Bill to Protect Small Businesses from Frivolous Lawsuits Fails

A California Chamber of Commerce-supported job creator bill that would have helped protect small businesses from unwarranted lawsuits failed to pass an Assembly policy committee earlier this week, but was granted reconsideration with the hope and expectation that the author would work with stakeholders to come to an agreement.

AB 1252 (Jones; R-Santee) would have provided needed relief to small businesses by prohibiting a person from bringing a Proposition 65 lawsuit against a business employing fewer than 25 employees.

Proposition 65

Proposition 65, “The Safe Drinking Water and Toxic Enforcement Act of 1986,” was designed to protect California’s drinking water from chemicals known to cause cancer or birth defects, and to warn members of the public about the presence of those chemicals in their environment to help them avoid exposure.

The law requires, among other things, that private businesses with more than 10 employees post warnings when they knowingly expose workers or the public to listed chemicals. These warnings can take the form of placards in business establishments where listed chemicals exist or are released into the environment, or as part of the labeling of a consumer product that contains a listed chemical.

Unfortunately, because Proposition 65 incentivizes individual pursuits by entitling private enforcers to 25% of the penalty collected for successful enforcement in addition to legal fees, a limited number of plaintiffs have engaged in shakedown lawsuits against small businesses over a lack of a sign.

These lawsuits can easily cost several thousand dollars to litigate, causing many small businesses to settle out of court regardless of whether they were required by law to provide a warning.

Determining Exposure

Currently, more than 900 chemicals are included on the Office of Environmental Health Hazard Assessment (OEHHA) Proposition 65 chemicals list. With so many chemicals on the list, including everyday products, it’s easy to understand why business owners sometimes fail to realize a warning sign is required. In fact, according to OEHHA, “determining anticipated levels of exposure to listed chemicals can be very complex.”

Furthermore, many business owners determine that signage is not warranted given the exposure levels of a particular chemical at their business establishment, but attorneys will still make an allegation in a demand letter in order to pressure businesses into handing over a small settlement or risk ruinous litigation.

AB 1252 will help eliminate the inappropriate use of litigation against these small businesses who can least afford these drive-by lawsuits, while ensuring that the public does receive Proposition 65 warnings when appropriate.

Key Vote

AB 1252 failed to pass the Assembly Environmental Safety and Toxic Materials Committee on April 14, 2-5.

Ayes: Dahle (R-Bieber), Gallagher (R-Yuba City).

Noes: Alejo (D-Salinas), Gonzalez (D-San Diego), Gray (D-Merced), McCarty (D-Sacramento), Ting (D-San Francisco).

Staff Contact: Anthony Samson