In general employers are allowed to choose their workers. But that's not the case for Los Angeles grocery store owners. That's because last spring the city became one of several California cities to pass the controversial Grocery Worker Retention Ordinance.

This law mandates that when a grocery store changes ownership, the new owner must retain the old employees for 90 days before making any hiring or firing decisions with some exceptions.

Legislators in Los Angeles claim the ordinance helps sustain the stability of the grocery workforce and thus the stability of communities, which depend on local stores for food and other necessities.

“A lot of grocery personnel, especially if they deal with perishable items, have special training to comply with state and local standards,” says Theresa Stamus, assistant city attorney for Los Angeles. “There is a public welfare and health interest in maintaining that knowledge base.”

However, the California Grocers Association (CGA), a statewide trade association, argues the law is just another attempt by unions to undermine national labor laws. The organization filed a complaint with the Los Angeles Superior Court in May 2006 to enjoin the city from enforcing the law. Eight months later the court ruled that the lawsuit can go to trial.

“Grocery chains are not buying or selling stores in Los Angeles because of this ordinance,” says Richard Ruben, partner at Pillsbury Winthrop Shaw Pittman who is representing the CGA in its suit. “If you want to protect jobs, this isn't the way to do it.”

Some experts also are worried that if the court upholds the ordinance, the doors may open for worker-retention laws in other industries and jurisdictions.

“Clearly, if the city prevails, this is a populace type of legislation that I would expect other municipal governments to glom onto in other areas with other businesses,” says Jeff Witham, partner at Dewey Ballantine in Los Angeles.

Sour Legislation

This isn't the first time the city has forced organizations to retain workers. Amid the privatization of food services at Los Angeles International Airport in 1995, the city passed the Service Contractor Worker Retention Ordinance, which forces city contractors to retain their workers for 90 days after a city contract changes hands. That law is still on

the books.

But the CGA isn't about to let the city do the same to its industry. The organization argues the law is preempted by the National Labor Relations Act and the California Health and Safety Code and that it violates the equal protection clause of the Constitution by targeting only large stores.

“The preemption argument is basically that the ordinance is regulating conduct between the employers and the employees that is already covered by federal law,” Ruben says. “Also, this law doesn't apply to stores that are under 15,000 square feet. Under the equal protection analysis, the city is allowed to make such distinctions if there is a rational basis, which there doesn't seem to be.”

Robert Millman, senior shareholder at Littler Mendelson in Los Angeles, thinks the CGA's argument is solid.

“Historically, most local ordinances that try to impact issues that are really the province of the NLRA don't hold up,” he says. “More often than not, courts find these ordinances to be preempted. There's a greater likelihood than not that this will get thrown out.”

Witham agrees. He says that the way the ordinance is worded, it not only requires that a buyer of a grocery store retain its employees for 90 days, but also requires it to do so pursuant to the terms of any collective bargaining agreement the old owner may have entered into with unionized employees.

“If that means that a new owner is subject to the old collective bargaining agreement, then that is simply inconsistent with federal labor laws,” he says.

Rotten Outcome

Although some experts are fairly certain the court will overturn the ordinance, Stamus isn't so sure. She believes the law is consistent with the NLRA.

And in terms of the CGA's equal protection argument, she believes the city will prevail in part because of the liberal threshold for meeting the rational basis standard.

“Rational basis is a very low threshold,” she says. “In this case the CGA will have to essentially prove that the action was arbitrary or unreasonable. And we feel that promoting food safety by keeping trained employees on staff during transitional periods serves a legitimate purpose.”

If Stamus and Los Angeles do prevail, that could spur other cities–both within and outside of California–to pass worker-retention laws.

“Other cities are already considering similar legislation,” Witham says. “If the court were to deny the claim that the NLRA preempts the ordinance, we will see this spread to other cities. And if that's the case, it's likely that other states will pick it up as well.”

But it's not just grocers that should be worried. The hospitality and food services industries, both of which employ a lot of unionized employees, are also likely targets for future worker retention laws.

“This ordinance is an effort to keep an entity unionized,” Millman says. “So I could definitely see similar attempts at legislating such industries if, hypothetically, this law were to pass judicial muster.”

If that happens, some experts believe companies may shy away from acquiring businesses in California.

“For a year, there have been no transactions involving grocery stores within the city of L.A.,” Witham says. “The inference being that somehow this ordinance might dissuade other potential businesses from entering the market. That's an issue you could see if similar laws involving other industries are passed.”

As of press time, no trial date had been set. If the CGA does lose its case in the superior court, it will likely seek review in the state court of appeal.

