248-409-1900 dburke@mi-worklaw.com

ImageBy:  Bill Pilchak – 5/27/14

     In approximately 2000, a labor/employment lawyer turned VP of HR told us that his then-employer, a Metro-Detroit based major manufacturer and automotive supplier was “getting out of California” because of the regulatory and litigation climate.  Anyone doing business there knows that California employees have rights found nowhere else in the country.  Class action wage hour suits are rampant and at times nearly indefensible.  (For example, if employers cannot prove that employees working remotely – such as in delivery trucks- actually took the breaks to which they are entitled, they can be sued.)  So, when the newswires reported on April 29 that Toyota was moving its US headquarters from California, where it has been located since 1957, to Plano, Texas, I checked the website of our colleague’s former employer.  As expected, of 23 facilities, not a single one is presently located in California.

     I hadn’t realized that other major companies were following suit until the Toyota announcement on May 2.  Reuters’ news story reports a number of companies that have exited California, including all three major Japanese car makers: Nissan in 2006 (to Tennessee); Honda in 2013 (to Ohio); and now Toyota in 2014.  Reuters also reports that in February, 2014, Occidental Petroleum Corp. said it would move from Los Angeles to Houston. In 2009, power company Calpine Corp. left San Jose for Houston and in 2006 engineering company Fluor Corp. relocated to the Dallas area from Orange County.

     When reading the news accounts, one must be aware that Toyota and others cannot be as candid as they might wish as to their reasons.  When Boeing announced that it was opening a plant in employer-friendly South Carolina, the federal government (via the NLRB) commenced legal proceedings that were eventually dropped.  It is not impossible that a California agency would contend that Toyota’s departure is in “retaliation” against the deluge of discrimination and other statutory claims it faced there – and won’t face in Texas.  Theoretically, employees losing their jobs because they won’t or can’t move to Texas could sue because the move is in retaliation for all the claims Toyota faced.

     Accordingly, Toyota’s message is somewhat coded.  Still, Toyota admitted that it never considered remaining in California.  In one respect the company said, “California didn’t work out for a number of reasons, especially the distance from our U.S. manufacturing operations.”  To an extent, that begs the question: Why would Toyota build its plants in Mississippi, Kentucky, Texas, Indiana, Alabama and West Virginia, instead of near its HQ in California which is also eminently closer-by-air to Japan?  Wouldn’t there be a steady stream of traffic as manufacturing, quality and safety executives based in Japan visit US plants?

     In some respects, Toyota’s message was more candid:  Deflecting the suggestion that Toyota moved in response to an overture from outgoing Texas governor, Rick Perry, Toyota cited a “friendly business climate” as a primary reason. Toyota’s chief executive for North America, Jim Lentz, told Reuters “Our decision was not based on the dollar amount we received,” but rather on a friendly overall business climate and certain advantages for Toyota employees, from affordable housing and shorter commutes to the absence in Texas of a personal income tax.”

     Read what you want into the term “friendly business climate,” but personally, I suspect that means the same regulatory and litigation climate that caused our colleague’s company to leave California chased Toyota from the state.

     Torrance mayor Frank Scotto made comments at a press conference that will resound with Michiganders. He said his son-in-law works for Toyota, so he faces the prospect of having to travel to Texas to see his daughter and grandchildren.

    Welcome to our world, Frank.  Not only have my son and daughter left Michigan, but nieces and nephews have as well, at least in part because of Michigan’s not-as-bright prospects and the lure of jobs elsewhere.  When companies set up shop in the US, whether landing here from overseas or fleeing California, Michigan faces an uphill battle attracting them because of its gold-plated civil rights and whistleblowing laws and workers’ rights mentality.  States with workers more focused on getting the job done, like Texas, fare better.

     It will be difficult to “dismantle” the statutory framework we have created in Michigan, although passage of the Right To Work statute illustrates that dramatic change is not impossible.  However, expect howls of protest at any reform of civil rights statutes.  Still, we have learned enough over the last several decades to propose meaningful reforms that will stop abuses while preserving important civil rights.  For example, the whistleblower statute is so often being used to extort employers, that meaningful reform is warranted and likely possible.  But, that’s a matter for a future blog.