BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                     AB 359


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          Date of Hearing:  May 6, 2015


                     ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT


                               Roger HernŠndez, Chair


          AB 359  
          (Gonzalez) - As Amended March 26, 2015


          SUBJECT:  Grocery workers


          SUMMARY:  Establishes a worker retention requirement for the  
          change on ownership or control of grocery establishments, as  
          specified.  Specifically, this bill:


          1)Defines "grocery establishment" as a retail store that is over  
            15,000 square feet in size and that sells primarily household  
            foodstuffs for offsite consumption, as specified.

          2)Defines "incumbent grocery employer" as the person that owns,  
            controls, or operates a grocery establishment prior to a  
            change in control.

          3)Defines "successor grocery employer" as the person that owns,  
            controls, or operates a grocery establishment after a change  
            in control.

          4)Defines "eligible grocery worker" to mean any individual whose  
            primary place of employment is at the grocery establishment  
            subject to a change in control and who has worked for the  
            incumbent grocery employer for at least six months prior to  
            the execution of the transfer document.  "Eligible grocery  
            worker" does not include a managerial, supervisory or  








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            confidential employee.

          5)Defines "change in control" to mean any sale, assignment,  
            transfer, contribution, or other disposition of all or  
            substantially all of the assets or a controlling interest,  
            including by consolidation, merger, or reorganization, of the  
            incumbent grocery employer or any person who controls the  
            incumbent grocery employer or any grocery establishment under  
            the operation or control of either the incumbent grocery  
            employer or any person who controls the incumbent grocery  
            employer.

          6)Requires an incumbent grocery employer, within 15 days after  
            the execution of the transfer document, to provide to the  
            successor grocery employer the name, address, date of hire,  
            and employment occupation classification of each eligible  
            grocery worker.

          7)Requires the successor grocery employer to hire from the  
            aforementioned preferential hiring list for a period beginning  
            upon execution of the transfer document and continuing for 90  
            days after the grocery establishment is fully operational and  
            open to the public under the successor grocery employer.

          8)Requires a successor grocery employer to retain each eligible  
            grocery worker hired from the preferential hiring list for a  
            period of at least 90 days after the eligible grocery worker's  
            employment commencement date.  During this 90-day transition  
            employment period, eligible grocery workers shall be employed  
            under the terms and conditions established by the successor  
            grocery employer and pursuant to the terms of a relevant  
            collective bargaining agreement, if any.

          9)Provides that if the successor grocery employer determines  
            that it requires fewer workers than were required by the  
            incumbent grocery employer, it shall retain workers by  
            seniority within each job classification, as specified.

          10)Provides that during the 90-day transition employment period,  








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            the successor grocery employer shall not discharge without  
            cause an eligible grocery worker.

          11)Provides that at the end of the 90-day transition employment  
            period, the successor grocery employer shall make a written  
            performance evaluation for each eligible grocery worker.  If  
            the worker's performance during the 90-day period is  
            satisfactory, the successor grocery employer shall consider  
            offering the worker continued employment under the terms and  
            conditions established by the successor grocery employer and  
            as required by law.

          12)Requires the incumbent grocery employer to post public notice  
            of the change in control, as specified.

          13)Authorizes an eligible grocery worker to bring a civil action  
            against the incumbent grocery employer or the successor  
            grocery employer for violations of these requirements, and  
            authorizes the worker to be awarded hiring and restatement  
            rights, front pay or back pay, the value of benefits the  
            worker would have received, attorney's fees and costs, as  
            specified.

          14)Specifies that parties subject to this bill may, by  
            collective bargaining agreement, provide that the agreement  
            supersedes the requirements of this bill.

          15)Provides that this bill shall not apply to grocery  
            establishments that will be located in geographic areas  
            designated by the U.S. Department of Agriculture as a "food  
            desert," as specified, provided that both of the following  
            apply:

             a)   More than six years have elapsed since the most recent  
               grocery establishment was located in the area designated as  
               a food desert.

             b)   The grocery establishment stocks and during normal  
               business hours sells fresh fruits and vegetable in amounts  








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               and of a quality that is comparable to what the  
               establishment sells in its three geographically closest  
               stores, which are located outside of the food desert.

