases the courts have pierced the veil of limited liability protection.  Courts will allow the limited liability veil of a corporation or LLC to be pierced under the following circumstances:

1)    Where the members have comingled personal assets with that of the corporation (“alter-ego theory”);

2)    Where permitting the entity to keep its limited liability veil would allow fraud or other injustice to occur;

3)    Where the entity is undercapitalized; and

4)    In the case of corporations, where the members failed to follow corporate formalities.

If a business owner wishes to maintain the limited liability protection afforded to either of the forms of entity discussed above, they must ensure that their entity has sufficient means to cover the entities debts and keep entity assets separate from their own.

3. Protect Your Trade Secrets, Intellectual Property, or Trademarks

If your business has an innovative new product or method of providing services, take the time to file the necessary paperwork to protect your product or method.  The business will be more profitable if its products or methods are the exclusive property of the business.  Not only will protecting your product or method give you a competitive edge, but it will allow you exclusive rights to profit from your idea.  In order to protect your product or method, you must file a patent with the United States Patent & Trademark Office.  It may be necessary to hire an attorney to assist with filling out the necessary paperwork.

Business owners will also want to protect their trademark phrase or symbol.  If the business does not have a trademark phrase or symbol, it can be worthwhile to come up with one.  The trademark will allow easy identification of the business as it grows, and people will come to associate it with the quality of goods or services the business provides.  Not every word or phrase can be protected with a trademark.  Following the three rules below will increase the likelihood that your trademark will receive protection:

1)    Use words or symbols that the business owner or employees created themselves

2)    Use words or symbols that have a common meaning, but their meaning bears no relationship to the good or service; and

3)    Use words or symbols that are suggestive of the good or service.

Once the trademark symbol or phrase is created, the proper paperwork must also be filed with the United States Patent & Trademark Office.  Please keep in mind that generic words, symbols, or phrases are not protectable with a trademark.  Furthermore, a geographical search may be necessary to ensure that other businesses operating in the same area are not using the same trademark words or symbols.  For a deeper explanation of the rules for creating a trademark, please visit this website: http://www.jdsupra.com/post/documentViewer.aspx?fid=2fcf0fa8-3814-4e0e-bf73-272b5647bd7b.

4. Ensure Former Employees Do Not Become Your Competitor

One of the most important provisions of a standard employment contract is the covenant not to compete.  This contract clause ensures that the employee does not become the business owner’s competitor if the employee leaves the business or is terminated.  California courts disfavor covenants not to compete and will rarely enforce them.  However, they will be enforced if they are reasonable in scope, geographic area, and time.

For the clause to be reasonable in scope, it can only restrict the employee from performing jobs or activities that would place him or her in direct competition with the former employer.  For example, a former employee of a burger stand cannot open up a burger or hotdog stand on the corner across the street from the former employer.  However, the former employee could open up a refreshment stand across the street from the former employer because such service does not directly compete with the former employer.

There is no specific rule governing how much time or how big of a geographical area restriction is reasonable.  The court will simply examine these restrictions on a case-by-case circumstance and judge whether they are reasonable within the context of the case.  Generally, the longer the temporal restriction is, the less likely that the restriction is reasonable.  Geographic restrictions will usually be reasonable so long as it is the restricted area is a reasonable estimate for the business’s area of operation.

The covenant not to compete should also contain language that will protect the business’s trade secrets.  Included in the definition of “trade secrets” is the business’s customer contact list.  Protecting the business’s customer list with a covenant not to compete will provide your business grounds to recover damages from the former employee or their subsequent employer if either attempts to solicit your valued customers.

5. Conclusion

Following the tips given above will help your business avoid many of the legal pitfalls that can plague a new small business.  While some of these tips do require the assistance of an attorney, the expenditure should be worthwhile.  The time, money, and effort ensuring that the business is covered from all angles will minimize the need for costly litigation down the road.  The less a business has to spend on litigation, the more it can spend on purchasing capital and creating the jobs America so desperately needs.

