Government contractors would be insane to operate in California (and perhaps other regulatory hell-holes, but I am familiar with California). California has a myriad of arcane labor laws (like break laws and heat stress laws) that are difficult to comply with, combined with a legislature that shifts the laws every year to make it hard to keep up, combined with a regulatory and judicial culture that assumes businesses are guilty until proven innocent. If state labor violations or suits lead to loss of business at the national level, why the hell would a contractor ever want to have employees in California?
Bader provides the numbers:
Whether a large company is sued for discrimination or labor law violations often has more to do with its location than whether it violated the law. A recent study shows that “California has the most frequent incidences of [employment-practices] charges in the country, with a 42 percent higher chance of being sued by an employee for establishments . . . over the national average. Other states and jurisdictions where employers are at a high risk of employee suits include the District of Columbia (32% above the national average) [and] Illinois (26%).” It’s because of their location, not because California employers are more racist or anti-union than employers in other states (indeed, California employers spend more time and money on compliance mechanisms than employers elsewhere).
He goes on to discuss what I think is actually is a bigger issue than differential penalties, which is the criminalization of things in California that are perfectly legal in other places. The best example is lunch breaks. Companies don't just have to provide lunch breaks, they have an affirmative responsibility to make sure an employee takes a non-working lunch. An employee who voluntarily does some work while taking a lunch break (e.g. answers a question from a customer that might walk up to her) makes the company liable for a penalty. I kid you not. That is why California corporations have sometimes made it a firing offense to be caught doing work at lunch, because it makes the company liable under the law.