BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: AB 359 Hearing Date: June 24,
2015
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|Author: |Gonzalez |
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|Version: |May 18, 2015 |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Alma Perez-Schwab |
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Subject: Grocery workers.
KEY ISSUES
Should the Legislature establish a worker retention requirement
when there is a change in ownership or control of a grocery
establishment requiring that eligible grocery workers be
retained by the successor employer for a transition employment
period of at least 90 days?
Should the successor grocery employer be required to consider
offering the worker continued employment if at the end of the
90-day transition period the employee's work performance is
satisfactory?
Should the successor employer be required to employ these
workers during this transition period under the successor's
terms and conditions and pursuant to the terms of a relevant
collective bargaining agreement negotiated by the incumbent
employer and representatives?
ANALYSIS
Existing law establishes the Displaced Janitor Opportunity Act
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(The Act) which requires contractors and subcontractors that are
awarded contracts or subcontracts by an awarding authority to
provide janitorial or building maintenance services within the
California, to follow specified procedures when a service
contract is being terminated or will be terminated.
(Labor Code §1060-65)
Existing law requires the terminated contractor, within three
working days after notification by the awarding body of the
termination of the contract, to provide to the successor
contractor, the name, date of hire, and job classification of
each employee employed at the site or sites covered by the
terminated service contract at the time of the contract
termination.
Existing law requires that the successor contractor or
subcontractor do the following:
Retain, for a 60-day transition employment period,
employees who have been employed by the terminated
contractor or its subcontractors, if any, for the preceding
four months or longer at the site or sites covered unless
the successor contractor or subcontractor has reasonable
and substantiated cause not to hire a particular employee
based on his/her performance or conduct while working under
the terminated contract.
Make a written offer of employment to each employee
stating the time within which the employee must accept that
offer (not less than 10 days). Nothing in The Act requires
that the successor contractor or subcontractor pay the same
wages or offer the same benefits as were provided by the
prior contractor or prior subcontractor.
If at any time the successor contractor or subcontractor
determines that fewer employees are needed to perform
services under the new service contract, the successor
contractor or subcontractor shall retain employees by
seniority within the job classification.
During the initial 60-day transition employment period,
the successor contractor or subcontractor shall not
discharge without cause an employee retained pursuant to
The Act. Cause shall be based only on the performance or
conduct of the employee.
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At the end of the 60-day transition employment period,
the successor contractor or subcontractor shall provide a
written performance evaluation to each employee retained.
If the employee's performance during the 60-day period
is satisfactory, the successor contractor or subcontractor
shall offer the employee continued employment which shall
be at-will employment under which the employee may be
terminated without cause.
Existing law provides that an employee who was not offered
employment or who has been discharged in violation of The Act
may bring an action against a successor contractor or
subcontractor in any superior court of the State of California
having jurisdiction. Upon finding a violation of The Act, the
court shall award backpay, as specified, including the value of
benefits, for each day during which the violation occurred, as
well as reasonable attorneys' fees and costs.
Additionally, 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. Similarly, the
successor contractor or subcontractor is required to make a
written offer of employment to each employee to be rehired
stating the time within which the employee must accept that
offer. The wages and benefits do not need to be at the same
level as those provided by the previous contractor or
subcontractor and an aggrieved employee may bring an action
against the successor contractor or subcontractor in any
superior court having jurisdiction. (Labor Code Section 1070 et
seq.)
This Bill would establish a worker retention requirement for the
change in ownership or control of grocery establishments, as
specified. Specifically, this bill:
1) 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.
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2) Requires the successor grocery employer to maintain a
preferential hiring list of these eligible grocery workers
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.
3) 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. During this 90-day
transition 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.
4) 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.
5) Provides that during the 90-day transition employment
period, the successor grocery employer shall not discharge
without cause an eligible grocery worker.
6) 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 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.
7) Requires the incumbent grocery employer to post public
notice of the change in control that must include, among
other things, the name and contact information of the
successor grocery employer and the effective date of the
change in control.