New Standard for Meal/Rest Periods:

On April 12, 2012, the California Supreme Court issued its ruling on Brinker Restaurant Corp. v. The Superior Court of San Diego County.  This case ultimately stemmed from a class action suit in which the plaintiff class consisted of current or former cooks, stewards, buspersons, waiting staff, and host staff who worked in restaurants owned and operated by Brinker Restaurant Corp (“Brinker”).  The plaintiffs brought the class action in response to Brinker’s alleged failure to provide its employees with proper meal periods, rest breaks, or premium wages for work performed during break periods.  The case came before the California Supreme Court so that it could review the question of class certification.  In its analysis of the class certification issues, the Court spelled out the meaning of employment regulations with regards to the following: (1) the rules for providing rest breaks, (2) the employer’s duty to provide a meal period, and (3) the rules governing the frequency of meal periods.  This blog summarizes the rules established in the Court’s analysis of these issues.

Rules for Providing Rest Breaks

The court first discussed the issue of how many rest periods an employee is entitled to during any particular shift.  It determined that the governing law for this issue was Wage Order No. 5, subdivision 12.  Under Wage Order No. 5, the Court spelled out that an employee is entitled to one 10 minute break for a shift of 3.5-6 hours in duration; two 10 minute breaks (or a total of 20 minutes of break time) for a shift from 6-10 hours in duration; and three 10 minute breaks (30 minutes total) for a shift 10 hours or longer.  Brinker, S166350 at page 20.  This rule needed clarification because the Appeals Court below had applied the rule incorrectly due to a misinterpretation of the legislation’s use of the phrase “major fraction thereof.”  However, this Court clarified the rule laid out above, reasoning that the Appellate Court’s application of the rule was irreconcilable with the plain language of the statute.

Employer’s Duty to Provide a Meal Period

With regards to employer provision of a meal period, the issue was whether the employer must ensure that the employee is taking advantage of their meal break or if the employer must merely provide the opportunity for an uninterrupted break.  To answer this question, the Court first referred to the historical governing regulation, Wage Order No. 5, subdivision 11(A), which stated that an employer must provide a “duty free” meal period.  It then checked this principal against section 512, which was passed in 1999 (and cited as Stats. 1999, ch. 134, § 6, p. 1823) to determine if the historical principals were consistent with the most recent legislation.  After analyzing both pieces of legislation, the Court determined both pieces of legislation were consistent with one another.  It further held that under the two statutes, an employer’s duty to provide a meal period are as follows: (1) to relieve the employee of all duties for the meal period, (2) relinquish control over the employees activities, and (3) provide a reasonable opportunity for an uninterrupted 30 minute meal period.  Brinker, page 36.  The employer need not ensure that work is not performed during the period, and no liability attaches if the employee works during the period unless the employer coerces or encourages the employee to do so. [Although the legal standard changed some for imposing liability, the burden remains on the employer and employers should still be cautious about employees working during any such break.]

Rules Governing the Frequency of the Meal Periods

After determining what the employer’s duty was with regard to the provision of a meal period, the Court then turned to how often the employer must provide meal periods.  In order to parse out a definitive rule for how an employer must provide meal periods, the Court again turned to section 512(a) to spell out a definitive rule for how often an employer must provide a meal period.  The court determined that for workers working a shift longer than 6 hours, a meal period must be provided before the start of the 6^th hour of work at the latest; for shifts longer than 10 hours, a second meal period must be provided before the start of the 11^th hour of work.  Brinker, page 36-37.  If the shift is only 6 hours in length, the meal period may be waived in writing by employee; the same is true of the second meal period (but only the second meal period) for 12 hour shifts.  Brinker, page 37.  It is assumed that for shifts less than 5 hours, no meal period need be provided because the shift would conclude prior to the time an employer would be required to provide a meal period.

The full text of the California Supreme Court’s Ruling is available in Word Format at http://www.courtinfo.ca.gov/opinions/documents/S166350.DOC and in Acrobat at http://www.courtinfo.ca.gov/opinions/documents/S166350.PDF.

