BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 359


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          Date of Hearing:   May 12, 2015


                           ASSEMBLY COMMITTEE ON JUDICIARY


                                  Mark Stone, Chair


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


                              As Proposed to be Amended


          SUBJECT:  Grocery workers


          KEY ISSUE:  Should employees of a large grocery store be  
          entitled to retain their jobs for a 90-day transition period  
          after the grocery store is purchased by a new owner, subject to  
          the new owner's right to terminate any of those employees for  
          cause or to reduce the size of their workforce? 

                                      SYNOPSIS


          This measure will protect the jobs of grocery workers - at least  
          for a 90-day transition period - if the store where they work is  
          purchased by another company that will continue operating the  
          business as a grocery store.  The bill only applies to larger  
          grocery stores (greater than 15,000 square feet).  A new (or  
          successor) employer would retain the right to terminate  
          employees for cause during the 90-day transition period.  Once  
          the 90-day period ends, the employer would be required to  
          "consider" the former employees for permanent employment, but  
          would not be required to hire them.  According to the author,  
          mergers and buy-outs in the supermarket industry can have a  








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          devastating effect on workers who suddenly find themselves out  
          of work for no fault of their own.  Existing state law provides  
          similar, though not identical, protections for janitorial  
          workers and public transit workers.  In addition, at least four  
          California cities - Los Angeles, San Francisco, Santa Monica,  
          and Gardena - already have local retention ordinances for  
          grocery store workers.  As discussed in greater detail in the  
          analysis, the California Supreme Court in 2011 upheld the Los  
          Angeles ordinance, the major provisions of which are almost  
          identical to this bill.  The bill is co-sponsored by the Western  
          Center on Law & Poverty and the Western Section of United Food  
          and Commercial Workers Union.  The bill is opposed by the  
          California Grocers Association and a coalition of business  
          groups led by the Chamber of Commerce, which labels this bill as  
          a "job killer" on its website.  Opponents contend that this bill  
          improperly restricts the successor employer's right to select  
          its own workforce; undermines California's long-standing at-will  
          employment presumption; forces successor employers to abide by  
          terms of union contracts to which they never agreed; and has  
          little relationship to the health and safety benefits claimed by  
          the proponents.  The bill recently passed out of the Assembly  
          Labor & Employment Committee on a 5-2 vote.  The author will  
          take a clarifying amendment in this Committee. 


          SUMMARY:  Establishes a worker retention requirement in the  
          event of a change of ownership or control of grocery  
          establishments.  Specifically, this bill:


          1)Applies to any grocery store that is over 15,000 square feet  
            in size and that sells primarily household foodstuffs for  
            offsite consumption, as specified.


          2)Requires an incumbent grocery employer, within 15 days after  
            the execution of the transfer document, to provide to the  
            successor grocery employer with a list of the name, address,  
            date of hire, and employment occupation classification of each  








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            eligible grocery worker, and requires the incumbent grocery  
            employer to post advance public notice of the change in  
            control.


          3)Requires the successor grocery employer to hire from a list  
            provided by the incumbent employer 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.


          4)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.


          5)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.


          6)Provides that during the 90-day transition employment period,  
            the successor grocery employer shall not discharge an  
            incumbent employee without cause.


          7)Provides that at the end of the 90-day transition 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  








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            established by the successor grocery employer and as required  
            by law.


          8)Permits 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.


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


          10)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.


          EXISTING LAW:  


          1)Requires a successor contractor to retain janitorial employees  
            of an incumbent contractor for 60 days and to offer permanent  
            employment to satisfactory employees at the end of the 60-day  
            period.  Specifies, however, that the successor contractor is  
            not required to pay the same wages or provide the same  
            benefits that were paid or provided by the incumbent  
            contractor. (Labor Code Section 1060 et seq.)


          2)Requires, for purposes of public transit contracting, a  
            contract-awarding entity to give a 10 percent bid preference  
            to a bidder who agrees to retain public transit employees of  








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            the prior contractor for a period of not less than 90 days.   
            (Labor Code Section 1070 et seq.)


          FISCAL EFFECT:  As currently in print this bill is keyed  
          non-fiscal. 


