By Marcus Rayner | The Record
FOR MANY OF US it may be hard to conceptualize, but there was a time in New Jersey’s recent history when our state was a beacon for the American Dream instead of a disincentive to it.
An abundance of natural resources, an educated workforce and low business costs made the Garden State ripe for the mom-and-pop shops and diners that at one time penetrated nearly every Main Street across the state.
New Jersey shined especially bright to would-be small business owners across the Hudson, and these attributes helped lure a good number of them from the five boroughs.
It’s almost inconceivable that within the span of a generation, the New Jersey we knew has become one of the most hostile business environments in the United States. The Monmouth University Polling Institute recently conducted a survey assessing the attitudes of small business owners and operators in New Jersey, specifically asking about our state’s liability laws and how they impact their businesses.
The results were startling: among small businesses employing two to 50 workers, 20 percent have been sued within the last five years. Others expressed serious concern that they would be hit with litigation in the near future.
Among the more outrageous lawsuits business owners have had to deal with in the last few years was a North Jersey car dealership, which was sued for accidentally overcharging a customer by about $40 on a car purchase. The customer went to court instead of asking for a refund.
It was appealed all the way to the state Supreme Court, which found that a customer has no obligation to ask for a refund before suing under the New Jersey Consumer Fraud Act. Nor does the customer actually have to have been defrauded.
As a result, an accidental double-charge on a restaurant bill can be grounds for a lawsuit, underwritten by consumers like you and me who will pay the higher prices that restaurant will need to go to court or settle the claim.
Sued for fraud
Another notable lawsuit was filed against a Mercer County window installation business in 2006. The customer changed her mind about the Pella windows they installed after the job was complete. She wanted them uninstalled, but she didn’t stop there – she filed a lawsuit under the Consumer Fraud Act.
The business won on all counts, except one – the one-day job did not have a start and end date written on the contract. For this, the business was initially ordered to pay $35,000 in fees to her lawyer.
What’s of most concern is what small businesses do after they’ve been sued. According to the Monmouth Survey, nearly one-third of businesses reported having to lay off workers after being hit with a lawsuit. And unlike corporate America, where lawsuits are routinely handled by a company’s legal department, 85 percent of small businesses had to hire an attorney as a direct result of a lawsuit – and taking all of the money spent on litigation out of the economy with it.
Nearly half of the companies surveyed limited plans for expansion. One-third reported having to cut employee hours as a direct result of litigation, and one-in-five raised the prices of their goods and services. Others discontinued certain goods and services or considered closing their doors entirely.
Critics will tell you to look on the flip side: The majority of small businesses haven’t been sued, and even ones that have don’t head straight for the Pennsylvania border.
But the reality is that losing small businesses to other states as we continue to hemorrhage jobs across all industries will prolong our economic recovery, and restructure our economy going forward.
Small businesses have historically played a crucial role in getting the workforce back on track after economic disarray, and in New Jersey, they have served a crucial cultural purpose as well. The fact that nearly one-in-five small businesses has seriously considered leaving New Jersey should set off alarms.
Measure would address inequities
A bill before the Assembly Consumer Affairs Committee, A-3333, would amend New Jersey’s Consumer Fraud Act to bring it more in line with national standards and level the comparative disadvantage New Jersey’s entrepreneurs face.
“When any businessperson can be dragged into court on any day, for virtually any reason, it chokes off innovation, expansion and competition,” said Assemblywoman Amy Handlin, R-Middletown, who is a co-sponsor of the legislation.
The New Jersey I know doesn’t shy away when things are difficult. Do we really need to wait until more of our small businesses dissolve before we acknowledge that New Jersey has a lawsuit problem? At that point, it’s too late.
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