          16)Specifies that this bill does not preempt any city, county,  
            or city and county ordinances that provide greater protection  
            to eligible grocery workers.

          17)Establishes specified recordkeeping requirements for the  
            incumbent grocery employer and successor grocery employer to  
            document compliance with these requirements.

          18)Makes other related changes.

          19)Makes related legislative findings and declarations.

          FISCAL EFFECT:  None.  This bill is keyed non-fiscal by the  
          Legislative Counsel.



          COMMENTS:  Existing law already contains specified worker  
          retention requirements for certain categories of workers.  For  
          example, in the janitorial industry, existing law requires a  
          successor contractor to retain employees for 60 days and to  
          offer permanent employment to satisfactory employees at the end  
          of the 60-day period.  (Labor Code Section 1060 et seq.).  In  
          addition, in the public transit industry, existing law requires  
          an awarding body to give a 10 percent bid preference to a bidder  
          who agrees to retain the employees of the prior contractor for a  
          period of not less than 90 days.  (Labor Code Section 1070 et  
          seq.).

          This bill is sponsored by the United Food and Commercial Workers  
          Union Western States Council (UFCW) and would establish a worker  
          retention requirement for specified grocery establishments that  
          is similar, but not identical to, the janitorial industry  
          retention requirement referenced above.









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          UFCW also indicates that this measure is modeled after a grocery  
          worker retention ordinance enacted by the City of Los Angeles in  
          2005.  In 2011, the California Supreme Court held that the Los  
          Angeles ordinance was not preempted as intruding upon either  
          matters of health and safety already regulated by the state or  
          matters of employee organization and collective bargaining fully  
          occupied by federal labor law.  California Grocers Association  
          v. City of Los Angeles, 52 Cal. 4th 177 (2011).  The court also  
          concluded that the ordinance was fully consistent with both  
          state and federal equal protection clauses.  Id.

          In addition, UFCW contends that this approach is consistent with  
          other grocery worker retention ordinances adopted in the City  
          and County of San Francisco, the City of Santa Monica, and the  
          City of Gardena, as well as worker retention ordinances for  
          other industries adopted in the City of San Jose (airport  
          workers), the City of Oakland (hospitality workers), the City of  
          Emeryville (hotel workers), and the City of Berkeley (marina  
          workers). 
          


          RECENT RESEARCH ON WAGES AND WORKING CONDITIONS OF FOOD RETAIL  
          WORKERS





          A 2014 study by the Food Labor Research Center at U.C. Berkeley  
          (and commissioned by the UFCW) made the following findings:





            "California's food retail industry has shown consistent and  
            robust growth in sales and employment, with employment growing  








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            faster than in the economy overall.  Between 2000 and 2011,  
            the number of grocery stores in California - the largest  
            segment of food retail establishments in the state- increased  
            by 5%, from 9,893 to 10,403.  California's food retail  
            industry paid workers $7.7 billion in 2011, and generated  
            gross revenue of $98.2 billion in 2013.  While grocery store  
            jobs have grown faster than overall employment since the year  
            2000, general merchandise store jobs have grown much faster -  
            almost tripling in number.  From 1990 to 2012, general  
            merchandise employment grew 176%, increasing from 41,000  
            employees to 113,100 employees, while overall employment grew  
            by only 14%. Employment in grocery stores grew 23%, from  
            240,800 to 296,300.  We estimate that there are now  
            approximately 383,900 food retail workers in California?



            ?While California food retail industry employment has grown in  
            the past decade, food retail workers' wages have declined.  
            According to Census data, in 2010 dollars, median hourly wages  
            of grocery store workers - the largest segment of food retail  
            workers - fell from $12.97 in 1999 to $11.33 in 2010, a  
            decline of 12.6%.  Moreover, the proportion of food retail  
            workers earning poverty wages increased dramatically, from 43%  
            in 1999 to 54% in 2010.  This means that in 2010, more than  
            half of all California food retail workers earned less than  
            the hourly wage needed to reach an annual income of $22,458,  
            the minimum income necessary to provide them with a low  
            standard of living for a family of three in the Western U.S.  
            if they worked full-time for the full year (2,080 hours).   
            While food retail workers' median hourly wages declined  
            drastically in the decade prior to 2010, overall private  
            sector median hourly wages rose slightly, from $16 to $16.16 -  
            an increase of 1%.  As a result of these divergent trends, by  
            2010 the median hourly wage for grocery store workers had  
            declined to about 70% of that earned by the California  
            workforce overall.  Similarly, while grocery store workers  
            suffered a serious decline in weekly wages over this period,  
            general merchandise workers experienced a slight weekly wage  








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            increase. As a result, by 2012, grocery store workers' weekly  
            wages, which were once much higher than those of general  
            merchandise store workers, had fallen to nearly the same  
            level."
          


