This op-ed by FBA Chairman Ken Monroe appeared in the Los Angeles Times on December 6, 2018
Fourteen years ago, California set up a new method for enforcing its complex wage and hour laws.
The legislation, called the Private Attorneys General Act, or PAGA, allows private attorneys to sue employers on behalf of a class of company employees.
The ostensible motivation behind the law was to protect workers. But in reality, PAGA lawsuits have made it more difficult for family-owned businesses like mine to be flexible with employees. Predatory trial lawyers take advantage of the law, using as their playbook the more than 800 pages that make up California’s labor code.
PAGA lawsuits have made it more difficult for family-owned businesses like mine to be flexible with employees. PAGA sets penalties for each labor code violation, no matter how minor: $100 for each employee per pay period for an initial violation, and $200 for each employee per pay period for each subsequent violation, and other possible penalties. These violations can be stacked, with multiple penalties for each statutory wage violation.
As I learned the hard way, these penalties can add up fast, easily reaching hundreds of thousands of dollars for a small company like ours (and millions for larger businesses). The end result is that employers have to enforce onerous labor regulations that often do not benefit employees, or risk getting sued. For instance, we have employees who start their work day early and don’t necessarily want to stop for lunch at 10 a.m. They would rather wait until their friends take their lunch breaks, so that they can eat together.
As a family-owned business, we wanted to take employee desires into account, so we used to let them wait to eat — even though state law requires that hourly employees take a half-hour meal period after five hours of work, whether they want to or not.
Then, about two years ago, we were hit with a PAGA lawsuit. A disgruntled former employee had linked up with San Diego trial lawyers who specialize in such suits. Like virtually all companies that find themselves the target of a PAGA or class-action lawsuit, we negotiated a settlement rather than take the risk of losing in court and facing the onerous maximum penalties prescribed by the law.
In what was a pretty standard negotiation, the attorneys received 35% of the settlement, the state got 2%, the mediator got 2% and the disgruntled former employee got $7,500. The 300 employees that made up the class action each received between $23 and a few thousand dollars.
Our employees did better than some plaintiffs, at least. Google recently paid $1 million to settle a similar lawsuit. Its employees got $15 each, while the lawyers who brought the case walked away with more than $300,000. Uber drivers did even worse. They got $1.08 each, the lawyers $2.3 million.
The law of unintended consequences has since kicked in at our company. We have had to institute strict rules about meal and rest breaks and the accuracy of time cards, to ensure that we are always in compliance with California’s complex labor laws.
Now employees who want to work through their lunch so that they can go home early or eat with fellow employees are simply out of luck. We cannot legally accommodate their reasonable requests. The company cannot risk another PAGA lawsuit.
We’ve received many complaints from our employees about our strict adherence to every clause on every page of the labor code, and we’re sorry to take away their flexibility. But our hands are tied. Making matters worse, a California appeals court ruled in September that business owners can now be held personally liable for certain violations.
Ask any human resources consultant what employees want in the workplace and their answer is likely to include: respect, trust, recognition, autonomy and flexibility. Unfortunately, California’s labor laws and regulations are making it increasingly difficult for businesses to provide these things.
Lawmakers defeated two bills this year that would have given employers the right to fix problems before PAGA suits could be filed. The Family Business Assn. continues to search for solutions.
In the meantime, I encourage state legislators to come by any of my company’s locations, from Merced to Redding, and talk to employees who now can’t eat lunch with their friends or leave early to go to a doctor’s appointment.
Surely this isn’t what the authors of the Private Attorneys General Act had in mind.
Ken Monroe is the chairman of the Family Business Assn. of California and the president of Holt of California.
While family businesses are the bedrock of California’s economy and its communities, keeping a business going for decades is extremely difficult. Studies show that only 30 percent of family businesses survive into the second generation, 12 percent to the third, and only 3 percent to the fourth generation and beyond.
But in 2018, eight family businesses that are members of the Family Business Association of California celebrated milestone anniversaries, demonstrating that despite the difficulties of running a successful business in California well-run companies can thrive for generations, said FBA Executive Director Robert Rivinius.
“This year’s list of anniversaries includes a wide range of companies, including two that marked their 100thyear in business,” Rivinius said. “The families who have these businesses growing for 50 year or more deserve recognition for their hard work and their ability to navigate the state’s difficult tax and regulatory regime.”
