Three grocery stores in Los Angeles have announced they will be shutting their doors permanently due to the excessive cost of hazard pay mandates to their workers. The requirements order grocery stores to pay a higher wage to employees, which created a financial burden for two Ralph’s stores and one Food 4 Less store in the L.A. area.
The closures will affect two Ralphs, one on West Pico Boulevard and one on West Slauson Avenue, and a Food 4 Less located on West Sunset Boulevard. In a statement on Wednesday, Kroger confirmed the stores will close on May 15. The three stores have repeatedly not performed as well as some of the other locations.
On February 24, the L.A. City Council voted to mandate that larger grocers and drugstores pay an extra $5 per hour to workers for the next four months.
Kroger said that with the new pay bumps in effect, it will cost an additional $20 million to keep the stores running for the next four months. The company said that, in light of the new ruling, it is “financially unsustainable” to continue the operation of stores that are already not doing as well as others.
“Unfortunately, the Los Angeles City Council disregarded their own Economic Impact Report by not considering that grocery stores — even in a pandemic — operate on razor-thin profit margins in a very competitive landscape,” the company said.
Before the council voted, the city released a report that confirmed how stores would be harmed by a vote in favor of the pay increase. It showed that grocery stores might have to fire employees or shut down if the mandated wage hike was enforced.
The findings also suggest that the increase in sales for grocers occurred at the beginning of the pandemic when people bought a lot of grocery items at one time, but did not continue in the same upward motion. The L.A. Times reports that the boost in grocery store sales was part of the reason why people sought a pay increase for workers, but stores didn’t maintain the bump, and groceries continued to be a low-profit-margin business.
According to the Times, the report showed that even though some companies like Kroger and Albertson’s experienced an upswing in early 2020, this didn’t continue. The report stated that “companies did not earn above-average profits until the first quarter of 2020 during the COVID-19 shopping spike and by the third quarter had dropped below the average.”
When grocery stores close, it can harm communities and impact the greater region and quality of life for residents. Some businesses have taken their frustrations to court, noting that the hazard pay is not required by some other workers in front-line industries, but rather has been unjustly applied to groceries.
Denise Francis Woods ran unsuccessfully for City Council to represent her South L.A. district last year. She said closing the store on Slauson would cost residents their jobs and strip the area of a needed grocery, according to the L.A. Times.
“That would be a total disaster for us if that Ralphs was to leave,” she said. “We’re considered a food desert.”
A similar scenario has already played out in other places such as Long Beach, which was one of the first cities to pass hazard pay requirements in January, adding an extra $4 per hour for grocery store workers. Last month, Kroger reportedly announced it would be closing two stores in the area, citing the pay mandate as the reason. Similarly, the chain stated that two stores in Seattle would be closing due to the passage of a hazard pay directive. The stores were already not performing as well as other stores, according to Kroger.