The Family Business Association of California today issued the following statement expressing disappointment in Gov. Gavin Newsom’s decision to support Proposition 15, the measure on the November ballot that would create an $11.5 billion tax increase on businesses.
“The Family Business Association is composed of family-owned businesses that have been investing in California for decades. Our members have a long-term view. We create jobs and opportunities for thousands of Californians. COVID-19 has hit us hard. Global, offshore competition has narrowed our margins. Asking us to now pay in many cases two or three times the amount in property taxes that we have historically paid means higher wages will be deferred and what limited job growth there is will stop and any new jobs likely will be created in other states. Proposition 15 is a terrible idea, especially during these difficult times. We are very disappointed by Governor Newsom’s endorsement of this proposition that will seriously harm our businesses and our employees’ job security.”
By Ken Monroe, FBA Chairman
California’s 1.4 million family-owned businesses are in the fight of their lives.
Some have been shuttered since March, still waiting nervously for an all-clear from state officials. While their revenue stopped, the bills kept coming. And many voluntarily kept paying wages, health benefits and other costs to take care of their greatest asset: their employees.
Other businesses benefited from the “essential” tag (or so they thought) and were allowed to continue operations. But staying open during the stay-at-home order meant limited operations and large drops in revenue, yet higher costs to modify how we work to protect workers and customers.
The point is regardless of the size or industry, few businesses have made it through the past few months without major harm.
With California reopening, there seems to be a light at the end of the tunnel. The question now at hand is this: will state lawmakers allow that light to shine and help business power an economic comeback? Or will our prospects dim under short-sighted policies that throw more burdens and new costs on employers, slow job creation and kill future growth?
There are several areas where lawmakers can show whether they are friend or foe to family-owned businesses, including how they deal with new taxes, restrictive contracting rules and predatory lawsuits.
Another threshold test will be workers’ compensation. California employers have historically paid among the highest costs for workers’ compensation insurance. A lot of these costs do not benefit the workers who truly need it – instead money is skimmed away by lawsuits and outright fraud.
As a result of COVID-19, a new workers’ compensation threat has emerged: a “presumption” that all COVID-19 cases should be blamed on work and, therefore, eligible for workers’ compensation benefits.
Let me be clear: employers support – and pay for – our workers’ compensation system as an important safety net. We do our best to keep workers safe and healthy. When accidents or illnesses occur because of work, our workers should get the medical care and benefits they need.
Presumptions turn the system inside out. Instead of providing these benefits for work-related injuries or illnesses, employers will pay for any instance when a worker gets sick – even if the illnesses was caught a home from a family member or out in public from a stranger.
In early May, Gov. Gavin Newsom enacted an emergency presumption, when most of our state was still closed down.
As Californians get back to work – and back to their own personal lives – blaming all COVID-19 cases on work is unfair and unjustifiable. Worse, it will cost employers billions of dollars to pay benefits that have nothing to do with work.
If lawmakers expand or extend the workers’ compensation presumption – as several have proposed – it would deal a devastating blow to family-owned businesses. Jobs will be lost, or not brought back. Economic recovery and growth will be dampened. And, ironically, it will depress the tax revenue our state leaders need to restore public services, such as education and community health.
Business will be the engine of the economic recovery. For state lawmakers, the choice is clear: are they friend or foe?
Ken Monroe is president and CEO of Holt of California, a major Central Valley Caterpillar dealer, and chairman of the Family Business Association of California. This op-ed first appeared in the Bakersfield Californian.
Two months into California’s economic lockdown, it’s time to start working on creating a V-shaped economic recovery.
Gov. Gavin Newsom has shown strong leadership during the past couple months in response to the coronavirus outbreak. Now he needs to unleash the power of private enterprise to protect our livelihoods.
Ken Monroe
He made the right decision in moving the state into a shelter-in-place strategy at a time when many people were still not convinced COVID-19 was that serious a threat. As a result, the virus has not had the same impact here as it has in many other large states.
It is also important that we continue to take prudent precautions to prevent a spike in cases or a later second wave of illnesses.
However, the unemployment statistics are beyond alarming. Nearly 4.6 million California workers have filed for unemployment benefits since March, and Newsom projects the state’s unemployment rate will peak north of 24.5%. In comparison, the jobless rate peaked at “just” 12.3% during the Great Recession in 2010.
While many counties are easing their shelter-in-place mandates and businesses are trying to reopen, many sectors of the economy remain shut down. And most businesses that are open or are trying to do so have had to radically rethink their operations to allow employees and customers to practice safe social distancing.
As a result, many of the state’s 1.4 million family businesses are struggling, even with the influx of federal assistance. If the strict quarantine lasts much longer, many of these businesses – and the 7 million jobs they provide – will be gone.
