Existing law regulates various aspects of the workplace and employee safety and health.

This bill, upon a change in control of a grocery establishment, would require an incumbent grocery employer to prepare a list of specified eligible grocery workers for a successor grocery employer, and would require the successor grocery employer to hire from this list during a 90-day transition period. The bill would require the successor grocery employer to retain eligible grocery workers for a 90-day period, prohibit the successor grocery employer from discharging those workers without cause during that period, and, upon the close of that period, require the successor grocery employer to consider offering continued employment to those workers. The bill would exempt a grocery establishment located in a food desert from the bills requirements, as provided. The bill would provide that a collective bargaining agreement may supersede these requirements and that these provisions do not preempt any local ordinances that provide equal or greater protection to eligible grocery workers.

This bill would provide that its provisions are severable.

Existing law regulates various aspects of the workplace and employee safety and health.

This bill, upon a change in control of a grocery establishment, would require an incumbent grocery employer to prepare a list of specified eligible grocery workers for a successor grocery employer, and would require the successor grocery employer to hire from this list during a 90-day transition period. The bill would require the successor grocery employer to retain eligible grocery workers for a 90-day period, prohibit the successor grocery employer from discharging those workers without cause during that period, and, upon the close of that period, require the successor grocery employer to consider offering continued employment to those workers. The bill would exempt a grocery establishment located in a food desert from the bills requirements, as provided. The bill would provide that a collective bargaining agreement may supersede these requirements and that these provisions do not preempt any local ordinances that provide equal or greater protection to eligible grocery workers.

This bill would provide that its provisions are severable.

Existing law regulates various aspects of the workplace and employee safety and health.

This bill, upon a change in control, as defined, control of a grocery establishment, would require an incumbent grocery employer, as defined, employer to prepare a list of specified eligible grocery workers, as defined, workers for a successor grocery employer, as defined, and would require the successor grocery employer to hire from this list during a 90-day transition period. The bill would require the successor grocery employer to retain eligible grocery workers for a 90-day period, prohibit the successor grocery employer from discharging those workers without cause during that period, and, upon the close of that period, require the successor grocery employer to consider offering continued employment to those workers. The bill would additionally authorize eligible grocery workers to bring a cause of action against an incumbent or successor grocery employer for a violation of these provisions, and would specify what may be awarded pursuant to this cause of action. The bill would exempt a grocery establishment located in a food desert from the bills requirements, as provided. The bill would provide that a collective bargaining agreement may supersede these requirements and that these provisions do not preempt any local ordinances that provide equal or greater protection to eligible grocery workers.

This bill would provide that its provisions are severable.

Existing law regulates various aspects of the workplace and employee safety and health.

This bill would require, bill, upon a change in control, as defined, of a grocery establishment, that would require an incumbent grocery employer, as defined, to prepare a list of specified eligible grocery workers, as defined, for a successor grocery employer, as defined, and would require that the successor grocery employer to hire from this list during a 90-day transition period. The bill would require the successor grocery employer to retain eligible grocery workers for a 90-day period, during which time an employee may only be discharged for cause, prohibit the successor grocery employer from discharging those workers during that period, and, upon the close of that period, require the successor grocery employer would be required to consider offering continued employment to these those workers. The bill would additionally authorize eligible grocery workers to bring a cause of action against an incumbent or successor grocery employer for a violation of these provisions, and would specify what may be awarded pursuant to this cause of action. The bill would exempt a grocery establishment located in a food desert from the bills requirements, as provided. The bill would provide that a collective bargaining agreement may supersede these requirements and that these provisions do not preempt any local ordinances that provide equal or greater protection to eligible grocery workers.

This bill would provide that its provisions are severable.

Existing law requires an employer to indemnify his or her employee for losses caused by the employers want of ordinary care.

This bill would make nonsubstantive changes to that provision.

 THIRD READING 

Bill No: AB 359

Author: Gonzalez (D), et al.

Amended: 5/18/15 in Assembly

Vote: 21

SENATE LABOR & IND. REL. COMMITTEE: 4-1, 6/24/15

AYES: Mendoza, Jackson, Leno, Mitchell

NOES: Stone

ASSEMBLY FLOOR: 46-27, 5/26/15 - See last page for vote

SUBJECT: Grocery workers

SOURCE: Community Food and Justice Coalition

Roots of Change

United Food and Commercial Workers Western States Council

DIGEST: This bill establishes a worker retention requirement, upon a change in control of a grocery establishment, that requires an incumbent employer to prepare a list of specified eligible grocery workers for a successor grocery employer, and requires the successor grocery employer to hire from this list during a 90-day transition period. This bill requires the successor grocery employer to retain eligible grocery workers for a 90-day period, prohibits the successor grocery employer from discharging those workers without cause during that period, and, upon the close of that period, requires the successor grocery employer to consider offering continued employment to those workers.

