Employing People in California Really is Harder

California is a uniquely difficult place for companies trying to actually employ people rather than robots.   Owning a business in that state, you could be forgiven that the legislation actually embarked on a program to explicitly punish companies for hiring people.  The state has spent the last ten or twenty years defining a myriad of micro offenses employees for which  may sue employers and make large recoveries -- everything from having to work through lunch to having the wrong chair and not getting to sit in that chair at the right times of day.

To illustrate this, I want to show you the insurance application I just received.  Most companies have something called employment practices liability insurance.  This insurance helps pay legal and some settlement expenses if and (nowadays) when a company is sued by an employee for things like discrimination or harassment or any of the variety of sue-your-boss offenses California has established.  In that multi-page application, after the opening section about name and address, the very first risk-related question asks this:

They specifically ask about your California employment, and no other state, in order to evaluate your risk.

The other insurance-related result of California's regulatory enviroment is that if one is in California, it is almost impossible to get an employee practices insurance deductible under $25,000.  This turns out to be just about exactly the amount of legal costs it takes to get a nuisance suit filed with no real grounding dismissed.  It essentially means that any disgruntled ex-employee, particularly one in a protected class, can point their finger at a company without any evidence whatsoever and cost that company about $25,000 in legal expenses.  Rising minimum wages is not the only reason MacDonald's is investing so much in robotics.


  1. JohnThackr:

    " you could be forgiven that the legislation"

    Should be "you could be *forgiven for thinking that the Legislature*" I think?

  2. DirtyJobsGuy:

    The California list of issues is seemingly endless. For example no worker can work more than 7 days sequentially without a day off. This is not an overtime or bonus issue, so even if the employee wants to work they can't. I had a subcontractor on a job who was concerned he might not be able to support a two day job that had to be done all at once because his lead technician would have worked more than 7 days so would have to stop after day one. Cal OSHA requirements all have potential lawsuit landmines built in with no real increase in worker safety. When the state political class is completely owned by the unions and trial lawyers no one cares about the general public welfare

  3. Heresiarch:

    Coincidentally, Visual Capitalist just had a post titled "Why Do Businesses Fail" in which one part of the graphic showed that four out of the five worst places for failing businesses are in California. (The fifth was Allentown, Pa., strangely enough.)

  4. The_Big_W:

    Someday the post will be written when you explain that you have exited all California business. The only question is how long until you make that post...

  5. cc:

    When I have done contract consulting, it happened that I went to the employer's site and stayed for 10 days, working straight through. They would not have been happy if I had to take a day off in the middle.
    Employees have different needs and wishes. Someone desperate for money or wishing to work 12 days and get 5 off to go hunting (people might actually ASK for such a schedule) are only hurt by such rules. There are more and more rules against flexible schedules, but many people want the flexibility. Again, nanny knows best.
    There is lots of rhetoric about being anti-capitalism, and it appears that it is not just rhetoric. Venezuela drove all the capitalists out and it is not turning out so well for them.

  6. marque2:

    I can tell you how I am hurt in CA. When I work hourly in most states I don't get OT unless in work more than 40 hours in a week. So if I take off 3 hours on Tuesday for a doctors.appointment I can make it up working 9 hours on W-Th-F. In CA to protect me from evil bosses, I get mandatory OT if working more than 8 hours on a particular day - so if I go on a doctors appointment, my boss will generally refuse to let me work 9 hours the next three days because it would be OT, so I have to come back to work and try to make up the hours that day. I have been caught on this several times, so.CA "protections" have actually cost me money.

  7. bloke in france:

    When North Sea Oil was discovered the oil co's did a deal with the UK government. No employment rules / protection whatsoever.
    We got sacked so often we had a saying "You'll never work in this industry again... until we need you".
    Flipside was we made megabucks. Happy days.

  8. WhitewaterMkII:

    I did construction for 35 years, started in the union and eventually got into management. Big jobs, most over two years. Whenever there was a job site accident it was inevitable that CalOSHA would show and start handing out citations like crazy, didn't matter if you were a worker, sub contractor, whatever. No matter what someone and in many cases a lot of people got cited,for picky ass shit, in a lot of cases the guys getting cited wouldn't even know there was a job site accident because they would be ten or twenty stories higher up. It got to the point that I informed all our workers that if there was ever a job site accident, no matter how minor, that they were to immediately roll up and clear the site. It was the only way to avoid the nit picking inspectors that showed up like flies to shit.

  9. Rusty1:

    I am a member of a union. It works exactly as you say. They "protect" me out of many thousands of dollars a year and many days off. They are not interested in individual union members. They just want as many members as possible, and all paying dues.

  10. Texas_Accountant:

    Thank you for the link.

  11. Alan n:

    There's a reason we moved our Los Angeles plant to Tijuana.