Profiles of five of the companies can be found on the FBA website: Shubert’s, Lund, Pini, Lippow, Jim Dobbas
The companies are:
Gorrill Ranch, Durham, was founded in 1918 by Ralph Gorrill, an engineer who was part of the team building what became U.S. 99. He purchased 2,400 acres along Butte Creek from the Leland Stanford estate. Teaming up with a colleague, Gorrill learned the rice industry and today the ranch is a small but prominent grower of rice and orchard crops. The ranch is now run by the fourth generation of family members. http://gorrillranch.com/our-story
Pini Hardware, Novato, was also founded in 1918, by a Swiss immigrant who opened a general store which within a decade became one of the largest employers in town. The Young family became involved in ownership in 1968 and today the store is operated by the third generation of the family. http://www.piniacehardware.com/about-pini/
Shubert’s Ice Cream and Candy, Chico, was founded in 1938 by Leonard C. Shubert, who left Montana at the age of 54 to find a location in California for an ice cream shop. When he drove into Chico, he knew he’d found his location and since then the shop has become a community institution. The fourth generation of the family now make ice cream and candies on the premises. https://shuberts.com/our-story/
Valley Truck and Tractor,Yuba City, was established in 1948 and today is the leading John Deere dealer in Northern California. https://www.valleytruckandtractor.com/about-valley-truck-tractor-yuba-city-chico-ca–info
Lippow Development, Martinez, was officially formed in 1948 – 44 years after Leo Lippow arrived in the United States as a penniless immigrant. Now run by the third generation of the family, the company owns and operates a diverse portfolio of commercial and industrial properties in California and Arizona. https://www.lippow.com/about
Lund Construction, North Highlands, was founded 1958 by George and Alta Lund out of their garage. Now in their third generation, the company specializes in pre-construction, earthmoving, and pipeline services. https://www.lundconst.com/company/
Vanella Farms, Chico, began in 1968 when 23-year-old Bob Vanella purchased his first almond huller. Today, the company grows and processes almonds, walnuts and other crops on 3,000 acres and is a wholesaler that sells nuts to customers around the world. https://vanellafarms.weebly.com/about.html
Jim Dobbas, Inc., Newcastle, began its heavy equipment contracting business in 1968 and today specializes in emergency and derailment response services for class 1 railroads. The company is now run by the second generation of the family. http://www.jimdobbasinc.com/about/company-overview
Rivinius noted that the state’s 1.4 million family businesses employ 7 million people and tend to pay their employees better, train them better, and provide more generous benefits than nonfamily companies.
About the Family Business Association of California (FBA): Founded in 2012, the Family Business Association of California is the only organization working exclusively at the Capitol to educate lawmakers and regulators about the importance of family businesses to the state’s economy and to their communities – and to advocate positions on legislation and regulations. For more information, visit www.myfba.org.
Asm. Adam Gray, right, receiving FBA award from legislative advocate Dennis Albiani at FBA’s Annual Meeting of Members
The Family Business Association of California, the only organization advocating exclusively for California’s thousands of family businesses, has awarded its first Outstanding Legislator Award to Assembly Member Adam C. Gray, D-Merced, for his record on legislation crucial to family businesses during the recently concluded session.
The award was presented at FBA’s Annual Meeting of Members this month in Sacramento.
“Gray is a member of the influential New Democrats caucus – lawmakers who are committed to a pragmatic approach that promotes the interests of hard-working Californians alienated by the extreme partisanship of both the left and the right,” said FBA Executive Director Robert Rivinius.
“He had a 100 percent voting record on FBA’s key bills this session and played an influential role in advancing business-friendly bills and amending or blocking bills that would have harmed family businesses. That’s not surprising since he comes from a family business background.”
Gray’s grandfather, Ernest Denault, established Merced Dairy Supply to serve the Central Valley’s growing dairy industry and the company continued to thrive under Gray’s father, Robert. In fact, Adam Gray’s first job was washing storage barrels and loading feed bags for the family business.
After graduating from UC Santa Barbara, Gray went to work for then-Assembly Member Dennis Cardoza, focusing on agricultural issues and later owned a small public affairs and communications firm while also serving as a lecturer at UC Merced. He was elected to the Assembly in November 2012.
By Dennis Albiani, FBA Legislative Advocate
As the final votes are tallied in California, more races get called for the Democrat challengers taking down the few moderate Republicans that remained in California. The tight race for California Senate District 34 took a shift on Monday when Democrat Tom Umberg pulled ahead of Republican incumbent, state Sen. Janet Nguyen.
Umberg, a retired U.S. Army colonel and previous assemblyman, was leading for the first time since Election Day with 50.09 percent of the votes to Nguyen’s 49.91 percent, according to data released Monday by voting officials. Umberg had 126,824 votes and Nguyen had 126,386 votes, reversing a lead held by Nguyen since the Nov. 6 election.
It’s unclear how many ballots are left to be counted in the district. There are a total of 91,338 ballots left to be tallied in Orange County and an estimated 422,600 left in Los Angeles County.
“What’s interesting is how much it shifted from a safe Nguyen victory to a potential Umberg win,” Mitchell said. If Nguyen loses, “she could be a casualty of national reaction to Trump,” Mitchell added. “She has an ‘R’ next to her name, and that could (make the) difference.”
Another Orange County incumbent trailing in his bid for re-election was Assemblyman Matthew Harper, a Republican from Huntington Beach. Democrat Cottie Petrie-Norris was leading late Monday with 96,238 votes, or 52.5 percent of the ballots counted, to Harper’s 87,082 votes, or 47.5 percent.
