Reprinted from The Sacramento Bee (July 21, 2015)
What once was old is new again. This old adage rings true, especially with regards to California public policy. Assembly Bill (AB) 359 authored by Assemblywoman Lorena Gonzalez (D-San Diego), which is on Gov. Jerry Brown’s desk awaiting signature or veto, is just that. It is simply a retread of a long line of failed attempts to force new burdensome regulations on California businesses.
Specifically, AB 359 would impose mandatory worker retention standards upon change of ownership for traditional grocery stores over 15,000 square feet. This measure may make for a catchy sound bite or fall in line with a campaign platform—but AB 359 is an unnecessary proposal riddled with unintended consequences that will limit food access, lead to job loss and hurt family-owned companies.
AB 359 is at the top of the California Chamber of Commerce “Job Killers” list, and rightfully so. Prior attempts to establish the unprecedented policy of taking away a private employer’s right to choose their own workforce have either been rejected by the Legislature or has been vetoed by the sitting Governor.
AB 359 won’t create stability, and instead will cause blight when failing grocery stores are forced to close their doors rather than sell to a company whose format and business model better reflect the needs of the community they serve.
If the demographics in a neighborhood change, the original store format may no longer be suited for that community. Generally speaking, grocery store owners look for a buyer whose business model meets the needs of the changing community. AB 359 will stall transactions or, worse, scare off potential buyers who would be subject to a host of new regulations including burdensome record keeping requirements, different workforce standards and greater potential for frivolous litigation. All the while big-box retailers, chain pharmacies and others would not be subject to the same set of standards.
The average size of a traditional supermarket, regardless of ownership, is about 45,000 square feet according to the Food Marketing Institute. With razor thin profit margins, often 1 to 2 percent, sales volume is essential to success in the traditional grocery industry. To yield a profitable volume a store must have tens of thousands of products. Setting aside a few uniquely positioned business models, traditional grocers must operate at a larger footprint in order to offer the variety of products customers are seeking; this includes many independent and family owned companies. AB 359’s arbitrary footprint threshold of 15,000 square feet reflects a lack of experience and knowledge of the grocery industry.
The author has failed to produce any substantial evidence that warrants this targeted attack on the industry. In fact, on the contrary, the grocery industry saw one of the largest and most successful California-based mergers earlier this year between two major grocery chains. The merger resulted in 83 store locations sold in Southern California, purchased by a single buyer, who voluntarily retained store employees. The buyer even honored the collective bargaining agreements already in place.
AB 359 creates an unlevel playing field for small family-owned businesses by exempting out some of the largest retailers in the country and the author never produced examples of Californians being put out of work explicitly due to grocery companies merging.
The answer is clear – AB 359 is nothing more than a Trojan horse designed to assist labor groups in their organizing efforts.
If a new employer is forced to retain a 50 percent plus one unionized workforce for 90 days, a federal statute known as the “Successor Employer Doctrine” is triggered. This means that the existing workforce is automatically recognized as the bargaining unit – without a vote by the employees.
One of the chief responsibilities of the legislature is to pass responsible, economically viable policies aimed at balancing the needs of its citizens, not green-lighting policies that will make it easier for big labor to organize. AB 359 is bad public policy and is a solution in search of a problem that simply has not been identified. We urge Governor Brown to veto this bad legislation.
Ronald K. Fong
President & CEO, California Grocers Association
Rex S. Hime
President & CEO, California Business Properties Association