  12. gtwreck:

    Robots will not save mcdonalds. I expect California will enact a tax for every hour worked by a robot. Someone has to pay for the unemployed to get welfare. The only cure available is a change of administration. California is well on its way to becoming a third world economy with a huge poor class, minuscule middle class and small upper class. Look at the bright side. The poor class will provide the upper class and the politicians with nannies to mind their children, maids to take care of their houses, chauffeurs to drive their cars and gardeners to take care of the grounds. Almost like the south in the glory days of slavery but without the guilt. Hallelujah and the Lord be praised.

  13. James:

    I don't call this mad house where I was born and have lived in all my life "California" any more, now I call it "Gruberfornia," in dishonor of Jonathan Gruber, Professor at MIT who took advantage of the stupidity of the voters to cram Obamacare down all of our throats.

  14. curmudgeoninchief:

    Where at least there is equal justice under law.

  15. Mark Vargus:

    How can you tax a robot? It won't ever clock in, and most of the "robots" aren't anything more than normal appliances set up so they can automatically do the things a human was doing to get the food on and off the grill or into the hot oil.
    Yes the state will be horrified when the first kiosks start going in as the tax revenue they expect will vanish, but there is little they can do about it.

  16. wolfram_and_hart:

    It's California, Mark. If the legislators want to tax a robot, they'll pass a law to do it.

  17. tex:

    Long ago I was in a mason’s union apprentice program but after a while quit to go to college. To earn my way I worked part time as a non-union mason & was good enough they paid me more than my apprentice rate. One summer, working full time for college $’s, I met a union mason working with me for a non-union contractor at less than union scale & I asked him why he did that. He replied that during the rainy season our non-union boss would let us work on the week-end to make our 40 while the union required 1.5x on Sat which the contractors would not pay. He said his take home was higher working non-union at a lower rate during the summer.

  18. Timothy Rutt:

    They support the schools in Nevada by requiring every slot machine to have a license. Should be no problem requiring that for California robots.

  19. Mark Vargus:

    Ah, but how will they define "robot". If all they use is a specialized I-pad that's got some kind of square creditcard reader how is that a robot, or will they end up taxing every I-pad in the state. (and do you really think that would go over all that well?).
    I've even heard that there is a machine already set up in one restaurant that can make burgers to order and cook them exactly as the customer wants. For now that place has humans taking the order. But if this machine is significantly different from another other automated burger cooker, how can they be combined under a catchall "robot" without just convincing companies to shut down.
    I just don't see any attempt to tax robots working out for the state. I'm sure that people will look into it, but the definition is both too broad and too vague to allow it to be as simple as taxing "slot machines".

  20. m a:

    California is going to go the way of Venezuela, and the legislature in the final acts will be finding justification to confiscate any property/assets they can. The flimsiest excuses will be invoked.
    Anyone having more than about a month or two of expenses in an account should probably consider setting up a corporation in another state and holding their assets there.

  21. megaboz:

    There was a recent case that provided better guidance on questions regarding the 7 sequential day work rule. Specifically, employees can work 7 days in a row if they choose to, but the employer can't force them to.

    A good explanation is here: http://hrwatchdog.calchamber.com/2017/05/one-day-rest-seven-answered/

  22. WesternRover:

    I predict that employees choosing voluntarily to work on their mandated day of rest will eventually go the way of California employees choosing to work through lunch, which is supposed to be an option. To quote Coyote from 9/4/1012:

    "it does not matter what preferences the employee expressed on the job site. In the future, the employee can go to the labor department and claim he or she did not get their break, and even if they did not want it at the time, and never complained to the employer about not getting it, the employer always, always, always loses [...] So, we took a series of approaches to getting people on-paper, on-the-record as having asked to work through lunch. Unfortunately, [...] the only safe harbor left for employers is to FORCE employees to take an unpaid lunch. [...] Yet another example of laws that are supposed to be "empowering" to employees actually ending up limiting their choices."

  23. An_A_C:

    Mark, I think you made a terrible mistake suggesting that. California businesses will no doubt see a license required for every iPad (or other tablet) using a square card reader in a business by next year, thanks to you. The legislature is desperate to find more revenue to squander.

  24. Larry J:

    My wife is a retired nurse. Her job for the last five years of her career was doing case management via phone for a major insurance company. She handled the medical care of her clients and had nothing to do with the financial side of the business. Her caseload spanned several states and involved worker's compensation insurance. She constantly complained about her California clients. Almost every one got a lawyer, which greatly slowed down the process because all of her communications with the client had to go through the lawyer. It didn't matter if it was scheduling a medical exam or physical therapy, she had to go through the lawyer first. Of course, the lawyer was after billable hours but the end result is that even simple cases would drag out for months or even years. Of course, that's what most of the clients wanted. They saw the insurance as "free money" and wanted to keep getting it for as long as possible. And to think, some people complain about the cost of worker's compensation insurance in California. Things like this are a big reason why it's so expensive there.

    Her favorite state was Minnesota. Her clients there always were asking how soon they could get back to work. They tended to cooperate with their treatment and were back on the job much sooner than most other states. They must have a very strong work ethic there.

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