Mounting corporate departures fuel debate over California business climate

Corporate relocations and public rebukes of California’s business environment have intensified in recent months, with executives and business groups blaming the state’s taxes, labor rules and litigation climate for an exodus to lower-cost states.

Bed Bath & Beyond’s executive chairman, Marcus Lemonis, announced this month that the retailer would not reopen stores in California as part of its post-bankruptcy comeback, saying the company needed "to be in markets where we can actually make a profit." Playboy said it was moving its operations to Miami Beach, and the nation’s second-largest alcohol distributor, Republic National Distributing Co., told customers it would cease doing business in California starting in September, citing rising operational costs and industry headwinds.

Those departures follow a string of higher-profile moves in recent years by companies including Chevron, Charles Schwab, Tesla and SpaceX, Oracle and Hewlett Packard. Critics have increasingly targeted Democratic Gov. Gavin Newsom, saying state policy choices have made California "extremely expensive" and "anti-business." Tom Manzo, founder of the California Business and Industrial Alliance, warned that the state could suffer long-term economic decline, likening the trend to the outmigration that afflicted Detroit after the auto industry contracted.

Business leaders and small-business owners point to a combination of high taxes, local fees, rising minimum wages and complex labor rules as drivers of relocation and reduced investment. Manzo said California’s labor law code is so complex that even well-resourced employers can be exposed to costly lawsuits. He and other critics singled out the Private Attorneys General Act, or PAGA, passed in 2004, which allows employees to file suits seeking civil penalties on behalf of the state for labor-code violations such as missed meal breaks or unpaid wages.

According to the California Department of Industrial Relations, plaintiffs filed more than 9,464 PAGA notices in 2024, a preliminary step before a civil case can be filed. Business advocates said that volume reflects a legal environment that can deter investment and add to operating costs for firms of all sizes.

At the same time, research cited by state officials suggests the phenomenon is narrower than media attention implies. A report from the Public Policy Institute of California this year found that roughly 3 percent of firms in California have moved to a different state. The governor’s office, through deputy communications director Tara Gallegos, disputed the broader account that the state is in decline, saying California’s large and dynamic economy continues to grow and that the state is the fourth-largest economy in the world.

"California knows that when our workers do well, our businesses do well, too — and are proving it year after year," Gallegos said, adding that top-line economic numbers show continued performance and growth.

The political exchange between business leaders and the governor has grown public and personal. After Lemonis said he would "love to see Gavin Newsom out of office" and criticized state policy, Newsom’s account on social media responded by noting Bed Bath & Beyond’s bankruptcy two years earlier.

Republic National’s president and CEO, Bob Hendrickson, said the distributor's decision to exit the California market was driven by "rising operational costs, industry headwinds and supplier changes that made the market unsustainable." Smaller operators and franchise owners who cannot relocate face different choices, advocates said, including passing costs to customers, automation, or shuttering outlets.

Analysts and policy experts say the debate highlights a tension between statewide economic aggregates and localized business experiences. California continues to generate large amounts of economic output, driven by technology, entertainment and agriculture, but some employers and sectors report rising costs and regulatory complexity that affect margins and expansion plans.

The dispute is likely to shape discussions about labor law reform, tax policy and economic development in Sacramento. Business groups are pressing for changes they say would reduce litigation risk and simplify compliance, while the governor’s office and labor advocates argue that worker protections and public investments underpin long-term economic strength.

For now, the movement of a handful of recognizable brands and loud public criticism have made the political and economic friction visible, even as state officials point to broader measures of growth. Policymakers, employers and economists will be watching whether relocations remain a set of high-profile anecdotes or become a sustained trend with measurable effects on jobs, investment and state revenues.