(September 25, 2023) A California Chamber of Commerce job killer bill that removes business’ flexibility and autonomy over hiring is awaiting action by the Governor.

The CalChamber is urging Governor Gavin Newsom to veto SB 627 (Smallwood-Cuevas; D-Los Angeles) because it imposes an onerous and stringent process to hire employees based on seniority alone for public-facing and health care businesses, including hospitals, retail, restaurants, and movie theaters, which will delay hiring and eliminates contracts for at-will employment. The bill also likely violates the Contracts Clauses of both the federal and California constitutions.

Undermines Basic Management for Businesses

SB 627 seeks to micromanage the rehire process for the affected businesses.

Several of the provisions, or lack thereof, will only delay rehiring and increase costs on employers. Specifically:

1. SB 627 forces an employer to repeatedly offer newly available positions to qualified employees, no matter how many times the employees have turned offers down, failed to respond to previous job offers, or explicitly declined previous offers to return to work.  Further, there is no opt-out option. Under SB 93 (2021) and similar local ordinances, this slowed down the hiring process significantly and upset former employees who obtained other employment, moved out of state, or changed career paths entirely.
2. SB 627 would essentially eliminate the use of severance agreements, which benefit employees. No employer subject to such a retention right would have any reason to offer a severance agreement.
3. SB 627 forces an employer to send notices to all eligible, qualified employees for an available position and then wait five business days before analyzing acceptance offers based upon seniority. Under SB 93 (2021) and similar local ordinances, this waiting period has slowed down hiring and will have the same impact here.
4. SB 627 forces employers to hire based on seniority, not skill. The bill ties the employer’s hands as far as hiring because they are only allowed to consider seniority, not who is most qualified for the job. It further prohibits them from considering other applicants that may be best suited for the position.

Likely Violates the Contracts Clauses

As defined in the bill, “chain” would include a multitude of businesses and industries, such as retail, restaurants, grocery stores, hotels, hospitals/health care facilities, movie theaters, and more. For all of these industries, SB 627 creates a problematic, permanent statutory scheme that eliminates at-will employment and mandates hiring based on seniority alone.

Unlike prior right-to-recall laws, there is no common tie between these industries or their circumstances. Further, there is no justification for the bill. For example, in 2021, the Legislature passed SB 93 as a result of the unique obstacles presented by the COVID-19 pandemic and limited to hospitality.

In fact, in its first iteration, Governor Newsom returned AB 3216 (2020) without his signature for creating too large a burden on employers and not being sufficiently tied to a narrow justification. SB 93 was a subsequent, more narrow version. SB 93 was limited in both time and scope and specifically tied to the impacts of COVID-19 on jobs with a sunset. No such justification exists for the permanent mandate proposed by SB 627, and it is completely unlimited as to time.

For this reason, SB 627 likely also violates the Contracts Clauses of the United States and California constitutions because it modifies existing at-will contracts. Any law that substantially impairs pre-existing contractual obligations violates the contract clauses of both the federal and California constitutions.

SB 627 creates a novel, long-lasting retroactive right.

Under California law, and absent an agreement otherwise, all “employment may be terminated at the will of either party on notice to the other” (Labor Code Section 2922). Nearly every employment agreement in California either impliedly or expressly recognizes the at-will nature of the relationship. Employers hired workers assuming that, if the viability of their business was threatened, they could lay off these workers without granting them a possible cause of action.

Given the fact that there is no justification for SB 627 and its broad applicability to nearly every industry without any limitation in time or scope, it is unlikely that the state would be able to show that SB 627 is “appropriate and reasonable” in serving a specific interest.