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Opinion

California Leads in Class Action Lawsuits

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If you own or operate a business in California you most likely already know we have one of the highest workers compensations rates in the nation, highest tax rates, health insurance rates, and recently named number one for the most litigious state. At a certain point you would think our legislators would be embarrassed by such numbers.
Recently I saw an article published in Law 360 and it pointed out that California accounts for 12% of the total US population and more than 50% of all class actions in the US. There are more than 3,200 new federal cases filed a year in California with even more class actions filed in State Court. I would say California shattered the Class Action Lawsuit ranking and has another number one in the nation trophy to mount on their wall.
With the court system already being too jammed up, this opens the door for more cases to be settled in mediation. The Private Attorney General Act (PAGA) appears they have about 98% mediation rate as most never go to court due to the expense.
PAGA is known as the sue your boss law and has been gaining more and more momentum year after year as the trial attorneys are realizing huge payouts for themselves while business owners, their employees, and the state are helpless in mediation and also become victims to this cruel law. PAGA was written into law in 2004 to protect employees for the underground economy so bad employers would not take advantage of them. The state at the time had a deficit and felt it was a good idea to allow trial attorneys to enforce labor law violators. ‘Ovem lupo commitere’ , Latin for (‘To set a wolf to guard sheep.’)
More than 35,000 PAGA Lawsuits have been filed since 2004 and the cases are shocking to comprehend based on the so called labor violations. If you have a flexible schedule and decide to eat your lunch 1 second past 5 hours, that is a violation. If you give an employee a gift card or bonus for a job well done, that is a violation if not calculated properly, off by a penny or two, it could coat you millions.
What is really taking place is trial attorneys are seeking out terminated employees and offering them money they are owed from their previous employer. This ex-employee can represent all of their fellow employees in a class action lawsuit. With the PAGA provision it makes it easy to send a notice to the employer, investigate, while looking for any violation, and then file suit against the employer.
Here is an example of how skewed this law is. If the employer shorted the employee $ 28.61 on alleged labor law violations civil penalties and personal damages would be $69,508.61. That is 2,430 times the alleged actual damages and I bet you would get a better rate form a loan shark. If the employer has 30 employees the exposure is over $ 2,000,000 and actual damages would be only $ 858.30 to the aggrieved employees. So the trial attorney goes to mediation with the threat of more than $ 2,000,000 and tells the employer you need to settle this as legal expenses to fight could be another million. The trial attorneys know based on their deal with the state they will get 100% of their fees paid, as it comes right off the top of the settlement, usually a third of the total. The balance is then negotiated and what is supposed to happen rarely does, meaning the state takes 75% California Leads in Class Action Lawsuits of the balance and the employees get the remaining 25%. When the balance is settled everything becomes a shroud of secrecy and all of the employers do not want to talk about this as they are afraid they will get hit again.
The state is so overwhelmed with PAGA cases they can’t keep track, and the disgruntled employee who gets a check for $ 15.00 is told by the attorney who is being paid to protect them that you were only owed $ 28.61, so you did alright. The employer thinks after they settled for $ 750,000 that it was way better than 2 million. The trial attorney gets $ 250,000 and tells all of their colleagues how much they are helping the employees who have been taken advantage of.
That is the reality of PAGA and if anyone tells you different they are probably a trial attorney. California is being a leader in too many categories and Class action Lawsuits is nothing to be proud of. Furthermore we are the only state with such a law as PAGA and it is only allowing trial attorneys to steal from not only businesses, they are stealing form non- profits as well. Plaintiff Magazine has an article on settling class action lawsuits and how to divvy up the money on PAGA to the LWDA, “Most attorneys are allocating only a small amount to PAGA claims in their settlements”. Recently one attorney stated in an article,” PAGA is not for the employees.”
Our legislators need to focus on business and the negative effects of passing too many complex laws. Alan Dershowitz is quoted, “The defendant wants to hide the truth because he’s generally guilty. The defense attorneys job is to make sure the jury does not arrive at that that truth.” The PAGA Trial Lawyers know they are guilty of taking advantage of a broken law and it is their job to keep you way from that truth.

