EMPLOYMENT LAW: WHAT SHOULD I CONSIDER BEFORE EXPANDING MY MICHIGAN COMPANY INTO CALIFORNIA?

California has one of the most robust economies in the world. To capture market share for products, California is almost inevitable. Many talented employees live in California, including tech talent in Silicon Valley. If your Michigan company is growing and has a national market or presence or a strong need for talent, you'll likely soon find yourself in California. That can be a good thing. Even if you're in Traverse City, Michigan, you can still enjoy the benefits of doing business in San Francisco without worrying about the commute. 

But before your Michigan business takes the plunge, you should slow down and consider what's best for your Michigan-based business. 

Why? Because from an employment law perspective, there are three states you should be extra cautious with.

 Those states are California, California, and California. 

There’s a reason Elon Musk and others have threatened to move operations from California to Texas. There’s also a good reason why, if you look closely at your company’s insurance coverage, you’ll probably notice exceptions for specific claims in California.

 Insurance companies work with the best analytics and know that one of the most effective ways to mitigate their risks is to create policy coverage exceptions for specific California-based claims. Your insurance company’s fine print can become your company’s loss. 

Here are my two pieces of advice if you’re considering expanding operations into California.

 First, slow down. For better or worse, the patterns you start with your first employee in a new state will usually become institutionalized. It’s better to catch a problem early when you have one employee in the state rather than in five years when you have 200 employees. A simple, correctable mistake now is a class action later. 

Second, consider hiring a California-based human resource specialist or an attorney with experience in California law. It would be best if you also considered getting a California-specific employee handbook. 

California is a great state. But things can quickly get complicated. California’s employment laws are often stricter and more nuanced, its attorneys more expensive, its verdicts higher, and its government investigators more zealous. There are other states where I would advise much of the same. But don’t throw caution to the wind when it comes to California. At Parker Harvey, we have experience working with companies that have expanded their operations and hiring into California.