This Fox Business article provides a good summary on handling OSHA inspections and the factors to consider before hand.

http://smallbusiness.foxbusiness.com/legal-hr/2011/10/27/preparing-for-osha-inspection/

This is a good summary article for any new business owner, or those thinking of starting a business. It lays out the top 10 legal pitfalls you should strive to avoid when starting a new venture.  It was written by Mark Britton and posted on Fox’ Small Business Center web page this morning:

The etymology of the word “entrepreneur” is well established. Since the earliest of French times, it has meant “someone who breaks into hives when coming within 20 feet of a lawyer.”

While I’m joking regarding the word’s origins, I’m quite serious (albeit figurative) regarding the entrepreneurial response to lawyers. Most young entrepreneurs see themselves as an unrivaled visionary and the last thing they need is some old dude in a three-piece pulling on the handbrake.

Until something else does.

Nothing will grind the entrepreneurial party train to a halt faster than a big lawsuit, nasty contract dispute or some other legal circus animal that no one bothered to stop from coming on board. The lawyer-averse entrepreneur suddenly finds himself begging for a hug from the old dude.

So, before you need to beg for that hug, here are 10 pitfalls that often cause startups legal trouble. A penny of legal proactivity in each of these areas will offer a pound of protection as your business matures.

1.   Not Hiring a Startup Lawyer: There are a lot of lawyers that represent small businesses, but there are only a few that regularly represent startups–particularly when it comes to fundraising from sophisticated angels and venture capitalists. There is a “market” around angel and VC funding and if your lawyer is not immersed in that market you can get fleeced.

2.   Not Having Founders’ Agreements: How do you split the equity pie? Who contributes what? Who acts as CEO? What if a founder stops performing? There are so many questions that founders never think through because everything is going to be “awesome.” However, when cash and humans are involved, things are seldom uniformly awesome.

3.   Choosing the Wrong Corporate Entity: While this sounds mundane, it is actually quite important. Whether you want to run your business as a C Corp, S Corp, LLC, LP etc. is wholly dependent on your long-term objectives. Different structures offer different opportunities and restrictions, and changing your structure years later is administratively painful and expensive.

4.   Using Someone Else’s Trade Name: Many entrepreneurs will lock on a company name without researching whether someone else owns that name. They will put up a web site, print a bunch of advertising collateral, and then they get a letter from some Malaysian conglomerate that says, “Quit using our name and pay us $1 million in damages.”

5.   Comingling Accounts: When money first starts coming in – either from investors or sales–it is easy to mix personal and business accounts. Don’t do it. The more you do, the more that someone can pursue your personal assets for any unpaid corporate liabilities.

6.   Failing to Protect Intellectual Property: Most great ideas are supported by a product or process that should be patented. If you are telling people all about your idea without a NDA or a patent application on file, you run the risk that your great idea will soon be your competitor’s great idea. Identify your core pieces of intellectual property and patent them.

7.   Failing to Have Adequate Employee Agreements: While these are less extensive than the founders’ agreements, you need at least a standard agreement in place for all of your employees and consultants that covers confidentiality, ownership of things they develop, etc. The agreement will not feel that important early on, but it will come in handy when your first employee is hijacked by a competitor.

8.   Failing to Check for Employee Agreements: If you are hiring someone from a company that has followed step No. 7, failing to investigate their former employee agreements can cause problems – especially if you are hiring them for their technical knowhow. If their “knowhow” is owned by their former employer or is blocked by a non-competition agreement, you may be getting less value than you bargained for.

9.   Failing to Comply with Federal or State Securities Laws: If you are asking even a couple of people for money – whether it is an investment or a loan – you must make sure you are observing the various securities laws. While you may not need to “register” your securities, you may need to file for an “exemption.” An improper offering can lead to regulatory fines and, maybe even worse, unwinding of a transaction.

