Small businesses make up the backbone of California’s economy. Throughout the pandemic, these entities fought to stay alive. While some were allowed to keep their lights on to provide essential services, many were forced to close. As heart-wrenching as it was to see many of our favorite shops and restaurants shut down, the experience provided us an opportunity to reflect on the value these companies add to our communities.
As California’s economy begins to recover from COVID-19, many of the issues that plagued small businesses before the pandemic have come back into focus. One major roadblock to prosperity, the Private Attorneys General Act, is a law formulated with good intentions, but has devolved to turn our civil justice system into a bureaucratic mess.
The law was implemented to allow workers to be compensated for labor violations, permitting aggrieved employees to recover civil penalties if their rights are violated. The principles of the law are generally accepted by Californians. On the surface, the law seems to codify an admirable proposition: Workers who have been wronged should be able to collect damages through the courts.
Unfortunately, due to the vague nature in which the law was written, courts have become inundated with frivolous lawsuits by greedy trial lawyers. The majority of these claims are trivial. Businesses have been sued for ridiculous things like paying for someone walking to their car from work. As inconsequential as these violations may seem, businesses have been forced to shell out millions in damages for not following the letter of the law.
Trial lawyers have enjoyed the fruits of the strict interpretation of PAGA for three reasons. First, the ambiguous nature of the law provides them the ability to cast an excessively wide net to trawl for even the most minute of violations. Ever wonder why your TV is flooded with trial lawyers begging you to file claims through their firm? This is why.
Secondly, the compensation for damages is often disproportionate to the distress actually inflicted upon workers. While I am all for fair remedies, some verdicts award lawyers outrageous sums for silly claims while plaintiffs receive pennies.
Combined, these first two reasons incentivize lawyers to sue as many companies as possible. They know that even if they are successful in a small percentage of lawsuits, they will cash in big.
The third, and arguably most consequential, side effect of PAGA is the ability it gives lawyers to strong-arm vulnerable companies who cannot afford a drawn-out court fight. This provides lawyers the quickest and easiest way to wring money out of small businesses for minor labor or wage and hour violations. In the age of COVID-19, this tactic has been abused more than ever. Ruthless lawyers have made an industry of targeting businesses teetering on the edge of bankruptcy.
California’s small businesses need all the help they can get. While record profits continue to be raked in by mega-tech companies, Californians on the ground know there is a great deal of work to be done before the state achieves full recovery. I call on lawmakers in Sacramento to find common-sense solutions to minimize PAGA’s most damaging provisions. Streamlining the code and disincentivizing lawyers from filing frivolous lawsuits against small businesses are great ways to start. I’m confident that if these policies are enacted, the Golden State will once again be open for business.