Sue Your Boss Fix: Touchstone for Arnold Era
By CHRIS CZIBORR
When state legislators forged a compromise fix to the notorious “sue your boss” law earlier this summer, the results showed the new reality for business: Gov. Arnold Schwarzenegger can help, but he only can go so far.
Schwarzenegger, who promised a new climate of compromise during the bid to unseat Gov. Gray Davis, got what he pledged in the softening of what was known as Senate Bill 796.
But the negotiations also showed the surviving power of the Democrats, and, perhaps, the limits of Schwarzenegger’s vow to take issues he’s unsatisfied with to the people.
Joseph Farrell, a litigation partner out of the Costa Mesa office of Los Angeles law firm Latham & Watkins LLP, calls the revision a partial win for business.
“It certainly doesn’t solve all the problems created by SB 796, but it addresses a few things,” he said “You still have the potential for someone who believes they’ve been aggrieved to pursue litigation over some things that could pretty easily be brought to the employer’s attention and corrected.”
What emerged out of the closed-door meetings during the state budget negotiations in July was SB 1809, a replacement for SB 796.
“The tactic of tying the law to the budget is an example of the way the governor is,” said Nhan Vu, assistant professor of law at Chapman University in Orange. “For all the rhetoric about being an outsider, he really knows how to play the system in a very traditional way. This is the way that he is, notwithstanding all of the talk about him coming in and reforming politics in Sacramento.”
Of course, the governor can claim contextual victory: Business likely wouldn’t have gotten any change to the law under former Gov. Gray Davis, who hurriedly signed SB 796 into law along with several others bills last October.
SB 796 took effect since Jan. 1, fueling lawsuits against Orange County and California businesses. Irvine-based El Pollo Loco Inc. was among those hit with SB 796-related lawsuits.
The legislation allowed workers to sue their employers for violating the state labor code, spurring what some considered frivolous suits. Penalties were tough, with a fine multiplied by the number of employees at a company, times the pay period under which the violation took place.
The upside to SB 1809: It’s retroactive, stopping dozens of suits launched under SB 796. But that isn’t likely to stop some lawyers from looking for ways to file new suits.
Another benefit of the new law is that it gives courts discretion over the amount of penalty awarded, according to Latham & Watkins’ Farrell.
“If the judge were to find that the violation was minor and technical in nature and that no significant harm had occurred, the judge could exercise discretion to impose a very minor penalty,” he said.
The new law also limits what workers can sue for. Technical matters such as employee notices posted in the wrong style or type size can’t be the basis for a suit, as under the old law.
And the new version provides the state Labor Commission and its enforcement office with more time to pursue a worker claim against an employer before the worker can sue.
The legislative meetings over SB 1809 included a handful of Orange County politicians, including SB 796’s sponsor, Sen. Joe Dunn, D-Santa Ana (photo, left), as well as Sen. Dick Ackerman (R-Fullerton).
Representatives from the California Chamber of Commerce, California Federation of Labor and the governor’s office also took part.
Republicans and Democrats had been at loggerheads over the bill for months. But the state budget talks provided a means for both sides to come together.
The talks led to a final version of SB 1809, also sponsored by Dunn. Republicans and the governor insisted the bill be approved with the budget. Schwarzenegger signed the bill into law last month.
Businesses and Republicans such as Assemblyman John Campbell, R-Irvine (photo, right), had wanted the law scrapped entirely. Democrats, including Dunn, acknowledged there were some flaws to the law but wanted the thrust of it to remain intact.
Business groups such as the Orange County Business Council, California Chamber of Commerce and California Manufacturers & Technology Association had supported modification or repeal of the bill, as did companies such as General Motors Corp.
Labor groups and trial lawyers had opposed making changes.
The new law seems to have won the approval of all sides, at least publicly.
“It’s a pretty good fix, we think,” Assemblyman Campbell said. “We wound up with a middle ground that says if you have violations where no harm is shown, you have to go through the state’s administrative process first. In the end, the governor and Republicans said that without some reform of this, it was a budget deal-killer.”
Campbell has been one of the most vocal opponents of litigation-friendly legislation. The sue your boss issue had put him in a familiar position of being at odds with Dunn.
But even Dunn said he was pleased with the results.
“It served all interests involved,” Dunn said. “For the Republicans, it worked out well, because, by linking the issue to the budget, they got to gracefully quit their idea that they would get the bill totally repealed and got to portray the final outcome as a compromise.”
Meanwhile, Ackerman, Republican leader in the Senate, said the tone of the talks was constructive, a contrast to negotiations under former Gov. Davis when Democrats were in complete control.
“Everybody realized we needed to fix this thing and if we didn’t get a pretty good fix, we weren’t going to support it,” Ackerman said.
Labor unions, who saw the power of the original sue your boss law diluted in the new version, also expressed support,if a bit tepid,for the new version.
“Labor laws will continue to get enforced,” said Angie Wei, Sacramento-based legislative director for the California Federation of Labor, who was at some of the closed-door meetings. “The final bill we got was different than what Sen. Dunn originally had in print. But he started off the conversation.”
