Imagine the following scenario: You are a commercial developer. It is noon on a Sunday, and you are reviewing your bid for a major project before submitting it at 9:00 am the next day. You notice a potential error in the analysis underlying your proposal that could make your bid uncompetitive. You contact the employee who performed the analysis to ask them about their analysis. You send emails and texts, but to no avail. You call and leave voicemails on their cell phone. You receive no response. You submit your bid the next day, but you are outbid for the project by a competitor. New California legislation will legally allow your workers to ignore your calls during nonwork hours and prevent you from taking any action against them.
California Assembly Bill 2751, also known as the “Right to Disconnect” bill, if passed and signed into law, will make contacting your employees during nonworking hours a violation of state law. The bill requires employers to “establish a workplace policy that provides employees the right to disconnect from communications from the employer during nonworking hours.” The bill states that employees are entitled to ignore communications during nonworking hours without employer retaliation.
Employers would be allowed to communicate with employees during nonworking hours only for an emergency or for scheduling purposes. An emergency is an “unforeseen situation that threatens an employee, customer, or the public; disrupts or shuts down operations; or causes physical or environmental damage. “Scheduling” means communicating with a worker to notify them of a change in their schedule within the next 24 hours. Anything else is verboten.
Matt Haney, the bill’s sponsor, stated, “Smartphones have blurred the boundaries between work and home life.” But what Haney doesn’t recognize is that information technology has made workers more productive and more highly compensated than ever. It has also increased workplace flexibility, including remote work; currently, 35 percent of Californians work at home part or full time.
Remote work and increased schedule flexibility is what workers want, and these have necessarily blurred the boundaries between work and home life that Haney is worried about. This is the new normal in human resources management. But this bill threatens California’s competitive edge, which it cannot afford to lose: since February 2020, the state has lost 410,000 jobs, while the rest of the country has gained over 7.2 million jobs.
Over this period, California businesses have increasingly relocated to states with lower costs of living, lower taxes, and fewer business regulations. California businesses relocating their headquarters since 2020 include large employers such as Tesla, Hewlett Packard Enterprise, Oracle, and Charles Schwab. California has also lost small, rapidly growing companies, including Maxar Technologies, which provides proprietary satellite and radar technologies; Envirotech Vehicles, which is developing zero-emissions trucks, buses, and heavy equipment; and Aqua Metals, which is creating unique recycling technologies for rare minerals, including lithium, a key component in electric vehicle and smartphone batteries. These businesses have migrated to Colorado, Arkansas, and Nevada, respectively.
Not so long ago, it would have been inconceivable that Silicon Valley would lose unicorn businesses like these to states like Arkansas. This is the business relocation equivalent of Duke University’s losing a five-star basketball recruit to a community college. And California has no one to blame but itself for these losses.
Supporters of the bill do not recognize the enormous regulatory compliance costs that businesses already face. The National Association of Manufacturers reported that in 2022, manufacturing firms faced regulatory compliance costs of about $29,000 per worker across all firms, and as much as $50,000 per worker among firms with fewer than 50 employees.
While this study does not report costs at the state level, compliance costs in California are almost certainly larger than the national average, and perhaps much larger. California is consistently ranked as among the least business friendly, the most costly, and the most highly regulated states in the country. It is ranked as having the fifth-worst business tax climate by the Tax Foundation, a nonpartisan research organization that specializes in studying tax and fiscal policies; and has been ranked by CEOs as being the worst state for business in each of the last five years. Conversely, Texas and Florida are judged by these same CEOs as being the two best states for business. It is no coincidence that these two states are also among the fastest growing states in the country.
In 2011, then California governor Jerry Brown remarked when vetoing a bill that “not every human problem deserves a law.” This is a perfect example. Businesses compete for workers. Some will compete by offering a work environment in which there are few, if any, work demands during off hours. Businesses that need employees during off hours will compete by offering packages that compensate them adequately for responding to queries during their personal time. Businesses that don’t make competitive offers or that treat workers poorly will lose employees and struggle to recruit new ones. There is no better cure for “bad bosses” than a competitive labor market that offers workers these choices.
If this new legislation is passed, it will reduce job opportunities for Californians as businesses buckle under the new requirements or opt to relocate. The state has lost 410,000 jobs in the last four years under Governor Gavin Newsom. California’s proposed “Right to Disconnect” law is the last thing the state needs. Instead, California’s political leadership should conduct an audit of existing state regulations and eliminate those that are damaging job creation, productivity, and business formation and expansion. This would be a valuable step in reversing California’s continuing economic decline.
