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California Supreme Court upholds LA employee-retention ordinance

July 18, 2011

A long-running feud between major Los Angeles grocery stores and grocery workers’ unions came to a close today, with the unions coming out on top.

The case, California Grocers Assoc. v. City of Los Angeles, involved an ordinance passed in December of 2005, after a number of Southern California grocery store acquisitions led to layoffs of a number of (mostly unionized) workers by the acquiring companies.  The ordinance requires the buyer of a large grocery store to immediately prepare a list of employees of the purchased store with six months or greater tenure.  For the first 90 days after the purchase, the acquirer can only hire off of that that list — i.e., can only hire the employees of the former owner.  During the same 90 days, workers hired can only be discharged for cause.  At the end of the 90-day period, the buyer must evaluate each employee’s performance in writing, and must “consider” offering future employment to those workers.  The buyer is free, however, to fire all the former employees after the 90-day transition period if it wishes.  Last but not least, the provisions of the ordinance can be superseded by a collective bargaining agreement between the buyer and a valid employee union.

The (purely intentional) effect of the ordinance was to preserve the power of unions that represented the workers prior to the acquisition, and to permit an opportunity for them to reorganize during the transition period.

The grocers association asserted the law was preempted by both state law concerning health and sanitation and the federal National Labor Relations Act.  The association prevailed at both the trial and and appellate levels, albeit by a divided panel on appeal.  The California Supreme Court, however, reversed.

After an extensive discussion of preemption — where a local agency’s ordinance can be struck down if it conflicts with a higher authority’s law, or intrudes without conflicting into an area the higher authority has fully occupied — the court rejected the grocers’ contentions on both counts.

On the health and safety issue, the court concluded:

[T]he Ordinance imposes no substantive food safety standards.  Its provisions regulate, for certain grocery stores during ownership transitions, how a new owner may select its workforce.  It does not speak to how employees must conduct themselves to ensure sanitation, how food should be handled or transported, how grocery stores should be designed or cleaned, or any of the various other topics for which the Retail Food Code sets out exclusive state standards.  The face of the Ordinance thus discloses no incursion into the exclusive realm reserved for the state by [the] Health and Safety Code. . . ; the former regulates employment, not food safety, while the latter regulates food safety, not employment.

With regard to the asserted NLRA preemption, the court rejected the grocers’ contention that federal labor law guaranteed successor employers the right to pick and choose whom they wished to employ, free of local regulation, holding that:

[The ordinance does not enter] into the substantive aspects of the bargaining process to an extent Congress has not countenanced.  It does not regulate the process by which a bargaining agreement may be reached.  Nor does the Ordinance speak directly to the process of organizing; rather, it temporarily preserves the status quo, whatever that might be, whether the workforce is unionized or not.  And, while the Ordinance does confer on each employee, as an individual, certain rights the individual employees might otherwise have obtained only through organizing and collective bargaining, it is well established that so doing is no basis for [federal] preemption.

The court expressly and firmly rejected the concept, advocated by the grocers, of “a new owner’s right, untouchable by state or local regulation, not to hire its predecessor’s employees upon acquiring a new store.”

There is a possibility of US Supreme Court involvement in this case, given the court’s analysis of the federal NLRA.  So this may not be the last word on the subject.

Does this herald the direction of the new (and still forming) Cantil-Sakauye court?  It is hard to say.  The decision was quite employee-friendly and union-friendly.  One other recent employment decision from this court showed the same bent.  Two cases do not make a trend, but it may be giving employers, and their lawyers, some heartburn — especially as we wait for Brinker.

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