Yesterday, the Supreme Court declined to hear a challenge to Los Angeles' Grocery Worker Retention Ordinance that imposes a 90 day transition period on grocery stores when ownership changes. The California Grocers Association ("Grocers") filed a lawsuit challenging the ordinance on various grounds, including the claim that the ordinance is preempted by the National Labor Relations Act.
The ordinance provides that during the transition period, purchasers of grocery stores 15,00 square feet or larger must hire the predecessor's employees with at least six months tenure. Moreover, the owner can only terminate those employees for cause during the 90 day transition period.
The Grocers claim that the ordinance is preempted by the NLRA because it interferes with negotiations between employees and employers, deprives employers of the freedom to choose their own employees, and forces employers to become successor employers under the NLRA when the predecessor employees are represented by a union. Typically, an employer becomes a successor employer under the Act when the new employer hires a majority of the predecessor's represented employees. Successor employers must then recognize the union and either accept any existing collective bargaining agreement or bargain with the union for a reasonable period of time. However, employers that do not hire a majority of the predecessor's employees are not successor employers and thus do not have to recognize and bargain with the union. Accordingly, the Grocers asserted that by forcing new grocery store owners to automatically have the obligation to recognize and bargain with the union, the ordinance is preempted by the NLRA.
In July 2011, the California Supreme Court disagreed, and held that the NLRA does not preempt the ordinance:
On the subject of employee hiring and firing, the text of the NLRA is, with one notable exception, resoundingly silent. It neither guarantees nor prohibits the retention of employees; it does not affirmatively protect new employers‘ latitude to hire and fire whomever they please, nor does it address in any way the power of states and localities to regulate the subject....
This silence leaves unrebutted the initial presumption that Congress did not intend preemption. The NLRA‘s statutory text does not disturb state and local authority to address, as these entities see fit, matters of hiring and firing, authority traditionally recognized as a core incident of their police power.
It also rejected the Grocers' claim that the ordinance impermissibly intrudes upon federal successor employer determinations:
Additionally, we can discern in the NLRA no clear and manifest congressional intent to foreclose indirect impacts on successorship. As with any preemption question, "'"[t]he purpose of Congress is the ultimate touchstone"'" (Metropolitan Life, supra, 471 U.S. at p. 747), and on this point we find neither textual nor historical support. Successorship is a question of federal common law because "[n]o provision of the [NLRA] even mentions successorship."
The United States Supreme Court's refusal to review the California Supreme Court's decision has implications beyond the grocers in Los Angeles. Shortly after taking office, President Obama issued Executive Order 13495 requiring federal contractors and subcontractors that are successors to certain government contracts to offer employment on a "first right of refusal" to employees (not including managerial or supervisory employees) employed under the predecessor contract whose employment would be otherwise terminated at the end of the predecessor contract. Many commentators have asserted that the executive order is preempted by the NLRA on the same grounds asserted by the Grocers in its unsuccessful challenge to the Los Angeles ordinance.