ANALYSIS:

Existing law:

1. Establishes the Displaced Janitor Opportunity Act (The Act) which requires contractors and subcontractors that are awarded contracts or subcontracts by an awarding authority to provide janitorial or building maintenance services, to follow specified procedures when a service contract is being terminated.

2. 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.

3. Requires that the successor contractor or subcontractor do the following:

1. Retain, for a 60-day transition period, employees who have been employed by the terminated contractor, if any, for the preceding four months or longer unless the successor employer has reasonable and substantiated cause not to hire a particular employee based on his/her performance or conduct while working under the terminated contract.

2. During the initial 60-day transition employment period, the successor employer shall not discharge without cause any retained employee. Cause shall be based only on the performance or conduct of the employee.

3. At the end of the 60-day transition period, the successor employer shall provide a written performance evaluation to each employee retained. If the employee’s performance is satisfactory, the successor contractor or subcontractor shall offer the employee continued employment (made in writing) which shall be at-will employment.

4. 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.

4. 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 employer in any superior court of the state having jurisdiction and seek back pay, as specified, as well as reasonable attorneys’ fees and costs.

5. Requires, in the public transit industry, 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. 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 employer in any superior court having jurisdiction.

This bill:

1. Establishes a worker retention requirement for the change in ownership or control of grocery establishments, as specified.

2. Requires an incumbent grocery employer to provide to the successor grocery employer the name, address, date of hire, and employment occupation classification of each eligible grocery worker.

3. Requires the successor grocery employer to maintain a preferential hiring list of eligible grocery workers. The successor grocery employer shall retain each eligible grocery worker hired from the list for a period of at least 90 days during which the eligible grocery workers shall be employed under the terms and conditions established by the successor 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 worker.

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

7. Requires the incumbent employer to post public notice of the change in control that must include the name and contact information of the successor employer and the effective date of the change in control, as specified.

8. Defines, among others, the following terms:

   1. "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.

   2. "Eligible grocery worker" means individuals whose primary place of employment is at the grocery establishment 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.

   3. "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. Exempts grocery establishments that will be located in geographic areas designated by the U.S. Department of Agriculture as a "food desert," as specified.

Background

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 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 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).”

Local Ordinances on the Issue. In December 2005, the City of Los Angeles adopted the Grocery 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 90 days, the employees may be discharge only for cause.

3. At the conclusion of the 90 days, 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. The case was appealed and a final decision by the Supreme Court of California was issued on July 18, 2011, stating that the 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 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).

Prior Legislation

AB 350 (Solorio, 2011) would have renamed the Displaced Janitor Opportunity Act the Displaced Property Service Employee Opportunity Act and would have extended those provisions of the act to property services, which included licensed security, building maintenance, window cleaning, and food cafeteria services. AB 350 failed passage on the Senate Floor.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 6/24/15)

Community Food and Justice Coalition (co-source)

Roots of Change (co-source)

United Food and Commercial Workers Western States Council (co-source)

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

UFCW Local 648

UFCW Local 770

UFCW Local 1167

UFCW Local 1428

UFCW Local 1442

Western Center on Law & Poverty

OPPOSITION: (Verified 6/24/15)

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

ARGUMENTS IN SUPPORT: 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.

ARGUMENTS IN OPPOSITION: Opponents argue that this bill 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. They argue that 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.

Similarly, they argue that this bill forces employers to adhere to terms of a contract to which it is not a party. This bill requires 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.

ASSEMBLY FLOOR: 46-27, 5/26/15

AYES: Alejo, Bonilla, Bonta, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooper, Dababneh, Daly, Dodd, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Atkins

NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Brown, Chang, Cooley, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Jones, Kim, Lackey, Levine, Maienschein, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk

NO VOTE RECORDED: Bloom, Chávez, Eggman, Harper, Linder, Mathis, Salas

Prepared by: Alma Perez / L. & I.R. / (916) 651-1556

7/13/15 9:55:15

**** END ****

SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS

Senator Tony Mendoza, Chair

2015 - 2016 Regular

Bill No: AB 359 Hearing Date: June 24, 2015

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 (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.

• 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.

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.

