U.S. Supreme Court Allows Worker Retention Rules To Stand

On January 23, 2012, the Supreme Court of the United States declined review of local ordinance language requiring supermarkets to keep their workforce for 90 days when a new owner takes over the business. Such ordinance language has become commonplace, for example, with hotel and other service industries specified by ordinance in some Bay Area cities. Contractors performing federal work face similar requirements when they take over a contract from another contractor and must inherit the predecessor's workforce.

Proponents of these rules assert continuity, efficiency, and experience of the workforce are beneficial to the community. Opponents of the measures argue that the rules are devices meant to protect unions and union members in the event of a sale.  In particular, successorship rules under labor law apply and can force a purchaser into union obligations if the purchaser hires a majority of the seller's union-represented employees.

Expect that the Supreme Court's denial of certiorari in the case of California Grocers Association v. Los Angeles, Supreme Court Case Number 11-615, will prompt further local rules like the ordinances at issue and create heightened need for due diligence as businesses look at purchase and sale strategies.

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