# Small Businesses Hurt By California’s Lawsuit-Friendly Legal Climate



## mark handler (Oct 5, 2011)

Small Businesses Hurt By California’s Lawsuit-Friendly Legal Climate

By John Kabateck

California Executive Director, National Federation of Independent Business

http://foxandhoundsdaily.com/blog/john-kabateck/9491-small-businesses-hurt-by-california%E2%80%99s-lawsuit-friendly-legal-climate

Wed, October 5th, 2011

It isn’t easy being a small business owner in California with excessive regulations, the threat of higher taxes, and a lengthening recession. It’s no wonder most never know from one day to the next if they will be able to keep their employees on board and their doors open. Perhaps one of the worst challenges they face is a horribly broken legal climate that creates the opportunity for abusive lawsuits at every turn.

Recently, NFIB polled its members about the affects of lawsuit abuse – and the results were sobering. More than one-third of small business owners have been sued in the past five years and nearly 6 in 10 have been threatened with

a lawsuit during the same period. More than three-quartersare concerned that their business may be sued in the next five years. These small business owners report that the fear of a lawsuit could impact their businesses by forcing them to:

- Raise their costs

- Make their products or services more expensive

- Restrict, reduce or change products or services offered to their customers

- Reconsider expanding their business

- Lay off employees

- Consider closing their business

NFIB has spent time traveling the state and talking to members about their personal experiences with lawsuit abuse. One Northern California member, a bookstore owner went to the effort (and expense) to retain the services of an American’s with Disabilities (ADA) compliance ‘expert’ before she opened her business and was still sued. Another member in Southern California, a music store owner, was sued for ADA violations – and her son is in a wheelchair. Both of these members were willing to make accommodations for those who were disabled and wanted to access their businesses. Both times they ended up having to spend precious, limited resources to fight these lawsuits – dollars that instead could have been used to hire employees or expand their business.

Think you won’t be sued? Think again. Does your place of business contain one of the over 900 chemicals regulated by Proposition 65? If you don’t have a warning sign, you can be sued by any lawyer who feels like making a quick buck. There are many law firms that get the bulk of their fees from settlements with small businesses in Prop. 65 lawsuits. In fact, of the $13.6 million in Prop 65 settlements in 2010, lawyers received $7.8 million, or roughly 57%, for attorneys’ fees.

In the State Capitol, NFIB has supported many pieces of legislation that would have reformed the practice of frivolous lawsuits here in California. Sadly, thanks to the powerful trial lawyers lobby, most of these bills never even made it out of committee…and the window for meaningful reform was missed once again. There is a need to do more and hold trial lawyers accountable at both the state and federal level.

We hear from legislators on both sides of the aisle how plaintiffs’ attorneys are ravaging their communities, how they have maligned the legal system and – because money speaks louder than words – lost sight of the difference between justice and a quick buck.

Now is an opportune time for the Governor along with Democrat and Republican leaders to unite in the same way they have nobly done with redistricting and regulatory reform, to help Main Street in our communities. As California struggles to emerge from an epic recession, our leaders need to pass laws that stop the bad lawsuits – and ruthless attorneys – that are victimizing hard-working “mom and pops,” damaging our state’s small businesses and costing our communities good jobs.


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## Papio Bldg Dept (Oct 5, 2011)

mark handler said:
			
		

> More than three-quartersare concerned that their business may be sued in the next five years. These small business owners report that the fear of a lawsuit could impact their businesses by forcing them to:- Raise their costs
> 
> - Make their products or services more expensive
> 
> ...


Fear-mongering at it's best.  Poll these same business owners, without biasing the survey with frivolous legal terms, and I bet the top 5 things small business owners lay awake at night worrying about concerning their everyday business operations are:

- Raise their costs

- Make their products or services more expensive

- Restrict, reduce or change products or services offered to their customers

- Reconsider expanding their business

- Lay off employees

- Consider closing their business



			
				mark handler said:
			
		

> NFIB has spent time traveling the state and talking to members about their personal experiences with lawsuit abuse. One Northern California member, a bookstore owner went to the effort (and expense) to retain the services of an American’s with Disabilities (ADA) compliance ‘expert’ before she opened her business and was still sued. Another member in Southern California, a music store owner, was sued for ADA violations – and her son is in a wheelchair. Both of these members were willing to make accommodations for those who were disabled and wanted to access their businesses. Both times they ended up having to spend precious, limited resources to fight these lawsuits – *dollars that instead could have been used to hire employees or expand their business.*


...dollars that instead could have been used to remove barriers when expanding the business or to hire new employees to remove the barriers.

Where are the articles about the small businesses that removed barriers and are now seeing an increase in business by being accessible?


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## rktect 1 (Oct 5, 2011)

I'd like to see that information too.  But, oh wait, that isn't the intent of the codes, laws or acts.