10. Understand Key Contracts: If a third-party is important to a core part of your business, you need a contract with that party and you need to understand the core terms of that contract. In a breach-of-contract lawsuit, ignorance is not a defense.

Recently, a California Court of Appeal held that compliance with Labor Code Section 512 Meal Period provisions requires employers to merely “provide” a meal period, and not “ensure” that a meal period was actually taken.  The court cited the statutory language of Labor Code Section 512 and IWC Wage Order 5-2001 at issue in this case, both of which require employers to “provide” a meal period. The court noted that the Division of Labor Standards Enforcement’s current enforcement position is that employers need only “provide” meal periods to employees. The Court also noted that requiring large employers to “ensure” meal periods are taken would create an impractical standard and place an undue burden on employers.

This case follows on a string of other similar cases discussing the same issue. The California Supreme Court is presently considering this exact issue in two pending cases (Brinker Restaurant v. Superior Court and Brinkley v. Public Storage). As such, it is expected that the California Supreme Court will grant review of this case and hold any decision pending the outcome of Brinker.

The appellate court has also held that the trial court properly denied class certification in this wage and hour class action involving 3,000 employees in more than 130 restaurants. The court held that individual issuers would predominate, because absent a universal practice regarding breaks, plaintiffs would have to explain violations on a restaurant-by-restaurant and supervisor-by-supervisor basis. The appellate court also upheld the trial court’s ruling that the employee’s proffered statistical evidence would not support class certification, because employees would still need to explain how and why breaks were missed. Lastly, the court held that substantial conflicts of interest existed among class members, because the hourly employees often temporarily assumed supervisory duties, including managing meal and rest breaks-meaning that class members would be accusing one another of violating Labor Code provisions.

If you have questions about meal and rest periods for your employers you can give us a call at our office to set up an appointment or compliance review.

Here is a guest post by Joseph Gustav, a blogger for Pounding the Pavement and a writer on High School Diploma at Home for Guide to Career Education. Joseph provides some good points to ponder when convening a meeting at your workplace:

Meetings are an evil necessity. Workers must take time from their busy days for sessions that are all too often unproductive and unengaging. Meetings are supposed to be extremely valuable opportunities to work as a team at a designated time and place but all too often are unorganized nuisances. Here are some tips to run effective business meetings that will boost productivity rather than take away from time that could have been spent more productively.

Plan, plan, and plan ahead of time. This goes for everybody. Supervisors or team leaders should have a set agenda working toward a predetermined goal. Meetings should be rigidly structured and time should be allotted for specific points of discussion. The more advance notice, the better — have an agenda prepared the day before so team members can prepare as well, and the expectation should be made clear that they should attend well prepared for the topics at hand.

Stick to a schedule. Start meetings on time and end on time, if not early. Certainly try hard not to run over on time because that is the easiest way to have team members start watching the clock and stop paying attention and contributing to discussion. This is tied to the planning aspect: make sure your expectations for what will be covered in the time allotted are realistic. Also, do not schedule meetings for incovenient times such as the end of the day. Mid-morning right before lunch is a good time, but try to ask team members for what works best for the majority.

Do not stray off topic. Your agenda should be followed, so do not allow anything not on that agenda to enter into discussion unless absolutely relevant and necessary. Staying on topic will make for meetings that are more efficient, productive, and useful, and that are well worth your team members’ time and yours. Get down to business and dig in to the topics at hand, and nothing more.

Do not hold unnecessary meetings. If there really is nothing new to talk about, you do not have to hold a meeting for the sake of having one. It’s a waste of time and only reinforces that meetings are pointless and unproductive. If an e-mail works just as well, send one out; face time is not always essential.

Write it down. Have a white board or something large to write on to put down new goals and ideas. Having something in writing motivates people to recognize that what was discussed in the meeting will happen, and that it needs to happen. Also, have someone keep minutes and send it out to all team members post-meeting. Recapping is always welcomed by team members to remember what was discussed and decided and serves to underscore the ideas presented and goals made while together.

