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Calif. small businesses are struggling with a new achilles heel: the legal system

As the President and CEO of the National Asian American Coalition (NAAC) and the National Diversity Coalition (NDC), my entire life has been dedicated to empowering minority communities and small businesses. 

And while we’re all aware of the inflation, supply chain, and employment issues nationwide, it hurts to witness the rapid deterioration of California’s minority small businesses and the communities that depend on them. Things are worse here than anywhere else and for a reason you might not expect—our legal system. 

While headlines continue to focus on wars abroad, high gas prices, and supply chain constraints, what is making life tougher for Californians is the exorbitant cost of a legal system that encourages the exploitation of the most vulnerable—small businesses and underserved communities.  

But how could something as under-the-radar and mundane to most have such a devastating impact? And on the world’s 5th largest economy no less?

The formula is simple but deceptive. You see, our lawmakers are outspoken about protecting consumers and vulnerable populations from the “predators of the private sector,” but the policy prescriptions they’ve enacted to achieve their stated goals have had the opposite effect. So far, their only solutions involve making it easier and easier for anyone to sue a business. 

We’ve seen this enacted through overregulation to the point where smaller businesses can’t keep up (Prop 65). We’ve watched as disgruntled employees have been encouraged to file lawsuits on behalf of anyone, including the state itself (Private Attorneys General Act). And we’ve seen law firms take advantage of disabled Californians to sue businesses over the smallest Americans with Disabilities Act (ADA) violations.

No matter how you slice it, the new “wild west” is in our courtrooms. But in this case, the outlaws are now plaintiff’s attorneys robbing small businesses that can’t afford to defend themselves. 

So, what does this really look like for you the consumer or the communities and small businesses I fight so hard to represent?

It looks like a family lawn service being sued for millions and forced to close its doors because a former employee discovered a typo on his paystubs. It looks like a minority-owned restaurant being sued for not including the dimensions of its bathroom on the company website and being forced to lay off half of its servers. It looks like lawyers forcing settlements out of businesses who can’t afford to go to court by accusing them of Prop 65 violations.

And what makes all this worse is the compounding nature of the problem. Lawyers know they can file claim after claim against businesses that can’t afford to defend themselves in court. To counter, businesses raise prices and shrink their workforces as they are forced to allocate more money for future legal expenses. Consumers pay more for the goods and services they need, and more and more workers are out of a job. Of course, this disproportionately impacts blue collar workers and low-income communities. Big businesses can afford to fend off frivolous lawsuits or pay expensive settlements if they need to. 

For a state that boasts one of the most inclusive, diverse, and welcoming populations in the country, we are ostracizing the very communities our leaders claim to prioritize. The legal system is driving a deeper wedge between rich and poor, big and small, minority and majority than in most other places, and we risk a divide too deep to recover if things don’t change.

As a proud Asian American and small business advocate, I urge California lawmakers to pursue their stated agenda with more effective policy solutions. We need legal reforms now.

Faith Bautista is the President and CEO of the National Asian American Coalition & National Diversity Coalition.