California cities may require the purchaser of a business to retain the seller’s workforce. That is the message in a recent decision by the California Supreme Court.
Many cities in California (and elsewhere) have adopted ordinances that restrict the ability of the purchaser of a business to replace the seller’s employees. Los Angeles’ “Grocery Worker Retention Ordinance” protects employees of large grocery stores from loss of employment following a change of ownership.
During a 90-day period following the ownership change, the buyer must hire from a list of the seller’s nonmanagerial employees with at least six months’ service and may discharge those workers only for cause. In addition, the buyer must prepare a written evaluation of each employee’s performance at the end of the 90 days and must “consider” offering employment to each employee whose performance was satisfactory. In California Grocers Association v. City of Los Angeles, 52 Cal. 4th 177 (Cal. 2011), the California Supreme Court held that this ordinance was not preempted by the California Health and Safety Code or the National Labor Relations Act and did not violate the equal protection clauses of the state or federal Constitution.
The ordinance in this case imposed somewhat limited restrictions on buyers of larger businesses in only one industry. However, the Supreme Court’s opinion is suffi ciently broad to uphold much more onerous restrictions in any or all industries. Therefore, employers considering the purchase of a business in California should take careful note of any local ordinances that might curtail the purchaser’s right to staff that business as it wishes. In California, the Supreme Court has spoken, and it said, “Buyer beware.”