The North Carolina House approved a bill today which reforms North Carolina's costly worker compensation laws into line with those in other states. The legislation, which was so modest that even the AFL-CIO endorsed it, is definitely a step in the right direction, but is hardly the reform North Carolina needs to reduce the out of control costs of our legal system. Meanwhile in Texas, Gov. Rick Perry signed a law which will significantly reduce the threat of meaningless lawsuits.
The new law would shift Texas into a "loser pays" system, meaning plaintiffs bringing lawsuits judged to be frivolous would be forced to pay the legal costs ofthe defendant. Writing in National Review Online's The Corner, Stephen DeMaura detailed why this reform will help Texas citizens and business owners.
The cost of tort litigation is strangling the U.S. and small businesses in particular. According to Marie Gryphon of the Manhattan Institute, the cost of tort litigation topped $247 billion in 2006. The National Federation of Independent Business estimates that tort litigation costs small businesses over $105 billion annually, $35 billion of which comes out of their pockets, not insurance.
‘Loser pays’ reform will result in fewer frivolous lawsuits, lower litigation costs, and more expedient justice for legitimate claims. Just as important, the passage of loser pays is yet another example of how Texas has taken the national lead in job creation and the fostering of a strong business climate. Immediately following Perry’s earlier reforms, the number of physicians applying to practice rose by 60 percent, filling a increasing need across the state, according to the Journal. Likewise, by tossing off the threatening shroud of frivolous lawsuits, Texas is removing yet another barrier to small business expansion and job growth.
It is important to remember that North Carolina's economy does not exist in a vacuum. Business owners looking to expand or relocate can easily decide to relocate in states with a more business friendly climate, such as Texas. Indeed, Texas's low-regulation, low-tax style of governance has created more jobs in the last five years than the rest of nation combined.
North Carolina's legislators need to embrace major reforms to reduce the costs of job-killing, frivolous lawsuits. While today's bill is a step in the right direction, much more still needs to be done.