          COMMENTS:  Under existing law, when a large grocery store is  
          bought out by another company, the grocery store employees are  
          vulnerable to instant termination - even if the purchasing  
          company intends to continue operating the business as a grocery  
          store.  This bill would provide a measure of protection to those  
          workers by allowing them to keep their jobs during a reasonable  
          transition period.  Specifically, when the old (incumbent) owner  
          sells the store to a new (successor) owner, the incumbent owner  
          must provide the successor owner with a list of all of its  
          non-managerial employees and their contact information.  The  
          successor owner would then be required to hire employees from  
          that list and retain those employees for the 90-day transition  
          period.  The successor owner could terminate those employees for  
          cause at any time during the 90-day period.  If the successor  
          owner determined that it needed fewer employees than the  
          incumbent owner, then the incumbent employees would be selected  
          and retained on a seniority basis or pursuant to the terms of  
          any existing collective bargaining agreement.  At the end of the  
          90-day period, the successor owner would be required to make a  
          written performance evaluation of each employee retained under  
          these provisions and "consider" offering the employee continued  
          employment under any lawful terms established by the successor  
          employer.  The successor would not be required to retain any of  
          the employees from the prior owner beyond the 90-day period.   
          The bill also imposes various notice requirements on the  
          incumbent employer and record keeping requirements on the  
          successor employer.  


          In addition, this bill would permit incumbent employees to bring  
          a cause of action alleging a violation by either an incumbent  








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          owner (e.g. for failing to provide notice of sale, provide an  
          accurate list to the successor, etc.) or a successor owner (e.g.  
          for failing to hire from the list, terminating without cause,  
          etc.)  In that action, an incumbent employee could seek any of  
          the following: reinstatement and hiring rights; front and back  
          pay; and the value of benefits the employee would have received  
          under the successor employer's benefit plan.  If the incumbent  
          employee is the prevailing party in the litigation, the bill  
          would require the court to award reasonable attorney's fees and  
          costs to him or her. 


          According to the author, the 90-day transition period will give  
          employees the time to search for other employment should the  
          successor opt not to retain the employees on a permanent basis.   
          In short, the measure will give employees a reasonable buffer  
          against the potentially disruptive effects of business decisions  
          beyond their control.   


          Similar Los Angeles Ordinance Survived Legal Challenge.  Many of  
          the legal and constitutional objections that have been raised  
          against this bill were addressed and rejected in a case decided  
          by the California Supreme Court four years ago.  In that case,  
          the court considered challenges to a City of Los Angeles  
          ordinance that is nearly identical to this bill.  The California  
          Grocers Association (CGA) made three claims in challenging that  
          ordinance.  First, to the extent that the ordinance claimed as  
          one of its purposes protection of public health and safety, CGA  
          claimed that it was preempted by the state Health & Safety Code,  
          which expressly occupies the entire health and safety field for  
          retail food facilities.  Second, CGA argued that the ordinance  
          was preempted by the National Labor Relations Act (NLRA) to the  
          extent that, in the case of a unionized business, the ordinance  
          imposed on the successor owner the bargaining and contractual  
          obligations agreed to by an incumbent owner, thereby limiting  
          the successor's right to negotiate its own collective bargaining  
          agreement (CBA).  Third, CGA argued that the ordinance violated  
          the equal protection clauses of the state and federal  








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          constitutions because it relied on several arbitrary  
          classifications, including distinctions between large stores and  
          small stores, and between grocery stores and other businesses.   
          (California Grocers Association v. City of Los Angeles 52 Cal.  
          4th 177, 186-187.)