8. Defines, among others, the following terms:

   1. "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.

   2. "Incumbent grocery employer" means the person that owns, controls, or operates a grocery establishment prior to a change in control.

   3. "Successor grocery employer" means the person that owns, controls, or operates a grocery establishment after a change in control.

   4. "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.

   5. "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.

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:

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

    2. 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 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 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 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 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 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.

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. 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.

• 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

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

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

-- END –

ASSEMBLY THIRD READING

ATR Bill Id:AB 359

Author:(Gonzalez)

As Amended Ver:May 18, 2015

Majority vote

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

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

2. Defines "incumbent grocery employer" as the person that owns, controls, or operates a grocery establishment at the time of a change in control.

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

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

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

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

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

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

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

10. Provides that during the 90-day transition employment period, the successor grocery employer shall not discharge without cause an eligible grocery worker.

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

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

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

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

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

    2. The grocery establishment stocks and during normal business hours 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.

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

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

17. Makes other related changes.

18. Makes related legislative findings and declarations.

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

COMMENTS: This bill is sponsored by the United Food and Commercial Workers Union Western States Council (UFCW) and would establish a worker retention requirement for specified grocery establishments. UFCW indicates that this measure is modeled after a grocery worker retention ordinance enacted by the City of Los Angeles in 2005. In 2011, the California Supreme Court held that the Los Angeles ordinance was not preempted as intruding upon either matters of health and safety already regulated by the state or matters of employee organization and collective bargaining fully occupied by federal labor law. California Grocers Association v. City of Los Angeles, 52 Cal. 4th 177 (2011). The court also concluded that the ordinance was fully consistent with both state and federal equal protection clauses. Id.

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

The sponsor argues 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. Retailers that offer workers such an environment are the most successful in California; others should follow their example.

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

Primarily, they argue that this bill denies employers the basic choice of whom to hire in their workforce. Absent unlawful conduct by the employer such as discrimination or retaliation, the choice of whom an employer wants to hire and retain should be left to the employer, not the government. In addition, opponents argue that this bill undermines the at-will presumption in order to protect the incumbent union. Similarly, opponents argue that this bill forces an employer to adhere to terms of a contract to which it is not a party.

In addition, the California Grocers Association states that their experience with similar local ordinances has shown that similar worker retention mandates have a chilling effect on commerce and hamper efforts to transition current grocery businesses to new ownership rather than close locations outright.

Analysis Prepared by: Ben Ebbink / L. & E. / (916) 319-2091 FN: 0000447

ASSEMBLY SECOND READING

ATR Bill Id:AB 359

Author:(Gonzalez)

As Amended Ver:May 14, 2015

Majority vote

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

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

2. Defines "incumbent grocery employer" as the person that owns, controls, or operates a grocery establishment at the time of a change in control.

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

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

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

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

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

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

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

10. Provides that during the 90-day transition employment period, the successor grocery employer shall not discharge without cause an eligible grocery worker.

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

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

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

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

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

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

    2. The grocery establishment stocks and during normal business hours 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.

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

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

18. Makes other related changes.

19. Makes related legislative findings and declarations.

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

COMMENTS: This bill is sponsored by the United Food and Commercial Workers Union Western States Council (UFCW) and would establish a worker retention requirement for specified grocery establishments. UFCW indicates that this measure is modeled after a grocery worker retention ordinance enacted by the City of Los Angeles in 2005. In 2011, the California Supreme Court held that the Los Angeles ordinance was not preempted as intruding upon either matters of health and safety already regulated by the state or matters of employee organization and collective bargaining fully occupied by federal labor law. California Grocers Association v. City of Los Angeles, 52 Cal. 4th 177 (2011). The court also concluded that the ordinance was fully consistent with both state and federal equal protection clauses. Id.

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

The sponsor argues 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. Retailers that offer workers such an environment are the most successful in California; others should follow their example.

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

Primarily, they argue that this bill denies employers the basic choice of whom to hire in their workforce. Absent unlawful conduct by the employer such as discrimination or retaliation, the choice of whom an employer wants to hire and retain should be left to the employer, not the government. In addition, opponents argue that this bill undermines the at-will presumption in order to protect the incumbent union. Similarly, opponents argue that this bill forces an employer to adhere to terms of a contract to which it is not a party.

In addition, the California Grocers Association states that their experience with similar local ordinances has shown that similar worker retention mandates have a chilling effect on commerce and hamper efforts to transition current grocery businesses to new ownership rather than close locations outright.

