Business Regulation

Congress has passed a host of laws over the years affecting commerce--from workers' collective bargaining rights to income taxes to air pollution. In addition, many states have enacted legislation either supplementing federal statutes or regulating business activities in areas not preempted by federal law. Although this legal framework has been crafted to achieve certain societal goals, some critics have suggested that this set of federal and state regulations makes compliance difficult and complex for employers. This report lists federal and state laws that apply to California businesses of different sizes. GAO discusses (1) the requirements of federal and state laws affecting the workplace, tax-related, and environmental practices of California manufacturing firms of different sizes; (2) the assistance available to firms to help identify applicable laws and understand their implications on operations; and (3) the impact that workplace and tax laws have had on human resources at firms in two industries: high-tech electronics and aerospace.

GAO noted that: (1) both federal and state laws impose a number of requirements affecting the workplace, tax-related, and environmental practices of California manufacturing firms; (2) as employers, firms must comply with federal and state laws; (3) firms also must report income resulting from their operations and pay taxes to the federal and California state governments; (4) in addition, as firms manufacture goods and dispose of their waste, they must comply with state and federal environmental laws regulating use, storage, and disposal of hazardous substances and releases into the air; (5) although a number of laws take effect as firms hire more employees, particularly those laws that are workplace-related, most laws have at least some requirements for all firms, regardless of the number of employees; (6) the interrelationships between federal and state laws in the different areas of regulation vary; (7) in many cases, California law sets more comprehensive standards with which businesses must comply than federal law does; (8) many sources of information are available to help firms identify and meet the legal requirements imposed on them; (9) although no one public agency--either federal or state--coordinates or produces a complete resource guide identifying all legal requirements that apply to California manufacturers, many California and federal agencies have individually sponsored activities to assist firms in complying with legal requirements; (10) however, company managers GAO spoke with seemed unwilling to rely on information provided by state or federal agency staff or to invest the time required to access, research, and understand the available information; (11) instead, these managers rely on trade or business organizations and outside experts to help them understand and remain abreast of new developments in federal and state laws and regulations; (12) managers overseeing human resource operations at the seven California manufacturing firms GAO visited have implemented a variety of approaches to meet their regulatory obligations; (13) while each of the firms had developed strategies to comply with the laws, each was concerned that certain requirements involved excessive complexity, paperwork, or cost, although there was little pattern in the firms' areas of complaint; (14) in general, managers expressed frustration with never being sure they were in complete compliance with all applicable requirements; and (15) notwithstanding these concerns, managers also cited areas in which they believed regulations helped to improve the workplace.