Whether you own a business, rely on the offerings of another business for your livelihood or frequent a business that has become a part of your daily routine, this month you have an opportunity to gain important insights into the tenuous nature of small businesses throughout California and what you can do to help stop the backslide of our state's economic foundation.
Oct. 6 kicks off Lawsuit Abuse Awareness Week (LAAW), during which time we illustrate the impact lawsuit abuse has on all of us, business owner and consumer alike.
In San Diego, key industry sectors are being hard hit by abusive lawsuits including class actions, employment litigation, ADA access, abuse of California's environmental laws by labor unions and other areas. Throughout this week industry leaders will weigh in on how litigation is hurting their business sectors and the overall local economy.
As executive director of the National Federation of Independent Business/California (NFIB), I regularly hear from our members how much of an impact lawsuit abuse has on their small businesses. In fact, NFIB, together with California Citizens Against Lawsuit Abuse (CALA), conducted a survey of NFIB members to gauge the impact lawsuit abuse has on California's small business community. The results were astounding.
Most alarming, almost three-quarters of the more than 800 respondents said that just the threat of a lawsuit could lead them to consider closing their doors. Couple that with the fact that nearly 60 percent of them said they have been threatened with a lawsuit over the past five years, and we have a potential disaster looming ahead.
And if that isn't enough, the survey reveals yet another telling result: More than 92 percent of respondents felt that the motivation to file lawsuits is to win big money. Small businesses are often the target of such suits. They are too small to have a bevy of defense attorneys to fight a lawsuit, thereby making them easy targets for greedy plaintiffs.
Small businesses are owned by families, friends and regular, everyday people. In fact, more than half of our membership is made up of businesses with five employees or fewer, and 71 percent employ less than 10 people. More than half of our membership generates annual sales of $500,000 or less. For these businesses, one lawsuit really can make the difference between being in or out of business. Even settling a frivolous lawsuit could force many to close their doors.
The effects of lawsuit abuse go well beyond the boundaries of business owners. This has a ripple effect on communities and their citizens. The vast majority of respondents said the threat of a lawsuit could force them to raise their costs; restrict, reduce or change produce and services; reconsider expansion; or, lay off employees.
These potential consequences -- higher prices, fewer jobs and less selection in goods and services -- don't just affect the business in question, but the entire community as well. Fewer businesses mean less tax money going into local government. People have to drive farther to shop or work. The effects continue to ripple as distributors and suppliers, in turn, lose business.
It is simply impossible for any small business owner to be completely immune from abusive lawsuits, particularly given today's legislative climate.
Just this year, California ranked 40th on Forbes' list of the best states for business. Yet, time and again, bills that would secure or improve our business climate are voted down in the legislature, usually not even making it past the first committee vote.
Our legislators continue to think our laws are fine for business, despite the fact that survey after survey continues to identify California as an unfriendly place for business. In our survey with CALA, nearly 98 percent of participants want new state laws to protect businesses from frivolous or unfair lawsuits. In addition, nearly 95 percent believe that current law favors those who sue.
In fact, more than 67 percent of respondents said they could hire more employees if they could be sure they would have greater protection from liability lawsuits. The vast majority also said they would be able to expand in California, improve facilities or purchase new equipment, increase offerings and expand the market for their goods and services.
Such definitive numbers should not be ignored, yet I fear our legislature will somehow find a way. Small businesses are a cornerstone to California's economic prosperity. We should be doing everything we can to help them thrive, not throw obstacles in their way.
I urge you to read the entire series of articles that will follow during Lawsuit Abuse Awareness Week. The issue is real and it is more prevalent than people want to acknowledge. Sadly, if personal injury lawyers have their way, it will only get worse.
Kabateck is executive director of NFIB/California.