Analysis Prepared by: Ben Ebbink / L. & E. / (916) 319-2091 FN: 0000379

Date of Hearing: May 12, 2015

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

ABPCA Bill Id:AB 359

Author:(Gonzalez) – As Amended Ver: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 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 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 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 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 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 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. 4^th 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 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 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 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 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 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 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.

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

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

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

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

Date of Hearing: May 6, 2015

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Roger Hernández, Chair

ABPCA Bill Id:AB 359

Author:(Gonzalez) – As Amended Ver:March 26, 2015

SUBJECT: Grocery workers

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

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

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

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

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

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

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

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

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

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

10. Provides that during the 90-day transition employment period, the successor grocery employer shall not discharge without cause an eligible grocery worker.
    
    

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

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

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

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

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

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

    2. The grocery establishment stocks and during normal business hours 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.
       
       

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

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

18. Makes other related changes.
    
    

19. Makes related legislative findings and declarations.

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

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

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

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

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

RECENT RESEARCH ON WAGES AND WORKING CONDITIONS OF FOOD RETAIL WORKERS

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

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

RESEARCH ON LOS ANGELES ORDINANCE SUBMITTED BY SPONSOR

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

That letter states the following:

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

…[T]he number of stores in Los Angeles County alone grew from approximately 1,170 in 2006 to 1,280 in 2013. This is more than an 8.5% increase…

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

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

ARGUMENTS IN SUPPORT

The sponsor of this bill, UFCW, argues that it will protect California’s grocery workers from being dismissed when a large grocery store goes through a change of ownership. Writing in support of this bill, they state the following:

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

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

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

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

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

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

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

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

ARGUMENTS IN OPPOSITION

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

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

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

"[This bill] is designed to ensure that an incumbent union who has been elected as the bargaining representative for the prior employer will remain the bargaining unit for the successor employer. Under the federal “successor employer” doctrine, a subsequent employer who intends and voluntarily chooses to (1) hire the majority of its predecessor’s employees and (2) is generally in the same business must recognize the incumbent union and bargain with it in good faith. See NLRB v. Burns Int’l Security Services, Inc., 406 U.S. 272, 281 (1972).

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

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

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

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

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

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

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

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

…While it is appreciated that the author attempts to address issues related to vacant locations, the “exception” included in the bill is so limited and subjective as to be meaningless. Only locations in USDA-designated “food deserts” are included and only if the location has been closed for at least six years. Those restrictions are limiting enough, but add to that the requirement that the new establishment stock and sell fresh fruits and vegetables, “…in amounts and of a quality that is comparable to what the establishment sells in its three geographically closest stores…” outside the food desert and there is no way for a grocery establishment to meet the exception criteria. There will always be an avenue to allege the offerings are not “similar” enough. In addition, the criteria inexplicably limits the exception to companies with four store locations or more. Smaller companies would be singled out for arbitrary application of the worker retention requirement until they opened their fifth store. Assuming, of course, the location and length of closure criteria are met…

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

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

This bill is double referred to Assembly Judiciary Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

American Federation of State, County and Municipal Employees

California Labor Federation, AFL-CIO

California Professional Firefighters

California Rural Legal Assistance Foundation

California School Employees

California Teamsters Public Affairs Council

Community Food and Justice Coalition (co-sponsor)

Community Health Council, Inc.

Consumer Attorneys of California

Hunger Action LA

Los Angeles Alliance for a New Economy

Orange County Communities for Responsible Development

Partnership for Working Families

Professional Engineers in California Government

Roots of Change (co-sponsor)

SEIU California

Tri-Counties Central Labor Council

UFCW Golden State Local 8

UFCW Local 135

UFCW Local 324

UFCW Local 648

UFCW Local 770

UFCW Local 1167

UFCW Local 1428

UFCW Local 1442

UFCW Western States Council (co-sponsor)

Opposition

Building Owners and Managers Association of California

California Business Properties Association

California Chamber of Commerce

California Grocers Association

California Retailers Association

Camarillo Chamber of Commerce

Chamber Alliance of Ventura and Santa Barbara Counties

El Centro Chamber of Commerce and Visitors Bureau

Family Business Association

Fullerton Chamber of Commerce

International Council of Shopping Centers

NAIOP – Commercial Real Estate Development Association

Orange Chamber of Commerce

Oxnard Chamber of Commerce

Rancho Cordova Chamber of Commerce

San Jose Silicon Valley Chamber of Commerce

Santa Maria Chamber of Commerce Visitors and Convention Bureau

Southwest California Legislative Council

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