March/April 2021 Legal Update

Pooja S. Nair, a partner at Ervin Cohen & Jessup LLP compiles recent legal news affecting the restaurant, food and beverage and hospitality industries for Modern Restaurant Management (MRM) magazine.

Legislation

California Passes COVID-19 Supplemental Sick Leave: On March 19, 2021, California Governor Gavin Newsom signed Senate Bill 95 providing a new form of COVID-19 related paid sick leave for many California workers. The law will become effective on March 29, 2021, and applies retroactively to sick leave taken beginning on or after January 1, 2021. All California employers with more than 25 employees and in-home supportive services providers are required to provide the supplemental sick leave benefits to employees. The law will remain in effect through September 30, 2021.

Kombucha Tax Act Introduced: On March 23, 2021, Representative Earl Blumenauer introduced the Kombucha Tax Act, which seeks to amend the IRS code to increase the applicable abv limit for kombucha from 0.5 to 1.25 percent, which would allow Kombucha to contain up to 1.25 percent abv without being taxed or regulated as alcohol.

Florida Passes Sweeping Business Immunity Bill for COVID-19 Claims: On March 29, 2021, Florida enacted a sweeping law intended to protect defendants from COVID-19-related lawsuits. Senate Bill 72 provides civil tort immunity to any person, business, school, governmental entity or church from a COVID-19 related claim. The statute creates substantial hurdles for plaintiffs to overcome before making a claim for damages, including a compressed statute of limitations and heightened legal standard.

FASTER Act Makes Sesame a Designated Allergen: On April 23, 2021, sesame was officially designated an allergen as the bipartisan FASTER Act was signed into law by President Biden. The FASTER Act makes sesame the ninth food that manufacturers must identify on prepackaged labels. Starting January 1, 2023, any food product containing sesame must indicate that on its label. The other eight allergens previously designated as allergens include eggs, dairy, fish, shellfish, tree nuts, peanuts, wheat, and soybeans.

Restaurant Revitalization Fund Opens: On April 27, 2021, the SBA announced that the much-anticipated Restaurant Revitalization Fund would be opening on May 3, 2021 at 9 a.m. PST/12 pm EST. Restaurant operators may register through the SBA’s RRF portal beginning on Friday, April 30 at 6 a.m. PST/9 a.m. EST.

California Passes Business Tax Breaks on PPP Loans: On April 29, 2021, California Governor Gavin Newsom signed a bill to allow for business deductions for expenses paid with forgiven PPP debt. 

Administrative Developments

FDA Releases Food and Nutrition Survey Results: On March 16, 2021, the FDA released the results of its 2019 Food Safety and Nutrition Survey. The survey is designed to assess consumers’ awareness, knowledge, understanding and reported behaviors relating to a variety of food safety and nutrition-related topics. The survey results found that consumers are paying attention to menu and product labeling and nutrition facts.

FDA Announces Actions on Leafy Greens: On April 6, 2021, the FDA announced agency actions to advance the safety of leafy greens. The FDA announced that it was releasing a report of its investigation on the Fall 2020 outbreak of E. coli linked to the consumption of leafy greens. The report found that the outbreak, which caused 40 reported domestic illnesses, was linked via whole-genome sequencing (WGS) and geography to outbreaks traced back to the California growing region associated with the consumption of leafy greens in 2019 and 2018. 

IRS Issues Guidance on Business Meal Deduction: On April 8, 2021, the IRS issued guidance regarding the temporary 100-percent deduction for food and beverage purchased from restaurants. From January 1, 2021, through December 31, 2022, businesses can deduct 100% of their food or beverage expenses paid to restaurants if the business owner is present when food or beverages are provided, and as long as the expense is not extravagant under the circumstances. Eligible entities include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. Grocery stores, convenience stores, and any other businesses that primarily sell pre-packaged goods not for immediate consumption are excluded from the guidance.

DOL Announces Essential Worker Initiative: On April 26, 201, the Department of Labor’s Wage and Hour Division launched an “Essential Workers, Essential Protections” initiative to provide workers with information about the wage and hour laws that apply to them. DOL also released a set of FAQs regarding pay, hours worked, and job-protected leave during the pandemic. 

California Updates Vaccine Guidance: On April 26, 2021, California’s Department of Fair Employment and Housing (DFEH) has updated its COVID-19 vaccination guidance, replacing its prior guidance issued July 24, 2020. The DFEH’s updated guidance permits employers to require employees to receive a vaccine approved by the FDA, subject to certain exceptions and requirements. 

DOL Partially Delays Tip Pooling Rule: On April 28, 2021, the Department of Labor announced a Partial Delay final rule delaying the effective date of three portions of the 2020 Tip final rule for eight months, until December 31, 2021. These three delayed portions are related to the assessment of civil money penalties under the FLSA and the application of the FLSA tip credit to tipped employees who perform tipped and non-tipped duties (dual jobs). The remainder of the 2020 Tip final rule—consisting of those portions addressing the keeping of tips and tip pooling, recordkeeping, and minor technical changes made to update the regulations to reflect the new statutory language and citations added by the CAA amendments—will become effective on April 30, 2021.

Litigation

Second Circuit Upholds Class Decertification in Restaurant Wage and Hour Case: On March 9, 2021, the Court of Appeals for the Second Circuit upheld a lower court’s decision to decertify a class of restaurant workers suing over wage violations because of concerns about class counsel’s “shortcomings” and track record. The court held that the trial court acted within its discretion because class counsel’s conduct made clear that “counsel was no longer adequately representing the class.” The case involved claims by employees of Joe’s Shanghai restaurants, who sued the chain for alleged wage and hour violations under New York Labor Law and the FLSA.

“Herbal Chef” Trademark Protection Denied: On March 16, 2021, the Ninth Circuit Court of Appeals held the words “The Herbal Chef” do not qualify for trademark protection. The short memorandum opinion affirmed summary judgment granted in March 2020. The court found that the Herbal Chef mark was not descriptive and that a secondary meaning had not been established.

Eleventh Circuit Holds That Websites Are Not Places of Public Accommodation: On April 7, 2021, the U.S. Court of Appeals for the Eleventh Circuit decided a website accessibility case involving the Winn-Dixie grocery chain’s website. The court considered a blind plaintiff’s claim that a grocery chain violated the ADA by not offering an accessible website for plaintiff to be able to place grocery pick up orders. The court held that a website was not properly a “place of public accommodation” under Title III of the  ADA. The Court held that Winn-Dixie’s website does not constitute an “intangible barrier,” and Gil’s inability to access the website did not violate Title III of the ADA. This decision represents a significant split from other circuits, including the Ninth Circuit.

French Laundry Insurance Coverage Suit Dismissed: On April 27, 2021, a Magistrate Judge dismissed the French Laundry’s claim for insurance coverage due to COVID-19 shutdowns. The court held, as have the majority of courts considering the issue, that a virus exclusion precluded coverage of the economic losses caused by the shutdown.