Los Angeles Business Journal

California Policies Leave Companies Open to Poachers

By Arthur F. Rothberg Monday, March 18, 2013

Here in Los Angeles, of course, we have the dreaded L.A. gross receipts tax, which the Los Angeles Area Chamber of Commerce called the “No. 1 tax complaint of L.A. businesses.” The city now has the highest gross receipts tax rate in Los Angeles County and one of the highest in the nation. No wonder voters turned down a proposal to raise the city of L.A. sales tax to 9.5 percent earlier this month; that would have created the highest city sales tax among the 10 largest U.S. cities.

Overtime pay

Also consider California’s arcane rules regarding overtime pay: Federal overtime laws simply require employers to pay overtime wages to employees who work more than 40 hours in a week. But here, overtime pay is required if an employee works more than eight hours in a day.

So if an employee has to leave work two hours early to take her child to the doctor and wants to make this up by working 10 hours the next day, doing so would require her company to pay her two hours of overtime pay. Many companies will simply refuse to authorize the overtime, in which case the employee would lose the two hours of valuable pay simply for taking her child to the doctor.

It’s also very difficult for employers to prevail when disputing former employees’ unemployment claims. California’s unemployment system comes down heavily on the side of employees versus their former employers.

Time will tell, of course, the impact of all of this (if any) on business relocations out of California, whether to Texas or any other state. But according to “The Great California Exodus: A Closer Look,” a report recently published by the Manhattan Institute, more people have left California than moved here since 2005. The report attributes this net out-migration to “high taxes, burdensome regulations, lack of public-sector reforms and a lackluster job climate.”

In my opinion, it’s time to stop all the political posturing and warring of words with governors and business leaders in other states and start focusing on what needs to happen in order to make California an attractive state for entrepreneurs and business owners.

The fact is that Perry is essentially right: California is not an employer-friendly state right now. The question we face is simple: What are we going to do to make it one?

Arthur F. Rothberg is the managing director of CFO Edge of Los Angeles, a provider of outsourced CFO services.

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