Protecting employers from abusive lawsuits

Every once in a while there are glimmers of hope that the California Legislature gets legal reform and the impact it has on the lives of business people throughout the State of California. One of those moments came with the defeat of AB 2416 by State Assemblyman Mark Stone, which would have dramatically increased lawsuits against small business owners.

AB 2416 would have allowed any employee, government agency, anyone authorized to act on the employee’s behalf, or any person or entity that has standing under the law to collect any portion of compensation owed to the employee, to record a lien against the employer’s real estate or personal property simply on the basis the employee believes he or she has a valid wage claim against the employer.

“There are already existing legal remedies for wage disputes. Between arbitration, grievance processes, and legal action, employees already have sufficient legal options at their disposal.”

At the time of recording the lien, the employee would have no burden to provide any actual evidence that the employer violated any wage law. Rather, all the employee would have to do is simply provide: (1) a demand statement or the alleged amount owed; (2) a general statement of the work performed; (3) the employer’s name and address; and (4) identification of the property upon which the lien should be recorded.

In plain English, AB 2416 would have allowed disgruntled employees to interfere with an employer’s business and property without first proving the merit of their allegations. This would subject employers to extortion to avoid dealing with a lien on their property.

There are already existing legal remedies for wage disputes. Between arbitration, grievance processes, and legal action, employees already have sufficient legal options at their disposal to address wage disputes without making the situation worse.

In fact, just last year, the governor signed into law AB 1386, which allows the Labor Commissioner to file a lien on an employer’s property with the state after a final order has been issued. The law has only been in place for six months and is still being implemented. On April 30th, the Labor Commissioner also launched her statewide wage theft campaign to emphasize her focus on the issue in California.

Even with these protections in place, the money at stake made AB 2416 a top priority for SEIU and the Consumer Attorneys, and they lobbied legislative leaders hard to get the bill approved. Given their clout, stopping the bill seemed like an impossible task.

Legislative advocacy is a team sport, and a strong coalition fought hard against this bill, including the California Chamber of Commerce, and the Civil Justice Association of California.

While lobbyists worked on both sides, legislators know they ultimately must answer to their constituents. What turned the tide in this legislative battle was when non-partisan groups like the California Association of Realtors (C.A.R.) and Citizens Against Lawsuit Abuse (CALA) educated and mobilized their grassroots supporters to oppose this bill. Supporters of these groups know how legislation can benefit or harm their communities. When these folks learned about AB 2416, they leapt into action and held their elected representatives accountable. C.A.R. in particular generated thousands of calls, Facebook posts and tweets in the legislative session’s last days and legislators felt the heat. When the dust settled, AB 2416 was nowhere near passage.

California must get serious about creating jobs and improving the state’s business climate. The defeat of AB 2416 was a move in the right direction.

Ed’s Note: Tom Scott is the executive director of California Citizens Against Lawsuit Abuse.




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