In my nearly two decades as a restaurant franchise owner, I was always grateful for my community and the passion they had for supporting local family-owned businesses.
Locally-owned businesses, whether franchises or independent, are the backbone of our local and statewide economies. Small business creates a majority of jobs in any local community and that translates into millions of jobs statewide. So, you would expect state and local leaders would do all that they could to protect these job creators, especially during this COVID-19 pandemic.
It doesn’t seem to be that way.
California has landed once again at the number one top spot on the 2021-22 Judicial Hellholes list provided in a report by the American Tort Reform Foundation. This is nothing to be proud of. Judicial hellholes are the most unjust local courts and state civil justice systems in the country. The 2021 report shines a light on lawsuit abuse and its effects on business and all of us as taxpayers.
As an example, California’s Private Attorneys General Act (PAGA) authorizes “aggrieved employees” to file lawsuits regarding labor code violations and to seek civil penalties. However, 75% of the penalties paid by non-compliant employers go to the state’s Labor and Workforce Development Agency. Less than 25% goes to the “aggrieved employees” after their lawyers take one-third or more of the remaining 25%.
The intent behind PAGA was to protect workers, but it has done little to help them. Employees have actually lost flexibility in their work lives as a result. Most of these lawsuits revolve around technical nitpicks and don’t claim any real injury. Trial lawyers have turned PAGA into a loophole around arbitration clauses in employment contracts which typically limit expensive class actions that only benefit the lawyers.
Businesses, small and large, are struggling to stay afloat, yet California’s leadership failed to ease unjust liability burdens and further stacked the deck against their survival. In fact, almost 60% of Californians believe lawmakers are not doing enough to combat lawsuit abuse, and over 90% believe that now is not the time to sue. Excessive tort costs in California lead to an annual estimated $15.1 billion lost in direct costs and 242,761 jobs. This amounts to each Californian paying a $594.74 “tort tax.”
Shouldn’t we expect our state leaders and governor to do better?
If California wants its job creators to survive, things need to change. It’s time for our state leaders to step up to the plate and protect our small business owners from these frivolous lawsuits. If they refuse to, many will continue to leave the state.
Read the full report at JudicialHellholes.org.
Victor Gomez is executive director of California Citizens Against Lawsuit Abuse. He wrote this piece for San José Spotlight, and is on its board of directors.