Local small business leaders set legislative agenda.

Limiting wrongful termination suits to be top priority

Leaders of groups representing L.A. small businesses intend to work for passage of a state law limiting the ability of employees to sue and/or collect damages for wrongful termination.

The 1993-94 session of the California Legislature ended Aug. 31, so small business leaders are now preparing for the winter session and setting their legislative agendas.

Lorraine Loder, an attorney and vice president for external affairs with the L.A. chapter of the National Association of Women Business Owners, said employers have serious problems when it comes to ridding themselves of bad employees.

Owners of small businesses are afraid to fire people because they can't afford the expense of lawsuits and judgments, Loder said.

Skip Cooper, director of the Black Business Association of Los Angeles, agreed that wrongful termination lawsuits are a big problem for small businesses in th Southland. He said his organization also would back such legislation.

"Small businesses don't have the financial resources to deal with all that -- the inconvenience, the expense, the nuisance," said Cooper. "It is another impediment that hinders the growth and development of small business."

Assemblyman John Vasconcellos, D-San Jose, chairman of the Assembly Democratic Economic Prosperity Team, has in the past sponsored legislation to limit damage awards in wrongful termination cases, but has been unsuccessful.

In the just-ended session, Vasconcellos sponsored a bill, supported by the California Manufacturers Association, that would have limited damage awards for "front pay" (estimated potential future earnings) to one year.

Attorney Michael Johnson, a partner with Baker & Hostetler specializing in employment law, noted that another possible strategy could be working for a bil that exempts small businesses from wrongful termination liability.

Other state laws apply only to businesses of certain sizes, and such "jurisdictional limits" have been upheld as constitutional by the California Supreme Court, Johnson noted.

For example, businesses with 15 or fewer employees can't be held liable under fair employment laws for sex and race discrimination in hiring. And small businesses don't have to comply with laws on notifying employees in advance of plant closing.

"These kinds of lines are very common," said Johnson. "I think they (advocates of such legislation) will have problems, though, from a political point of view getting support. Legislators would probably like to approach it some other way. This would be giving them (employers) free reign to fire anybody, any time, any way they want."

Johnson noted that the majority of cases filed by employees against their employers are filed against small and medium-sized companies rather than large corporations, because smaller businesses are more likely to be uninformed about fair employment laws and less likely to follow them.

"That will be an argument against this (legislation)," he commented.

Jim Smith, administrator of the Los Angeles Newspaper Guild, said small busines owners could probably win the support of organized labor for an exemption from wrongful termination liability if they were willing to replace the possibility of litigation with an arbitration system.

"Absent any sort of rights for employees, organized labor would oppose this (legislation)," he said. "In some cases, people are fired for the most outrageous reasons."

Smith said he would support protection from litigation, however, for businesses that hire impartial arbitrators (such as those used by unions in employment contract negotiations) to decide appeals of firing decisions.

Smith noted that professional arbitrators charge roughly $400 to $600 per day, which is much less than litigation costs, and they could be limited to awarding an employee his/her job back, with back pay, which could cost employers far les than a jury damage award.

"If they would agree to that, they could probably win organized labor to their side," Smith said.

Loder and Cooper, together with Diana Roberson of the Latin Business Association, also expressed continued concern about the cost of workers' compensation insurance and litigation on small business owners.

While California's workers' compensation laws have been reformed, Cooper said the issue is "still a serious problem for small businesses."

"For some businesses, workers' comp represents 20 to 30 percent of their operations costs, whereas it used to be 2 or 3 percent," said Cooper.

Loder said NAWBO will continue to work for additional reforms of California's workers' comp laws.

She and Roberson also are busy fighting against a state proposition on the November ballot that calls for adding employer mandates on health care insurance.

California Manufacturers Association General Counsel Chris Micheli said his organization also plans to fight in the next session for two bills of major concern to small businesses -- cutting the capital gains tax, and increasing th tax credit for research and development spending. Micheli said he would work to get the research and development tax credit increased from its present level of 8 percent to a level of 10 to 12 percent.