Employment Law Duties

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Associations that have their own employees have numerous obligations for compliance with state and federal labor laws and regulations. The checklist items in this section mention only a few specifics. Seek legal advice to be sure your association complies with all employment laws. We cannot include all of the employment related duties in this publication. However, we have included some important duties:

Workers Compensation Insurance

Be sure that you have workers compensation insurance for employees and pay taxes withheld from employees pay when due. Most insurance professionals advise associations that have no employees to have at least a basic workers compensation policy for defense and indemnification from unfounded claims that someone who was injured was an association employee.

Fidelity Bond Coverage

Associations are now required to maintain fidelity bond coverage for its officers, directors and employees in an amount that is equal to or more than the amount of the association’s reserves plus total assessments for three months. The fidelity bond must also include computer fraud and funds transfer fraud. If your association uses a managing agent or a management company, your association’s fidelity bond coverage must be separate from the fidelity bond of the management company or managing agent and must also include dishonest acts by that person, entity and its employees. [CC §5806]

Independent Contractor or Employee?

Be sure you know whether your independent contractors are truly independent contractors and not employees. The penalties under workers compensation laws and unemployment compensation laws for failure to pay overtime and the Labor Code for misclassifying an employee as an independent contractor can be severe. [Labor Code §§226.8, 2750.3, 2753, 2775-2787]

Security Service Personnel

Associations that have security service personnel directly employed by the association must register those private security officers with the Department of Consumer Affairs. [Bus. & Prof. Code §7574 et seq.]

Discriminatory Employment Practices

Associations must avoid numerous unlawful or discriminatory employment practices. [Gov. Code §12940]

Injury, Illness & Prevention Program

Associations must have an effective Injury, Illness and Prevention program if it has employees. [Cal. Code Regs., tit. 8, §3203(a)]

Paid Sick Leave

Associations must provide paid sick leave to all employees who work for the association for 30 or more days within a year from the commencement of employment. [Cal. Labor Code §246]

Issues for Inspectors of Election to Consider

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  1. Front of envelope – not signed in upper left corner

         Accept            Reject

  1. Front of envelope – signed but other identifying information not filled in

         Accept            Reject

  1. Front of envelope -ballot voted by proxy, but envelope not signed by proxy holder (owner’s signature or no signature)

         Accept            Reject

  1. Front of envelope – no identifying information or signature

         Accept            Reject

  1. Front of envelope – name is different than the name on Association’s owners list

         Accept            Reject           Female and first name is the same
(possible change in marital status)

         Accept            Reject           Unit owned by corporation

         Accept            Reject           Unit owned by trust (trustee)

         Accept            Reject           Alleged Power of Attorney

         Accept            Reject           None of the above – name just does not match

  1. Outer envelope has been opened

         Accept            Reject           Apparently opened after receipt by
management/Inspectors of Election

         Accept            Reject           Apparently just not sealed by voting owner

  1. Outer envelope sealed, but inner envelope not sealed

         Accept            Reject

  1. Some form of ballot other than Official Ballot put into double envelopes (e.g., directions to proxy holder, handwritten ballot, other) [1]

         Accept            Reject

  1. Ballots received not in double envelope system – only in one envelope

         Accept            Reject           Placed only in outer envelope

         Accept            Reject           Placed only in inner envelope

  1. Validity of ballot if placed in ballot box but not in envelope(s)
    1.   Accept            Reject           Signed (or identity of voter can be determined)
    2.   Accept            Reject           Unsigned (identity of voter cannot be determined)
  1. Ballot delivered to other than the meeting or the officially designated location on envelope

         Accept            Reject

  1. Two ballots received from same unit

         Accept            Reject           Earliest dated / First received

         Accept            Reject           Owner vote over proxy holder vote

  1. Ballots received after official close of the polls

         Accept            Reject

  1. Validity of ballot if faxed

         Accept            Reject

  1. If owner wants to revoke original ballot and re-vote, can they revoke ballot already cast?[2]

         Accept            Reject           Allow Revocation and re-vote

         Accept            Reject           Disallow revocation and re-vote

If allowed to re-vote, what is the latest point in time when this can occur?