          Although the trial court and Court of Appeal sided with the CGA  
          on all but the equal protection claims, the California Supreme  
          Court upheld the ordinance against all of the claims raised by  
          CGA.  First, as to whether the ordinance was preempted by the  
          Health & Safety Code, the court reasoned that mere intent  
          language and city council debates suggesting that a major  
          purpose of the ordinance was to protect health and safety - by  
          retaining workers experienced in handling food products - did  
          not make the ordinance a health and safety law.  The Health &  
          Safety Code sets very specific standards relating to how food  
          must be handled in a retail grocery store, the court noted, but  
          the ordinance made no attempt to set standards of this sort.   
          The ordinance, in other words, did not regulate health and  
          safety standards; its proponents simply maintained that keeping  
          experienced workers would have an incidental positive effect on  
          health and safety.  (Id. at 189-193.)  Second, the court  
          rejected the argument that the ordinance was preempted by  
          federal labor law.  The court argued that NLRA occupied the  
          field only as to the regulation of the collective bargaining  
          "process;" federal law does not preempt the field when it comes  
          to regulating conditions of employment that protect all workers,  
          union and nonunion alike.  The court concluded that the  
          ordinance did "not regulate the process by which a bargaining  
          agreement may be reached . . . rather, it temporarily preserves  
          the status quo . . . whether the workforce is unionized or not."  
           (Id. at 200.)  Finally, on the equal protection claims, the  
          court concluded that CGA failed to show that there was no  
          rational basis for the distinctions.  While the problem that the  
          city attempted to address could arise in non-grocery settings,  
          and in grocery stores smaller than 15,000 square feet, a  
          legislative body may reasonably attack a problem incrementally,  
          and it could reasonably conclude that grocery stores had, at  








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          that time, a particularly important impact on both workers and  
          the community.  It was not the court's job to decide if the city  
          was right or wrong on this point, but only to consider whether  
          there was any rational basis for the decision to limit the  
          ordinance in the manner it was drafted.  (Id. at 208-211.) 


          Impact of Los Angeles Ordinance on Area Grocery Industry.  The  
          Los Angeles grocery worker retention ordinance upheld by the  
          California Supreme Court has apparently not led to dire  
          consequences for the grocery industry in Los Angeles.  In  
          support of this bill, the author's office provided the Committee  
          with a letter from U.C. Davis Professor Chris Benner who  
          examined data on the retail grocery industry in the Los Angeles  
          area.  Professor Benner found that grocery store employment in  
          Los Angeles County increased by 18% between 2005, when the  
          measure was enacted, and 2013.  During that same period, the  
          number of grocery stores in the area increased by 8.5%.  Benner  
          suggested that growth in the grocery industry may well be higher  
          than his study suggests, because the study did not include the  
          "general merchandise stores" (Costco, Target, Walmart, etc.)  
          that increasingly sell a substantial amount of groceries. When  
          this bill was heard in the Assembly Labor & Employment Committee  
          last week, the opponents claimed that these figures were  
          misleading because the numbers provided by Professor Benner  
          apply to all of Los Angeles County, whereas the ordinance  
          applied only to the City of Los Angeles.  In addition, opponents  
          claimed that even though the ordinance was enacted in 2005, the  
          enforceability of the ordinance remained uncertain until it was  
          upheld by the California Supreme Court.  While these are  
          certainly valid observations, the opponents have not offered any  
          counter evidence that the Los Angeles ordinance - or any similar  
          ordinances enacted in other California cities - have had a  
          detrimental impact on grocery industry profits, the number of  
          grocery stores, or the number of grocery workers.  


          Statutory Exception to California's At-Will Presumption.  The  
          coalition opposing this bill claims that this bill undermines  








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          the traditional "at-will presumption" embodied in the California  
          Labor Code, which holds that in the absence of an agreement  
          specifying some specified term, the employment relationship may  
          be terminated "at the will of either party" upon notice to the  
          other, without need of giving any "cause" for the termination.   
          However, the key word in California's "at-will presumption," is  
          presumption.  According to the California Supreme Court, the  
          presumption may be overcome not only by express agreement, but  
          also by a statutory exception for reasons of public policy. (Guz  
          v. Bechtel National, Inc. (2000) 24 Cal. 4th 317, 336.)  This  
          bill creates a statutory exception for reasons of public policy.  
             


          Employers Right to Hire Workforce and Negotiate Collective  
          Bargaining Agreement.  While opponents raise a number of  
          objections to this bill, most of them center upon the  
          limitations that the bill imposes on the successor employer's  
          right to hire its own workforce.  By limiting the employer's  
          freedom of choice over who it will hire, opponents point out,  
          the bill also eliminates an employer's opportunity to  
          investigate applicants before hiring them.  This precludes the  
          employer from conducting any pre-hiring background checks and  
          potentially exposes employers to liability for negligent hiring.  
           Opponents also claim that this bill is inconsistent with the  
          NLRA and the case law interpreting it, which generally provides  
          that a successor employer has no duty to retain the employees of  
          the prior employer or to abide by any collective bargaining  
          agreement between the prior employer and incumbent employees'  
          union.  However, as the California Supreme Court observed in the  
          Los Angeles ordinance case, the NLRA may not impose a duty on  
          successor employers to maintain incumbent employees, but that is  
          only because the NLRA is silent on that issue.  In rebutting  
          claims that the ordinance was preempted by NLRA, the California  
          Supreme Court stressed that while there is no obligation on the  
          successor employer under the NLRA, it does not follow that state  
          or local government could not impose such a requirement on  
          successor employers.  In sum, federal law does not require the  
          successor owner to hire incumbent employees, but this does not  








