The ongoing debate about businesses moving out of California rages on, with business groups pointing to the number of headquarters moving out of California and many of our politicians pointing to California’s rank as the fifth-largest economy in the world with tech start-ups still growing.
Most family businesses have many key performance indicators (KPIs) they use to measure their success, and well-managed companies focus on the critical few KPIs that will present a major issue for the business if they turn down.
Unfortunately, besides their poll numbers and fundraising for future elections, many politicians don’t seem to focus on critical indicators. But one irrefutable negative indicator that they should be watching and start doing something about is the loss of a congressional seat. Our politicians proudly boast that legislation passed in California will be the lead for the rest of the country, but for the first time in 171 years, California’s political voice is getting a little softer as our population actually decreased in 2020.
Most family businesses try to ensure a stable, consistent workplace by treating employees like family, and as a result many choose to stay with that company for their entire careers. At my family business, Holt of California, we ask our employees to complete an exit interview if they leave the company. That allows us to look at overall trends and enables us to make adjustments if there appears to be an area where employee satisfaction lags.
Over the past few years, we have seen an increase in the number of employees leaving for other states. In the past two years alone, we have had 30 employees leave the state. All were hardworking, excellent employees and none are easily replaced. While with employees who are leaving our company but staying in California we can modify compensation, vacation and other benefits to get them to stay or come back, there is little we can do to convince employees who have decided to leave the state to stay. In fact, many employees who left the company but remained in California came back to work for us after discovering the grass is not always greener elsewhere. We have only had one come back from out of state.
Reasons to leave the state vary. Many follow their adult children who moved elsewhere to look for opportunity. But many others leave to improve their own qu
ality of life, citing California’s high cost of living, the homeless crisis and cultural issues. Statistics show that the majority of people moving out are blue-collar families with children who have had enough and see a better future elsewhere. In short, the reason California has always grown is why our population is declining: people see the way to a better life elsewhere.
California’s 1.4 million family businesses employ 7 million Californians. However, the impacts from COVID-19 have created a significant challenge for our members to find enough employees to get the job done. Just look at all the help-wanted banners you see as you drive down the street. It is difficult to find enough new employees to serve our customers and the last thing we need is employees leaving the state for good. Unless corrected, the shrinking workforce that we are seeing will damage California’s ability to continue to maintain that high economic worldwide status we so proudly proclaim as a final measure of our success.
Perhaps our politicians need to develop an exit interview for the productive residents leaving the state and use the information to adjust their policies to encourage people to stay and help family businesses recruit those that left back to the companies and jobs that they once loved.
Two businesses recently joined the Family Business Association of California, the only organization in the state that focuses exclusively on issues affecting California’s 1.4 million family businesses.
Ming’s Recycling Corporation recycles 230,000 tons of aluminum cans, plastic, fiber, and non-ferrous metals every year. Founded in 1989 by Ming Luong, the Sacramento-based company employs 110 people and operates a second location in Hayward. Luong’s son, Kenny, is the current president and his brother, Kevin, gave up his practice as an orthopedic surgeon in 2006 to join the company as marketing director and CFO.
Joining as an associate member is The Policy and Taxation Group, a company formed in 2013 to fight the federal death tax and educate the public about estate and fight taxes and generation-skipping issues that can seriously affect the ability of family businesses to remain family-owned into the next generation. The group is based in Anaheim Hills.
FBA Executive Director Robert Rivinius welcomed the new members and said they will further enhance the Association’s ability to educate state policymakers about the importance of family businesses.
“California’s family businesses employ an estimated 7 million people statewide and are important foundations of their communities, yet the state continues to add requirements that make it harder for these Main Street businesses to succeed,” Rivinius said. “There is strength in numbers, and we appreciate the support that these two companies will make to our mission.”
The Family Business Association of California has named Assemblywoman Cottie Petrie-Norris as its Outstanding Legislator for 2021 for her strong support of family businesses and efforts to improve California’s business climate.
Petrie-Norris, a Democrat, represents coastal Orange County. A businesswoman and community leader, she chairs the Accountability and Administrative Review Committee and the Select Committee on Small Business and Entrepreneurship. FBA Executive Director Robert Rivinius said Petrie-Norris has carved out a solid position as a business-oriented lawmaker who understands the needs of family businesses.
