As many of you know, California Citizens Against Lawsuit Abuse is recognizing Lawsuit Abuse Awareness Week. Nearly every small business owner I know has a horror story about lawsuit abuse. These lawsuits are much more than a paperwork headache – they can force small businesses to shut down and destroy jobs.
My story is not unusual. I own a private security firm, and when a client cancelled and moved to a national provider, I had to lay off one of my employees assigned to the account. We could not place him back to work and as a result, I was hit with a lawsuit claiming that I didn’t give the employee the appropriate number of breaks as required by law. I was astounded to be told by our lawyer that even though a violation had not been committed, I would actually spend less money if I settled the lawsuit rather than fighting it. With reluctance, we settled the lawsuit – and the employee and his lawyer received thousands of dollars.
I was fortunate that my business was barely able to absorb this massive hit. Unfortunately, there are many businesses in California that are forced to shut down when facing a lawsuit such as this. In this way, lawsuit abuse takes an enormous toll on our economy, and contributes to the state’s difficulty creating jobs and lowering its high unemployment rate.
Now I understand why business leaders put so much focus on a region’s legal climate. More than regulations or taxes, lawsuit abuse can stop a successful business in its tracks, wasting time and money that would be better spent running and expanding the business.
California is slowly recognizing that lawsuit abuse is hurting its businesses and slowing job creation. But until California starts following the lead of other states and passing common sense laws to reform its legal system, investment – and the jobs that follow- will continue to flow to other states.