Legal Vultures Hurting Small Businesses

More laws affecting small businesses have been enacted in the past eight years than in all of the nation’s history.               

Enacted for the common good, they often force extra costs and burdens on smaller entities.

Most anti-government pundits talk about federal laws, but often state and local laws are the most punishing to enterprises.

In the end, billions of dollars are consumed effecting changes in business locales and practices but not all of it helps or protects the general public.

Moreover, even the most conscientious unwitting small business leader can run afoul of laws that have unintended consequences.

Individuals and law firms have made a cottage industry of suing smaller establishments for offenses or practices once considered within legal boundaries. They range from not having proper access for handicap persons to making or selling common food additives proscribed by state legislation.

Once filed by a small cadre of consumer groups, individuals, or law firms, these cases often never reach the courts because smaller companies don’t have the time or resources to fight the charges.

For instance, in California, food distributors and purveyors are facing lawsuits based on Proposition 65 (Prop 65) aimed at protecting consumers from certain types of contaminates. Food ingredients such as cane sugar in black licorice, turmeric, and ginger can contain high levels of lead, which is often caused by contaminants from the air and groundwater, as well as improper growing practices abroad and certain types of processing.

In New York City there are a group of lawyers and individuals with handicaps who find retail establishments violating access rules and win out of court settlements.

Across the country, similar instances pose a real threat to many companies.  A lawsuit is a daunting situation for many businesses. Companies with five or fewer employees are very vulnerable. But the threat is not limited to these tiny firms.

Experts say the mental toll from lawsuits are amongst the most disrupting events for any business. This particularly is true when a “whistle blower” is repeating the claim against multiple companies.

While Prop 65 aims to protect the best interests of California’s residents, the issue, many say, is how it is enforced. The law includes a citizen lawsuit provision that allows advocacy groups to bring suit against companies believed to be in violation of the law. A citizen or organization need not have been directly injured or harmed in order to draw suit.

For most entrepreneurs the first reaction is to fight such claims. Most lawyers however feel it is best to settle such issues as quickly and as quietly as possible.

“Publicity like this doesn’t usually help any business,” a prominent liability defense attorney said. “It’s best to settle quickly because usually a government agency is involved and the public usually believes the charges and not the resolution.”

Adds the attorney, “besides the bill for attorney fees, both the defendant and whistle blower settlements may be too large for the company to absorb.”

As pundits point out the whistle blowers and attorneys can both collect a portion of the governing body’s fine and also receive victim’s compensation. There are hefty monies to be made in this area.

Fancy Food Daily reports “According to Prop 65 Scam, a project of the Center for Consumer Freedom, citizens or organizations that bring lawsuits against businesses are awarded one-quarter of the civil penalty paid by a business found in violation. Lawsuits are extremely lucrative for law firms, with businesses paying $17.4 million in settlement payments in 2013 alone. Of that total, 73 percent went to attorneys’ fees.”

The best advice for small business leaders is to be very sure all activities and plant(s) are in compliance. When hit with a lawsuit, consult an attorney and listen to the proffered advice.