“Assemblywoman Petrie-Norris was a successful businesswoman before entering politics, and as a lawmaker she has demonstrated that she wants to help businesses grow and create jobs,” Rivinius said. “She is a founding member of the California Problem Solvers Caucus, which includes Democrats, Republicans and independents from both the Assembly and Senate who are determined to put partisanship aside and find solutions to our problems.”
Petrie-Norris addressed FBA’s Legislative Conference in May and urged family business owners to reach out to their lawmakers and educate them on how legislative proposals could have disastrous impacts on small- and medium-sized businesses. She later invited Rivinius to testify before the Select Committee on steps the state could take to support businesses.
She has also earned solid ratings from business groups such as the California Chamber of Commerce and the Howard Jarvis Taxpayers Association.
“It is an honor to be recognized by the Family Business Association as the Outstanding Legislator of the Year,” Petrie-Norris said. “Making up nearly 1.4 million businesses, family businesses are a critical driver of California’s economy. I look forward to continuing to work together to remove barriers to success and cultivate opportunities for innovation and growth for California businesses.”
Petrie-Norris grew up in San Diego County and is a graduate of Yale University. Prior to being elected to the Assembly, she had a successful career in finance and technology. She has helped build businesses and lead teams at Fortune 500 corporations, small companies and start-ups.
She lives in Laguna Beach with her husband, Colin, their two sons, Dylan and Hayden, and their rescue dog,
Ballot measure would help parents pass their family business along to their childre
The COVID-19 pandemic hit many family-owned businesses hard. Now as California emerges from the crisis, those businesses are still struggling to stay afloat.
There are 1.4 million family businesses in California. They provide jobs for seven million Californians. These businesses improvised, innovated and gave their blood, sweat and tears to keep their doors open during the height of the pandemic.
It’s now been four months since Gov. Gavin Newsom lifted pandemic executive orders and reopened the state. Yet despite what we all hoped would be a return to normal, California family businesses continue to face more uncertainty.
First, the labor shortage is causing many businesses to cut operating hours or delay expansions that could grow their business. Then the Delta variant hit — spreading throughout the state and causing renewed alarm. And supply chain shortages that are so frustrating for consumers are squeezing businesses who are already under strain and now are unable to restock shelves.
Through all this, family businesses have been learning the full effects of Prop 19, which narrowly passed in November 2020 and brought the Death Tax back to California.
Prop. 19 had some good elements, but it took away voter-approved constitutional protections that allowed families to keep a business or home they worked so hard to acquire.
Now when a parent passes away and leaves behind a family business or home, their children are hit with the Death Tax — reassessment to current market value, triggering a massive property tax increase in the midst of grieving a parent’s death.
The Death Tax is cruel and unfair. When the children can’t come up with the cash to pay the new annual property tax bill, they are forced into an unwanted sale. Lost are California family businesses that took decades of hard work to build along with the dream of passing on a legacy to children and grandchildren.
California can’t afford to lose more family businesses who are uniquely connected and invested in the success of their local community.
That’s why it is so important that we pass the Repeal the Death Tax Act, which will soon be gathering signatures for the November 2022 statewide ballot.
The Repeal the Death Tax Act will restore the constitutional taxpayer protections that California family businesses relied on for nearly 35 years.
The measure brings back the ability of Californians to transfer a family business, farm or other non-primary residential property, valued up to $2.4 million and indexed for inflation, to their children upon the property owner’s death without triggering reassessment and a huge property tax increase.
The measure will also allow parents and grandparents to again transfer their homes to their children and grandchildren upon death and maintain the property taxes at current level.
In essence, the Repeal the Death Tax Act will help to preserve the long-term wishes of parents to pass on their family business or home to their children.
Please think of the family businesses that you rely on. They may have been in operation for generations, not only serving customers but giving back to the entire community. We need these family-owned businesses in California. So when you see signature gatherers in front of stores, please sign the petition for the Repeal the Death Tax Act or visit HJTA.org/RepealTheDeathTax to learn how you can help.
This op-ed originally appeared in the Mercury News.
FBA Executive Director Robert Rivinius was invited by Assembly Member Cottie Petrie-Norris, D-Laguna Beach, to be on a panel at today’s Select Committee on Small Business and Entrepreneurship hearing. Following is a letter sent to committee members afterwards summing up FBA’s views.
Dear Assembly Member Petrie-Norris
Thank you for the opportunity to participate on the California Comeback: Pandemic Recovery for Small Business panel today. Many excellent points were raised and discussed by you and the panelists. I will summarize my recommendations here for the committee members not attending the hearing:
A most critical problem facing family businesses is workforce development. Due to federal and state programs, many workers can make more money not working than they make working. Our members report that when employees are called to ask them to come back to work, the reply often is that they are making more money not working and might consider coming back when the benefits end. It is important not to implement new programs or extend existing programs that create this outcome.