The Inland Empire Business Journal (IEBJ) is the official business news publication of Southern California’s Inland Empire region - covering San Bernardino & Riverside Counties.

Opinion

Supply Chain Delays and Strains to Continue through 2022

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OPINION

By Hema Dey, IEBJ Content Contributor

Managing Price Increases

From the start of the pandemic in 2020, businesses have been absorbing ongoing shocks that impacted operations and the bottom line. The supply chain delays and strains everybody hoped would resolve in 2021 seem set to continue through 2022; while the backlog of ships waiting for berths at the ports of Los Angeles and Long Beach fell to a low of 43 mid-March, experts expect a new surge of goods shipped from Asia after the Lunar New Year to drive those numbers up again. After that, the situation is unclear—the latest lockdowns in Shenzhen threaten to cut off supplies of parts and products when U.S. businesses are already starved from ongoing shortages.

At the same time, the war in Ukraine and sanctions on Russian oil are driving already-high fuel prices even higher around the world. While experts disagree on whether we can expect gas prices to keep climbing or that they’re near their peak, it’s clear significant relief is unlikely soon. That additional expense is unwelcome news for businesses of all kinds.

Knowing the current difficulties will be part of the landscape for the foreseeable future has brought many companies to the unavoidable conclusion that they have to raise their prices to stay in business. If you’ve delayed making changes in the hope that things would pass, you’re certainly not alone—but if you’re coming to the realization that you can’t wait to adjust your prices to reality anymore, then you’re not alone there either.

The Right Way to Handle Raising Prices

When raising your prices is a necessity, how you approach it can make a significant impact on minimizing any negative fallout. Your customers are naturally not going to be happy about seeing their costs go up. Anticipating such dissatisfaction is one reason why businesses put off making price adjustments much longer than they should. However, postponing the inevitable can harm your business and won’t change the factors that make an increase necessary. Here’s what you should be doing to manage price increases wisely.

The first thing to remember is that price increases don’t happen in a vacuum. Beyond simply considering the pressures on your business in terms of your growing costs, you need to know what your competitors are doing, and you need to find out fast. If your proposed price increases are wildly out of line with what the rest of your competition is doing, you could easily lose market share. We can assist in getting an up-to-date view on the moves your competitors are making to help you factor in this critical angle.

Next, you shouldn’t delay price increases, but you should also keep them realistic. Deferring the inevitable will weaken your business’s financial position and increase the pressure to put even higher prices in place when you finally do act. At the same time, you must keep in mind that your customers are almost certainly experiencing the effects of increased fuel costs and higher shipping rates just like you are. When clients feel like a business is taking advantage of a general atmosphere of inflation to boost their own profits at the expense of their customer base, they’re rarely quiet about it. Stick to doing what you have to do to keep your business healthy, and don’t be tempted to pad it.

Finally, this is absolutely the time to revisit your marketing strategy. When prices go up, buyer behavior changes. Review all your keyword searches to understand how these fluctuations may be affecting traffic to your website. Repositioning your business accordingly can help avoid unexpected hits to your sales and leads, and may even lead to new opportunities. 

Seeking Guidance

Trying to adjust to the current economic challenges can feel overwhelming for business owners. You don’t have to go it alone when you’re contemplating significant changes like raising your prices—calling in an expert consultant can give you confidence that you’re taking the right steps for the long-term good of your company and your customers. If you need benchmarking assistance, contact Iffel International here. We can help you take the right steps down a difficult road.

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Banking & Financial Services

Q&A Session with Black Cooperative Investment Fund Executive Director—Kaine Nicholas

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Q&A with Kaine Nicholas, Executive Director of Black Cooperative Investment Fund

By Josaline Cuesta, Small Business Majority, Senior California Program Manager, and IEBJ Contributor

Why is financial literacy important for small business owners? What are the pillars of financial literacy?

