In California, lawsuit abuse fuels rising prices
There seems to be no end in sight for the nationwide supply chain crunch that is crippling our nation’s economy. For small business owners in California who barely survived the destruction caused by the pandemic, this could not come at worse time.
California – which is already in the midst of an affordability crisis – has long been known as one of the most expensive places in the country to live. While high prices are nothing new for California consumers, the wave of inflation that we are currently experiencing is an entirely new animal.
When the input costs for businesses rise, they are forced to raise prices on their customers to compensate. While traditional market forces such as changes in supply or demand generally dictate price movements, misguided government policies that artificially alter the cost of goods and services can play an outsized role.
While the ADA is a widely recognized federal statute, PAGA is a lesser-known law unique to California.
This is especially true in California, as the state’s growing lawsuit abuse problem is contributing to the rise in consumer prices. This development can be squarely blamed on lawmakers in Sacramento, who designed California’s legal code in a way that unnecessarily makes small businesses vulnerable to frivolous claims.
The state’s legal climate specifically allows for rampant abuse of the Private Attorneys General Act (PAGA) and Americans with Disabilities Act (ADA) by greedy trial lawyers in search of a quick buck. This exploitation clogs up our state’s court system, harms small businesses, and prevents judges from focusing on legitimate trials.
While the ADA is a widely recognized federal statute, PAGA is a lesser-known law unique to California. Essentially, PAGA allows aggrieved current or former employees to file claims against their employer to collect damages in the event of a workplace-related incident. While the well-intentioned law allows for employees to collect remedies if they can prove they were wronged, it was written so broadly that it opened the flood gates for all sorts of abuse.
While both laws incentivize lawyers to seek out those who need representation, in many cases, these attorneys actually recruit faux plaintiffs to participate in their profiteering schemes. To do this, they spend millions of dollars each year blanketing television airwaves and dotting highways with advertisements for their legal services.
Their goal is to spook honest small businesses with overwhelming lawsuits and then strongarm them into settling before trial. By resolving the case before it is heard in court, these attorneys can quickly make a profit and move on to their next victim.
Small businesses are often forced into these agreements due to their lack of financial resources to fight drawn-out court cases and their fear of losing their livelihoods should a judge rule against them.
In the end, many of these “victims” end up with nothing as their attorneys’ cash huge checks.
Unfortunately for California consumers, this dishonest maneuvering comes at a steep price. When businesses get hit with frivolous, costly lawsuits, they are forced to raise prices on their customers to make up for the losses. The more this happens, the less affordable everyday goods and services become for the average Californian.
This vicious cycle can be stopped. By reforming PAGA and the way the ADA is enforced, lawmakers in Sacramento can provide relief for struggling small businesses who live in fear of being sued. By reining in lawsuit abuse, our Representatives can also ease the upward pressure on prices for consumers.
In this inflationary environment, our government must do all it can to make the cost of everyday goods and services more affordable for Californians.
Editor’s Note: Connie Conway represented Tulare County in the California State Assembly and served as Assembly Republican Leader. Prior to that, she served on the Tulare County Board of Supervisors.