Sell the business, remain in California or move out of state? Lawyer Responds

Among the questions business owners ask attorneys is a common one – should we stay in California or should we leave?

“Our family owns a small furniture manufacturing company in Southern California that is very much a happy, living dinosaur. We are a mini United Nations, with about 30 employees, most who have been here for decades, and the average age is around 50.

“Our employees really are like family, and you name the country, race, ethnicity or religion, it is represented here.

“We have an upholsterer who could pass for Rodney Dangerfield or Don Rickles, hysterically putting down everyone. People still tell jokes about their own ethnicity and race, and we all know that it is just good fun. We celebrate each other’s religious holidays, and are known as ‘Matchmaker Central.’ Many of us are godparents to co-workers’ children. In brief, we are still the way that so much of America was until politically correct speech destroyed normal human relations across our country.

“Dad wants to retire and offered me to take over the business or he will sell it. Given California’s anti-business attitude, what would your advice be? If we stay, I know that younger employees will be hired who are not used to ‘us old timers’ sense of humor and could run to a lawyer. If we relocate, where should we not go? Thanks. Sarah.”

‘Why California is a Disaster to Business – If You Can, Move!’

I ran Sarah’s question by a friend of this column, Joseph Vranich, President of Spectrum Locations Solutions, based in McKinney, Texas. He knows more about the disastrous impact California’s legislature and courts have had on business – both large and small – than perhaps anyone in the country.

His company helps firms relocate to states that want business to thrive. He co-authored a just-released Hoover Institution report entitled, “Why Company Headquarters Are Leaving California in Unprecedented Numbers.”

“If Sarah moves her firm out of California, she will be one of the hundreds who have done so over the past three years at an increasing pace. Contributing factors include high taxes, harsh regulatory policies, above-average labor costs, massively excessive litigation costs, ever-increasing energy and utility rates, and a dismal quality of life related to California’s unaffordable housing costs,” Vranich says, adding:

“I moved to Texas from Orange County in Southern California. That says something.”

“Then, where should my reader consider relocating her company?” I asked.

Vranich replied, “Today, the more important question to ask is, ‘What states should I keep far away from?’ and one of the main reasons is something that most people have never heard of until they have been sued by a PAGA attorney.”

PAGA – the “Sue Your Boss Law” – stands for the Private Attorney General Act which was passed by the California legislature in 2004 where private lawyers were deputized to sue employers for violations of state labor laws. Penalties are collected for the state and massive attorney fees for the cottage industry which this act created. And the employees? They get peanuts.

“Employers have been sued for the most petty, inconsequential violations of labor laws, primarily for one purpose alone,” maintains Southern California labor law attorney Jay Rosenlieb, “and that is to ‘legally’ extort millions of dollars in penalties and attorney fees.

“Very much like suits alleging a violation of the ADA (Americans with Disabilities Act) PAGA lawsuits are most often filed over petty things, such as a clerical error on a timesheet or an employer’s failure to print an address on a pay stub, despite the fact that the address was on the paychecks.

“So, no harm results to the employee, but the employer pays thousands of dollars in penalties and attorney fees. Many small businesses have been forced to close their doors while plaintiffs’ counsel became multi-millionaires.”

Vranich notes that several other states – hungry for free money – are considering adopting PAGA legislation. These include: Connecticut, Illinois, Maine, Massachusetts, New Jersey, New York, Oregon, Vermont and Washington. He says, “stay away from those states.”

“Texas remains a terrific place to do business, but before making a relocation decision, it is important to speak with a business relocation consultant,” he underscores, “as they are well informed as to the various perks offered as a way of attracting companies.”

Can the Family Business Hang On to Their Old Fashioned Ways?

“There are a few states where Sarah and her employees can retain what was and still is good about America. Texas, most of the Southeastern states and Florida are generally free of lawsuits over mere words that some people construe as being offensive,” Vranich says.

“Assuming that her employees also want to move, it is important to provide adequate financial assistance to help and get re-settled in a new city. You do not want these loyal people to suffer economically in any way. This is the time for generosity.

Wrapping up our interview on a touching note, “The decision to move is always difficult for small business owners, especially where employees who have been with you for many years are not like family; they have become your family.”

Dennis Beaver Practices law in Bakersfield and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

The full report can be downloaded from Why Company Headquarters Are Leaving California in Unprecedented Numbers

Additional commentary at California Businesses Headquarters Are Now Leaving Twice as Fast, With No End in Sight

Spectrum Location Solutions conducts data-driven evaluations to identify optimum locations for company relocations, expansions or consolidations. To explore whether a location-related project makes sense for your company, contact Joe Vranich at 800-508-5138. The no-obligation consultation will be completely confidential.