February 1, 2013
Colorado legislative Democrats have introduced a measure to increase penalties for workplace discrimination to the state’s smallest companies. It’s about fairness, they say, but business groups warn it could bankrupt tiny companies to defend themselves against lawsuits.
Bills similar to this year’s House Bill 1136 died both in the Democratic-majority House in 2010 and the Republican-led House in 2011. But state Rep. Claire Levy, a Boulder Democrat co-sponsoring this year’s legislation with Rep. Joe Salazar, D-Thornton, said she removed parts of the old bills that some in her party objected to — such as a clause exempting small state agencies from facing the harsher penalties in lawsuits — and has worked to get the Colorado Women’s Chamber of Commerce on board this time.
“I just think this bill has to give a heads-up to all business owners that the time is over for discrimination,” said Rep. Sue Schafer, a Wheat Ridge Democrat who usually sides with business groups but is a co-sponsor of HB 1136. “Whether you’re large or small, hire and fire on merit.”
Business leaders continue to negotiate with the bill’s sponsors to make the bill less odious for small companies. They’ve offered to extend legal remedies to all companies of six or more workers if the very smallest businesses can remain exempt, and they’ve asked for a cap smaller than the $50,000 limit now proposed on noneconomic damages. So far, nothing in the bill has changed.
“We’re not interested in protecting businesses that discriminate,” said Jeff Weist, lobbyist for the Colorado Civil Justice League. “The question is, how do you create the right balance with claims that are being filed just for their monetary value?”
Under current law, Colorado businesses of any size that discriminate against workers because of factors such as color, age or religion are subject to lawsuit verdicts that can include front pay, back pay, interest on back pay, reinstatement or hiring.
But federal law states that companies of less than 15 people are exempt from paying compensatory damages such as punitive damages, attorneys’ fees or emotional-distress damages in a verdict.
Elsewhere, 42 other states have expanded their laws to add these compensatory damages to the list of things a winning plaintiff can receive, but Colorado is one of eight that have not.
HB 1136 not only would allow for compensatory damages against the smallest companies but also would expand the state’s law to allow people 70 and older to sue for age discrimination — which they’re barred from doing now.
Erin Bennett, Colorado director of 9to5, National Association of Working Women, said the changes are necessary because the monetary compensation some plaintiffs get isn’t enough to cover attorneys’ costs. This leads to some attorneys not being willing to take discrimination cases against small businesses, leaving those victims without any means for justice, she said.
“What we see with a lot of people is they face discrimination, they’ve been fired … and back pay does not cover what they have faced,” Bennett said.
Bill opponents say federal law excluded the smallest companies because of the financial burden that even meritless lawsuits could inflict on them.
They don’t have in-house lawyers and can break laws inadvertently, and the cost of defending the lawsuits could close them, Weist said.
State Rep. Bob Gardner, an employment-law attorney and Colorado Springs Republican who opposes the bill, said defending against such suits can cost $50,000 to $70,000. And he believes the number of such lawsuits will rise if plaintiffs’ attorneys who can’t make money taking such suits now on a contingency basis see them as potentially big paydays.
“It’s significant because it creates a greater economic incentive for trial lawyers to take cases against our very smallest employers,” Gardner said. “At a time when we need to create more jobs in Colorado and encourage hiring by small business — and at a time we need less burdens, not more on small businesses — practically all of the Democrats are signing onto a bill that exposes small businesses to more liability.”
The Colorado women’s chamber decided to back HB 1136, however, after looking at information provided to it by 9to5 and determining that similar law changes in other states haven’t led to a significant increase in lawsuits against small businesses, said Donna Evans, president and CEO.
And Bennett noted that a clause in the bill directs courts to take into consideration the size of businesses and their assets when deciding damages. “We certainly don’t want to be bankrupting businesses,” she said.
Still, the bill also specifies that caps should mirror the federal Civil Rights Act of 1991 — which allows for damages of $50,000 per claim against companies of as many as 100 employees, Weist noted. His defense attorneys’ organization, as well as business groups such as the National Federation of Independent Business and Colorado Association of Commerce and Industry (CACI), are asking sponsors to lower caps on a graduated per-employee basis.
“We understand the political realities, but we also believe we have a compromise that can work for both sides,” said Loren Furman, CACI senior vice president of state and federal relations.
So far, 18 Senate Democrats — a majority of that chamber — and 31 House Democrats, two short of a majority, have signed on to sponsor HB 1136, almost assuring its passage.
Levy said the tough economy that helped to doom the bill in 2010 has improved, and supporters are doing a better job explaining how they believe the bill still protects small businesses.
It’s unknown where Gov. John Hickenlooper, a Democrat, will come down on the measure if the bill lands on his desk. He hasn’t taken a public stance. And of the five Democrats that worked with minority Republicans to kill the bill in 2010, two are now appointed officials in the Hickenlooper administration — including his director of legislative affairs, Christine Scanlan.
The bill is scheduled for its first hearing before the House Judiciary Committee on Feb. 14.
Ed Sealover covers government, health care, tourism, airlines and hospitality for the Denver Business Journal and writes for the “Capitol Business” blog. Phone: 303-803-9229.