          RESEARCH ON LOS ANGELES ORDINANCE SUBMITTED BY SPONSOR





          The sponsor of this bill has submitted a letter from a Professor  
          at the University of California at Davis that analyzes data on  
          the retail industry in Los Angeles since 2005 (when the local  
          grocery worker retention ordinance was enacted).





          That letter states the following:





            "Thus, overall, approximately 80,909 people were employed in  
            retail grocery sales in 2005, which grew to 95,990 in 2013.   
            This is more than an 18% increase in employment in this  
            timeframe?





            ?[T]he number of stores in Los Angeles County alone grew from  
            approximately 1,170 in 2006 to 1,280 in 2013.  This is more  








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            than an 8.5% increase?





            ?Based on this data, I would conclude overall that the grocery  
            industry in Los Angeles has continued to grow since 2005 at a  
            rate that is substantially greater than the overall economy."


          


          However, the California Grocers Association argues that this  
          research encompasses significantly more time and geography that  
          the City of Los Angeles's ordinance.  While the aforementioned  
          data covers 2005 through 2013, they argue that the ordinance has  
          been in effect only since July 2011.  Between passage of the  
          ordinance and that time, the ordinance was stayed as litigation  
          proceeded through to the California Supreme Court.  In addition,  
          they argue that the aforementioned data covers the County of Los  
          Angles while the ordinance merely applies to the City of Los  
          Angeles.  Therefore, they contend that the differences are so  
          significant as to make the information meaningless.


          


          ARGUMENTS IN SUPPORT





          The sponsor of this bill, UFCW, argues that it will protect  
          California's grocery workers from being dismissed when a large  
          grocery store goes through a change of ownership.  Writing in  








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          support of this bill, they state the following: 


            "The cities of San Francisco, Los Angeles, Gardena, and Santa  
            Monica have taken proactive measures in protecting grocery  
            workers from Wall-Street style mergers. In July of 2011, the  
            California Supreme Court upheld the Grocery Worker Retention  
            Ordinance adopted by the City of Los Angeles in 2005. 





            Under [this bill], grocery stores that are larger than 15,000  
            square feet will have to ensure the retention of eligible  
            workers for a 90-day transition period. A worker must have  
            worked for a minimum of 6 months with the former grocer  
            company for retention eligibility.





            There are approximately 383,900 grocery workers in California  
            that seek to benefit from this policy. The effect of a major  
            Wall Street-style merger can be detrimental to consumers and  
            workers alike, the latter of which face serious consequences  
            when their jobs are at jeopardy.


            In a Pulitzer Prize-winning account of the human toll of the  
            1986 Safeway buyout, the Wall Street Journal found that 63,000  
            workers were "cut loose" from Safeway, and that, "while the  
            majority were re-employed by their new store owners, this was  
            largely at lower wages, and many thousands of Safeway people  
            wound up either unemployed or forced into part-time work  
            force.










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            In addition, a change of workers raises a serious public  
            health concern since the effects are carried over to the  
            grocery store's clientele. Experienced workers possess  
            valuable knowledge and skills regarding proper sanitation  
            procedures and local/state health regulations to ensure high  
            standards of food safety.


            We believe [this bill] is the right approach at the right time  
            for state lawmakers to advance a policy long overdue to  
            benefit both workers and overall economy of the state.


            California has the eighth largest economy in the world, but  
            the nation's highest poverty rate and it is disproportionally  
            harming women and children. More than half of the state's  
            workforce in the service industry are women and are  
            increasingly becoming the family head of household, working 2  
            or 3 part-time jobs to meet their basic needs. Now is the time  
            to strongly advocate the willingness to close the income gap  
            and pursue employment retention strategies that reflects our  
            values and commitment to progress.