Financial literacy is the comfort level one may have with topics related to money and its management. Financial literacy is critical to success, and it’s where everything begins for small business owners.  

At the beginning of a business venture, an entrepreneur can be cash-challenged and relatively inexperienced in practical business versus theory. It is important that while learning the business terrain, entrepreneurs have at the very least, a baseline of financial literacy to question documents and do calculations or have support to negotiate effective business terms. Any terms that are negotiated at the beginning of a venture can significantly affect the projections or the valuation of a business. These effects can vary widely, depending on the comfort level of financial literacy. 

The pillars of financial literacy are banking, budgeting, saving, credit, debt, and investing. What matters most to small business owners is budgeting, banking, and credit, and we recommend focusing on that order for small business owners. Understanding the numbers, having the assets with banking partners that can offer solutions, and building business and personal credit are all imperative to small business owners. BCIF and its trusted partner, AmPac Business Capital can help everyone gain a firm awareness of these pillars.

What’s needed to create a strong financial plan?

What is needed to make a strong financial plan is the actions that happen alongside writing the actual financial plan. While one may be uncertain of the “hockey stick” or optimistic revenue, what people can control is the cost. Know those costs and how they change in a good, better, or best scenario to keep you prepared.  

No one likes surprises. There is security and comfort in knowing that costs are consistent and predictable. Spend time conducting the research and use due diligence so that you and the financial partners understand the financial plan and financial statements. 

What’s in a business plan, and why is having one essential for a small business owner? 

A business plan is a document that, at its most basic level, can help small business owners navigate the who, what, where, why, and how to generate income with a product or service. The business plan tells the reader that this “document” is your prototype on paper. The business plan also helps readers understand the basic valuation of your business. 

If your business plan is on paper, does it articulate the vision, or is it a requirement for a loan program? The business plan is important because it represents as the creator of the business. Thinking business out on paper can reduce mistakes in real-world execution.  

What’s the best way to document and share major changes to a business plan with your financial advisor and employees, such as becoming a corporation or expanding to another state? 

Ensure the establishment of company meetings and hold them routinely, preferably with quarterly updates. This allows stakeholders to receive firm-wide public information and establishes communication between leadership, management, and employees. 

What are some tips for thinking strategically about cash flow?  

One tip is to understand what is in the pipeline and/or accounts receivables and monitor subscriber trends to your products or solutions. When I ask business owners how their business is doing, they usually respond with, “it’s going well.”  And I always ask myself, what does that really mean, and is the owner aware of the items that support healthy cash flow?

Is a personal credit score relevant to small business success? What defines a “good credit score” and how can you maintain one?

Personal credit is relevant to businesses at the earlier stages of a business. If used correctly, one should leverage good credit and create business credit as soon as possible. Personal credit and business credit are created differently and operate differently. That difference can be critical to accessing capital. Unfortunately, a “good credit score” is not universal. We recommend owners investigate the potential creditor by asking what numerical score and credit history on the credit report will produce a favorable outcome. A credit score and credit report are two components that contribute to a sizable credit decision. With that information, the small business owners have a credit “road map.” What is most important is that the business owner is proactive in the credit conversation. One can maintain and learn more with one of BCIF’s trusted partners, AmPac Business Capital.  

What are the top three easy-to-navigate business loans for a startup business? Do the types of loans that are needed change in your 2nd or 3rd year of business?

The top and the easiest loan is a zero-interest loan based on an alternative way of evaluating personal credit and traditional risk models. If one can find a small business loan that targets a certain demographic or type of business, that should be extremely helpful. Third, look for a small business loan that can be forgiven. 

The types of loans that could change in your second or third year of business can be tricky. Business success and loan/funding gaps require careful consideration, but most important, predictability. 

How will I know that a financial literacy resource is proven and credible?

Financial literacy is a journey. One way to affirm credibility is to compare it to your financial situation. Always have a backup resource for validation.

