Yesterday, Governor Jerry Brown signed into law AB 897, a “clean up” bill he requested to address an omission in AB 359, which Governor Brown had signed into law on August 17, 2015. This legislation, effective January 1, 2016, will require a successor grocery employer to retain eligible workers for a 90-day transitional period and, upon completion of that period, will require the successor grocery employer to consider offering continued employment to those workers. The new law will apply to retail stores in California that are over 15,000 square feet in size (your typical supermarket is 45,000 square feet) and that sell primarily household foodstuffs for offsite consumption.

To be “eligible,” the employee must

  • have worked for the predecessor employer for at least six months and
  • not be a manager, supervisor, or confidential employee (someone with access to confidential or discretionary information such as legal, budgeting, or development of policies and procedures pertaining to labor/employee relations).
  • The law will prohibit the new owner from discharging inherited employees without cause during a 90-day transitional period. As “successor grocery employers,” the new owners will also likely inherit the store employees’ union and any collective bargaining agreement, as well as problem employees and senior employees earning high wages.

But all is not restrictive: AB 359 permits successor employers to establish new terms and conditions for the inherited employees, which may allow for an opportunity to renegotiate any existing union contracts. In addition, the law expressly states that “parties may, by collective bargaining agreement, provide the agreement supersedes the requirements” of AB 359. This will presumably require a new employer to either become involved in the predecessor’s bargaining session prior to the purchase, or to engage in immediate bargaining with the current union to avoid having to offer employment to inherited employees after the 90-day transitional period.

What is the Impact on California Employers?

Grocery employers’ abilities to hire their own workforces will be substantially curtailed. No longer will a new employer be able to refuse to hire inherited employees based on results of background checks or other typical pre-employment screens. Instead, a new employer that does not wish to employ an inherited employee must have a valid reason to terminate the employee “for cause.” Further, a new employer that wants to build a culture from the ground up, with its own fresh crew, should think twice about triggering WARN and Cal-WARN Act obligations related a large scale reduction in force before releasing inherited employees.

Will the substance of AB 359 survive judicial challenge? In 2011, the California Supreme Court rejected a challenge to a similar Grocery Worker Retention Ordinance enacted by Los Angeles, which requires new grocery store owners to keep existing employees for months after taking over ownership.

Not the End of the Story…

Governor Brown also noted in his signing message some ambiguity in the law: “as drafted, the bill is not clear on how the provisions apply if an incumbent grocery employer has ceased operations.” He noted the author and sponsor have committed to clarify that the law would not apply to a grocery store that has ceased operations for six months or more, and that he expected to see legislation to that effect before the end of this legislative session. On August 20, Assembly Member Gonzalez, followed the Governor’s directive, gutting and amending AB 897, which previously related to court records. Now, AB 897 amends provisions that will be put in place by AB 359 on January 1, 2016 to exclude from the definition of “grocery establishment” a retail store that has ceased operations for six months or more. The Governor signed AB 897 on September 21, 2015.

Workplace Solutions

If you are thinking about purchasing an existing grocery establishment, you may want to wrap up the transaction and hire your new workers before this new law becomes effective on January 1, 2016. Companies that cannot close a deal before January 1, 2016, may consider the following:

  • Make sure you have a clear picture of the existing workforce, with whom you will be living for at least the first 90 days.
  • Set new terms and conditions of employment (i.e., position offered, wages, amount of vacation, etc.) before offering positions to inherited workers.
  • Condition the purchase of the grocery establishment on the negotiation of clear and unambiguous waiver language within its collective bargaining agreement (if any) giving successor grocery owners greater flexibility to screen and terminate inherited employees.
  • Hire effective managers and ensure human resources policies are solid, to hold inherited workers accountable for poor performance and ensure any disciplinary decisions comply with the new law’s “for cause” standard.