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## mtlogcabin (Oct 5, 2011)

> Where are the articles about the small businesses that removed barriers and are now seeing an increase in business by being accessible?


Very few small businesses could ever recover the cost if they had to rely on the profits paid by the purchases of the  increase in customers who would directly benefit from the improvements. Thay have to spread the expense across their entire customer base.


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## Msradell (Oct 5, 2011)

mtlogcabin said:
			
		

> Very few small businesses could ever recover the cost if they had to rely on the profits paid by the purchases of the  increase in customers who would directly benefit from the improvements. Thay have to spread the expense across their entire customer base.


In most cases the cost to comply is very reasonable, much less than a lawsuit.  This is especially true when setting up a new business.  In this case the building itself should be compliant before you sign the lease or the required modifications should be contingencies within the lease.  Other than that such things as counter height and spacing shouldn't cost any more than building it non-compliant.  It's just a matter of reviewing and verifying the requirements early in the process.  Existing businesses have had 20 years to reach compliance so there really isn't much excuse for not complying.  I take every state would be better served by duplicating the California System instead of California throwing there's out!


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## brudgers (Oct 5, 2011)

Businesses complain about the costs of doing business.  Film at 10.


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## mark handler (Oct 5, 2011)

IRS Tax Credits and Deductions

ftp://ftp.fedworld.gov/pub/irs-pdf/f8826.pdf

To assist businesses with complying with the ADA, Section 44 of the IRS Code allows a tax credit for small businesses and Section 190 of the IRS Code allows a tax deduction for all businesses.

The tax credit is available to businesses that have total revenues of $1,000,000 or less in the previous tax year or 30 or fewer full-time employees. This credit can cover 50% of the eligible access expenditures in a year up to $10,250 (maximum credit of $5000). The tax credit can be used to offset the cost of undertaking barrier removal and alterations to improve accessibility; providing accessible formats such as Braille, large print and audio tape; making available a sign language interpreter or a reader for customers or employees, and for purchasing certain adaptive equipment.

The tax deduction is available to all businesses with a maximum deduction of $15,000 per year. The tax deduction can be claimed for expenses incurred in barrier removal and alterations.


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## gbhammer (Oct 6, 2011)

Mark the link to that site is not working, it does not appear to be available. Very good stuff to know.


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## mtlogcabin (Oct 6, 2011)

> Existing businesses have had 20 years to reach compliance so there really isn't much excuse for not complying.


I gather from the articles Mark has posted the majority of businesses are not 20 years old. They are average people who rent a building and open up shop. It is the building owners who have had 20 years to comply and should have compliant parking, accessible path of travel into the building and compliant restrooms. Counters, dressing rooms and other built in furnishings required by the tenat should be the tenants responsibility.

Realtors have to disclose all kinds of things wrong with a building, mold, lack of egress windows, radon, how about disclosing if a building is non-ADA compliant with regards to parking, accessible path of travel and restrooms. Put some of the cupability back on the building owners. As Mark ponted out there are tax advandages for them.


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## brudgers (Oct 6, 2011)

mtlogcabin said:
			
		

> I gather from the articles Mark has posted the majority of businesses are not 20 years old. They are average people who rent a building and open up shop. It is the building owners who have had 20 years to comply and should have compliant parking, accessible path of travel into the building and compliant restrooms. Counters, dressing rooms and other built in furnishings required by the tenat should be the tenants responsibility.Realtors have to disclose all kinds of things wrong with a building, mold, lack of egress windows, radon, how about disclosing if a building is non-ADA compliant with regards to parking, accessible path of travel and restrooms. Put some of the cupability back on the building owners. As Mark ponted out there are tax advandages for them.


So new businesses should be allowed to employ child labor?


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## beach (Oct 6, 2011)

> So new businesses should be allowed to employ child labor?


Sure, if the child is legally allowed to work......otherwise, that would be discrimination, wouldn't it?


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## gbhammer (Oct 6, 2011)

brudgers said:
			
		

> So new businesses should be allowed to employ child labor?


Ah change the topic and throw out an emotionally charged ideological argument that makes no sense and would make mt look bad for even trying to respond against. Focus on the point mt made which was to make the property owners, which have ignored the rules for 20 years, responsible not the tenant who may be clueless.


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## brudgers (Oct 6, 2011)

gbhammer said:
			
		

> Ah change the topic and throw out an emotionally charged ideological argument that makes no sense and would make mt look bad for even trying to respond against. Focus on the point mt made which was to make the property owners, which have ignored the rules for 20 years, responsible not the tenant who may be clueless.


   It is just a counter-example to show how absurd the reasoning underlying his argument is.  In other words, there is nothing unique about ADA compliance - it is only the fact that enforcement is so lax which makes it seem like a different animal.  And tenants are responsible for ADA compliance, and shifting the blame to the property owner is nonsense.