Decide on what’s next. Be sure to have new goals and steps to take to reach these objectives decided at the meeting’s conclusion. Assign tasks to be undertaken and deadlines for them to be completed. If possible, detail a vague idea of what the next meeting will entail so everyone knows what to work toward — again, there can never be too much planning. This ensures that meetings stay productive and are viewed as such because actual actions will be expected to be taken after everyone has gone back to work.

Recently, the US Equal Employment Opportunity Commission (“EEOC”) announced that Trinity Products, Inc (“Trinity”), a billboards and signposts manufacturer, agreed to pay $55,000 to settle a sexual harassment and retaliation suit filed by the EEOC. The EEOC alleged that a “high level manager harassed his assistant with offensive language and gestures and requests for sexual favors and sought to replace her after she complained to other supervisors about his conduct, resulting in her discharge.” (EEOC, et al. v. Trinity Products, Inc., et al., Case No. 4:09-CV-01617 CAS). As part of the settlement, Trinity must distribute a notice informing employees of their rights under federal anti-discrimination laws and provide sexual harassment training for all managers.

The above case is a reminder that the “language” used by one employee can easily be considered “offensive” and sexual harassing by another employee. An employee’s stray comment, sexual inference or joke is often considered sexual harassment by a co-worker. Interestingly, the improper comments are often made by those employees in a supervisory, management or senior executive position.

To reduce company liability and prevent harassment allegations, claims and lawsuits, many companies conduct sexual harassment prevention training on an annual basis. Employees should be provided with the legal definition of sexual harassment, given examples of sexual harassment based on common work-day interactions, provided the company’s reporting procedures and encouraged to report all incidents without fear of retaliation.

Creating a culture where employees are empowered to report sexual harassment often starts with a well drafted employee handbook that clearly defines the company’s reporting procedures. To prevent sexual harassment, we recommend that all employers review their handbook policies for clarity and consider sexual harassment prevention training on an annual basis. Indeed, this training is a requirement for employers with more than 50 employees, which includes contractors and part-time employees.  Additionally, the training should be considered by smaller employers to bolster their defenses in the event of similar litigation.

Liberty Law provides economical harassment prevention training that complies with the law, adding to the employer’s defense in the event of litigation. Additionally, Liberty Law will provide this training and seminar free of charge to its level 2 and 3 monthly subscribers (more details here) after 6 months of engagement.

A recent decision by the California Court of Appeal has basically banned unions from picketing on business property within California. In its opinion the court invalidated two California laws designed to protect union demonstrations on business property.  The reviewing court ordered the trial court to grant an injunction restraining the United Food and Commercial Workers Union (“the Union”) from picketing in front of a Sacramento warehouse store owned by Ralphs Grocery Co. (“Ralphs”). Ralphs Grocery Co. v. United Food and Commercial Workers Local 8, No. C060413 (Cal. Ct. App. July 19, 2010).

Facts: The dispute arose when several members of the Union picketed in front of Food Co., a subsidiary of Ralphs, for being a nonunion store. Ralphs sued for trespass and sought to enjoin the unauthorized picketing after an unsuccessful attempt to require the Union to follow Food Co.’s rules for speech on the property. The rules prohibited, in part, the distribution of literature, physical contact with any person, display of signs larger than two feet by three feet, and speech within 20 feet of the store entrance. Ralphs alleged that the Union didn’t follow the rules ; specifically, that the Union  was handing out flyers and enlisting supporters within five feet of the entrance.

In bringing suit, Ralphs challenged the constitutionality of California’s Moscone Act, which deprived state courts of jurisdiction to issue injunctions against “peaceful picketing or patrolling” involving any labor dispute. Ralph’s lawsuit also challenged California’s Labor Code section 1131.8, which imposed severe restrictions on a property owner’s right to obtain injunctive relief against union activities. The trial court ruled that the Moscone Act was unconstitutional because it constituted content based discrimination in violation of the First Amendment and Equal Protection Clause. The trial court, however, upheld the constitutionality of California’s Labor Code section 1138.1 in light of a prior appellate decision which held that Labor Code section 1138.1 did not violate federal and state constitutional guarantees of equal protection. Applying Labor Code section 1138.1, the trial court denied Ralphs’ motion for a preliminary injunction. Ralphs appealed.

