New Suit Claims Wage Violations for Non-tipped "Side Work"

The restaurant industry just keeps getting hit with new and creative theories of liability under wage and hour law. Here, tipped employees in a tip-credit state claim they should not have to perform “side work” because it cuts into the time they could be spending on tip generating work. 

FDA Proposal Seeks to Prevent Food Terrorism

As FDA implements the various sections of the Food Safety Modernization Act (FSMA) through rulemaking, the agency continues to convey a pragmatic approach complicated by regulatory reality. With its latest proposal, FDA attempts to design a system for preventing acts of terrorism impacting food production. In FDA’s words, “food facilities would be required to identify and implement focused mitigation strategies to significantly minimize or prevent significant vulnerabilities identified at actionable process steps in a food operation.”

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California Appellate Court Holds That Federal Law Preempts Unfair Competition Law Claims Tied to Organic Label

By Chip English and Allison A. Davis

In a case of first impression in the state courts, a California appellate court delivered an early Christmas present Dec. 23 to beleaguered food and beverage companies facing an avalanche of lawsuits under California’s Unfair Competition Law (“UCL”). In Quesada v. Herb Thyme Farms, Inc., Case No. B239602 (2nd Appellate District, Dec. 23, 2013), the court found that the federal Organic Foods Production Act (“OFPA”) preempted state law claims related to organic certification where Herb Thyme labeled its products as USDA Organic, but sold products with organically grown herbs mixed with conventionally grown herbs. The putative class action, alleging that the UCL was violated under California’s separate, but federally certified, organic program, was dismissed because the label met USDA’s certification requirements.

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Oregon Court Limits Agri-tourism at Farm Stands

A land use decision by the Oregon Court of Appeals could impact farm marketing activities across the state, imposing new permitting requirements and forcing changes to business operations. 

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The Hidden Pitfalls of Joint Venture Partnerships

Restaurant joint ventures regularly grab headlines. In May, the San Antonio Express-News announced a deal between Steak 'n Shake and an unnamed professional athlete. A month earlier, Ollie & Jax Pub 'n Pizza was touted in the Orange County Register as putting roots down in the California community in a joint venture between the brand's owners and Main Street Concepts.

These strategic alliances form for many reasons, but all aim to combine complementary strengths. The brand owner seeks investors or experienced operators to replicate the restaurant concept in a new market; investors and operators want to hitch their money or sweat equity to the brand's star.

When joint venture, or JV, parties join together, they create a new legal entity, distinct and separate from the one through which the original restaurant operates.

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"Ladies' Night" Promotions Violate California Law

By Anna Buono

The hospitality industry is no stranger to the rules prohibiting discrimination in accommodations. The average restaurant or hotel operator is aware that the establishment cannot deny service to a patron on the basis of a protected status, such as race or gender. What appears to be less well known is that, at least in California, the same business establishments cannot discriminate by providing extra service to a protected status either. This fact is apparent by the continuing trend to hold “Ladies’ Night” events, or special discounts available only to women, for businesses from restaurants to car washes. These bonuses for female patrons may be useful in boosting business, but if the same businesses refuse service or the same discounts to a male patron, they may be in for a rude awakening when they receive a complaint for statutory penalties for violation of California’s Unruh Act and/or The Gender Tax Repeal Act.

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Food and the City: Making Density Palatable

Moderated by DWT partner Jim Greenfield, the third installment of DWT and Forterra's Creating a Great Global Region series was an interesting and engaging evening focused on how social equity, community building and conversation of farmland intersect around food. The event consisted of a panel discussion of prominent members of the local agriculture and hospitality industries, followed by a group workshop, and ended with a networking reception.

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New IRS Rule for Automatic Tipping Impacts Restaurant Owners and Servers

The new IRS ruling that takes effect in January will treat automatic gratuities as service charges, rather than tips. The IRS change will not only create additional accounting and bookkeeping work for restaurants, it could also mean the loss of an income tax credit, which restaurants receive for paying Medicare and Social Security taxes on employees’ reported tips. Read more about the implications of this change in the attached article “Automatic tipping: IRS rules change could be taxing for hospitality industry."