                                                                                                                     

  1. When will polls officially close? (If not previously determined)                                

PROXY ISSUES (IF USED)

  1. Front of envelope – ballot voted by proxy, but not signed by proxy holder (owner’s signature or no signature)

         Accept            Reject

  1. Validity/priority if two proxies received from same unit

         Accept            Reject           Earliest Dated

         Accept            Reject           Latest Dated

 

Date:                                                                                                                           

Inspector of Election

Date:                                                                                                                            

Inspector of Election

Date:                                                                                                                           

Inspector of Election

 

[1] The Association’s election rules may prohibit counting unofficial ballots. Please confirm with Association’s election rules.

[2] The Association’s election rules may prohibit revoking or changing an original ballot. Please confirm with Association’s election rules.

Membership/Owner Duties

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Resale Disclosure Statement

Owners must provide a completed statutory disclosure form to purchasers before reselling residential property. This also must be completed by a real estate agent, if any. The form is extensive and detailed and found in the statute. [Civ. Code §1102 et seq.; see e.g., §1102.6]

Smoke Detectors in Owner Units

Each owner must supply and install smoke detectors in accordance with the manufacturer’s instructions in any unit intended for human occupancy. Each smoke detector must be operable at the time that any tenant occupies a unit and must be repaired if the tenant reports a problem. The association is responsible for installing, maintaining and testing smoke detectors in hallways, common stairwells, etc. [Health & Saf. Code §§13113.7 & 13113.8]

Carbon Monoxide Detectors in Owner Units

Owners must install an approved carbon monoxide detector by July 1, 2011, in any single-family dwelling unit intended for human occupancy that has a fossil fuel burning heater or fireplace. For all other existing dwelling units intended for human occupancy, the deadline is January 1, 2013. [Health & Saf. Code §§17926-17926.2] Selling owners must disclose in the required form whether the unit being sold has a carbon monoxide detector. [Civ. Code §1102.6]

Low-Flow Plumbing Fixtures

Caution for associations and owners: all single-family dwellings must replace noncompliant plumbing fixtures no later than January 1, 2014 or January 1, 2017, depending on factors specified in the statute. The date is January 1, 2019 for multi-family residential properties and commercial properties. Failure to provide proof of compliance could prevent the issuance of building permits. It is not clear if multi-family residential includes condominiums and attached planned development housing. See statute for details and disclosure duties. [Civ. Code §§1101.1 – 1101.9 and 1102.155] Flow rates of noncompliant fixtures are in California Civil Code section 1101.3. It may take additional legislation for clarification and for how an HOA that does not maintain, repair or replace plumbing fixtures could compel owner compliance.

Membership Meetings

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Nomination and Election Procedures

Associations must adopt election rules [CC §5105(a)], but the requirements of §5100-5145 do not apply if the governing documents provide that one member from each separate interest is a director. [§5100(f)] Every corporation must have reasonable nomination and election procedures given the nature, size and operations of the corporation. Certain specific requirements apply in corporations with 500 or more members and in corporations with 5000 or more members. [Corp. Code §7520-7525] Consult the statutes for details. There are a multitude of additional requirements on election rules, requirements for independent inspectors of election and other detailed requirements that are stricter or different from the requirements in the Corporations Code. Association funds may not be used for campaign purposes in board elections or in other membership votes. Consult the relevant statutes for requirements. [CC §§5100-5145]

Parliamentary Procedure Adoption

Adopt a recognized system of parliamentary procedure and/or other parliamentary rules for conducting membership meetings. It’s a good idea, but not mandatory for board meetings. [CC §5000] Some governing documents require use of a specific system of parliamentary procedure (like Robert’s Rules of Order) for member meetings, but most do not specify the system of procedure. Even if Robert’s Rules is specified, there are numerous books entitled Robert’s Rules of Order, so if Robert’s Rules is specified, it is best to identify which title, publisher and date you are using.

Election Rules

Associations must adopt election rules [CC 3.§5105(a)], but the requirements of CC §§5100-5145 do not apply if the governing documents provide that one member from each separate interest is a director. [CC §5100(f)]

Election Inspectors

Appoint one or three election inspectors, preferably in advance of the annual meeting and any membership vote by secret ballot to perform the duties specified in the statute. Civil Code controls over Corporations Code. [Civ. Code §5110; Corp. Code §7614] Bylaws or election rules may set the number of inspectors at 1 or 3 and specify the qualifications for the inspector(s). The association’s manager may only be an inspector if allowed by the election rules.