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          mean that it prohibits states or local governments from imposing  
          such requirements so long as they do not interfere with the  
          subject matter of the NLRA: the "process" of collective  
          bargaining.  


          Relatedly, opponents claim that this bill inappropriately forces  
          the successor to abide by a collective bargaining contract that  
          it never negotiated and to which it never consented.  Indeed,  
          the bill does require the successor, at least for the 90-day  
          period, to employ the incumbent workers "under the terms and  
          conditions established by the successor grocery owner and  
          pursuant to the terms of a relevant collective bargaining  
          agreement, if any."  It should be noted, however, that this  
          clause only appears in the subdivision dealing with the 90-day  
          transition period.  The subdivision pertaining to the  
          post-transition period states that any employees offered  
          continued employment will be employed "under the terms and  
          conditions established by the successor grocery employer and as  
          required by law."  The Los Angeles ordinance that was upheld by  
          the California Supreme Court contained this same language.   
          Requiring the successor employer to abide by the terms of a  
          collective bargaining agreement during the retention period did  
          not bind the successor employer to the prior contract, it only  
          require - consistent with the NLRA - that the successor employer  
          maintain the "status quo" during the retention period.  The  
          court stressed that the NLRA only preempts state or local laws  
          that regulate the collective bargaining "process."  The  
          ordinance, like this bill, requires the successors to  
          temporarily abide by the "terms" of the CBA for the 90-day  
          period in order to maintain the status quo, but neither the  
          ordinance nor this bill affects the "process" of collective  
          bargaining.  Once the 90-day period ends, the successor is free  
          to "negotiate its own terms" of employment as it chooses.   
          (California Grocers Association, supra, fn. 17, and accompanying  
          text.)  Put another way: while it is true that the successor  
          cannot be bound by a contract it did not make, this bill does  
          not bind the successor by the contract to employ the workers  
          under the terms of the CBA.  The successor is merely bound by  








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          the statute to maintain the status quo until the end of the  
          90-day period. 


          A Job-Saver or a "Job-Killer."  According to the author and  
          sponsor, this bill seeks to save the jobs of grocery workers  
          who, through no fault of their own, find themselves out of work  
          because of business decisions made by other people.  The  
          California Chamber of Commerce, on the other hand, has targeted  
          this bill as a "job killer."  The Chamber's view assumes that  
          this bill will discourage businesses that might otherwise  
          acquire a failing grocery store and keep it running from doing  
          so.  Although the opponents' coalition letter maintains that the  
          grocery industry is reluctant to take over existing facilities  
          in areas of the state with retention ordinances, the Committee  
          is not aware of any evidence supporting this claim.  Even if  
          there were evidence that Los Angeles, San Francisco, Santa  
          Monica, and Gardena, the cities that have adopted such  
          ordinances, have failing grocery stores that go unpurchased, one  
          could still not say that retention statutes, as opposed to some  
          other characteristic of those cities, was the cause.  


          Proposed Author Amendment.  When this bill was heard in Assembly  
          Labor & Employment Committee, the question was discussed among  
          the author, witnesses, and Committee members whether the  
          provisions of this bill would apply to a grocery store that had  
          already closed and was vacant.  For example, if the grocery  
          store had been closed for some extended period of time, would  
          the successor owner be required to find and offer employment to  
                                                             workers who had already been terminated?  The author indicated  
          in her comments that this was not the intent of the bill;  
          rather, the bill was only intended to apply where an operating  
          grocery store was sold to another company that planned to  
          continue operating the grocery store.  To be sure, the store  
          would most likely need to close for some period during the  
          transition from one owner to the other, but according to the  
          author the bill would only apply to a store that was operating  
          at the time of the sale.  It may well be that this is implicit  








