With respect to tax law, beyond the Internal Revenue Service (IRS) at the federal level, a number of state agencies are involved. Many Federal and State Laws Cover California Manufacturing Firms

To conduct business in California, a manufacturing firm must comply with numerous federal and state laws and regulations dealing with labor, tax, and environmental concerns. Table 1 broadly summarizes significant labor, tax, and environmental requirements that apply to California manufacturing firms and sets forth specific federal and state legal requirements that affect firms with different numbers of employees. For example, state law prohibits sexual harassment in firms of any size, and racial or sexual discrimination at all firms with at least five employees. Interrelationships of Federal and California State Requirements Add Complexity and Stringency to Labor, Tax, and Environmental Regulation

Both federal and state governments play active roles in the regulation of the workplace, taxes, and the environment. In addition, some areas of state regulation have no federal counterpart. In California, the net effect of these combined federal and state labor law requirements is that California manufacturing firms must, in many cases, meet higher labor standards than those required by the federal government. Many Sources of Information Are Available to Help Firms Identify Applicable Laws

California and federal agencies have taken proactive steps to inform manufacturers about employers’ duties under existing laws and regulations as well as about proposed changes in those requirements. However, California manufacturing employers cannot rely on a single governmental source or focal point to provide them with a comprehensive understanding of the many federal and state workplace, tax, and environmental laws that apply to them and must seek out information from the public agency responsible for enforcing the law. Advocacy and Trade Associations Also Help Manufacturers With Laws and Changes

California’s Chamber of Commerce has a number of resources available to manufacturers, most of which must be purchased, that can help businesses learn about and comply with many California and federal laws applicable to them. Electronics and Aerospace Firms Have Developed Strategies to Comply With Laws Related to Human Resource Operations but Have Concerns About Some Requirements

The firms we visited have devised different strategies to ensure compliance with those legal requirements related to their human resource operations—in general, the workplace and tax requirements listed in appendixes II and III. Responsibility for understanding and complying with legal requirements related to human resource operations at these firms was focused largely in the human resource departments but overlapped into other parts of the firms’ organization. Employers Had Varied Concerns About Regulatory Requirements

During our in-depth discussions with managers from the firms visited, each expressed some frustration about certain governmental requirements imposed on them, although there was little pattern in their complaints. Companies Identified Some Areas in Which Regulation Was Beneficial

Although the firms’ managers had many specific concerns about regulations affecting human resources, they also cited some areas in which they believed regulations had helped to improve the workplace. Employers must comply with applicable restrictions in the wage-hour laws on the use of child labor. Comparable state law: None. Table IV.3: Hazardous Substance Control —Manufacturers or importers of more than 10,000 lbs. Each day, GAO issues a list of newly available reports and testimony.
Why GAO Did This Study

Pursuant to a congressional request, GAO compiled a list of the federal and state laws that apply to California businesses of different sizes, and selected two industries within that state to illustrate compliance with selected laws, focusing on the: (1) requirements of federal and state laws affecting the workplace, tax-related, and environmental practices of California manufacturing firms of different sizes; (2) assistance available to firms to help identify applicable laws and understand their implications on operations; and (3) impact workplace and tax laws have had on the human resource operations at firms in the high-tech electronics and aerospace industries.

What GAO Found

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.