The regulatory system in California is crushing many small businesses. The large California Labor Law Digest published by the Cal Chamber contains over 1,000 pages of fine print. How can anyone be expected to comply with that? And this is just one form of the massive and costly regulatory system in California.
Something must be done to curb Private Attorneys General Act (PAGA) lawsuits. This allows employees to sue on behalf of the state. PAGA was originally enacted to help the state regulate its underground economy – those businesses that operate unlawfully outside of tax and licensing requirements. But PAGA also allows employees to sue for almost every Labor Code violation, not just serious violations or those dealing with health and safety — even something as innocuous as listing the corporate name on a pay stub instead of a company name. The average settlement in these cases is a staggering $1.2 million and attorney’s fees average more than $405,000 per case.
CTE funding is critical to create and fund vocational training programs at the K-12 and community college levels to teach skills that will help graduates get better jobs.
Due to the COVID crisis, the state now has a UI fund debt to the federal government of about $22 billion. Nothing has been put in the state budget to begin paying off this debt. This could result in a dramatic increase in unemployment insurance fees to California’s employers.
Thanks again for the opportunity to comment. We always stand ready to provide input from California’s family businesses.
Shortly after Dee Dee Myers became director of the Governor’s Office of Business and Economic Development (GO-BIZ) late last year, she said she understood the challenges the state’s high costs and strict regulations impose on businesses.
“Continuing to dig into those problems and try to figure out new solutions, creative solutions, is really important,” she told CalMatters in February.
Unfortunately, when it comes to one of the biggest challenges family businesses face in California – the Private Attorneys General Act, or PAGA – it doesn’t appear that state officials want to find those solutions.
Business groups, including the Family Business Association of California, have tried to educate officials about PAGA’s impact. One of our members, who is in the middle of a PAGA shakedown, recently wrote to Ms. Myers to ask for help. There was no response. In fact, the only group that has gotten relief is construction unions, which secured legislation exempting them from PAGA lawsuits.
PAGA allows employees to sue on behalf of the state for almost every Labor Code violation and imposes a $100 fine for the first violation and $200 for each subsequent violation of the same provision – even something as innocuous as listing the corporate name on the pay stub instead of the company the employee works for. PAGA attorneys look for companies with numerous employees because these fines can be assessed for each employee past and present for each pay period and can be combined with class action suits for settlement purposes, so potential penalties quickly add up.
The family business that reached out to GO-BIZ received a letter eight months ago from a law firm on behalf of a former employee, claiming that the company had violated numerous Labor Code requirements, including those covering overtime and lunch periods and rest breaks. This firm has filed over 800 similar claims.
“That’s all untrue and they have no proof,” the owner said. “They throw those accusations at you and expect you to defend yourself and just bury you in paperwork. We’ve already spent well north of $100,000 in attorney fees and that doesn’t include all the staff time to audit all the payroll records and time sheets,” the owner said.
“My attorney said it could take as much as $1 million to fight this. Who has that much to throw at it? I don’t. The bottom line is you either pay that money to the plaintiffs’ lawyers or you pay it to your own attorney. Like we told Dee Dee Myers, there is a huge difference between billion-dollar companies that can build this into their budgets and have a team of attorneys on staff and a company such as ours that simply cannot afford this cost.
“It feels like extortion, but if I cannot afford to pay, then I lose the business.”
Too many elected officials say PAGA is just a cost of doing business in California. But it doesn’t have to be. Let’s repeal it and return all Labor Code enforcement to the state Labor and Workforce Development Agency. That agency has continued to adjudicate many claims since PAGA was enacted, and the CABIA study found that in these cases, violations resulted in workers receiving almost twice as much money and in less time, while employers paid less than half of what they pay in PAGA cases.
Keeping PAGA in place will lead to more situations like this.
“Ironically, in spite of the (state’s) efforts on COVID-19 relief and the attempt to help businesses stay open in California, it is becoming increasingly likely that we will be forced to shutter operations,” the owner wrote. “PAGA is a disastrous law that is meant to help workers but instead buries small employers who really just want to help their communities, their families, their workers and all of the people they serve.”
This commentary originally appeared in the Orange County Register and other publications in the Southern California News Group.