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8) Defines, among others, the following terms:
a) "Grocery establishment" means a retail store that is
over 15,000 square feet in size and that sells primarily
household foodstuffs for offsite consumption, as
specified.
b) "Incumbent grocery employer" means the person that
owns, controls, or operates a grocery establishment prior
to a change in control.
c) "Successor grocery employer" means the person that
owns, controls, or operates a grocery establishment after
a change in control.
d) "Eligible grocery worker" means individuals whose
primary place of employment is at the grocery
establishment subject to a change and who have worked for
the incumbent grocery employer for at least six months
prior to the transfer. However, it excludes managerial,
supervisory or confidential employees.
e) "Change in control" means 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.
9) Specifies that parties subject to this bill may, by
collective bargaining agreement, provide that the agreement
supersedes the requirements of this bill.
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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, 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 sells fresh
fruits and vegetable in amounts 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.
11) Specifies that this bill does not preempt any city,
county, or city and county ordinances that provide greater
protection to eligible grocery workers.
12) Establishes specified recordkeeping requirements for the
incumbent grocery employer and successor grocery employer
to document compliance with these requirements.
13) Makes related legislative findings and declarations.
COMMENTS
1. Background on Wages and Working Conditions of Food Retail
Workers:
A 2014 study by the Food Labor Research Center at U.C.
Berkeley (commissioned by the United Food and Commercial
Workers) titled, "Shelved: How Wages and Working Conditions
for California's Food Retail Workers Have Declined as the
Industry has Thrived," 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
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."
2. Local Ordinances on the Issue:
In December 2005, the City of Los Angeles adopted the Grocery
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Worker Retention Ordinance which required that grocery stores
of a specific size (15,000 sq. ft. or larger) that undergo a
change of ownership to do the following during a 90-day
transition period:
1. The incumbent owner must prepare a list of employees
with at least six months' employment as of the date of
transfer in ownership, and the successor employer must
hire from that list during the transition period.
2. During the transition period, the hired employees
may be discharge only for cause.
3. At the conclusion of the transition period, the
successor employer must prepare a written evaluation of
each employee's performance.
4. If the employee's performance is satisfactory, the
employer must consider offering continued employment.
5. If the workforce is unionized, however, the union
and the employer may agree on terms that supersede the
Ordinance.
The California Grocers Association filed a complaint against
the City of Los Angeles on the grounds that it was preempted
by provision of the Health and Safety Code, the Labor Code,
and federal labor law, and that it violated the equal
protection provisions of the state and federal Constitutions.
The case was appealed and a final decision by the Supreme
Court of California was issued on July 18, 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. The court also concluded that the
ordinance was fully consistent with both state and federal
equal protection clauses. California Grocers Association v.
City of Los Angeles, 52 Cal. 4th 177 (2011).
This worker retention approach is also 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 substantially similar 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). Additionally,
similar worker retention requirements can be found throughout
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the United States including New York City (building service
workers), Philadelphia (service contract workers), Providence
Rhode Island (hospitality and building service workers), and
D.C. (health care, food service, and janitorial workers).
3. Research on the 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). The 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 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, critics of the bill argue that this research
encompasses significantly more time and geography than the
City of LA 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 CA Supreme Court. In addition, they
argue that the 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.
4. Need for this bill?
Existing law already contains specified worker retention
requirements for certain categories of workers. For example,
in the janitorial industry, existing law requires a successor
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contractor to retain employees for 60 days and to offer
permanent employment to satisfactory employees at the end of
the 60-day period. 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.
Proponents of the measure argue that good middle class grocery
jobs and the benefits that come with them should not be lost
just because shareholders of billion-dollar retailers seek to
make even more profits through a Wall Street-style merger. In
1990, a Wall Street Journal Pulitzer Prize winning article
took a look at the impact of the 1986 Safeway buy-out which
returned to its new buyers $7.2 billion from an initial $129
million investment. According to the article, "?63,000
managers and workers were cut loose from Safeway through store
sales or layoffs. 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 the part-time work force." ("Safeway Buy-Out? Take
a Trip down Memory Lane," March 5, 2014)
The author and sponsors believe that this bill is necessary to
protect grocery workers who can be terminated when
billion-dollar grocery store corporations merge to generate
more profits. The bill would establish a worker retention
requirement for specified grocery establishments that is
similar to the janitorial industry retention requirement
referenced above.
