Protectionism for Union Grocery Workers

JULY 20, 2011

Since it opened its first store in Palo Alto in 1989, Whole Foods Market has grown its market share in California’s highly competitive grocery industry by acquiring such food chains as Mrs. Goocher’s Natural Food Markets of Los Angeles and Food for Thought in Sonoma County.

Upon completion of its acquisitions, Whole Foods’ first order of business has been to bring in experienced personnel from its previously existing stores to put the company imprint upon its newly acquired stores. The strategy has proven quite successful.

That brings me to the ruling this week by the California Supreme Court reinstating a  2005 Los Angeles law requiring grocers, such as Whole Foods, to retain for at least three months the entire workforce of grocery chains they acquire.

The city law really was an obvious sop to L.A.’s all-too-powerful grocery workers’ unions, which represent the more than 60,000 employees of Ralphs, Vons and Albertsons.

The unions are concerned about the growing slice of California’s grocery business controlled by such non-unionized competitors as Whole Foods, Trader Joe’s, Fresh & Easy, Wal-Mart and Costco.

The lower labor costs of the non-unionized supermarket chains make it more difficult for the unions to extract higher wages and more generous benefits from the unionized chains. That’s because competition from non-unionized grocers prevents unionized grocers like Ralphs, Vons and Albertsons from passing along inflated labor costs to their customers in the way of higher food prices.

National Law

L.A.’s Grocery Worker Retention Ordinance had been struck down by lower courts, which held that the measure was preempted by the federal National Labor Relations Act, which guarantees successor employers the right to pick and choose whom they wished to employ, free of local regulation.

However, a 6-to-1 majority of state Supreme Court concluded that, “On the subject of employee hiring and firing, the text of the NLRA is …resoundingly silent.” The majority also stated that “we discern no evidence that Congress affirmatively intended to leave the subject of employee retention unregulated by states and municipalities.”

Court of Appeal Justice Elizabeth Grimes, temporarily filling a vacancy on the state Supreme Court, was the lone voice of reason in the six-year-old court case, California Grocers Association vs. City of Los Angeles.

She argued that “federal labor law does not permit a government mandate that an employer hire either a particular worker or a specific group of workers,” such as  those whose company has been acquired. “That fundamental choice,” she added, “is left under federal law to the employer and employee, that is, to the free play of economic forces.”

And speaking of economics, Justice Grimes cited compelling reasons why companies, such as Whole Foods, often prefer to hire a work force of their own rather than retain the workers of a company that’s acquired.

Indeed, she noted, trial testimony attested that the first 90 days of a new grocery store owner’s operation are the most important to establish its image and to deliver new customers.

She quoted one witness who testified, “The supermarket business is a very competitive business, and if you don‘t deliver to the customers in the first 90 days, you‘ve probably lost them.”

Hurting Expansion

That’s why L.A.’s so-called Grocery Worker Retention Ordinance will dampen future expansion by grocery chains like Whole Foods.

By “stripping away the new employer’s choices in hiring during the critical first 90 days,” wrote Grimes, in her dissenting opinion, it “operates as an economic weapon and directly affects the economic activities of the employer.”

That’s precisely what grocery workers unions want — economic leverage over non-unionized grocers. And that’s what the city government of L.A. and other cities throughout California want — a way to reward their friends in big labor for their continued political and financial support.

— Joseph Perkins






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