As a small business owner in Bakersfield, I know firsthand how desperate the California small business community is to catch a break during the COVID-19 pandemic. This pandemic has already gone on longer than anyone expected, but instead of receiving help from our state leaders in Sacramento, we are left to suffer needlessly with no end in sight.
While COVID-19 has made the current business climate more difficult than any I have seen in my lifetime, there is a little-known factor that has made life far tougher than it should be for small businesses during these challenging times—lawsuit abuse. California is already known for its backwards court system, and COVID-19 is making matters worse. Meanwhile, state lawmakers continue to turn their backs and allow the consequences of ignoring the need for tort reform—business closures, accelerating unemployment, and even higher prices—to run amuck.
California has a serious problem on its hands. It is common knowledge that businesses have been leaving the state en masse, searching for other states that will have their backs and prevent unfair lawsuits from closing their doors. So how can we stop the bleeding? How can we reverse course and keep our status as home to more small businesses than anywhere else in the country?
First, we must accurately diagnose the problem. Most our state’s legal woes come in the form of open-ended liability, loopholes, or vague statutory language that allow trial lawyers to exploit the court system and score massive paydays. To make matters worse, the lack of significant COVID-19 liability protections for small businesses has forced many mom-and-pop shops into meritless settlements with trial lawyers looking to take advantage of the global pandemic.
Here are just a few examples.
The Americans with Disabilities Act (ADA) was designed to protect Californians with legitimate disabilities, but it is now being used by trial lawyers to sue small businesses who struggle to keep up with the expensive and ever-changing ADA guidelines.
Without the resources to put up a fight in court, often even when they are in the right, small businesses are forced to settle with attorneys. If they aren’t put out of businesses, these companies are instead forced to lay off employees or raise prices on consumers just to pad the pockets of greedy lawyers. And the proof is in the numbers. In 2020, California saw more ADA claims than any other state. How does this serve the disabled?
Similarly, California’s “Sue Your Boss Law,” also called the Private Attorneys General Act (PAGA), allows any employee to sue their employer on behalf of themselves, colleagues, or the whole state. You can see where this might become problematic.
PAGA is a lawsuit free-for-all with no limit, and trial lawyers know it.
They routinely exploit employees to sue employers over minor violations and often compile massive class action lawsuits that bloat their own paychecks, while sending workers home with pennies.
And just like ADA loopholes, small businesses are backed into a corner, even when lawsuits have no merit. Many are forced to settle and pass along the financial consequences to customers or the rest of their workforce.
Last and possibly worst on the list is our state’s COVID-19 lawsuit problem. The same lawyers pouncing on every other legal loophole in the state aren’t letting small businesses off the hook during a global pandemic.
Instead, since lawmakers haven’t passed any significant liability protections against COVID-19-related lawsuits, trial lawyers are exploiting businesses left and right for minor violations, even when new data and public health restrictions are changing daily.
Further, many COVID-19 claims are simply unprovable, leaving businesses with limited resources to face the tough decision to settle out of court or fight a legal battle that could bankrupt them for good, even if they win. For most, paying the hostage ransom outside of court is generally the safest bet. In what world is this fair?
Lawsuit abuse in California is amplifying nearly every consequence of the COVID-19 pandemic and other underlying economic woes, such as the labor shortage and rising inflation. Desperate times call for desperate measures, and the small business community can’t afford to defend ourselves from trial lawyers exploiting us unchecked. Until lawmakers address California’s lawsuit abuse problem, businesses will continue to shut down or leave the state, and workers will face an even tougher uphill battle than they already have. Tort reform’s time in the sun has come, and the Golden State must act now.