5. Staff Comments :
As noted above, existing law contains similar employee
retention requirements for employees in the janitorial and
building maintenance industry, under the Displaced Janitor
Opportunity Act enacted in 2001, as well as employees in
public transit service contracts enacted in 2003. Both
sections of the Labor Code contain similar retention and
procedural requirements. Provisions governing public transit
service contracts require that the existing contractor provide
the name, addresses, dates of hire, wages, benefit levels, and
job classifications of employees to the successor contractor.
Provisions of the Displaced Janitor Opportunity Act, on the
other hand, only requires that the name, date of hire and job
classification of employees be provided. Additionally, under
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the public transit service contracts, employees are to be
retained for a 90 day transition period while displaced
janitors are only required to be retained for 60 days.
Furthermore, the public transit retention provisions require
employee retention unless there is reasonable and
substantiated cause not to, however, that cause is limited to
performance or conduct under the prior contract or employee
failure to pass any controlled substances and alcohol test,
physical examination, criminal background check, or other
standard hiring qualification lawfully required by the
successor contractor or subcontractor. Provisions of the
Displaced Janitor Opportunity Act, on the other hand, require
the retention of employees unless the successor has reasonable
and substantiated cause not to hire based on performance or
conduct while working under the terminated contract. However,
these provisions do not include any background checks or
hiring qualifications.
This bill proposes that grocery workers be retained for 90
days and requires the incumbent employer to provide to the
successor the name, address, date of hire, and employment
occupation classification of each eligible grocery worker.
This bill, like the displaced janitor provisions, does not
require any employee to pass any controlled substances and
alcohol test, physical examination, or criminal background
check.
The Committee may wish to consider to what extent the
different retention provisions in Labor Code [and proposed
with this bill] should mirror each other for equity and
consistency.
Additionally, in their opposition letter, the California
Grocers Association point to an issue with the bill. They
state that under the proposed bill, the incumbent grocery
employer is required to post and maintain signage at the
grocery establishment regarding the change of control prior to
sale and until the establishment is fully operational and open
to the public under the successor employer. However, they
argue, the incumbent grocery employer's right to control the
property generally terminates with the sale. Once the sale is
completed, the incumbent employer would generally have no
authority or legal standing to dictate the place and manner of
postings.
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The author may wish to amend the bill to state that the
successor grocery employer shall ensure that the required
notice continues to be posted until the establishment is fully
operational and open to the public.
6. Proponent Arguments :
According to the author, there are currently no state-level
protections for grocery workers who can be terminated, through
no fault of their own, when billion-dollar grocery store
corporations merge together to generate more profits.
Proponents argue that a change of workers raises public health
concerns since the effects are carried over to the grocery
store's clientele. They argue that experienced workers possess
valuable knowledge and skills regarding proper sanitation
procedures and local/state health regulations to ensure high
standards of food safety. AB 359 will allow grocery workers 90
days to work at the successor grocery store, which allows a
reasonable amount of time for the successor employer to hire
them if they are satisfied with their performance or for the
employee to pursue employment elsewhere.
Proponents state that there are approximately 383,900 grocery
workers in California that seek to benefit from this policy.
According to a report recently released by the Food Labor
Research Center at the University of California, Berkeley,
more than half of all California food retail workers earned
less than the hourly wage needed to live above the Census
defined supplemental poverty measure. Proponents further argue
that 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. They believe that 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.
Proponents argue that 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.
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Overall, proponents argue that this bill ensures workers have
a fair chance to prove that they are capable of meeting the
needs of the new employer.
