Recently, Steven Greenhut of Cal Watch Dog wrote in the Orange County Register on why Carl's Jr.'s parent company, CKE, is likely going to move its headquarters from Carpinteria, CA to Texas. It was a fascinating insight into what companies are seeing in the business climate of California and why they do not feel this state is business friendly. The article came from a speech CKE CEO Andrew Puzder gave to the California Chamber of Commerce recently.
In the speech, Puzder stated that it costs CKE Restaurants $250,000 more to build a restaurant in California than one in Texas, and that once a restaurant is built in California, the labor laws are incredibly restrictive. For example, California's rigid work rules classify managers as regular employees. They are mandated to work a maximum of eight hours a day and take breaks at specific times of their shift. So when a busload of tourists comes into a CKE restaurant, if the manager is on a break, he or she must sit there and do nothing, rather than do their job.
Puzder even cited the California law that encourages "private attorney general" lawsuits against private businesses over overtime and other regulatory rules, which encourage attorneys to file questionable legal actions against restaurants. One of our CALA Co-Chairs, David Houston, has been hit with one of the these wage and hour lawsuits.
In his lawsuit, a couple of former employees filed suit against his restaurant business claiming they were denied breaks and ultimately he settled for $900,000. The former employees got $7,500, and the rest of the employees got somewhere between 35 cents and $100. However, the attorneys got $325,000 plus expenses.
So for our Co-Chair, that is $900,000 that is not going into the economy to grow his restaurant business. Instead, it is being used to pay off an abusive lawsuit. So for two years going forward this business will not expand or hire new workers. You can see why this is just another reason why businesses are just fed up with the anti-business climate in this state.
CKE CEO Andrew Puzder was quoted in the article as saying, "We can bring back prosperity to back to this state. We don't need to be stimulated. We don't need to be subsidized. We just need to be left alone." But from the looks of it California is not paying attention. Over the last two weeks, the Assembly Judiciary Committee has voted down two common-sense legal reforms related to punitive damages.
I once met Carl Karcher and can only think that he would be rolling in his grave if he knew that the business he created was leaving the golden state, because it is just too hard to do business in.