When Bed Bath & Beyond’s executive chairman announced the franchise wouldn’t open stores in California because the state had become “one of the most overregulated, expensive, and risky environments for businesses in America,” the story went viral. But small businesses have been saying the same thing for years, sometimes taking the state to court to try to restore their economic freedom. Stories of car wash owners threatened with nearly $1 million in fines despite never being shown the evidence against them, or bookstores being buried under record-keeping rules so onerous they nearly shut down, show that California’s regulatory system has been broken for a long time.
One of the most jarring examples is the state’s recent crusade against a Southern California car wash. Last December, the California Labor Commission blindsided the owners with $810,000 in fines for alleged wage-and-hour violations. Before the owners could contest the charges or review any evidence, the Commission went straight to their bond company and demanded $300,000 in immediate payment.
That single act triggered a cascade of destruction. The bond company paid but canceled coverage — and no other surety would touch a business with such large unresolved claims. Because California law requires car washes to have a bond in order to operate, the business was forced to shut down and lay off its workers — the same workers the state was claiming to protect.
The Commission then gave the business a choice: settle the claims for $750,000 or stay closed. Like any entrepreneur under duress, the owners agreed, but it meant selling one of their car washes at a huge loss just to try to save the other. Throughout the ordeal, the state never provided any evidence of wrongdoing, never gave the business a hearing on the underlying claims, and even calculated penalties reaching back beyond California’s statute of limitations — meaning the Commission was able to inflate the potential fines by hundreds of thousands of dollars. In its lawsuit now pending against the Commission, the car wash argues that the agency violated the Constitution when it ran to the bond companies without affording them a hearing first.
This fits a pattern. The state frequently claims to be protecting workers’ rights while wreaking havoc on small businesses in the process. In 2019, lawmakers passed Assembly Bill 5, a law that gutted freelance work by forcing independent writers, photographers, musicians, interpreters, drivers, and others to become full-time employees. It effectively gagged California’s gig economy and nearly killed Uber and Lyft before the two rideshare companies were able to secure exemptions. Those without lobbyists or clout weren’t so lucky. Many freelancers saw their jobs vanish altogether. Some sued to get their right to direct their own livelihoods back, but none have been successful.
The same state indifference showed up during the pandemic. While casinos and big box stores stayed open, Ghost Golf, a family-owned indoor miniature golf course in Fresno, was forced to keep its doors locked for over a year. Its owner watched his savings dwindle while larger competitors thrived. The company sued, claiming that the Governor and Department and Health had assumed sweeping and unconstitutional powers. But a state court upheld the Governor’s emergency plan, even preserving his right to enact it again whenever he deems necessary in the future.
California’s arbitrariness even extends to bookstores. At the behest of Star Wars actor Mark Hamill, the state passed an autograph law requiring sellers to keep mounds of paperwork every time they sold a signed item, even a $5 paperback. For The Book Passage, a small independent bookstore in Northern California, that meant the end of author events, once the lifeblood of its business and the community. Fortunately, the store’s lawsuit and the industry’s outcry led the state to repeal the law the same year it was passed. But a law pitched as consumer protection nearly wiped out an industry that had operated successfully and safety for decades before.
Bed, Bath, and Beyond’s leadership was right to say that California “makes it harder to employ people, harder to keep doors open, and… deliver value to customers.” But the state’s problem isn’t just “overregulation,” it’s outright lawlessness masquerading as regulation. Until that changes, stories like these will keep repeating, whether they become viral headlines or not.
Anastasia Boden is a civil rights attorney at Pacific Legal Foundation, where she focuses on economic opportunity and equality before the law. PLF represented the carwash, journalists, mini golf course, and bookstore mentioned in this story.
