Small businesses in blue states are feeling the regulatory heat this summer

It’s hard to run a small business in 2023. And it’s even harder to run one in a blue state.

Despite higher costs, tight labor and a slowing economy, many businesses in states that are either Democrat-controlled or have a Democratic governor across the country are dealing with a tsunami of new regulations that are putting pressure on profits.

In Connecticut, small businesses are now required to offer retirement plans to their employees. Both California and Washington State are proposing new rules for businesses for when temperatures indoors exceed certain levels. Also in California, a proposed bill on website accessibility will create headaches for countless small businesses who need to make sure their websites are able to be used by people with a number of disabilities. DC restaurants are struggling under heavy new fines for “wage thefts” even when discrepancies are minor.

In my home state of Pennsylvania, Gov. Josh Shapiro has teamed up with New Jersey Gov. Phil Murphy to together announce an interstate partnership for ensuring that employers in both states are properly classifying their employees (and paying their taxes, of course). Murphy is also cracking down on the state’s nefarious (who knew?) temporary staffing firms, and is imposing new rules on companies that are planning layoffs.

Gov. Phil Murphy has been busy this past year. He signed a bill that expands access to benefits for workers during labor disputes against their employers, which will help give them more time to dispute. This July, an unemployment bill in New Jersey also went into effect, adding more reporting requirements for local businesses.

New York State, meanwhile, has extended the time consumers can use unused gift cards, but that’s nothing compared to what’s going on in New York City, where employers who use software to help them recruit employees are facing new rules requiring them to submit the algorithms — not kidding — of these softwares for an independent audit. Spoiler alert: AI is sometimes biased.

Earlier this year, legislators in the Big Apple introduced a bill that requires employers to show “just cause” before firing an employee (which makes it much harder to do so). And — this is my favorite — city officials are now cracking down on the dozen or so wood-fired pizza kitchens because they’re apparently destroying the environment. Even pizza isn’t safe from regulations.

Getting paid not to work also seems to be a popular policy in blue states this year.

For example, Illinois joined two other blue states — Nevada, whose legislature is controlled by Democrats, and Maine — in passing a law earlier this year that requires employers to provide paid time off to their employees, regardless of the reason. In Maryland, employees can enjoy partially paid time off funded by mandatory employer payments. Workers in Minnesota are now able to earn up to 48 hours a year in paid sick time, which dovetails into the generous paid time off policies already mandated in Bloomington, Duluth, Saint Paul and Minneapolis. Oregon requires its employers to offer 12 weeks of paid leave. California — not be left out of such things — is also considering a bill to expand mandated sick days and now requires employers to provide time off for bereavement.

As if high crime and taxes aren’t enough, employers in Chicago and the rest of Illinois now have lots of new regulations to deal with. In addition to the mandated time off they have to provide (mentioned above), they now face new rules forcing them to reimburse employees for certain expenses, and will be held potentially liable if an employee insults another worker’s gender, race or sexual orientation. Illinois has also expanded the definition of “race” to include “traits associated with race, including but not limited to hair texture and protective hairstyles such as braids, locks and twists” under its Create a Respectful and Open Workplace for Natural Hair (“CROWN”) Act, so that employers are forced to hire an employee regardless of their hairstyles. Being someone with no hair, I’m completely baffled by this (in defense of Illinois lawmakers, similar CROWN Acts are in effect in in many other states, including Texas).

Of course, the federal government has been sneaking in its own regulations. A new Federal Pregnant Workers Fairness Act expands current federal protections by requiring certain employers to provide “reasonable accommodations” to a worker’s known limitations related to pregnancy, childbirth or related medical conditions, unless the accommodation will cause the employer an “undue hardship on the operation of the business.” The National Labor Relations Board is making it harder for employers to discipline workers even if they demonstrate abusive behavior, and has also denied employers the ability to make severance payments contingent. New bills allowing victims of workplace racial discrimination to file cases in public court, instead of being forced into arbitration, and changing credit card processing will impose higher costs on businesses across the country.

Are these regulations good or bad for workers? For society? I’ll let you decide that. But if you’re a business owner, what all of this means is that if you’re going to start or operate a company in a blue state, or if you’re going to support a Democratic administration in Washington, you’re going to have more regulations, which in turn will translate into higher costs.

Gene Marks is founder of The Marks Group, a small-business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.