November 17, 2011

PLF defends southern California job creators against union favoritism

By PLF defends southern California job creators against union favoritism

Pacific Legal Foundation today filed a petition with the U.S. Supreme Court, asking the justices to review a Los Angeles City ordinance that deprives grocery store owners of the right to choose their own workforce. On behalf of the California Grocers Association—a trade group that represents some 600 grocery store owners in the state—we argue that the Ordinance violates federal law, specifically, the National Labor Relations Act, which bars states and local governments from interfering with the bargaining of unions and employers.

The NLRA, passed in the 1930s, leaves it to unions and employers to negotiate between themselves for the terms of an employment contract, without government putting its thumb on the scales. Thus in 2008, the U.S. Supreme Court struck down a California law that restricted the ability of employers to express themselves on issues relating to unionization, and in 1986, the Court invalidated an attempt by Los Angeles officials to force a taxi company to resolve a labor dispute. In short, cities may not subsidize or burden one side or the other, but must leave employers and workers alone to negotiate their own agreements.

But under the Los Angeles Grocery Worker Retention Ordinance, whenever a new company buys an existing grocery store, it is required to hire its workforce exclusively from a list of the employees of the previous owner—and hire them in order of seniority. The new employer is also barred from terminating any workers except for “good cause.” As a result, people looking for jobs are out of luck—even if the new owner wants to hire them, he or she cannot, because the WRO requires the new owner to hire the existing workers instead. Even if the applicant is more skilled or more experienced, the owner is required to turn him or her away.

After imposing this costly mandate on employers, the Ordinance provides an opt-out for companies that agree to a collective bargaining agreement. It therefore works as a “carrot and stick,” that burdens employers unless they agree to union demands. Worse: under a rule called the “successor employer” doctrine, when a new firm hires the old firm’s employees, federal law requires the new company to abide by an existing collective bargaining agreement, or at least to negotiate with the existing union. The Los Angeles Ordinance shoehorns employers into this “successor employee” role under federal law. In short, it loads the dice in favor of unions and against employers—in violation of the NLRA.

The California Supreme Court, however, upheld the Ordinance in a 6-1 decision this past summer, ruling that employers have no right to choose their own workforce, and that the Ordinance is just a routine regulation of the economy. Justice Elizabeth Grimes, in a dissenting opinion, urged the U.S. Supreme Court to take up the case, calling it a “truly extraordinary intrusion upon the freedom of contract, one that threatens to upend the very foundation of our national labor laws and policies.”

You can read PLF’s brief in the case here. A litigation backgrounder, that explains the case and its nationwide importance in more depth, is available here. You can read the California Supreme Court’s decision here, and the Court of Appeals decision (that went in favor of CGA) here. PLF previously participated in the case as amicus curiae.

What to read next