Needless to say, billions of dollars in tax revenues that state and local officials were counting on to provide the wide array of government services are gone as well. If the economy doesn’t rebound, the loss in tax dollars will be far greater, resulting in even more painful cuts.
We will not be going back to “business as usual” any time soon, but there are four things the governor could do to jumpstart the economy and help family businesses in particular before it’s too late for many of us to resume operations.
First and foremost, he should urge backers of the so-called split-roll initiative to stand down. Now is not the time to make dramatic changes to Proposition 13and burden struggling businesses with an additional $12 billion in commercial property taxes. Even in the best of times, raising business taxes by this huge amount would cause many companies to fail and cause many others to downsize or relocate out of state. Doing so now would be devastating to the economy.
Second, he should suspend AB 5. The prohibitions against independent contractors are so restrictive that they will make it hard for many family businesses to get back on their feet.
Third, he should work with lawmakers to provide protection during the rest of the year for employers against wage and hour lawsuits authorized by the Private Attorneys General Act. These lawsuits filed by trial lawyers can cost employers hundreds of thousands of dollars for paperwork violations even when workers incur no damages. Family businesses will need as much flexibility as possible to rebuild operations after this shutdown.
Finally, the governor has the authority to suspend the mandated minimum wage increases if economic conditions warrant it – and clearly they do. Holding off further increases until our family businesses can recover would be extremely helpful.
The governor has shown Californians leadership to prevent the coronavirus from causing a public health catastrophe. It’s now time for him to show the same leadership to prevent an economic catastrophe that could last for years.
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Ken Monroe is chair of the Family Business Association of California, kmonroe@holtca.com. He wrote this commentary for CalMatters.
By Ken Monroe
Chair, Family Business Assn. of CA and president, Holt of California
This op-ed originally appeared in the Orange County Register on July 5, 2019
You can’t watch TV or go online these days without hearing about more and more politicians who are calling for America to become a socialist nation. With California’s presidential primary just nine months away, these calls will become even louder in the months ahead.
As a family business owner and chairman of the Family Business Association of California, I’d argue that in many ways we already live in a socialist state. After all, a basic definition of socialism is that the state redistributes the wealth and controls the means of production. Through high taxes and ever-increasing regulations, California does both quite effectively.
But there are other ways the state redistributes wealth, and one of the most egregious is the Private Attorneys General Act, or PAGA.
PAGA was one of the last bills signed into law by Gov. Gray Davis before his historic recall in 2003 and was his parting gift to the state’s trial lawyers. It allows private attorneys to act as the state and use the 800 pages of labor laws on the books to sue employers over any and all violations, even for incredibly trivial issues. For example, if a company doesn’t list its full legal name on a paystub, it’s a violation.
But no matter how trivial, the penalties for each labor code violation are the same: $100 for each employee per pay period for an initial violation, and $200 for each employee per pay period for each subsequent violation, along with other possible penalties.
These violations can be stacked, with multiple penalties for each statutory wage violation and can quickly add up. I know, because my company, Holt of California, was sued over allowing our employees the flexibility to schedule lunches so they could eat with friends, even if that meant they worked more than five hours set without a meal break.
Because the possible penalties and legal fees in PAGA lawsuits can easily total millions of dollars if a suit goes to trial, most employers settle the cases. While the employees usually get about 60% and the lawyers get about 35%, that means a few lawyers get large checks while the numerous employees end up with relatively little.
PAGA has created an unfair distribution of wealth and should be repealed, with the state once again given the power to enforce labor laws. Since trial lawyers are a major part of the state’s progressive governing coalition, this probably won’t happen any time soon.
But there are some reforms that could at least make PAGA truly focus on the needs of employees more than the trial lawyers’ desire for big paydays:
• First, give employers 90 days to cure underlying issues before a suit can continue. Faced with a similar deluge of lawsuits over construction defects a decade ago, the Legislature gave homebuilders an opportunity to make repairs before they could be sued, so there is a precedent.
• Cap attorney’s fees so that in cases where significant violations occurred that the employees get more of the settlements.
• And make some common-sense reforms in those 800 pages of labor laws. Give employees the right to take their lunch break when they want to and allow companies to include the name they do business as on paystubs. The state should focus on situations that really harm employees.
Successful economies need an ongoing economic engine to create wealth. Here in California, family businesses play a major role making California the fifth-largest economy in the world. But our state’s economic engine is being choked back by a whole host of state laws and regulations, so the Legislature should at least take some modest steps to strengthen our economy. PAGA reform would be a good place to start.
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.
Ken Monroe
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.
The point is regardless of the size or industry, few businesses have made it through the past few months without major harm.