As the cost of living continues to skyrocket in California, working schedules are busier than ever. For many working families, receiving an end-of-year bonus makes all the difference during the holidays and going into tax season. Our company prides itself on offering bonuses to our employees when we’ve had a good year.
Which is why it was devastating for our company to be the target of a frivolous and harmful lawsuit. The case cost our business upwards of $1 million and the ability to provide our employees with end-of-year bonuses and schedule flexibility.
In the case brought against our company, we were accused of denying workers timely meal breaks, otherwise known as the “five-hour rule.” Our workers asked, collectively, if they could report to work at 6 a.m. instead of 7 a.m. so they could finish their day earlier, at 2:30 p.m. We allowed this flexibility for our workers. At this time, we asked them to move their lunch time to 10:30-11 a.m. However, they felt this was too early; they asked to take lunch later because they wouldn’t be hungry at 10:30 a.m. They also stated that it would make the end of the day go by faster if they ate a little later. It was their choice. No one was injured and no one lost pay – there were no damages. It was as simple as that, a collective morale-boosting employee request, and we saw no harm in it. It meant, however, that the first shift took their lunch break more than 5 hours after they began work – in violation of the state’s five-hour rule.
Unfortunately, this flexible lunch was taken advantage of by a former employee who filed a lawsuit against our company, even though this former employee – who became the designated class representative – had never even worked that shift. The lawsuit was filed under the state’s Private Attorney General Act. Commonly known as PAGA, it allows employees to act as a state regulator and bring legal action – often with costs and penalties against the company that are far, far higher than what a state regulator would normally seek.
Not coincidentally, the employee’s attorney on our case was the same one who had represented this employee’s husband in a case against another manufacturer in our area. That same attorney also sued a large high-tech employer in California and countless other companies. Our small business was defenseless against this high-functioning lawsuit machine.
Lawsuits hurt everyone, not just business owners. Being forced to pay exorbitant costs to attorneys can force businesses to cut jobs, bonuses and benefits in order to stay open in the face of huge settlements. We were one of those companies.
This lawsuit was a terrible blow for many reasons, but the most heartbreaking being that we were unable to provide year-end bonuses. For more than 100 of our employees whose families enjoyed the extra cash at the end of the year, this was simply devastating.
We are a small family owned business in the San Fernando Valley. We’re very proud of our diverse workforce and currently employ 190 people. Our employees are extremely important to us. But after facing this lawsuit brought against us by a disgruntled former employee and a predatory attorney, we were forced to become more rigid in how we manage our staff.
The wage and hour laws, in addition to the extra regulations that businesses face at the city level, are very complicated for most small and even large employers. California’s labor code is over 800 pages long. Even if small businesses strive to comply, we get overwhelmed as Sacramento churns out new laws each year; we can’t possibly keep up. We need to be able to fix these problems without facing business- threatening litigation. If this minor rest-break infraction had been brought to our attention, we would have corrected it immediately.
Small businesses like ours never want to deny our employees a year-end bonus, or a flexible work schedule. In fact, it is the exact opposite. We take pride in our employees and want to accommodate simple requests that ultimately make their lives better. Without broader reforms aimed at helping business settle their legal disputes fairly, without both parties going through a lengthy and costly lawsuit, we will continue moving farther away from that goal.
Anne Hackney is chief financial officer of Dytran Instruments, a manufacturer of pressure sensors and accelerometers in Chatsworth.