How can the average entrepreneur improve their financial literacy?

This is an important and critical question that I will answer in an alternative, more direct way. I strongly recommend these three words as ways to improve personal and business financial literacy:

  • Curiosity
  • Humility
  • Discipline

Start with opening your mail and being curious about the words that you do not understand in your statements. Call the service number and ask the person to explain what these words mean regarding your account. It sounds simple, but it truly is a free lesson that benefits your personal or professional situation. The information is memorable because the asker is learning even when configuring the question. (Do not forget your tax person or accountant.   They are your resources).

Humility helps your behavior when you ask a question, and you partially know the answer, but you ask questions to attain mastery.  

Lastly, you must be disciplined and determined when you call the service line or account representative when you do not fully understand a financial term. Do not feel like you are wasting their time asking basic questions. If they have chosen to do business, service your needs, or hold your money, you are only using your mutual rights within the relationship. 

What is the best way to stay abreast of COVID relief funds and resources in the Inland Empire area?

Contact the Black Cooperative Investment Fund (BCIF) at www.bcifund.org, 310-904-6336, reach out to our partner, AmPac Business Capital at www.ampac.com, or visit Venturize: https://venturize.org/—Small Business Majority’s free online resource hub for small business owners who need help accessing tools and resources to grow their businesses.

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Opinion

City of Ontario adopts updated Housing Element to help address housing – and affordability – crisis across Southern California

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The Ontario City Council Tuesday night adopted an aggressive plan that would position the City to lead the Inland Empire in addressing the housing crisis.

Ontario’s updated Housing Element lays out a series of planning and zoning changes that would allow the building of more than 20,000 housing units over an eight-year period ending in October 2029, including nearly 9,000 units for low-income and very low-income residents.

Those numbers represent Ontario’s allocation under the state-mandated Regional Housing Needs Assessment (RHNA) – a process governed by the state Department of Housing and Community Development (HCD) and updated every eight years to address the housing shortage across California.

No Inland Empire city had a higher RHNA allocation than Ontario – testament to the City’s standing as one of the most dynamic economic and population centers in Southern California. Across the six-county SoCal region, in fact, only three cities – Los Angeles, Long Beach and Irvine – had higher allocations.

“Our updated Housing Element reflects the City Council’s commitment to Ontario as a complete community and a destination for individuals and families looking for a better quality of life,” said Mayor Paul S. Leon.

Under state guidelines, Housing Elements do not require a city to build their allocated number of housing units. That is ultimately determined by market forces, point-in-time demand and the ability of homebuilders themselves to meet those needs at the appropriate price points.

What HCD does require is that cities establish a framework that would allow that level of production if those other factors were met.

The updated Housing Element approved by Ontario’s City Council was built around several priorities:

  • Addressing the needs of existing Ontario residents for quality and affordable housing at all income levels.
  • Ensuring that the city’s housing stock matches the type, price and tenure needed by Ontario’s residents and workforce.
  • Creating, preserving and (where needed) improving the quality and identity of Ontario’s distinct neighborhoods.
  • Assisting residents of all ages and backgrounds to allow them to live, work and enjoy themselves and their families in Ontario.
  • Obtaining financing for affordable housing as tax credits become more competitive and make it more difficult to obtain financing for affordable housing.

The plan also takes into account job growth and the City’s commitment to supporting business and employment opportunities. During Tuesday’s meeting, the Council certified the Environmental Impact Report for the South Ontario Logistics Center, which will create hundreds of new jobs on more than 200 acres of commercial and industrial space.

Other major economic development efforts in the City include the Downtown Renaissance, which, when completed, will include nearly 600 new residential units, 13,000 square feet of commercial space, a 450-space parking structure, breweries and tasting rooms, and college satellite campuses.

“The vision and leadership of our Council and City staff have made Ontario a model for business growth, career opportunities and livability. The future has never been brighter,” said Mayor pro Tem Alan D. Wapner.

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