Organized labor has suggested for years that employees of a large business in Hawaii should be guaranteed by law to keep their jobs in case the company is sold. Such job security, though, would be unprecedented and could result in major problems for companies being put up for sale. Potential buyers are likely to be reluctant to consider such a purchase, which could result in unintended wholesale job loss if company options are limited and micromanaged under a bill moving through the state Legislature.
The bill, which has been moving in nearly identical versions by the state House and Senate, would require the buyer of any business with at least 100 employees to retain the non-management staff. No other state has such a law, according to the Chamber of Commerce of Hawaii.
In the past, proponents of the idea may have aimed at hotels with employees represented by labor unions. Among companies of understandable concern recently is Tesoro, which plans to close its Hawaii refinery by the end of this month, leaving nearly 200 of the refinery’s 240 employees without jobs. Tesoro plans to try selling the terminal, distribution and its 31 gas stations.
If the bill is enacted, it "is likely to have a chilling effect on our ability to attract strong buyers," Lance N. Tanaka, Tesoro Hawaii’s government and public affairs manager, told legislators.
The legislation would allow a buyer to lay off some of the seller’s employees if the nature of the left-over business "is substantially dissimilar to the former employer’s business" or if the buyer’s work force needs are reduced. That could provide an exemption for Tesoro —but many other companies, such as hotels and large stores trying to emerge from a slow period of tourism, would not be so fortunate.
Moreover, the "substantially dissimilar" escape that may be available for Tesoro "is difficult to define and will result in litigation in most cases," warns the Chamber. While labor unions testified in favor of the legislation, the Chamber warned that the employees who want to keep their jobs may instead "lose their jobs due to potential overwhelming litigation costs that could impact the employee."
For example, the purchaser of a business may change the kind of goods or services that existed with the previous owner, but would changing men’s clothing to women’s garb — or turning an afternoon newspaper gradually into a morning daily — be "substantially dissimilar?"
The lack of business predictability is reality, as are resulting layoffs, but this legislation is not the cure. Instead, denial of a new company’s right to choose its employees amounts to government meddling. The result would be certain to hinder business activity on a large scale, as many big businesses in Hawaii are potential victims at some point.
As the Chamber correctly warned, "This will send a negative message to the nation and further undermine Hawaii’s efforts in becoming a ‘business-friendly’ climate."