7. Opponent Arguments :
A coalition of employers 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, ensures continued union representation and
subjects employers to litigation. Opponents argue the
following in opposition to this bill:
Denies Employers the basic choice of whom to hire in
their workforce. They believe the choice of whom an
employer wants to hire and retain should be left to the
employer, not the government. This bill establishes an
unequivocal mandate that precludes the successor employer
from conducting any pre-hiring background checks or
interviews to determine if the employees of the
predecessor meet the unique and specific employment
criteria of the subsequent employer.
The bill is designed to ensure that an incumbent
union for the 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. 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 - essentially
forcing an employer to offer continued employment to the
predecessor's workforce ensuring recognition of the
incumbent union. They believe that not offering
employment could lead to unfair labor practice charges
and civil litigation by the employees or incumbent union.
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Similarly, they argue that the bill forces employers
to adhere to terms of a contract to which it is not a
party. The bill would require that employees be retained
according to the "terms and conditions" established by
the successor grocery employer and pursuant to the terms
of a relevant collective bargaining agreement (CBA).
Thereby forcing the successor employer to abide by these
contractual provisions, even though the successor
employer is not actually a party to that CBA. They argue
that this conflicts with the CA Supreme Court decision in
CA Grocers Association v. City of Los Angeles, wherein
the Court agreed that a successor grocery employer
covered under the LA ordinance had no duty to bargain or
engage in negotiations with the incumbent bargaining
representative until after the transition period expired.
They conclude that it is unreasonable to suggest that a
successor employer has a duty to abide by the terms of
any existing CBA during the transition period.
Also writing in opposition is the CA Grocers Association which
raises a number of concerns. Among other things, they state
that their member companies experience with this concept has
shown that they have a chilling effect on commerce and hamper
efforts to transition current grocery businesses to new
ownership rather than close locations outright. 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. They also argue
that the bill targets only certain types of grocery retail,
they argue that if the compelling interest is ensuring the
welfare of residents then the bill should apply to all retail
outlets selling foodstuff not just those that meet the square
footage and involvement parameters.
In conclusion, opponents argue that this bill will not impact
the unemployment rate or provide stability to employees in the
grocery industry. Instead, they argue, eliminating a successor
grocery employer's ability to voluntarily choose its own
workforce will ultimately discourage those employers from
investing in failing grocery stores or even taking over an
existing grocery establishment.
8. Prior Legislation :
AB 350 (Solorio) of 2011: Failed passage on the Senate Floor
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AB 350 would have renamed the Displaced Janitor Opportunity
Act to the Displaced Property Service Employee Opportunity Act
and made the provisions of the act applicable to property
services, which included licensed security, building
maintenance, window cleaning, and food cafeteria services.
SB 1521 (Alarcon) of 2004: Vetoed by the Governor
This bill would have (1) extended, from 60 to 90 days, the
transition employment period for retaining janitors under the
Displaced Janitor Opportunity Act, and would have (2) expanded
responsibility to building owners.
SB 2850 (Ridley-Thomas) of 2004: Vetoed by the Governor
This bill would have enacted the Private Security Service
Assurance Act, which would have required contractors awarded
contracts to provide private security to retain, for a period
of 90 days, certain employees who were employed at that site
by the previous contractor. The provisions of this bill would
have mirrored the Displaced Janitor Opportunity Act.
SUPPORT
Community Food and Justice Coalition (Co-Sponsor)
Roots of Change (Co-Sponsor)
United Food and Commercial Workers Western States Council
(Co-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 Association
California Teamsters Public Affairs Council
Food Chain Workers Alliance
Hunger Action Los Angeles
Los Angeles Alliance for a New Economy
North Valley Labor Federation
Orange County Communities for Responsible Development
Orange County Labor Federation, AFL-CIO
Partnership for Working Families
Service Employees International Union
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
Western Center on Law & Poverty
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
East Valley Business Legislative Advocacy Committee
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
Redondo Beach Chamber of Commerce
San Diego Regional Chamber of Commerce
San Jose Silicon Valley Chamber of Commerce
Santa Maria Chamber of Commerce Visitors and Convention Bureau
South Bay Association of Chambers of Commerce
Southwest California Legislative Council
Torrance Area Chamber of Commerce
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