            As the largest provider of food to the nation, California  
            should provide workers who sell groceries good jobs - jobs  
            that will allow their families to purchase and enjoy that food  
            themselves, and allow them to work in an appropriately  
            staffed, healthy, and safe environment. Retailers that offer  
            workers such an environment are the most successful in  
            California; others should follow their example."


          


          ARGUMENTS IN OPPOSITION










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          A coalition of employers, including the California Chamber of  
          Commerce, opposes this bill and argues that it unfairly forces  
          grocery employers to hire a predecessor's employees, undermines  
          the at-will employment presumption in California, and ensures  
          continued union representation.





          Primarily, they argue that this bill denies employers the basic  
          choice of whom to hire in their workforce.  Absent unlawful  
          conduct by the employer such as discrimination or retaliation,  
          the choice of whom an employer wants to hire and retain should  
          be left to the employer, not the government.  Moreover,  
          opponents contend that this bill establishes an unequivocal  
          mandate that precludes the successor grocery employer from  
          conducting and pre-hiring background checks or interviews to  
          determine if the employees of the predecessor employer are  
          individuals who meet the unique and specific employment criteria  
          of the subsequent employer.





          In addition, opponents argue that this bill undermines the  
          at-will presumption in order to protect the incumbent union,  
          stating:





            "[This bill] is designed to ensure that an incumbent union who  
            has been elected as the bargaining representative for the  








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            prior employer will remain the bargaining unit for the  
            successor employer.  Under the federal "successor employer"  
            doctrine, a subsequent employer who intends and voluntarily  
            chooses to (1) hire the majority of its predecessor's  
            employees and (2) is generally in the same business must  
            recognize the incumbent union and bargain with it in good  
            faith. See NLRB v. Burns Int'l Security Services, Inc., 406  
            U.S. 272, 281 (1972).





            Because [this bill] mandates subsequent employers to hire the  
            predecessor's employees for at least the 90-day retention  
            period and, thereafter, only terminate such employees for  
            unsatisfactory performance committed during the 90-day period,  
            it limits a successor employer's ability to voluntarily choose  
            its workforce, thereby triggering the successor employer  
            doctrine.   "Unsatisfactory" performance is a higher standard  
            to achieve than the current at-will presumption of employment  
            in California and will essentially force an employer to offer  
            continued employment to the predecessor's workforce, thereby  
            ensuring recognition of the incumbent union. If a successor  
            employer actually chooses not to offer continued employment  
            based upon "unsatisfactory" performance, it will undoubtedly  
            face unfair labor practice charges and civil litigation by the  
            employee or incumbent union. 





            We believe the decision of whether or not to have a union in  
            the workplace should be left to the employers and employees  
            after following the proper election procedures outlined by the  
            National Labor Relations Act. Neither party should be forced  
            into such a relationship as [this bill] seeks to do."









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          Similarly, opponents argue that this bill forces an employer to  
          adhere to terms of a contract to which it is not a party.  They  
          state:





            "[This bill] mandates that a successor grocery employer "shall  
            retain" each eligible employee of a prior grocery employer  
            hired under this proposal for at least 90 days according to  
            the "terms and conditions" established by the successor  
            grocery employer and pursuant to the terms of a relevant  
            collective bargaining agreement (CBA).  To the extent the  
            collective bargaining agreement referenced is the CBA with the  
            predecessor employer, [this bill] mandates a successor  
            employer to abide by these contractual provisions, even though  
            the successor employer is not actually a party to that CBA.  





            This mandate conflicts with the California Supreme Court  
            decision in California Grocers Association v. City of Los  
            Angeles, 52 Cal.4th 177, 205 (2011), wherein the Court agreed  
            that a successor grocery employer covered under the Los  
            Angeles grocery worker retention ordinance had no duty to  
            bargain or engage in negotiations with the incumbent  
            bargaining representative until after the transition period  
            expired.  If the Supreme Court does not believe a successor  
            employer was not required to bargain with an incumbent union  
            for a new CBA until after the transition period expires, it is  
            unreasonable to suggest that a successor employer has a duty  
            to abide by the terms of any existing CBA, during the  








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            transition period, to which it is not a party."