Decision: Three questions of law were at issue on appeal:

1) Is the entrance area of Food Co., where the picketing was taking place, a public or private forum? If public, the California Constitution required that any time, place, and manner restrictions on free speech be reasonable. The court found that Food Co.’s entrance area was not a public forum, so the company was free to restrict the type of speech allowed at its entrance.

2) Is California’s Moscone Act, which limited the ability of courts to issue injunctions in labor relations cases, constitutional? The constitutionality of the Moscone Act was at issue because the Act’s selective restriction was based on the content of the speech. The court held that the Moscone Act was unconstitutional under the First and Fourteenth Amendments because it afforded preferential treatment to speech concerning labor disputes over speech about other issues.

3) Is the requirement of California’s Labor Code section 1138.1 that factual showings be made before a court is able to grant an injunction in a labor dispute constitutional (i.e., that unlawful acts have been threatened and will be committed and that substantial and irreparable injury to the property would result)? The court found that this Labor Code section was unconstitutional for the same reasons as that of the Moscone Act.

Stay Tuned: Although the decision may be subject to further appeal, this case provides important guidance for employers dealing with the issue of regulating union activity on business property. The court’s ruling is seen as a major victory for California retailers who have endured loss of business and damage to their image resulting from union picketing on their properties. A wide spectrum of businesses ranging from hospitals to retail chain stores are expected to be impacted by this decision. Employers need to have a firm grasp of what constitutes public and private forums under California law and be able to determine the types of content neutral restrictions that are enforceable on their premises.

The Wall Street Journal writes that the U.S. economy slowed in the second quarter of this year and the government said the recession was deeper than earlier believed, adding to concerns over the recovery’s strength.  The Commerce Department Friday said U.S. gross domestic product, or the value of all goods and services produced, rose at an annualized seasonally adjusted rate of 2.4% in April to June. In its first estimate of the economy’s benchmark indicator, the government report showed growth was lifted by business investments and exports. Consumer spending, a key growth engine for the U.S. economy, made a smaller contribution to growth.

Economists polled by Dow Jones Newswires were expecting GDP to rise by 2.5% in the second quarter. In the first quarter, the economy grew by 3.7%, revised up from an originally reported 2.7% increase. But growth estimates all the way back to the start of 2007 were revised lower.

After suffering its worst downturn since the 1930s, the U.S. economy began taking small steps forward about a year ago, helped by the Federal Reserve’s slashing of lending rates and the government tax cuts. But recent data have raised questions about the recovery’s durability. The job market remains weak, with almost one in 10 Americans unemployed, and growth in consumer spending and manufacturing appears to be slowing down.  The government revision of data over the past three years showed that the economy’s exit from its deep slump was weaker than previously estimated. In the final quarter of 2009, for example, GDP rose at an annualized rate of 5.0% as consumer spending didn’t grow as much as previously thought. The earlier estimate was that GDP increased by 5.6%.

In the most recent quarter available, consumer spending rose by a moderate annualized rate of 1.6% in April to June. Spending by Americans, which accounts for more than two-thirds of the economy, rose by 1.9% in the first three months of the year.  Meantime, business spending on equipment and software continued to surge, increasing by 21.9% in the second quarter, compared with a 20.4% rise in the first three months. The figures highlight the contrast in the economy between high company profits and a persistently feeble jobs market keeping consumers at bay.

Federal Reserve Chairman Ben Bernanke, who last week said the economy’s outlook was “unusually uncertain”, has stressed the strength of the recovery will depend on whether consumers spend and companies invest enough to make up for fading support from the government. With unemployment still at 9.5% and Americans worried that taxes will need to rise to cut a huge budget deficit, that remains in doubt. When they meet Aug. 10, Fed officials are widely expected to repeat they see interest rates staying close to zero for a while and are likely to at least discuss ways in which they could support the economy further. A Fed official Thursday warned that deflation is a growing risk for the economy.

