Small-business owners in Colorado will soon have another thing to worry about: discrimination lawsuits.
On Monday, Colorado Gov. John Hickenlooper signed into law a bill allowing employees of small companies to receive more damages from such lawsuits. The law takes effect on Jan. 1, 2015, and will allow workers at businesses with fewer than 15 employees to receive punitive and compensatory damages and attorney’s fees—comparable to the types of damages workers can receive from large corporations. However, the law limits damage awards to $10,000 for companies with up to four employees and $25,000 for companies with five to 14 employees.
Currently, employees at those small businesses can only receive back pay and reinstatement of their jobs and, for that reason, many lawyers won’t take on their cases, according to the Denver Business Journal.
While admitting that the new law exposes Colorado’s small businesses to the risk of frivolous suits, Gov. Hickenlooper defended it in a statement, saying it “strikes the appropriate balance between protecting small business employers from costly and frivolous litigation and providing the victims of intentional and unacceptable discrimination with appropriate remedies.”
The National Federation of Independent Business fought the controversial legislation, claiming discrimination suits can cost a small business $150,000 to defend even if no damages are awarded. “These businesses do not have the capacity or capital needed to have human resource departments, in-house counsel or other resources required to defend themselves when hiring, promoting or terminating an employee under Colorado’s complex employment law,” NFIB and a few other pro-business groups wrote in a letter asking the governor to veto the bill.
The impact of lawsuits on small businesses has gained more attention in recent years, especially as other types of financial pressures on businesses have mounted. The U.S. Chamber of Commerce Institute for Legal Reform introduced its Faces of Lawsuit Abuse project in 2009, which features a video collection profiling businesses that have been sued. According to a survey conducted by the U.S. Chamber, 93 percent of small-business owners view lawsuits as a “somewhat serious” or “very serious” problem.
NFIB also provides an online resource center for businesses to learn more about lawsuits and liability.
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