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California's economic image suffered another blow Wednesday when the U.S. Chamber of Commerce rated it in the bottom tier of states in the friendliness of its laws to business investment.

California was placed in the bottom of three tiers in a nationwide review of state business laws for the chamber by Seyfarth Shaw LLP, a prominent employment and labor law firm.

The chamber noted that California's and Massachusetts' laws are so unique that the law firm has published employers' handbooks just for those states.

"California has a large and diverse economy environment for new job creation," the chamber's report says. "The state is known for its persistent budget woes and debt, high taxes, and complex employment laws and regulations. The unemployment rate in California was 12.4 percent in late 2010, well above the national average."

The report listed specific factors in the state's "poor" ranking along with Massachusetts, Connecticut, Hawaii, Illinois, Maine, Michigan, Montana, Nevada, New Jersey, New York, Oregon, Pennsylvania, Washington and Wisconsin. They include: "hostility towards non-competition agreements," complex and "elaborate" wage and hour laws, anti-discrimination laws that go beyond those of the federal government, tight privacy laws, personal leave laws that go beyond the feds and a ban on "use it or lose it" vacation rules.

"California has some of the most complex labor and employment laws in the nation," the report continues. "Many of the requirements imposed on employers differ significantly from federal law. California is unique in its hostility to noncompetition agreements. Even narrowly tailored restraints are not only unenforceable in California, but can also be considered unfair business practices."

The report accuses California labor law of creating "a cottage industry of class actions for employees seeking payment for unreimbursed or inadequately reimbursed job-related expenses such as mileage and cell phone charges."

The report was the second this week to besmirch the state's business climate. The Gallup polling organization, in a nationwide survey of employees, rated California the third lowest state in job creation activity, with only Nevada and New Jersey in worse shape.

Both reports were issued as Gov. Jerry Brown and legislators confront a multi-billion-dollar budget deficit and Republican lawmakers hint that scaling back business regulation may be a price for their voting for Brown's plan of budget cuts and asking voters to extend taxes.

The full U.S. Chamber of Commerce report can be found here.


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