February 1984 - VOLUME 5 - NUMBER 2
California City Passes Landmark Plant Closure Bill
by Tim Shorrock
A California city has approved a landmark ordinance that sets strict guidelines for businesses that use public funds to relocate in the area. Passed in January by the city council of Vacaville, a rural community 50 miles northeast of San Francisco, the ordinance requires a company to agree to an affirmative action plan and give advance notice of any plans to cut production or relocate. The guidelines may be the strongest of their kind in the nation.
The ordinance is the result of a long battle between Local 1412 of the United Electrical, Radio, and Machine Workers (UE), and Simpson-Duravent, a manufacturing company in the south San Francisco community of Redwood City, whose employees the UE represents. Last year, Local 1412 joined forces with the Plant Closures Project, a Bay Area coalition of trade unions and churches, to stop the company from moving to Vacaville without rehiring the original workforce or recognizing the union.
The outcome of the case has important implications for cities trying to attract investment and economic growth, and for workers and communities faced with the problems of corporate mobility. It also illustrates the widening gap between corporate demands for a "competitive environment" and the needs of workers and communities.
"We think this is an important legal battle for anyone concerned about corporate responsibility and accountability," says Jan Gilbrecht of the Oakland-based Plant Closures Project. But Barclay Simpson, the embattled owner of Duravent warns, "If you set up some kind of draconian measures when somebody moves a plant because they think they can be competitive, you're going to destroy our industry." And, he adds, "You have to be very careful that law doesn't put some obligations on businesses that drive them right out of business."
The story begins in August 1982, when Simpson, a wealthy Bay area art dealer and entrepreneur, purchased Duravent, the nation's third largest manufacturer of chimney pipes. After negotiating a new contract with the UE that helped the nearly bankrupt company regain profitability, Simpson abruptly began looking for a new location. In January 1983, the company announced that it would move from Redwood City to Vacaville to take advantage of a $2.5 million offer of low interest financing from the city.
That loan was made available by the Vacaville Redevelopment Agency (which was actually the city council) to any company that would relocate in a 3,300-acre industrial park owned by Southern Pacific Railroad, the Chevron Land Development Company (a division of Standard Oil of California), and several local developers. Under state law, cities can set aside certain areas for industrial development by granting tax-free loans and other subsidies.
But Simpson's declarations that he had no obligation to rehire any of the Redwood City employees in Vacaville angered the union, which had gone to considerable lengths to keep the company alive. Most of the workers, according to UE organizer Mike Eisenscher, have been employed at Duravent for more than ten years, and lack the job and language skills (90 percent are Hispanic) to compete in the highly competitive job market in the Bay area.
Eisenscher calls Simpson "totally irresponsible." But Simpson says his obligation to the workers is minimal because "we provided them with jobs that they wouldn't have had otherwise. And they've had over a year's notice that we are moving."
After Simpson refused to agree to a hiring plan and balked when the union found an alternative site for the new plant in nearby Union City, the union and the Plant Closure Project began to investigate the Vacaville Development Plan. They found two major violations of state development law: first, the Vacaville City Council had avoided a clause that forbids one city from "raiding" the industrial base of another city by calling itself a redevelopment agency instead of a local government. And second, to qualify for redevelopment financing, the industrial park was classified as "blighted"-a term that hardly fit an area with a new restaurant complex, an airport, a golf course, and 2,234 acres of prime agricultural land.
Last summer attorneys for the union and the project filed a suit against Vacaville's entire development plan, based on these violations. At the same time, supporters in the state legislature introduced amendments to close loopholes in the law to prevent cities from attracting "runaway" plants like Duravent, and limiting types of areas that can be defined as "blighted." Faced with the loss of their development plan, the city agreed to negotiate with the UE and the Plant Closures Project over the issue of Simpson-Duravent.
The July 12 agreement, which stipulated that a firm moving to Vacaville abide by prescribed affirmative action and labor standards, preserved the development plan. Simpson-Duravent, which refused to abide by the agreement, lost its tax exempt loans.
Within a few weeks, Masson Land Development Company, a company that owned land within the development zone, filed a case in state court challenging the validity of the agreement. The suit was backed by both Chevron and Southern Pacific. In a series of negotiations ending in mid-January, the companies agreed to drop the suit in return for a less strict city ordinance that took into account their complaints. Passed on January 24, the law requires a one-year notice, when possible, of any plans to reduce the workforce or cease operations affecting 35 or more employees, with a three month minimum notice; stipulates that companies provide specific means of upgrading minority participation; and requires any application for relocation be made to the bargaining agent at the site of origin, so the union can make contact with the city.
Members of the Plant Closures Project see the ordinance as an important step in their fight to get legislation regulating plant closures passed on both the state and federal level. This "puts workers back on the offensive on questions of economic development and corporate responsibility," says Gilbrecht. "Vacaville is really a first."
The Project is working with other cities to get similar legislation passed on a local level as a means of making "an end run around the powerful lobby" of the California Manufacturers Association that has so far had the clout to stop state legislation, says Jim Eggleston, attorney for the project. "We're in essence building a grassroots political network that will eventually give enough support for statewide legislation," he says.
But for the mostly Hispanic employees at the old Duravent site in Redwood City, the future is bleak: despite the ordinance, the factory closed January 31 and is in the process of moving to Vacaville. The workers will not receive severance pay, extended benefits, or insurance. Of the 89 workers who applied to Vacaville, only 19 will be interviewed.
Simpson strongly defends his actions. "The obligation of a company towards his workforce is to provide jobs in the long run," he argues. "And that's impossible if you're not competitive in the market place." Simpson says the job loss that accompanies plant relocation "is a community problem. You force a company to spend so much money looking backwards they're liable not to have enough to look forward and create more jobs in the future."
Simpson puts most of the blame for his problems on the union. The relationship with UE was "adversarial right from the start," he says. "I just felt that they didn't really have foremost the interest of the workers there. And second, I got a definite feeling of hostility towards the whole free enterprise system. And I've never felt that with any other union."
In retaliation for losing the Vacaville development bonds, Simpson filed a federal suit in a Sacramento federal court on August 3 against the UE local, the UE international, the Plant Closures Project, and the city of Vacaville. One part of the suit asks for $4.8 million in damages, and a second part asks for a ruling against the city ordinance, based on the argument that local governments do not have the jurisdiction to pass laws governing plant closures. Similar arguments in a state court in Pennsylvania overturned an advance notification law in Pittsburgh last year.
"This decision could affect not only this ordinance, but all other local ordinances and state legislation" on plant closures, says Eggleston. The Plant Closures Project and the UE have set up a legal defense fund to help defend the ordinance and fight the federal suit.
For Mike Eisenscher of the UE, the fight represents a new stage in local struggles against capital flight and corporate mobility. "If we could just get the rest of the labor movement and community organizations to amplify what we've been doing on a national basis, it would be possible for us to obtain the kind of legislation that is already on the books in Europe," he says. "Yet because the working class in this country is not politically organized, we have remained largely victims instead of political participants in the process of controlling our fate."
For more information about the Vacaville ordinance and the fight to save it, contact the Plant Closures Project, 433 Jefferson, Oakland, California, 94607, (415) 834-5656.