New York City Council Bill Could Empower Lawsuits Against Small Businesses

A proposed bill in the New York City Council, known as the People and Organizations Winning Economic Relief Act (POWER), could significantly alter how businesses operate and face legal challenges, according to critics.

The legislation, backed by Councilmember Zohran Mamdani, would establish a new municipal right for private individuals to sue businesses over broad categories of alleged misconduct. While the city already allows claims for deceitful business practices under state law and attorney general prosecution for unfair practices, the POWER Act expands the scope of potential lawsuits.

Under the proposed bill, private plaintiffs could sue over "unfair methods of competition" and any "unfair, deceptive, abusive or unlawful acts or practices in or affecting business, trade or commerce." The bill defines "injury" broadly, which critics contend could lead to a surge in litigation, benefiting plaintiffs' attorneys.

Small Business Definitions Under Scrutiny

A key concern raised by opponents is the bill's definition of businesses subject to its provisions. While the city's "OPEN" agenda previously defined small businesses as those with up to 50 employees, the POWER Act would cover businesses with as few as five employees. Exemptions are limited to businesses that are independently owned, earn less than $5 million annually, and employ no more than four people. This means businesses with five to 49 employees, which represent a significant portion of the city's private sector employment, could become targets for lawsuits.

The bill allows for damages of $2,500 per alleged violation, with the definition of "violation" left intentionally vague. It also permits claims for injuries that are not financial or quantifiable, such as loss of time, privacy, or emotional well-being. Nonprofits could also initiate lawsuits on behalf of the public, and prevailing plaintiffs would be entitled to attorneys' fees, creating a financial incentive for litigation.

Businesses would have a tight 10-day window to address a "violation" before legal action can be taken. Critics argue this tight deadline is particularly challenging for businesses operating on thin margins and could lead to small, unwitting businesses settling claims to avoid costly legal battles.

Roots in Federal Regulatory Approaches

Proponents of the POWER Act point to its alignment with federal regulatory philosophies. Consumer and Worker Protection Commissioner Sam Levine, who previously led the FTC's Bureau of Consumer Protection, is cited as a champion of the bill. The legislation directs courts to consider the FTC's 2022 unfairness statement and a now-withdrawn Consumer Financial Protection Bureau policy statement from 2023, which targeted alleged coercive, exploitative, and predatory corporate behavior.

Critics contend that while fraud exists and requires enforcement, the city already has mechanisms to address it. The state attorney general can handle deceptive claims, and the Department of Consumer and Worker Protection has investigative powers. They argue that the POWER Act deputizes private lawyers and activist groups as enforcers, potentially increasing liability for businesses that have no intention of acting unlawfully.

The potential consequences, according to opponents, include increased legal costs, higher insurance premiums, rising prices, job losses, and reduced investment, all of which could impact the city's affordability.

Exemptions and Contrasts

Notably, the bill exempts the city itself, its agencies, and its employees from its provisions. This has drawn criticism, particularly in contrast to Mamdani's administration's initiatives, such as taxpayer-funded city-owned grocery stores, which critics argue compete with tax-paying small grocers.

The legislation comes despite previous acknowledgments from the mayor's office about the challenges businesses face with confusing rules and enforcement. In July, the mayor reportedly promised clearer standards and opportunities for businesses to correct mistakes. However, the POWER Act appears to shift the approach towards a more litigious framework for businesses that meet its criteria.

The article asserts that if passed, the POWER Act could transform the landscape for small businesses in New York City, potentially making litigation a primary means of engagement rather than fostering a thriving business environment.