California Legislature Is Just A Rent-Seeking Body for Litigation Attorneys

The vast majority of so-called consumer or employee protection laws in California appear to be written with one purpose in mind -- to create more rent-seeking opportunity for lawyers.  While more expensive to comply with than laws in any other state, most of these laws do little to actually make the life of consumers or employers easier.  Are consumers really better off for the myriad of carcinogen warnings one sees in California, or is it just white noise?  Are employees better off because they can sue over having to work through lunch?  In most cases, the answer is "no" or only trivially at best.

But what all these laws have in common is that they give attorneys incredible power to extract money from businesses via any number of extortion techniques.  For example, my company has never lost an employee lawsuit in California, but I have spent hundreds of thousands of dollars of my money to successfully defend such claims (no insurer will cover you for such employee suits without a deductible of at least $25-50 thousand per claim in CA).  How can anyone call this justice?

The only defense we have is to try to take claims to arbitration.  I have no problem paying a thousand dollars of back wages if we made a mistake, but I don't want to pay $50,000 in legal fees reaching that conclusion.  That is the point of arbitration, to pay off employee claims without the long hassle of litigation.  It offers the bonus of paying employees quickly, rather than forcing them to wait through years of legal procedures.

The only folks hurt by arbitration are the attorneys, and of course since they virtually control the California State Legislature, CA attorneys are urging their government lapdogs to ban arbitration of employment issues

When you take a job, should you be required to waive your right to have a future employment dispute adjudicated by the state labor commissioner or in civil court?

That has increasingly become the case for job applicants. Forty-three percent of companies nationwide now require employees to sign arbitration clauses precluding class-action suits, according to the Wall Street Journal. That’s an increase from 16 percent of companies in 2012. It’s paid off for businesses – employee class-action lawsuits have declined 5 percentage points since 2011, saving employers $136 million.

Assemblyman Roger Hernández, D-West Covina, believes mandatory employee arbitration agreements provide California businesses with an unfair advantage in employee disputes. He authored Assembly Bill 465, which would make it illegal to require such agreements as a condition of employment.

The bill passed the Senate Labor and Industrial Relations Committee along party lines on June 10 after a debate over the pros and cons of arbitration.

It is telling that even the supporters cannot point to any study or evidence that employees do worse with their claims in arbitration vs. in the court system.   The only real claim they make is this one, which is hilarious:

“The harm from these kinds of agreements goes beyond the impact on the individual worker. Obviously, no workers should be required to give up such core protections when it’s not knowing or voluntary. But beyond that, this takes away the ability to the state labor commissioner to even know what is happening in these work sites. These arbitration agreements are private, they are individual.

“They do not provide a forum for the state labor commissioner or anyone else to know what is happening and try to find a more systemic solution or to say, ‘Wow, there’s a lot of violation coming out of this one site or employer. Maybe we should consider a more efficient enforcement plan than just each individual worker having to take their claim separately to an arbitrator.’

This is stupid.  First, there is nothing in an arbitration agreement that prevents an employee from reporting his or her issue to the state labor commissioner.  Second, if this really were an issue, a simple reporting requirement of the basic facts of arbitration cases to the state labor commissioner would suffice to solve the problem.

Here is how you should think about this proposed law:  Attorneys are the taxi cartels, and arbitration is Uber.  And the incumbents want their competitor banned.

A few years ago I had a woman file a discrimination case against me, saying her supervisor discriminated against her.  This person did not even attempt to lay out a factual basis for the claim, just said essentially she was dissed.  What made the case a total joke is that the person who was her supervisor was her sister (no more making exceptions to nepotism rules after that one).  The claim went nowhere, but it still cost be $20,000 to make go away.  And the real kicker was the employee's attorney.  This person came to me (actually my attorney) and he said he would drop the case with no payment to the plaintiff if we agreed to give him $X thousand dollars personally.  Basically, the attorney said that if he got paid, but his client did not, he would be satisfied and get her to drop the suit.  This is the racket attorneys have created for themselves in California.


  1. ErikEssig:

    California sounds like a nightmare. And I'm in NY, known for years as a trial lawyer haven.

  2. jdgalt:

    I would think the Federal Arbitration Act would trump any state-level ban.

  3. me:

    Well, if it were just Cali, we wouldn't have such a problem. The real issue is that 99% of all existing law in the US is an outcome of aggressive lobbying to create more opportunity for rent seeking. And hence, trouble.

  4. irandom419:

    If an employer wants to treat you like !@#$, then move on to another job. The dems have created an incredible economy with loads of opportunities. It's almost like their current job is so valuable, they need to keep it at all costs which would be non-sense.

  5. Tom Lindmark:

    The only issue I would take with your post is its California specific nature. Seems like attorney rent seeking is a nationwide problem up to and including the US Congress.

  6. brandonberg:

    Did you report the lawyer's misconduct to the bar association? That has to violate some kind of conflict-of-interest regulations.

  7. David in Michigan:

    Like commenter Tom Lindmark, I'm not certain why you're identifying only California as having this problem, unless you're just saying that it is more out in the open there. I assure you litigation lawyers are a nationwide problem and they will oppose ANYTHING that interferes with their gravy train. Here in Michigan there are no less (and usually more) than 5 commercials per hour! for lawyers whoring themselves and services on television....... dog bites, slips and falls, auto accidents, social security disability, employment injustice, mesothelioma, bad drugs (pharmaceutical companies), the list of possibilities is apparently endless. Their main point is always the same, free money for thee and me.

  8. sch:

    Sounds like a (non-employment related) suit I was involved in (Southern state) in which after 3 yrs my co-defendent offered the
    plaintiff attorney 'expense money' (ca $40k IIRC) which was paid. They were chagrined ~6 months later when in a pre-trial
    hearing the judge made a summary judgement in favor of the defense. Of course defense ran upwards of $100k.