IRS Revenue Ruling Needed?

Consult with the association’s accountant regarding the appropriate resolution, if needed, to adopt at the annual meeting for the treatment of any surplus income over expenses from the current fiscal year. [IRS Revenue Rulings]

Secret Ballots-Double Envelopes

Use a secret ballot and a double envelope system mailed to all owners at least 30 days in advance for all elections and removal of the board, membership votes regarding assessments, votes on amending the governing documents or the grant of exclusive of common area under CC §4600. There are a multitude of additional requirements on election rules, requirements for independent inspectors of election and other detailed requirements that are stricter or different from the requirements in the Corporations Code. Association funds may not be used for campaign purposes in board elections or in other membership votes. Consult the relevant statutes for requirements. [Civ. Code §§5100-5145] There is a maximum of one year to file an action for a violation of the article on elections. [Civ. Code §5145; Compare with Corp. Code §7527.]

Written Ballots in Lieu of Meeting (not Secret Ballots)

Written ballots to members (used in place of a meeting) must meet many specific requirements to be valid. [Corp. Code §7513] Written ballots are signed and dated by the voter and cannot be used when the Davis-Stirling Act requires a secret ballot.

Timing of Member Meeting Notices

Give written notice of membership meetings at least 10 and not more than 90 days before the meeting date. If notice is given by mail, and the notice is not mailed by first-class, registered, or certified mail, notice must be given at least 20 days before the meeting. Notice of meetings at which directors are to be elected must include the names of all those who are nominees at the time notice is given to members. [Corp. Code §7511] Corporations with more than 5000 members must have articles or bylaws that set a date for the close of nominations for the board. The date must be no less than 50 and no greater than 120 days before the election, and no nominations are permitted after that date. [Corp. Code §7522]

Topics Specified in Notice

Specify matters intended to be presented at the meeting in the notice of the meeting. [Corp. Code §7511(a)]

Special Meeting Petition

When a special meeting is called by a petition signed by the specified percentage of the members [Corp. Code §7510(e)], the Board must set the date, time and place of the meeting between 35 and 90 days after receipt of the petition and send notice within 20 days after receipt of the petition, or the persons signing the petition may give the notice. [Corp. Code §7511(c)]

Maximum Adjournment

No membership meeting may be adjourned for more than 45 days. [Corp. Code §7511]

Proxies

Any proxy distributed to 10 or more members in a corporation with 100 or more members must include the chance to specify a choice between approval or disapproval of each matter or group of related matters intended to be presented at the meeting. [Corp. Code §7514] Proxies may not be used in lieu of a secret ballot. Any proxy holder must complete a secret ballot. Any instruction in a proxy that directs the manner of voting must be set forth on a separate page of the proxy that can be detached.

Proxy Validity

Consult the statute for details on proxy validity. [Corp. Code §§7517 and 7613]. IMPORTANT: Under California Corporations Code section 7613(g), a proxy cannot be used for certain types of votes, including recalls, unless it generally mentions the nature of the transaction for which it will be used. Many associations do not use proxies any longer after the secret ballot, double envelope system took effect. Under California Corporations Code section 7613(f), proxies can be prohibited only if the members amend the Bylaws or Articles to do so.

Cumulative Voting

Cumulative voting is authorized in all new associations and many older associations. The Corporations Code and many bylaws state that no one may vote cumulatively unless the candidate’s name was placed in nomination before the voting, and someone gives notice prior to the voting of the intention to cumulate votes. As such, we recommend that the board give such notice before sending or with any proxies used for the election that provide for cumulative voting. [Corp. Code §7615]

Election Results

The results of any election (not just for the board), must be reported to the board, recorded in the minutes and published within 15 days to all members. [Civ. Code §5120(b)] Election materials must be kept for a minimum of one year. [Civ. Code §§5125 & 5145(a)] There is a maximum of one year to file an action for a violation of the article on elections. [CC §5145; Compare with Corp. Code §7527.]

