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PayPal withdraws planned N.C. expansion due to anti-gay law

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April 05, 2016

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PayPal withdraws planned N.C. expansion

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PayPal announced the canceling of their plans for a new facility in Charlotte. The online payment service have decided to nix their plans to open a global operations center in Charlotte, in response to the state’s controversial new law. USA TODAY

SAN FRANCISCO — PayPal is canceling its planned $3.6 million North Carolina operations center due to the state’s new law preventing cities from banning discrimination against lesbian, gay, bisexual and transgender people, just two weeks after it announced the investment.

It becomes the second, and thus far largest, company to pull business out of the state, while others contemplate possible moves.

Similar political dramas are playing out nationally as multiple states vote on what proponents sometimes call religious freedom laws, laws gay rights advocates say foster discrimination. Mississippi passed a religious freedom law Tuesday. Georgia’s governor vetoed a similar law late last month while Indiana passed one a year ago.

The laws are ratcheting up tensions between liberal-leaning businesses and conservative states, with hundreds of jobs and millions of dollars potentially at risk. Tech companies, who aggressively court specialized workers who are often younger, have been particularly vocal in criticizing the recent rash of laws.

In North Carolina, voting on its law and the backlash that followed have moved at lightening speed.

On March 18, North Carolina governor Pat McCrory announced San Jose, Calif.-based PayPal would build a new global operations center in Charlotte, N.C. The center would have employed 400 people. PayPal noted Charlotte’s  “ties to the financial community and technology savvy talent pool” at the time.

Then on March 23, North Carolina passed a sweeping law that prevents cities and counties from passing rules preventing discrimination against gay, lesbian, bisexual and transgender people.

On Tuesday, PayPal CEO and president Dan Schulman announced the electronic payment company was withdrawing its plans to build the center because, he said, the new law perpetuates discrimination and violates the values and principles at the core of PayPal’s mission and culture.

Locating in a state “where members of our teams will not have equal rights under the law, is simply untenable,” Schulman said.

The company is now looking for an alternative location for its operations center. McCrory’s office did not immediately respond to an email seeking comment.

The loss represents an economic setback to Mecklenburg County, where Charlotte is located. According to the Economic Development Partnership of North Carolina, PayPal would have invested over $3.6 million in Mecklenburg County by the end of 2017. The center was anticipated to yield a payroll impact of nearly $20.4 million per year for Mecklenburg and surrounding counties.

Conservatives decried PayPal’s decision.

“This is an example of bullying from big business that have been coming out against religious freedom bills across the country,” said Roger Severino, director of the DeVos Center for Religion and Civil Society at the Heritage Foundation, a conservative think tank based in Washington D.C.

Lionsgate, Braeburn Pharma

PayPal, which has no presence in the state, is the second company to take its business from North Carolina due to the new law.

Lionsgate, a Santa Monica, Calif-based entertainment company, had planned to shoot a pilot for a comedy series called “Crushed” in Charlotte but pulled out earlier this week, the Charlotte Observer reported. The series, about an African-American family in the wine business, would have employed more than 100 workers. The production will be filmed in Vancouver, Canada instead.

Braeburn Pharmaceuticals, a specialty pharmaceutical company based in Princeton, N.J., had planned to build a research and manufacturing facility in Durham County, N.C. The facility would employ 52 people and was expected to bring close to $20 million into the state.

Braeburn is now reconsidering the placement, because it “believes in fair treatment and equality for all individuals in their communities,” the company said in a statement.

Tech reaction negative

The tech community has been largely resistant to the new law. That could have far-reaching consequences for the state economy, from the smallest start-ups to the largest corporations.

Tech has become a lifeblood of North Carolina’s economy, generating 11% of the state’s total wage earnings and sales, according to the North Carolina State of Technology Report.

The major presence of IBM and other tech titans has established North Carolina as the third-largest tech sector in the country, after Silicon Valley and Boston, and second only to New York for financial services, says Chris Sgro, executive director of Equality NC, North Carolina’s largest LGBT advocacy organization.

Public outcry has been swift and decisive since HB2 became law last month. A letter authored by Equality NC and Human Rights Campaign last week, calling for the law’s repeal, was signed by 120 CEOs, including those of Bank of America, Wells Fargo, Facebook and Red Hat.

Start-ups Against HB2, a web site, was created last week by start-ups and tech companies.

“We’re seeing (opposition) every day — PayPal is just the latest,” says Chris Heivly, managing director of The Startup Factory, a small venture firm in Durham that investments in 35 tech firms. The law has created “friction” for the business community, “building walls and barriers,” he said.

“I’ve never seen such an emphatic, across-the-board response from the business community in my four years here,” says Christopher Brook, legal director of the ACLU in North Carolina.

Sgro and Robbie Allen, CEO of Automated Insights, a software company based in Durham who signed the letter, are hopeful the escalating pressure will force Gov. McCrory to repeal HB2 when the state legislature reconvenes on April 25.

Other states face same issue

Mississippi Gov. Phil Bryant signed a controversial law Tuesday that gives individuals and businesses the right to deny services or goods for the celebration or recognition of any marriage that goes against their religious beliefs.

Some of the state’s largest employers, including Nissan, Toyota and Ingalls Shipbuilding have issued statements against the legislation.

The Mississippi Manufacturers Association had called for the governor to veto the bill.

Georgia faced a similar business backlash that began March 16 when it passed a religious freedom bill, House Bill 757.

The bill would have protected individuals from being forced to attend same-sex weddings, given religious organizations and groups the right to fire employees because they are gay, allowed religious organizations to refuse to provide charitable, social or educational services that clashed with their tenets of faith and allowed religious leaders to decline to perform same-sex weddings.

Georgia Gov. Nathan Deal vetoed the bill on March 28, saying the problems it purported to fix didn’t exist.

Had the law gone into effect, it might have caused economic problems, however. The NFL had hinted it might nix Atlanta as a future Super Bowl site.

It also threatened Georgia’s thriving, $1 billion film and TV production business. Major studios denounced the bill, with some threatening to quit the state because of it.

Some similar issues played out in Indiana last year when it passed legislation in March 2015 that was decried as legalizing discrimination against gay, lesbian, bisexual and transgender people.

Titled The Religious Freedom Restoration Act, the bill allowed religious beliefs to be used as a defense against lawsuits when individuals or businesses refuse to serve to certain customers. Advocacy groups claimed its main goal was to allow business owners to refuse service to lesbian, gay, bisexual and transgender patrons.

After the bill passed, Indiana-based Angie’s List said it would cancel a $40 million headquarters expansion in Indianapolis and San Francisco-based Salesforce gave some employees relocation packages to leave the state.

After a week of backlash, the Indiana General Assembly passed a clarification that the law “would not create a license to discriminate or to deny services,” Indiana Gov. Mike Pence said.

Evolving landscape

Brands and the companies behind them face a tricky balancing act of trying to be where their customers and their employees are in a nation whose underlying presumptions about sexuality, gender and marriage are rapidly evolving.

Employees and customers both care about what companies stand for, said Deborah Small, a professor of marketing at the Wharton School at the University of Pennsylvania.

“We see that over and over again. Customers vote with their wallets and employees are choosing to work for companies that support their values,” she said.

Taking a stand in states that are passing laws perceived as being against gay-rights gives companies an opportunity to be relevant to their customers and employees. While there may be some losses related to their decisions, it also allows them to connect more strongly with those whose beliefs align with theirs, Small said.

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