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While the rest of the country cracks jokes about the off-and-on California recall election, at least one group is taking it quite seriously-the lawyers who represent or oppose businesses. California has led the country in enacting cutting-edge labor and employment laws. But critics like attorney Samuel T. McAdam think it has gone too far, with new laws that cost corporations billions more each year and result in loss of jobs, loss of new businesses and loss of state revenue. McAdam, a labor and employment attorney in the Sacramento, Calif., office of Chicago’s Seyfarth Shaw, said the recall election could have a powerful effect on businesses and their lawyers. Even without a shift in the legislature, McAdam said a new governor could use his position as a “bully pulpit” to change the political trends. Others, like attorney Philip Recht, believe the recall has absolutely nothing to do with stopping labor legislation. “That’s a myth. The recall will have no immediate impact on the law,” Recht said last week, just after the 9th U.S. Circuit Court of Appeals, en banc, overturned an earlier ruling and agreed to allow the election to take place on Oct. 7. Recht is a partner and head of the government practice group in Chicago-based Mayer, Brown, Rowe & Maw’s Los Angeles office. But Ronald J. Klepetar, a labor and employment attorney in the Los Angeles office of Dallas’ Jenkens & Gilchrist, said the recall is sending state government a message about its “anti-business climate.” Klepetar, who once served as an attorney at the National Labor Relations Board in Washington, added that he has lost at least one client to Mexico because of unfavorable workers’ compensation laws in California, which, critics say, has the highest premiums of any state. Governor Gray Davis, target of the recall election, has enraged Republicans and the pro-business lobby by signing the workers’ comp law and others, including bills that make California the first state in the nation where employers must grant up to six weeks of paid family leave; that expand the scope of workplace discrimination to include everyday injuries as disabilities; that base overtime on an eight-hour day rather than a 40-hour week; and that allow consumers to sue an employer for “unfair competition” if the business is found to violate other laws, such as overtime. The unfair competition law led to what businesses called “extortion lawsuits,” which some courts tossed as frivolous and abusive. Pending measures awaiting Davis’ signature include a bill mandating that all but the smallest businesses provide employee health insurance or pay into a state pool; and one that allows a worker to act as a private “attorney general” to sue employers over labor code violations. The California Chamber of Commerce has attacked the health insurance bill, saying it will cost billions of dollars and will put pressure on businesses across the country to offer similar coverage. Republicans have blasted the labor code bill as a “bonanza for frivolous litigation [that] will dramatically drive up costs to businesses.” Also opposing such bills is a group called the Coalition for California Jobs, which includes business groups like the chamber. The group sponsors the “Pink Slip Express”-a moving van that travels from city to city, representing jobs leaving California as a result of its employment laws. During the legislative session, the coalition listed 51 “job-killer” bills that “impose burdensome or unnecessary regulations, create new workplace mandates, increase litigation, expand government at businesses’ expense, criminalize inadvertent business error, or impose new or higher fees and taxes.” Davis supporters like attorney Recht say the recall election, and even a new Republican governor, cannot bring the kind of changes that businesses seek. Even Richard Costigan III, head of the chamber’s government relations staff, conceded that “it would take two or three election cycles” to change the heavily pro-labor, heavily Democratic state legislature. But recalling the governor “would be the first step in changing the anti-business climate in state government,” Costigan said. Possible impact If a majority of voters recall Davis on Oct. 7, then the person on the candidates’ ballot with the most votes will become governor. Leading in the polls are Lt. Gov. Cruz Bustamante, a Democrat backed by labor, trial lawyers and Indian tribe casinos; and Republican candidate Arnold Schwarzenegger, who has campaigned to “bring business back to California” and was endorsed by the California Chamber of Commerce. Klepetar said the recall election could have several possible kinds of impact: If Davis holds on to his job or Bustamante is elected, the governor might be more restrained toward business. Or a new Republican governor might be able to restrict the Legislature by threatening to veto, or actually veto, anti-business bills. Klepetar said businesses also are looking at the recall election as a possible way to deal with a new law providing benefits for paid family leave. The law does not take effect until Jan. 1. Despite such feelings, businesses did not put vast amounts of money into the recall effort, according to figures from Recall Watch, an independent campaign finance watch group. The largest recall group, Republican U.S. Rep. Darrell Issa’s “Rescue California,” raised about $3 million, most of it from Issa’s own company and a handful of other businesses. Five different recall groups, including Issa’s, raised a total just below $6 million. In contrast, a group called Californians Against the Costly Recall raised nearly $8.5 million, mostly from labor unions and Indian gambling tribes. The money totals indicate that California businesses are not overly concerned about the recall, Recht said. John Sims, a law professor at the University of the Pacific in Sacramento, said, “It’s convenient for groups to use the recall to try and get restrictions on workers’ rights” and plaintiff’s lawsuits, but the election is really about the economy, state budget deficit and energy crisis. Observers like Sims said California is no worse off than other states. Statistics would seem to support him. Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto, said the state figures on job loss and unemployment almost mirror the national averages. All states are suffering from the weak economic recovery, Levy said. “California is participating in that, but not disproportionately.”

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