SB800 and Governing Documents Checklist

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[Requirements usually found in the Association’s Bylaws and/or the CC&Rs]

Notice to Members and Informational Meeting

  • Notice to members required at least 30 days before filing a civil action against developer
  • Notice must include:
    • Time and place that a meeting will take place to discuss problems impacting association
    • Potential impacts to community, including potential financial impacts to association and its members. This can include impact of claims on sales; attorney fees, expert and other costs; raising funds through assessments and reserves
    • The options, including civil actions, that are available to address the problems
  • If the association has reason to believe an applicable statute of limitations will expire, it may give notice of this meeting within 30 days after filing of a civil action
  • Some governing documents may suggest a membership vote is required prior to initiating any legal action against a declarant entity. Generally, these provisions are void and unenforceable if drafted by the declarant. Such provisions may be enforceable if adopted by the non-declarant members of the association.

Information Typically Required for Meetings Through Governing Documents

  • Impact of claims on sale
  • Attorney fees, expert and other costs
  • Raising funds through assessments and reserves
  • Potential parties
  • Description of process to pursue claims

Documents to Have Prepared and Ready when Sending Notice to Builder

  • Meeting Minutes
  • Maintenance Manual reports
  • Maintenance Records
  • Budgets, reserve studies for 10 years
  • Communications with members?

Community Association Transition to Owner Control Checklist Construction

  • Manufacturer warranties (HVAC, elevators, windows, lift gates, pool equipment, exterior cladding, key fobs, security)
  • Manufacturer recommended maintenance schedules and instructions
  • Building plans and permits; notices of completion or occupancy
  • Location of key components (water, gas, irrigation valves and shut off) and information concerning all fire safety and other emergency systems
  • Owner and Association Maintenance Manual
  • List of contractors and contact information
  • Inventory of Association real and personal property

Legal Documents

  • Everything recorded (CC&Rs, easements, maps), Bylaws, CC&Rs, Rules
  • Architectural requests, approvals, denials; meeting minutes
  • Insurance policies
  • Release of mechanics liens; lawsuit documents
  • Records from Department of Real Estate (or “BRE”)
  • Assessment and Construction Bonds
  • Leases
  • Senior Housing Compliance documents

General Timeline to Bring Claims

(Each case varies with the applicable facts)

For an association, the time to bring claims can begin to run from a number of different dates, including, the date of substantial completion of the building or building component (as defined by code) or the date the declarant relinquishes control over the decision to initiate a claim (this can have various meanings, including the date a homeowner becomes a director, the date homeowners become the majority on the Board of Directors, or some governing documents define a specific date based on the association’s annual meeting). Do not apply these time periods without consulting with counsel!

1 year          Irrigation systems, drainage, manufactured products, noise (from occupancy of adjacent unit)

2 years        Dryer ducts, landscaping systems, untreated wood posts

4 years        Exterior pathways, driveways, hardscape, sidewalks, patios, (certain) plumbing and sewer system issues, (certain) electrical systems, untreated steel fences

5 years        Paint, stain

10 years      Other components including decks, balconies, tiles, stucco, framing, foundations, (other) plumbing and sewer lines, roofs, soils, structural, windows

 

 

 

 

 

 

Fire Damage Checklist

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The following is a basic checklist for associations faced with a fire damaged unit:

