California Lawmakers Must Protect Family Businesses in 2021

These days, it is hard to avoid headlines about the latest businesses going under and more lost jobs due to COVID-19 in California. But not only are California’s businesses suffering like most across the country, we have it even worse for one reason: lawmakers did virtually nothing last session to protect our businesses against California’s worsening lawsuit abuse problem. With everyone back in Sacramento, my hope is that issue will seriously be considered this year.

Let’s start with California lawmakers’ failure to curb the oncoming wave of COVID-19-related frivolous lawsuit, while in fact creating more ways in which businesses can be sued. Did you know that businesses must actually prove they did not give a customer or employee COVID-19 instead of plaintiffs providing any evidence of their own? They are required to spend precious resources on discovering who may have gotten sick and where, even if they were following all appropriate public health guidelines. If this seems backwards, it is. And it’s the perfect storm for lawyers looking to turn a buck via lawsuit settlements – a recipe for disaster for our state’s struggling family business owners. And this is only one of the ways that our lawmakers let our business community down during this past session.

Then there is the issue of California’s notorious Private Attorneys General Act (PAGA), which allows any “aggrieved employee” to sue on behalf of the state for the most trivial “violations” imaginable, such as a typo in an employee’s paystub or a clerical error on a timesheet. Why are these utterly useless lawsuits continuously filed in the Golden State? Because under PAGA, there is the potential for a huge payout, which – as usual – attracts the state’s aggressive trial attorneys.

Under PAGA, 75 percent of penalties paid by non-compliant employers goes to the state. Therefore, the employees who bring the suit are left with 25 percent, a third or more of which goes to the lawyers. In the most classic example of why this needs to be changed, a 2019 PAGA lawsuit against Uber resulted in a $7.75 million settlement – $2.3 million of which went to the plaintiff’s counsel. This left a little over $1 to the average Uber driver.

In addition, the threat of PAGA lawsuits prevents employers from working with their employee’s need. As an example, Jim comes to work at 6:00am, so is required by state law to have lunch at 11:00am. All of Jim’s friends at the business have their lunch at noon, so Jim would like to put his lunch off an hour so he can join them. The employer must say no, the law won’t allow that and you could sue me if I OK it. Another example, Sue would like to skip her afternoon break so she can be there for the start of her son’s little league game. Again, the employer must say no, for the same reasons.

It’s senseless laws like this like this that allow trial attorneys to reap the benefits of our broken legal system, while leaving our businesses owners to suffer the consequences. As the Executive Director of the Family Business Association of California, I know that our lawsuit abuse problem is hurting struggling, family-owned businesses. If we want to ensure we actually have an economy to come back to once this crisis is over, lawmakers must prioritize protecting, rather than harming, the employers in this state, and ending these unwarranted lawsuits.