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          in the bill; it allows grocery workers who are employed to  
          continue their employment, but the bill is apparently not  
          intended to ensure employment for workers who had been  
          terminated before the sale.  In order to clarify this intent,  
          the author will take the following amendment in this Committee:


             -    On page 3, line 30 replace "prior to" with "at the time  
               of"


          ARGUMENTS IN SUPPORT:  According to the author, AB 359 will give  
          job protection "to workers in the rapidly changing grocery  
          industry statewide.  Good middle class grocery jobs should not  
          be lost just because shareholders of billion-dollar retailers  
          seek to make even more profits through a Wall Street-style  
          merger."  The author adds that AB 359 "will ensure the proper  
          maintenance of health and safety standards in grocery stores  
          during the larger grocer mergers."   It will do this by keeping  
          "the grocery workers with knowledge of proper sanitation  
          procedures, health regulations, and state laws."  


          The United Food and Commercial Workers Union (UFCW), a  
          co-sponsor, supports AB 359 because it will benefit "the  
          approximately 383, 900 grocery workers in California."  UFCW  
          claims that while the food retail industry has grown at a  
          "staggering rate" over the last twenty years or more, the same  
          cannot be said for the wages of the employees who work in that  
          industry.  "As the largest provider of food to the nation," UFCW  
          concludes, "California should provide workers who sell groceries  
          good jobs - jobs that will allow their families to purchase and  
          enjoy that food themselves."


          ARGUMENTS IN OPPOSITION:  A coalition of business groups  
          spearheaded by the California Chamber of Commerce oppose this  
          "job killer" bill as one that "unfairly forces grocery employer  
          to hire a predecessor's employees, undermines the at-will  








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          employment presumption, and ensures continued union  
          representation, despite any changes in employers."  Along with  
          limiting the employer's freedom to hire, the bill  
          correspondingly eliminates an employer's opportunity to  
          investigate applicants before hiring, thereby precluding the  
          employer from conducting any pre-hiring background checks.  The  
          coalition also argues that this bill undermines the at-will  
          presumption in California law in order to protect incumbent  
          unions.  The bill will do this, according to opponents, because  
          the federal "successor employer" doctrine provides that if the  
          successor employer chooses to hire the majority of the  
          predecessor's employees and is generally in the same business,  
          the successor must recognize the incumbent union and bargain in  
          good faith.  The coalition believes that "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."  While acknowledging that this bill would permit the  
          successor employer to terminate an incumbent employee "for  
          cause," the coalition observes that this is a higher standard  
          than the at-will presumption and will "undoubtedly [lead to]  
          unfair labor practice charges and civil litigation by the  
          employee or incumbent union."  


          In addition to its primary objection that employers should be  
          free to hire their own workers, the opposition also highlights a  
          number of other ways in which this bill is unfair or  
          unreasonable.  For example, the bill will force an employer to  
          adhere to terms of a contract to which it is not a party; the  
          bill will ultimately discourage investment in grocery  
          establishments and jeopardize jobs because a business will not  
          risk investing in a failing grocery store if it cannot select  
          its own workforce; and, finally, there is no evidence that AB  
          359 preserves health and safety standards.  Indeed, the  
          coalition claims that some businesses might be failing because  
          of repeated health and safety violations, and the successor  
          would be forced to hire employees who were engaging in those  
          violations.  








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          The California Grocers Association (CGA) opposes this bill for  
          substantially the same reasons as those put forth by the  
          coalition.   


          REGISTERED SUPPORT / OPPOSITION:




          Support


          UFCW Western States Council (sponsor)


          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


          Community Food and Justice Coalition 










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          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 


          SEIU California


          Tri-Counties Central Labor Council


          UFCW Golden State Local 8


          UFCW Local 135


          UFCW Local 324










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          UFCW Local 648


          UFCW Local 770


          UFCW Local 1167


          UFCW Local 1428


          UFCW Local 1442




          Opposition


          Building Owners and Managers Association of California


          California Business Properties Association


          California Chamber of Commerce


          California Grocers Association


          California Retailers Association


          Camarillo Chamber of Commerce


          Chamber Alliance of Ventura and Santa Barbara Counties








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          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




          Analysis Prepared by:Thomas Clark / JUD. / (916) 319-2334









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