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Tom Scott

AB 2361 Will Protect Small Businesses from Abusive Prop. 65 Lawsuits

Until I started working closely with small business owners, I had no idea how many things could cause a business to close. Sure, I knew that an economic downturn, natural disaster, or lack of customers could cause businesses to close their doors. But the one thing I never anticipated was that a lawsuit would force the doors of a business to close. Many business owners don’t see these lawsuits coming, especially “shakedown” lawsuits alleging Proposition 65 violations. These are one of the most dangerous lawsuits a business can face. Luckily, there is a bill pending in the Legislature that will help stop these lawsuits.

Proposition 65, passed by the voters in 1986, requires businesses in California to warn consumers if any chemicals that may cause cancer or reproductive harm are present in their business or products. At first glance, this seems reasonable, but here’s the catch: the law is enforced by private lawyers, who make outrageous profits off of these lawsuits. How much do they get paid? I’ve heard of settlements of $75,000 -$80,000, and some even higher.

What makes it so difficult to avoid these lawsuits is that a violation can be hidden anywhere. The list of chemicals that require Prop. 65 grows larger every year, and even the simplest process or item can cause you to be in violation. For example, a party store in California did not have a warning sign, and was sued because one of their inexpensive children’s toys contained a clear plastic sheet that had a trace of a chemical that, if ingested in enormous amounts, may cause harm.

Knowing that many small businesses simply can’t afford the necessary legal fees to even begin to fight a lawsuit, unscrupulous attorneys have turned this well-intentioned initiative into a racket. Here’s how it works: if a lawyer suspects a place of business contains a product with one of these chemicals, he can file a lawsuit asking for $2,500 in fines per day that the violation was in place. The goal of these lawsuits is not to protect the public, but to extract a large settlement from businesses as quickly as possible, and move on to the next victim.

These shakedowns must stop. Each dollar a business spends fighting the lawsuits or on a settlement is a dollar it can’t spend on expansion or hiring new workers.

There is a reform out there that can help change the tides and help more businesses stay open: AB 2361 by Assemblymember Brian Jones. Current law prohibits private enforcement actions over generic warning sign requirements against businesses with fewer than 10 employees. AB 2361 would expand this protection to businesses with fewer than 25 employees. The reforms signed by Governor Brown last year in AB 227 by Mike Gatto would be extended to all businesses with 25 or fewer employees. Even OEHHA, the agency that oversees Prop. 65 is proposing regulations with similar cures for businesses with 25 employees or less.

AB 2361 would help small business owners be free from shakedown lawsuits and allow them to focus on serving their customers. The customer base is what keeps these businesses alive and allows them to employ workers. If they do not have to focus on the threat of a Proposition 65 lawsuit, they can focus on making their business the best that it can be. Encourage your local Assemblymember to support AB 2361, a protection for small businesses.