Economic growth in the U.S. during the second quarter slowed to 2.4%, indicating that the recovery has been weaker than previously expected. David Wessel, Dennis Berman and Evan Newmark discuss. Also, Dennis Berman tells the story about one of the leaders at Tiananmen Square who is now one of the top candidates to manage Berkshire Hathaway’s investment portfolio.

In a sign of the economy’s weakness, Friday’s report showed price increases continued to move down in the second quarter from already low levels.

The underlying inflation rate — which excludes volatile moves in food and energy prices and is closely watched by the Fed — increased by 1.1% in the April-to-June period from the previous quarter. That was the lowest reading of the core personal consumption expenditure index since the first three months of 2009 and came after a 1.2% rise in the first quarter of this year.

Other inflation gauges within the government’s report were also muted. The overall price index for personal consumption expenditures rose by only 0.1% in the second quarter, slowing sharply from a 2.1% gain in the first quarter. Gross domestic purchase prices rose just 0.1%, after a 2.1% increase in the first quarter. The chain-weighted GDP price index increased by 1.8%, compared to 1.0% in the first three months.

For all of 2009, the government said the U.S. economy contracted by 2.6%, compared to the previously estimated 2.4% decline. In the whole of 2008, GDP was flat, instead of rising 0.4% as previously estimated. In 2007, the world’s largest economy expanded by 2.1%, down from an originally reported 1.9% increase.

In Otsuka v. Polo Ralph Lauren Corp., a federal district court in Northern California recently approved a $4 million class action settlement for unpaid wages. Plaintiffs alleged that, as part of the retailer’s loss prevention program, they were required to submit to inspections of their personal bags and belongings before exiting the store. However, the inspections occurred after the employees had already clocked out. The settlement will compensate as many as 6,700 class members for the off-the-clock time waiting for and submitting to these bag inspections.    Employers are cautioned against retaining control over employees after the employee has clocked out.  Retaining sufficient control over what the employee does after clocking out, may amount to nothing short of forcing the employee to work off the clock, thereby entitling the employees to back pay, penalties and attorneys fees.

The U.S. Department of Labor (“DOL”) has published an Administrator’s Interpretation to address the question of whether an employee is entitled to leave under the Family Medical Leave Act (“FMLA”) to care for a child they are not biologically related to.  The FMLA provides that an eligible employee can take up to 12 weeks of unpaid leave for, among other things, the birth and care of the employee’s own newborn child, for placement of a son or daughter with the employee for adoption or foster care, and to care for a son or daughter with a serious health condition.  Under the FMLA, employees who have no biological or legal relationship with a child may still be considered to stand in “loco parentis” to the child and be entitled to leave to care for the child.  Such a relationship can be demonstrated either by providing day-to-day care for the child, or financial support to the child. The DOL memo also makes it clear that same sex partners can establish the requisite in loco parentis relationship, providing in part that “where an employee provides day-to-day care for his or her unmarried partner’s child (with whom there is no legal or biological relationship) but does not financially support the child, the employee could be considered to stand in loco parentis to the child and therefore be entitled to FMLA leave to care for the child if the child had a serious health condition.”  The Interpretation further states that the same applies for “an employee who will share equally in the raising of a child with the child’s biological parent” and “an employee who will share equally in the raising of an adopted child with a same sex partner, [but] does not have a legal relationship with the child.”  The DOL also notes that “the fact that a child has a biological parent in the home, or has both a mother and a father, does not prevent a finding that the child is the ‘son or daughter’ of an employee who lacks a biological or legal relationship with the child for purposes of taking FMLA leave.”

Employers need to be aware that the FMLA and California child care leave laws are not  necessarily limited to traditional definitions of family and parentage.  When faced with a request for child care leave, employers need to make an individualized fact-based determination regarding the relationship between the employee and the child.