In general employers are allowed to choose their workers. But that's not the case for Los Angeles grocery store owners. That's because last spring the city became one of several California cities to pass the controversial Grocery Worker Retention Ordinance.

This law mandates that when a grocery store changes ownership, the new owner must retain the old employees for 90 days before making any hiring or firing decisions with some exceptions.

Legislators in Los Angeles claim the ordinance helps sustain the stability of the grocery workforce and thus the stability of communities, which depend on local stores for food and other necessities.

“A lot of grocery personnel, especially if they deal with perishable items, have special training to comply with state and local standards,” says Theresa Stamus, assistant city attorney for Los Angeles. “There is a public welfare and health interest in maintaining that knowledge base.”

However, the California Grocers Association (CGA), a statewide trade association, argues the law is just another attempt by unions to undermine national labor laws. The organization filed a complaint with the Los Angeles Superior Court in May 2006 to enjoin the city from enforcing the law. Eight months later the court ruled that the lawsuit can go to trial.

“Grocery chains are not buying or selling stores in Los Angeles because of this ordinance,” says Richard Ruben, partner at Pillsbury Winthrop Shaw Pittman who is representing the CGA in its suit. “If you want to protect jobs, this isn't the way to do it.”

Some experts also are worried that if the court upholds the ordinance, the doors may open for worker-retention laws in other industries and jurisdictions.

“Clearly, if the city prevails, this is a populace type of legislation that I would expect other municipal governments to glom onto in other areas with other businesses,” says Jeff Witham, partner at Dewey Ballantine in Los Angeles.

Sour Legislation

This isn't the first time the city has forced organizations to retain workers. Amid the privatization of food services at Los Angeles International Airport in 1995, the city passed the Service Contractor Worker Retention Ordinance, which forces city contractors to retain their workers for 90 days after a city contract changes hands. That law is still on

the books.

But the CGA isn't about to let the city do the same to its industry. The organization argues the law is preempted by the National Labor Relations Act and the California Health and Safety Code and that it violates the equal protection clause of the Constitution by targeting only large stores.

“The preemption argument is basically that the ordinance is regulating conduct between the employers and the employees that is already covered by federal law,” Ruben says. “Also, this law doesn't apply to stores that are under 15,000 square feet. Under the equal protection analysis, the city is allowed to make such distinctions if there is a rational basis, which there doesn't seem to be.”

Robert Millman, senior shareholder at Littler Mendelson in Los Angeles, thinks the CGA's argument is solid.

“Historically, most local ordinances that try to impact issues that are really the province of the NLRA don't hold up,” he says. “More often than not, courts find these ordinances to be preempted. There's a greater likelihood than not that this will get thrown out.”

Witham agrees. He says that the way the ordinance is worded, it not only requires that a buyer of a grocery store retain its employees for 90 days, but also requires it to do so pursuant to the terms of any collective bargaining agreement the old owner may have entered into with unionized employees.

“If that means that a new owner is subject to the old collective bargaining agreement, then that is simply inconsistent with federal labor laws,” he says.

Rotten Outcome

Although some experts are fairly certain the court will overturn the ordinance, Stamus isn't so sure. She believes the law is consistent with the NLRA.

And in terms of the CGA's equal protection argument, she believes the city will prevail in part because of the liberal threshold for meeting the rational basis standard.

“Rational basis is a very low threshold,” she says. “In this case the CGA will have to essentially prove that the action was arbitrary or unreasonable. And we feel that promoting food safety by keeping trained employees on staff during transitional periods serves a legitimate purpose.”

If Stamus and Los Angeles do prevail, that could spur other cities–both within and outside of California–to pass worker-retention laws.

“Other cities are already considering similar legislation,” Witham says. “If the court were to deny the claim that the NLRA preempts the ordinance, we will see this spread to other cities. And if that's the case, it's likely that other states will pick it up as well.”

But it's not just grocers that should be worried. The hospitality and food services industries, both of which employ a lot of unionized employees, are also likely targets for future worker retention laws.

“This ordinance is an effort to keep an entity unionized,” Millman says. “So I could definitely see similar attempts at legislating such industries if, hypothetically, this law were to pass judicial muster.”

If that happens, some experts believe companies may shy away from acquiring businesses in California.

“For a year, there have been no transactions involving grocery stores within the city of L.A.,” Witham says. “The inference being that somehow this ordinance might dissuade other potential businesses from entering the market. That's an issue you could see if similar laws involving other industries are passed.”

As of press time, no trial date had been set. If the CGA does lose its case in the superior court, it will likely seek review in the state court of appeal.