Where to Open Shop: New Report Ranks the Best Places to Do Business in the U.S.

The COVID-19 pandemic continues to affect the global economy, and employers are increasingly considering which are the most and least employer-friendly places  new offices, distribution centers, and operational locations, both during the pandemic and after emerging from it. The Arizona State University Center for the Study of Economic Liberty recently released Doing Business North America 2020 (DBNA), a report analyzing and comparing data indicative of the regulatory context for business activity in a number of metropolitan areas. The report ranked 130 cities across Canada, Mexico, and the United States, based on 111 variables for determining where the best places to do business are currently (although given the ever-changing local, state, and federal landscapes, the assessment may change frequently). The variables underlying the rankings fall into six broad categories: starting a business; employing workers; obtaining electricity, land and space use; and paying taxes and resolving insolvency.

The DBNA project assigned each city an “Ease of Doing Business” score and ranked the cities accordingly. . According to the report, the best U.S. cities for doing business based on the six criteria above include top-ranked Raleigh, NC, followed by Jackson, MS; Tulsa, OK; Sioux Falls, SD; Charleston, SC; Houston, TX; San Antonio, TX; Colorado Springs, CO; Cincinnati, OH; and Cheyenne, WY.

The five U.S. cities receiving the DBNA project’s lowest rankings related to difficulty doing business based on the six criteria are: (1) Newark, NJ; (2) San Diego, CA; (3) San Jose, CA; (4) New York City, NY; and (5) Los Angeles, CA.

Although some of the DBNA project’s analytical factors were outside an employment lawyer’s normal space, employment laws significantly impacted the rankings. Specifically, the DBNA project analyzed variables such as the ratio of annual minimum wage to income per capita, the length of paid or unpaid maternity leave, the number of paid and unpaid sick leave days, average severance pay, and the average amount of paid annual leave.

Little doubt can exist that a wide variety of state and local laws not only impact the ease of doing business, but also the costs and risks of doing business. Employers may wish to consider the following types of laws when determining the best place for a new office, distribution center, or other location.

• Predictive scheduling laws. Cities are implementing predictive scheduling laws that require employers to provide advance notice of employee shifts.
• Minimum wage laws. The federal minimum wage is currently $7.25 per hour, but state and local minimum wages vary. According to the DBNA report, a locality’s minimum wage rate appears to have an impact on the ease of doing business in a city. For example, the minimum wage rate for employees who are not covered under the federal Fair Labor Standards Act is only $5.15 per hour in Atlanta, GA (ranked 12) and Cheyenne, WY (ranked 10). On the other hand, San Francisco, CA (ranked 65) has a higher minimum wage of $15.59 per hour.
• Paid sick leave laws. Paid sick leave laws may also impact the ease of doing business in a city. For example, a majority of the top 10 cities in the report do not require employers to offer any paid sick leave days. In comparison, Arizona cities such as Mesa (ranked 58) and Phoenix (ranked 59) require employers to provide at least 40 hours of paid sick leave.
• Marijuana laws. The marijuana legal landscape continues to expand across the country in patchwork fashion. In the 2020 election, several more states legalized recreational and medical marijuana.
• Right-to-work laws. More than half of the states have enacted right-to-work laws, providing employees with the right to choose whether to join unions.
• Ban-the-box laws. Over the past several years, more states and cities have “banned the box” and prohibited employers from asking applicants about criminal history. Employers may want to consider other state-specific laws that impact the application and hiring process. Nuanced background check, salary history, and application and interview prohibitions are all worth factoring into the calculus.

Ogletree Deakins will continue to monitor and report on developments with respect to the COVID-19 pandemic and will post updates in the firm’s Coronavirus (COVID-19) Resource Center as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.