BILL ANALYSIS Ó
AB 359
Page 1
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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