          In addition, the California Grocers Association raises a number  
          of concerns in their opposition letter to this bill.  Among  
          other things, they state:





            "Our member companies have experience with this concept in the  
            Cities of Los Angeles, San Francisco, Gardena, and Santa  
            Monica. Generally, that experience has shown that similar  
            worker retention mandates have a chilling effect on commerce  
            and hamper efforts to transition current grocery businesses to  
            new ownership rather than close locations outright?



            ?While [this bill] will not improve or protect public health  
            and safety, it will create significant new administrative and  
            record-keeping burdens for covered businesses and expose both  
            sellers and purchasers to liabilities they are unable to  
            determine or protect against?  





            ?While it is appreciated that the author attempts to address  
            issues related to vacant locations, the "exception" included  
            in the bill is so limited and subjective as to be meaningless.  
            Only locations in USDA-designated "food deserts" are included  
                                                                           and only if the location has been closed for at least six  
            years. Those restrictions are limiting enough, but add to that  








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            the requirement that the new establishment stock and sell  
            fresh fruits and vegetables, "?in amounts and of a quality  
            that is comparable to what the establishment sells in its  
            three geographically closest stores?" outside the food desert  
            and there is no way for a grocery establishment to meet the  
            exception criteria. There will always be an avenue to allege  
            the offerings are not "similar" enough. In addition, the  
            criteria inexplicably limits the exception to companies with  
            four store locations or more. Smaller companies would be  
            singled out for arbitrary application of the worker retention  
            requirement until they opened their fifth store. Assuming, of  
            course, the location and length of closure criteria are met?

            ?As noted previously, real world experience in jurisdictions  
            covered by current local grocery worker retention ordinances  
            tells us that these requirements have a chilling effect on  
            business transactions. In some instances, potential purchasers  
            have declined to proceed with transactions when they have  
            learned of the requirement to retain employees not of their  
            own choosing. In other instances, companies have determined it  
            unwise to proceed with the purchase of existing grocery  
            locations and rather seek out building opportunities or  
            non-grocery retail space as they look to expand and grow their  
            own businesses.

            Given current attempts to expand food access, it makes little  
            sense for lawmakers to enact legislation that could directly  
            undermine those attempts. Placing additional barriers in the  
            path to store development will not help communities or  
            companies looking to expand food access. Provisions in the  
            bill allowing for companies to avoid the worker retention  
            requirements are simply not broad enough to be helpful even in  
            underserved communities and do nothing to alleviate the  
            burdens created by the bill."
          


          This bill is double referred to Assembly Judiciary Committee.









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          REGISTERED SUPPORT / OPPOSITION:




          Support


          American Federation of State, County and Municipal Employees


          California Labor Federation, AFL-CIO


          California Professional Firefighters


          California Rural Legal Assistance Foundation


          California School Employees


          California Teamsters Public Affairs Council










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          Community Food and Justice Coalition (co-sponsor)


          Community Health Council, Inc.


          Consumer Attorneys of California


          Hunger Action LA


          Los Angeles Alliance for a New Economy


          Orange County Communities for Responsible Development


          Partnership for Working Families


          Professional Engineers in California Government


          Roots of Change (co-sponsor)


          SEIU California


          Tri-Counties Central Labor Council


          UFCW Golden State Local 8


          UFCW Local 135










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          UFCW Local 324


          UFCW Local 648


          UFCW Local 770


          UFCW Local 1167


          UFCW Local 1428


          UFCW Local 1442


          UFCW Western States Council (co-sponsor)




          Opposition


          Building Owners and Managers Association of California


          California Business Properties Association


          California Chamber of Commerce


          California Grocers Association


          California Retailers Association








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          Camarillo Chamber of Commerce


          Chamber Alliance of Ventura and Santa Barbara Counties


          El Centro Chamber of Commerce and Visitors Bureau


          Family Business Association


          Fullerton Chamber of Commerce


          International Council of Shopping Centers


          NAIOP - Commercial Real Estate Development Association


          Orange Chamber of Commerce


          Oxnard Chamber of Commerce


          Rancho Cordova Chamber of Commerce


          San Jose Silicon Valley Chamber of Commerce


          Santa Maria Chamber of Commerce Visitors and Convention Bureau


          Southwest California Legislative Council








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          Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091