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Tort reform will give California a better chance to recover

The coronavirus is crushing small businesses, forcing most to close and placing millions of workers whose jobs are on the line at risk, while commerce and production come to a halt. California small business owners are praying how they can hold on to their entrepreneurial dreams and preserve the jobs they have created. We need to give our economy and business owners a chance to survive and rebuild. One important way to do that is through tort reform so the economy can regain its strength.

Citizens Against Lawsuit Abuse (CALA) released a hopeful new report, The Economic Benefits of Tort Reform in California. The report explains how laws to reform torts, which are defined as an act or omission that harms another person either intentionally or through negligence, can lead to economic benefits, innovation, productivity and employment. Reformed laws will help provide protection and relief for business owners from abusive shakedown lawsuits – and CALA believes these same reforms may provide relief to struggling businesses trying to recover from the crisis.

That’s why Citizens Against Lawsuit Abuse is calling on the Legislature and Governor to enact meaningful tort reforms.

But even before the coronavirus pandemic hit, CALA’s Economic Benefits of Tort Reform 2020 Report in California, conducted in November, had cited how an overly aggressive tort environment was already a drain on the economy. California was recently named by CALA as the second highest “judicial hellhole” in the country. The California Governor and Legislature had further compounded the problem by recently enacting more laws that will increase class action lawsuit abuse.

Aggressive abusive lawsuits cost California’s economy $23.6 billion in annual output (gross product) last year, according to the report. These lawsuits further resulted in an estimated loss of 242,761 jobs and a tort tax of $594.71 per person. Locally, in Orange County, excessive tort litigation costs the economy $2.046 billion in annual output (gross product). These lawsuits also cost 23,868 jobs and A tort tax of $638.39 per person each year. Abuse of the legal system has shown that workers are not getting paid and that, in turn, do not have sufficient earnings.

California businesses already suffer from being attacked with unwarranted lawsuits all based on technical violations related to the Private Attorney General Act, or PAGA, wage and hour lawsuits, Americans with Disability Act lawsuits and Proposition 65 lawsuits, among others. We need a break from lawsuit abuse and contentious litigation, especially now since the state, like others, is in crisis mode.

We implore the plaintiffs’ bar to refrain from filing abusive suits. For example, does failure to place the beginning date and ending date of the pay period on a check stub, even though the check cleared the bank, the reason a business should be sued for tens of thousands of dollars?”

Gov. Gavin Newsom and the Legislature are debating several reforms of bills proposed or passed last year, including AB 5, the bill that redefines the definition of an employee versus independent contractor. The bill places the employer at risk for a class action lawsuit going back four years even though they were acting within the law at the time. The debate also extends to the California Consumer Privacy Act that will allow a plaintiff to sue on behalf of all involved in a data breach because they believe their information was violated. Tort reform, or refraining from enacting more bills that allow for the PAGA right of action, should be added to the list of reform measures this year.

The report, authored by the Perryman Group, an economic analysis firm, also states that legal reform that decreases exposure to liability lawsuits has been shown to enhanceinnovation and increase productivity and employment. It also improves access to health care through lower costs. Tort reform, without doubt, can lead to substantial economic benefits — and states that have implemented such reforms have seen improved judicial efficiency and better economic performance.

California businesses were hurting due to abusive lawsuits before the coronavirus pandemic hit. Now, they’re barely hanging on. If this state is to protect its economic vitality, our lawmakers must act now on tort reform. Bad lawsuits cost good jobs, and good jobs are may be in short supply for a long time.

This article was written by Maryann Marino, Regional Director, Citizens Against Lawsuit Abuse.