  • Immediately submit the claim to the association’s insurance carrier.
  • If you are aware of bodily injuries, notify the carrier of this fact too as experts may need to be retained.
  • Hire a contractor to board up the unit(s), if the insurance carrier has not already done so. Take any other action necessary to secure the area and to prevent people from entering the property which could cause further injury.
  • Shut off the utilities and inquire whether any further action needs to be taken with regard to power, water or gas. For instance, the electric company may need to remove the meters. Suggest any affected homeowners (and tenants, if any) to file claims on their personal insurance for moving expenses, personal property, etc.
  • Notify the local code enforcement officers. The City may need to condemn the building and post notice to restrict entrance. Be wary of unsolicited calls from public adjusters and contractors. Speak only with the insurance carrier’s adjuster and do not disclose information to unnecessary parties.
  • If the association has a preferred contractor, advise the insurance carrier that the association wants the contractor involved and would like it to bid the repairs, if possible.
  • Have all bids submitted both to the association and the insurance carrier. If the selected bid is not the lowest, try to get the insurance carrier’s concurrence and the contractor’s agreement to perform the work for the lowest price.
    The association should be the one to award the contract. If possible, control payments to coincide with payments from insurance carrier.
  • If a deductible is to be paid by the homeowner rather than the association, collect the deductible in advance, or have the contractor collect it directly from the homeowner. Often there are separate deductibles, one for the building and one for personal property (floor coverings, appliances, etc.).
  • If the claim covers personal items (floor coverings, etc.), ensure the contractor and homeowner are in direct contact with one another early on so that color and/or style selections can be made; some items may not be readily available and time will need to be allotted for delivery. Also, be sure homeowners are aware the association will not pay for any upgrades or extras that are not covered by the association’s insurance.
  • Some owners will want to take the insurance proceeds available for final interior decoration and use it to make changes or upgrades. In our experience, if they want to do this, this can complicate things, as the costs for their items can easily get mingled with the other costs, so that it is difficult to tell what expense belongs to whom. Discuss this early on with the insurance carrier and expect such requests. Also discuss it with the contractor before you sign the contract. Some owners will want to use the same contractor, and others will want to get their own contractor or vendor to do the work.
  • Decide how you want to handle this situation in advance so that if you allow it, neither the insurance carrier nor the association will be stuck with any extra costs. Also decide how those items will be split out from the contract and who will control the money to be used for the decor. If the association gets the money and has to parcel it out to the owners, count on disputes over how much is owed and under what circumstances it should be paid. Whether the association or the insurance carrier pays the money to the owner, it is not a good idea to pay anything until the materials are delivered and installed. It is also better to pay the money Ensure all monies are paid directly to the contractor, not the homeowner. If you give -money directly to the owner, the owner may take the money and not do the work.
  • If any fire or smoke-damaged materials or structures are to remain, i.e., not starting from a raw slab, be sure the contract includes a warranty for smoke-encapsulation as smoke odors may appear after reconstruction.
  • Execute a proof of claim only after all work has been completed and approved.

Individual circumstances, including the extent of the fire, may require additional or different actions. Please consult legal counsel.

Bidding Checklist

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In every bidding situation, consider the following issues:

  • Has the board defined its goals and objectives in this bid process?
  • Are there any bidding requirements in the Association’s governing documents that the board should follow (i.e., a requirement to obtain at least 3 bids)?
  • Will professional assistance be needed to draft the specifications for the job, and/or to evaluate the bids? Have complete plans and specifications been written to specifically define the scope of work to be performed?
  • Is the bid due date clearly stated? Have the bidders been given enough time to submit complete and accurate bids?
  • Should a pre-bid job walk be scheduled? Mandatory or optional?
  • Have interviews with the bidders been scheduled? What questions will be asked?
  • Who will check the bidder’s references and what questions will be asked of the references?
  • Who will check that the bidder has an active California Secretary of State registration?
  • Who will check the bidder’s Contractor’s State License Board profile for any prior complaints/violations? If there are any complaints/violations, does the bidder have a good explanation?
  • What special requirements does the association have? Are these listed in the bidder’s information materials?
  • Are bids to be submitted sealed or open?
  • Will unsuccessful bidders be told why they were not awarded the job?
  • Are the following forms included in the bid package? Invitation to Bid; Bid Form; Contractor’s Qualification Form; Designation of Subcontractors; Insurance and Licensing Information Form; Contractor’s Certification of Applicability of Specifications; Special Instructions; Contract Form.
  • Does the Contractor’s Qualification Form ask for all of the following? Form of company and company principals; years in business; number of employees; number of previous lawsuits/claims; references for similar jobs; bonding capacity/surety information; financial information; dollar volume of business in past year(s) and value of current work in progress.

Senior Housing Duties and Rights

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Protecting Senior Status

The legal issues pertaining to senior housing developments are extremely complex and have been changing constantly as the laws change. Any association interested in preserving its senior status needs to consult regularly with legal counsel.