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## gbhammer (Oct 6, 2011)

I agree that tenants need to be responsible for meeting ADA requirements. I also have seen property owners push the unsuspecting into lease agreements knowing full well that the building will not meet the building codes much less the requirements of the ADA.

I make myself available to meet on site with anyone thinking of starting a business in an existing space, so that I can make them aware of requirements that might bankrupt their plans before they ever get started. I can’t count the times a landlord gets them to sign a lease on a property that will never meet the needs of the lessee without major remodeling. Some landlords go to great lengths to keep the County away from potential tenants. We try to keep a close eye on those spaces.


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## mtlogcabin (Oct 6, 2011)

> and shifting the blame to the property owner is nonsense.


Why is it nonsense. If you rent a boat and while enjoying it law enforcement stops and there are no life jackets on board so you are given a citation. Did you not expect the rental company would have provided life jackets and made sure the boat complied with all other laws before renting it to you. That is all I am saying, parking, accessible route and restrooms. Items that remain the same regardless of the number of business's that have been through the building.


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## gbhammer (Oct 6, 2011)

Hmmm that would be Intentionally Clear & Concise


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## Papio Bldg Dept (Oct 6, 2011)

gbhammer said:
			
		

> Hmmm that would be Intentionally Clear & Concise


Ha!  I forgot that when the ICC doesn't stand for something, such as Intentionally Clear & Concise, it tends to fall apart under application or scrutiny.


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## Papio Bldg Dept (Oct 6, 2011)

mtlogcabin said:
			
		

> Very few small businesses could ever recover the cost if they had to rely on the profits paid by the purchases of the  increase in customers who would directly benefit from the improvements. Thay have to spread the expense across their entire customer base.


As Mark so kindly indicated, removing barriers is rarely an unrecoverable cost, even if you only increase your customer base by one by making your business accessible.  There is plenty of blame and excuses to go around for all vested parties, however, the responsibility still sits there waiting for someone to take it and do the right thing.

It only takes a few good people to do nothing for discrimination to prevail.


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## steveray (Oct 6, 2011)

We try to do the same thing...if we can get people in for a pemit, it is easy to educate and make adjustments...straight tenant swap w/o permits is another challenge...we never see them...



			
				gbhammer said:
			
		

> I agree that tenants need to be responsible for meeting ADA requirements. I also have seen property owners push the unsuspecting into lease agreements knowing full well that the building will not meet the building codes much less the requirements of the ADA.I make myself available to meet on site with anyone thinking of starting a business in an existing space, so that I can make them aware of requirements that might bankrupt their plans before they ever get started. I can’t count the times a landlord gets them to sign a lease on a property that will never meet the needs of the lessee without major remodeling. Some landlords go to great lengths to keep the County away from potential tenants. We try to keep a close eye on those spaces.


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## mtlogcabin (Oct 6, 2011)

The IPMC puts it squarley on the property owner to correct a violation on their property. Not the tenant or business owner. California could do the same thing in their ADA state laws

107.6 Transfer of ownership.

It shall be unlawful for the owner of any dwelling unit or structure who has received a compliance order or upon whom a notice of violation has been served to sell, transfer, mortgage, lease or otherwise dispose of such dwelling unit or structure to another until the provisions of the compliance order or notice of violation have been complied with, or until such owner shall first furnish the grantee, transferee, mortgagee or lessee a true copy of any compliance order or notice of violation issued by the code official and shall furnish to the code official a signed and notarized statement from the grantee, transferee, mortgagee or lessee, acknowledging the receipt of such compliance order or notice of violation and fully accepting the responsibility without condition for making the corrections or repairs required by such compliance order or notice of violation.


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## gbhammer (Oct 6, 2011)

Unfortunately we can not get the powers that be to adopted the IPMC. We do have similar language in the sewer ordinance for violations regarding on site systems.


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## brudgers (Oct 6, 2011)

mtlogcabin said:
			
		

> Why is it nonsense. If you rent a boat and while enjoying it law enforcement stops and there are no life jackets on board so you are given a citation. Did you not expect the rental company would have provided life jackets and made sure the boat complied with all other laws before renting it to you. That is all I am saying, parking, accessible route and restrooms. Items that remain the same regardless of the number of business's that have been through the building.


  Sorry, but that's still nonsense. Buildings change ownership all the time, and clueless people buy buildings every day, too.  To put it another way, nobody takes that attitude toward three compartment sinks.


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## brudgers (Oct 6, 2011)

mtlogcabin said:
			
		

> The IPMC puts it squarley on the property owner to correct a violation on their property. Not the tenant or business owner. California could do the same thing in their ADA state laws


  Yeah, because real estate is never sold by entities whose lifespan ends when the property is disposed of.


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