Answer is E.
Here is why.
A) Factories in southern states like Georgia and Mississippi employed more than 300,000 workers in the late nineteenth century, but they
> Nope. They can refer to factories or workers
B) More than 300,000 workers had been employed by factories in southern states such as Georgia and Mississippi in the late nineteenth century, but they
> Nope. They can refer to factories or workers
In the late nineteenth century, more than 300,000 workers were employed by factories in southern states such as Georgia and Mississippi, but they
> Nope. They can refer to factories or workers
More than 300,000 workers had been employed by factories in southern states like Georgia and Mississippi in the late nineteenth century, but these factories
> Maybe. The word "they" is removed, but the sentence pattern does not match the original sentence. Keep it for now.
Factories in southern states such as Georgia and Mississippi employed more than 300,000 workers in the late nineteenth century, but these factories
> YES. No ambiguity + retains the original sentence pattern or structure.
I also agree with Ritesh's explanation. The independent clause should begin with factories.