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socrateaser
socrateaser, Lawyer
Category: California Employment Law
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mY daughter and i recently become part of a not for profit

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mY daughter and i recently become part of a not for profit corporation. Under the Articles of Incorporation my daughter is the Secretary, I am the treasurer and we entered into this corporation with the now President of the corporation. Prior to the new business starting this April 1, 2011, our President verbally stated to my daughter that along with a weekly salarly she would also receive up to $200,000.00 annually as secretary of the Corporation. I was then selected by both my daughter(secretary) and our business associate (president & financial backer) that I would hold the position of Treasurer of the not for profit corporation. It was also explained to me that I would be given the same employment & annual earnings opportunity for myself as treasurer as my daughter was provided by verbal agreement. Under the Articles of Incorporation my daughter and I would be given a small ownership share of the company. Prior to the business opening my daughter and I have proofen that we have conducted ourselfs in complete good faith for the betterment of the company both during business hours and off hours for the company and personal needs of the President. Even though we have not provided anything finacially for the construction and start-up of the company; my daughter and I have provided an excessive amount of our personal time and physical resources to the start-up and operation of the company. Since we've opened the president has become extremely abusive to both my daughter and has demonstated complete misconduct of his position. In the time since we have opened he has fired us twice and threatened to terminate us as corporate officers. He continues to display frequent episodes of angry abusive behavior causing both emotional distress and defamation. He continues to smear our proofen loyalty to the company and himself. additionally he routinely vilifies and accuses my daughter and I of unthinkible misconduct to both the company and himself personnally. At this time he wants to terminate the both of us as secretary and treasurer of the corporation. He says he is able to terminate us based on his single majority vote as president of the company and financial backer. 1. Do my daughter and I have any recourse for severance pay, verbal commitments to salaries and ownership shares along with protecting us as corporate officers from liability once terminated?
2. What are our rights as corporate officers against wrongful termination and harrasment?
3. Does termination require a majority vote of the complete board of directors or does his majority shares as president allow him to terminate us without any recourse?

Sincerely,
Treasurer
Submitted: 5 years ago.
Category: California Employment Law
Expert:  socrateaser replied 5 years ago.
1. Do my daughter and I have any recourse for severance pay, verbal commitments to salaries and ownership shares along with protecting us as corporate officers from liability once terminated?

A: Under Cal. Labor Code 2922, all employment in California is "at-will," unless there is a written agreement between employer and employee providing for a specific future contract termination date more than one month after the date of commencement of employment. This means that the employer can terminate the employee at any time, for any reason, or for no reason at all.

There are exceptions for unlawful discrimination (race, color, nationality, religion, sex age or disability) -- exceptions for public policy (jury duty, witness subpoena, reporting employer criminal activities to law enforcement) and exceptions for breach of implied covenant of good faith, which gives damages to an employee where an employer violates a written disciplinary policy as part of the suspension, demotion or termination of an employee.

But, absent some specific connection to one of the above-descriped exceptions, an employer can simply say, your services are no longer required, effective immediately, and that ends the employment, without any further liability.

That said, a corporate officer, generally can't be fired without a vote of the board of directors/trustees, unless there are corporate bylaws or resolutions to the contrary. Cal. Corp. Code § 312(b).

I don't know what sort of control your President actually has, but it may or may not be as great as he claims.

Note: You mention in your question that the President was offering you a small ownership share. Nonprofit corporations do not have owners, and the provision of any ownership share to any person would instantly convert the corporation into a for-profit entity, both for federal and state tax purposes, and for every other legal purpose. So, this comment concerns me, because it suggests that the management does not understand corporations law at all, or that there is some sort of shenanigans in play.

2. What are our rights as corporate officers against wrongful termination and harrasment?

A: See #1, above.

3. Does termination require a majority vote of the complete board of directors or does his majority shares as president allow him to terminate us without any recourse?

A: See #1, above.

Hope this helps.

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