Liquor Privatization Battle in Washington Continues Over Shortfall Liability

By Ashley Watkins

The recent privatization of the liquor industry in Washington made headlines all over the United States. Implementation, though, has not been without some hiccups. The Association of Washington Spirits and Wine Distributors (the Association) renewed focus on the law when it filed suit this spring against the Washington State Liquor Control Board (the Board).  No. 13-2-00049-8 (Wn. Sup. Ct. filed Jan. 8, 2013). Under the privatization Initiative 1183 (I-1183), spirits distributors were required to pay a license fee equal to 10% of total spirits sales. In order to ensure that the State received a guaranteed revenue flow, if the fees collected did not total $150 million by March 31, 2013 the distributors would be required to make up the difference. Each distributor would be required to contribute the missing portion based on the proportion of his or her sales during the calendar year. 
 
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The Federal Government Shutdown and TTB

By Jeffrey Giametta

Approximately 483 federal employees that work for the Alcohol and Tobacco Tax and Trade Bureau (TTB) have dutifully reported to work today “for the orderly shutdown of TTB.” We have all heard how that the inability of Congress to pass a spending bill is creating a shutdown of the federal government, but what does that really mean for us in the alcohol beverage industry?

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Proposed Use of Tax Code to "Protect" Food Consumers Is Bad Policy and Unconstitutional

Davis Wright Tremaine attorney Chip English offers guest commentary on The Legal Pulse on the proposed use of Tax Code to “Protect” Food Consumers.

USPTO Finds Likelihood of Confusion Between Wine and Water Trademarks

Up until now, there has been a pretty clear line between alcoholic and non-alcohol beverages. However, the Trademark and Trial Appeal Board of the USPTO in Joel Gott Wines, LLC v. Rehoboth Von Gott, Inc. found that there is a likelihood of confusion between trademarks used for wine (here, JOEL GOTT) and water (GOTT LIGHT).

The USPTO found that winery-branded water is sold in the tasting rooms of wineries, so consumers would expect water and wine to come from the same source. Therefore, use of GOTT on both water and wine is likely to cause confusion.

This holding will likely be narrowly interpreted to address only water because wineries do not typically sell other branded non-alcohol beverages. However, this ruling may make it harder to clear new trademarks in the wine space.

Read the opinion here.

Preparing for the Aug. 29 Restaurant Workers Strike and Beyond

By Henry E. Farber, Janet Grumer, and J. Riley Lagesen 

 

Non-union restaurant workers are being urged to strike nationally on Aug. 29 by unions and others hoping to raise industry wages and promote union representation. Although the Aug. 29 strike is primarily focused on quick service restaurant workers (as has been the case with several other recent strikes in various markets around the country), employers in all dining segments are susceptible to such activity and should familiarize themselves with their rights and those of their employees. Given current economic and political trends, one can expect continuing pressure from unions for workers across the dining spectrum to unionize. Restaurants have significant rights in responding to such activity, but many are unfamiliar with the complexities of labor law and how to manage business during a strike. This advisory provides a general overview of rights and limitations on employees’ rights to strike, employers’ rights in case of strikes and potential strikes, and practical tips on what to do in the event of a strike. 

Read more about the fast-food workers strike planned in the Bay Area here

 

 

 

New FDA Rule Provides Standard Definition of "Gluten-Free" for Food Labeling

By Chip English and Cary Greene

FDA has at long last adopted formal and final rules regarding the voluntary labeling of products as being “Gluten-Free.” While the rules announced on August 2 will not be enforced until September 2014, we recommend strongly that anyone making or wishing to make this voluntary label claim should treat the FDA announcement as being immediately effective. Why? First, and as always most importantly, your customers will expect and demand it. Get ahead of the competition. Second, the best defense in this litigation heavy universe regarding food labeling is to go on offense – adopting the FDA approach may well insulate you against claims that your label is false or misleading.  This is especially true here since FDA has asserted that the new rules preempt contrary state law.

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How to Help Your Franchisees Find Financing

The good news for franchising is the economy is coming back. Hit hard by the 2008 economic recession, franchise indices show an uptick in new franchise concepts and pent up demand for franchises among buyers. FranData, an independent franchise industry research firm, estimates that in 2013, banks will loan $23.9 billion to franchise businesses, the highest level since 2009. A quarter of these loans will come from the SBA's loan programs, which guarantee as much as 80 percent of the loan principal for a bank, with the rest conventional bank loans. But even with this improved outlook for franchising, FranData estimates a nearly 10 percent lending shortfall in 2013. There is simply far greater demand for franchise financing than there is money to lend.

Read more.