The state Senate 34th District includes Little Saigon and parts or all of Seal Beach, Huntington Beach and other north Orange County communities, as well as a portion of Long Beach. Nguyen, 42, is viewed as a moderate Republican. She has served on the Garden Grove City Council, the Orange County Board of Supervisors and more recently the state Senate, where in 2014 she became the first Vietnamese-American elected to the office and the country’s first Vietnamese-American woman state legislator.
In the Bay Area, the last remaining Republican office holder, Assembly Member Catherine Baker, conceded her race to Democrat Rebecca Bauer-Kahan. Bauer-Kahan is an environmental attorney and community activist. Baker’s defeat means the Bay Area no longer has any Republican representatives in the state Legislature.
A victory for Bauer-Kahan had been considered a longshot, because Baker is a moderate Republican and had won the endorsements of the region’s daily newspapers. But Bauer-Kahan, a progressive, benefited from the Democratic blue wave this election cycle — and from strong voter turnout in the East Bay.
The sprawling 16th District runs from Lafayette and Orinda to Livermore. As of Nov. 16, Bauer-Kahan was leading Baker by about 2,500 votes, 50.6 percent to 49.4 percent.
Governor-Elect Newsom announces ‘ambassadors’ for “All In California” transition
Governor-Elect Newsom announced an inclusive “All In California” transition program intended to provide opportunities for all Californians to participate in state government. Part of that program is to enlist “ambassadors” from diverse backgrounds and locations to assist identify qualified candidates from across California wanting to serve. Upon announcing the list of appointees, Newsom said, “These respected leaders will help me as I search for innovative ideas and talent across this state.”
Newsom said his goal in creating the advisory group is to “create an inclusive, people-powered transition that reflects the diversity and values” of California.
According to a November 16 release from the Governor-elect, leaders who have agreed to be “All in California” ambassadors include:
- San Francisco Mayor London Breed
- San Francisco Mayor Willie Brown (Ret.)
- State Senate President pro Tempore John Burton (Ret.)
- Laphonza Butler, President, Service Employees International Union (SEIU)
- California State Treasurer John Chiang
- California State Superintendent of Public Instruction Delaine Eastin (Ret.)
- California State Controller Betty Yee
- Los Angeles Mayor Eric Garcetti
- Long Beach Mayor Robert Garcia
- Alice Huffman, California NAACP President
- State Senator Christine Kehoe (Ret.)
- Monica Lozano, former chair, U.S. Hispanic Media, Inc.
- Congressman George Miller (Ret.)
- California Secretary of State Alex Padilla
- Incoming House Speaker Nancy Pelosi
- Art Pulaski, Executive Secretary-Treasurer and CEO, California Labor Federation
- Los Angeles County Supervisor Mark Ridley-Thomas
- Oakland Mayor Libby Schaaf
- Sacramento Mayor Darrell Steinberg
- Los Angeles County Supervisor Hilda Solis
- Environmental activist Tom Steyer
- Fresno Mayor Ashley Swearengin (Ret.)
- Stockton Mayor Michael Tubbs
- Los Angeles Mayor Antonio Villaraigosa (Ret.)
- CalChamber President Allan Zaremberg
Governor-elect Newsom will be sworn in on Monday, January 7.
FBA’s Board of Directors has adopted the following public policy goals for 2019
State tax issues. FBA needs to be diligent in this debate to maintain fair and equitable business and personal taxes in California:
- Continue our leadership role to maintain prohibition on Estate Tax in California.
- Split Roll is headed for the 2020 statewide ballot and rolling back of Proposition 13 continues to be a concern in California. FBA will fight against any proposal to negatively impact commercial property taxes.
- Continue to oppose efforts to enact a sales tax on business services.
Regulatory and lawsuit relief continues to be a top priority for FBA members but regulations surrounding labor relations and human resource management provide additional challenges to our members. FBA will focus on opposing legislation and regulations that impact labor and our workforce and relief from PAGA lawsuits against family businesses.
Workforce development and identifying a qualified and available source of labor is an increasing challenge. FBA will work to support workforce development opportunities that help provide a trained workforce.
Publicize FBA policy, legislative and regulatory positions. FBA will work to achieve coverage of those positions and opinions in the news media.
FBA will continue to explore opportunities to assist the transfer of ownership and property between family members and through successive generations and oppose efforts to make that more difficult.
Continue to build relationships with key legislators, new legislators and new administration officials through such means as:
- Sponsoring the 7th Annual Family Business Legislative Conference.
- Meeting one-on-one with more key legislators, new legislators, and officials of the new Administration to educate them on the importance of family businesses and what issues are critical to family businesses
- Encouraging FBA members to call on their legislators and engage employees in both education and advocacy to illustrate the impacts state government has on family businesses and their employees.
- Participating in coalitions, public events, and hearings advancing the importance of the family business model and family business issues.