Age Verification

Senior associations should have adopted procedures for age verification no later than October 30, 1999, and, at a minimum, must perform age verification surveys or update age verification survey information at least once every two years and get forms completed by any new occupants as soon as possible. [24 C.F.R. 100.307(b)]

What To Do When Your Association And/Or Board of Directors is Served With A Lawsuit

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  • Note Service Date, Time and on Whom
    • Make a written note immediately of the name of the person who was served with the papers, the time and the date. Your attorneys and insurance carrier will need to know this information, as you have only 30 days in which to file a response in State Court and 21 days if the lawsuit is in Federal Court.
  •  Act Promptly
    • Do not take a lawsuit lightly. Do not put the legal papers in a drawer or someone’s mail slot and wait for the person to see it. If you fail to protect your rights, the courts may not help to save you from your own mistakes, or, more likely, it will cost you a great deal more to undo the errors.
  • Notify Attorneys and Insurance
    • Immediately send a copy of the lawsuit to your attorneys and your insurance carriers noting the name of the person served, and the date and the time when they were served. Depending on your insurance policies and the nature of the claim, there may or may not be insurance coverage. Your attorneys may have to take the initial steps to protect your rights in the lawsuit.
  • Preserve Evidence
    • Your Association, all members of the Board of Directors, the Community Association Manager, and any employees of the Association have a legal duty to preserve evidence related to the lawsuit. Do not delete any emails or other electronically stored information, nor destroy any hardcopies of documents, letters, photographs, etc. If in doubt, ask your attorneys for guidance.
  • Preserve The Attorney/Client Privilege
    • Do not discuss the lawsuit with anyone other than your attorneys and other board members in executive session. Do not forward emails or other correspondence from your attorneys to anyone who is not a member of the board of directors, or the Community Association Manager.

Contracting Checklist

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In every contracting situation, from the smallest everyday project to the largest construction project, consider the following issues:

☐           Does the contractor have a valid California contractor’s license for the relevant specialty?

☐           Does the contractor have minimally acceptable levels of general liability insurance, automobile insurance and worker’s compensation insurance?

☐           Has the association been named as an additional insured on all of the contractor’s insurance policies?

☐           Have all the subcontractors submitted proof of their contractor’s licenses and insurance policies?

☐           Have all HOA and insured versus insured exclusion and contractor’s condition endorsements been deleted?

☐           Has the contractor complied with all of the association’s bidding requirements?

☐           Has the contractor supplied references and have the references been checked?

☐           Is there a written contract?

☐           Has the scope of the work to be performed been clearly defined?

☐           Does the association have to pay start-up costs to the contractor? Is the amount of the start-up costs reasonable (less than 10% of the total contract price)?

☐           Are progress payments required at reasonable intervals? Have payment obligations such as “upon delivery” been deleted?

☐           Have the payment provisions been written so that the association only pays for work that has been satisfactory completed?

☐           Is the contractor required to submit mechanics’ lien releases before each payment?

☐           Should the association write joint checks to the contractor and subcontractors if unconditional lien releases are not provided?

☐           Can the association hold retention from each progress payment until the end of the contract?

☐           Is final payment required after all mechanics’ lien rights have been expired?

☐           Are the starting and completion dates clearly specified?

☐           Is there a liquidated damages (predetermined monetary payment) provision in the contract?

☐           Would a performance bonus provision provide incentive to the contractor to finish earlier than required?

☐           Can the association terminate the contract “without cause?” If “cause” is required, is it clear under what condition the contract can be terminated?

☐           Has the contractor clearly indicated the warranties being given? Are there any materials manufacturer’s warranties?

☐           What exclusions are there in the warranties? Are these exclusions reasonable?

☐           Will the contractor be required to supply a performance bond or labor & materials bond?

☐           Is the contractor required to indemnify the association for its negligent acts and omissions?

☐           Have all obligations of the association to indemnify the other party been deleted from the contract?

☐           Have limitation of liability clauses been deleted?

☐           Does the contract require some form of Alternative Dispute Resolution mediation or arbitration) prior to or in lieu of litigation?

☐           Is there an attorneys’ fee provision in the contract?

☐           Has the contract been reviewed by legal counsel?