Grocers close, may cut hours in response to ‘hazard pay’ ordinances

Large grocery chains are fighting hazard pay requirements for their workers, warning the policies will force stores to pass costs onto customers, slash employee hours or close entirely.

The California Grocers Association sued Oakland and Montebello on Wednesday for passing such ordinances, highlighting growing tensions between cities that have been looking to require hazard pay for grocery store workers who have been at the front line of the pandemic and large supermarkets that say they cannot afford the raises since they already operate on razor-thin margins.

The lawsuits were filed after Kroger announced that it will close two stores in Long Beach in April in response to the city mandating a $4 an hour increase in "hero pay."

"This misguided action by the Long Beach City Council oversteps the traditional bargaining process and applies to some, but not all, grocery workers in the city," the company said in a statement. "The irreparable harm that will come to employees and local citizens as a direct result of the City of Long Beach's attempt to pick winners and losers is deeply unfortunate."

The United Food and Commercial Workers International Union, which is sponsoring hazard pay ordinances throughout the state, denounced the closures as a "ruthless attempt to create a chilling effect that will discourage other cities from doing what is right."

"America's grocery workers will not be silenced in the face of these shameless scare tactics," UFCW International President Marc Perrone said in a statement. "Kroger does not have the right to ignore laws designed to protect workers and the public during this escalating health crisis."

Despite the closures in Long Beach, city councils in Oakland and Montebello voted on Tuesday to mandate hazard pay at large supermarkets. California Grocers Association v. City of Long Beach, 21-cv-00524 (C.D. Cal., filed Jan. 20, 2021); California Grocers Association v. City of Montebello, 21-cv-01011 (C.D. Cal., filed Feb. 3, 2021); California Grocers Association v. City of Oakland, 21-cv-00863 (N.D. Cal., filed Feb. 3, 2021).

The ordinances passed by the three cities, all of which have been sued by the California Grocers Association, only apply to chain stores with at least 300 workers nationwide and with at least 15 workers per store that mostly sell food products. The employee threshold is 500 in Oakland.

The trade group claimed that the forced raises are preempted by the National Labor Relations Act, a federal law regulating collective bargaining. Since the ordinance establishes raises that employees represented by the United Food and Commercial Workers International Union would not have otherwise secured, the association argued that it undermines the collective bargaining process.

The cities are acting beyond their authority to set minimum labor standards, such as minimum wage, by instituting a "mandatory hourly bonus," the lawsuit said.

The California Grocers Association also argued the ordinance violates constitutional equal protections since it ignores others that employ essential workers. Similarly large retailers such as Target and Walmart are not subject to the ordinance since they do not mostly sell food products.

"By design, the ordinance picks winners and losers," wrote plaintiffs' attorney William F. Tarantino. "It singles out large grocery companies with unionized workforces without providing any reasonable justification for the exclusion of other employers or front line retail workers."

The Morrison & Foerster LLP partner said the cities' stated objective to protect public health is "merely an attempt to impose a public policy rationale on interest-group driven legislation for labor unions."

U.S. District Judge Dolly M. Gee rejected in January the association's request for a temporary restraining order against Long Beach. She will consider whether to issue a preliminary injunction on Feb. 19.

The cities named in the complaints did not immediately respond to requests for comment.

Ron Fong, president of the California Grocers Association, emphasized in a statement that the cities "ignored low profit margins and significant operational costs grocers have incurred in response to the pandemic, including the hiring of tens of thousands of additional employees due to the pandemic."

A Brookings Institution report, however, said that retail companies have experienced record-breaking profits in 2020. Kroger reported a 90% increase over two quarters.

The company provided a $300 bonus for full-time workers in March and a $300 bonus in June in addition to a $2 an hour increase that lasted until May.