The U.S. Supreme Court recently declined to review a California Supreme Court ruling that the National Labor Relations Act (“NLRA”) did not preempt a Los Angeles city (“City”) ordinance. Cal. Grocers Ass’n v. Los Angeles (2011) 52 Cal. 4th 177; cert. denied Cal. Grocers Ass’n v. Los Angeles, 2012 U.S. LEXIS 1016 (U.S., Jan. 23, 2012). In Cal. Grocers Ass’n, the City enacted the Grocery Worker Retention Ordinance regulating the ability of grocery store owners of a specific size (15,000 square feet or larger) to summarily replace the workforce after a change in ownership. Plaintiff California Grocers Association (Grocers) filed a complaint against the City to enjoin enforcement of the ordinance on the grounds it was preempted by the NLRA and federal labor laws.
The Court analyzed federal labor laws and explained that preemption was directed at the process of organizing and bargaining, not local employment laws setting substantive minimum labor standards for all employees. Next, the Court considered whether there was evidence of a clear and manifest congressional intent to bar at any level the regulation of employee retention during ownership transitions. The Court found that the NLRA was silent as to an obligation to hire the employees of a purchased business. In addition, the Court held that the retention ordinance should not have a meaningful impact on successorship obligations i.e., if a new employer is deemed a successor of the old employer and hires a majority of its employees from the predecessor’s workforce, the new employer has a duty to recognize and bargain with the union representing the predecessor’s employees.
The dissent argued the ordinance impermissibly intruded on federal labor laws and the NLRA by obstructing an employer’s right to select its own workforce and “profoundly” interfering with the collective bargaining process. Further, the ordinance violates the “successorship doctrine” because it effectively binds the new employer to bargain with the union selected by the former employer’s employees. As a result, employers should consult with their legal counsel to determine what impact, if any, this ordinance has on future transactions.