August/September 2019 F&B Legal Update

Pooja S. Nair, a litigation attorney at TroyGould PC in Los Angeles, compiles recent legal news affecting the restaurant, food and beverage and hospitality industries for Modern Restaurant Management (MRM) magazine.


New Jersey Passes Strong Wage Theft Law: On August 6, acting New Jersey Governor Sheila Oliver signed into law a new wage theft law creating strict new enforcement, penalties, and procedures for employers.  The law provides for liquidated damages for violations of wage statutes; makes it a disorderly persons offense for employers to fail to pay agreed-upon compensation within 30 days; and creates a new crime for pattern of wage non-payment that can be prosecuted by state entities.  The new law will make New Jersey one of the toughest states in the country on wage theft and delay.

Illinois Adopts Sexual Harassment Overhaul: On August 9, Ilinois Governor J.B. Pritzker signed into law sweeping new rules for employers regarding sexual harassment.  This law, SB75, was designed to increase protections for employees and contractors.  The bill will go into effect on January 1, 2020.  Among other provisions, the bill extends legal harassment protections to contract workers and consultants; limits the use of contract provisions that may discourage employees from reporting harassment; requires employers to provide unpaid leave to victims of gender-related violence seeking medical or legal help; and requires the Illinois Department of Human Rights to make a sexual harassment training program for employers.  The law singles out restaurants and bars and requires that they provide a more rigorous anti-harassment training that includes sections on conduct, activities, and/or videos related specifically to the restaurant and bar industries; an explanation of manager liability and responsibility under the law.  The restaurant-specific training must be made available in both English and Spanish.

California Redefines Independent Contractors:  On September 18, California Governor Gavin Newsom signed into law AB 5, a sweeping overhaul of California’s independent contractor requirements.  The bill narrows the definition of an independent contractor, meaning that most workers will be classified as employees.  The bill will go into effect on January 1, 2020. For more information on how AB5 could affect the restaurant industry, click here.

California Expands Protections for Sexual Harassment Victims: On September 24, the California legislature approved a bill to expand protections for victims of sexual harassment from retaliations and presented it to Governor Gavin Newsom for his signature. The bill would amend Section 230 of the California Labor Code and create a rebuttable presumption of unlawful retaliation if any adverse employment action is taken within 90 days of a report of sexual harassment. 

Connecticut Legislature and Governor Grappled with Restaurant Tip Credit Bill: On September 24, Connecticut Governor Ned Lamont asked the state’s legislative leaders to convene a special session to vote on a revised version of a restaurant tip-credit bill the governor vetoed in July.  The proposed bill would have stripped restaurant workers of the right to pursue claims of unpaid wages in certain circumstances.  The Governor’s veto messagestated that the bill was a retroactive attempt to extinguish workers’ rights and raised due process concerns.  The current proposal would be to limit damages employees  could collect from restaurants that relied on inaccurate advice from the Department of Labor in calculating tip-credit wages.

California Permits Beer Manufacturers to Give Away Advertising Glassware: On September 26, 2019, the California Assembly and Senate approved AB 1133 and sent it to Governor Newsom for signature.  AB 1133 creates an exemption to the Alcoholic Beverage Control Act to permit beer manufacturers to give up to five cases of retail advertising glassware to an on-sale retail licensee, per licensed location, each calendar year for use at the licensed location. The bill would permit an on-sale retail licensee to accept, without direct or indirect charge, up to 10 cases of retail advertising glassware, per licensed location, from licensed beer manufacturers each calendar year for use at the licensed location.  The Alcoholic Beverage Control Act generally prohibits any licensee from giving any premiums, gift, or free goods in connection with the sale or distribution of any alcoholic beverage, so even this minor exemption required legislative action.

Maryland Anti-Harassment Law Going into Effect October 1: A significant expansion of Maryland’s anti-harassment law will go into effect on October 1. The amendments were approved and signed into law in April 2019.  Previously, the harassment Maryland’s Fair Employment Practices Law only applied to employers with at least 15 employees.  These protections will now apply to all employers with at least one employee and will also apply to independent contractors.  

Administrative Developments

Department of Labor Announces Final Overtime Rule: On September 24, the US Department of Labor announced its final rule on overtime pay and eligibility under the Fair Labor Standards Act (FLSA).  The FLSA requires employers to pay time-and-a-half rates to workers making less than a threshold amount for all hours beyond 40 per week. The new rule lifts the annual salary threshold below which workers qualify for overtime wages from $23,600 annually ($455/week) to $35,568 annually ($684/week). The rule also raises the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year.  Lastly, the rule permits employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices.  The rule will go into effect January 1, 2020, and the Department of Labor expects that the rule will extend overtime pay eligibility to an estimated 1.3 million workers.

FDA Holds Public Meeting on Food Standards of Identity as Part of Nutrition Innovation Strategy: On September 27, the FDA is holding a public meeting to give interested parties an opportunity to discuss FDA’s effort to modernize food standards of identity and to provide information about changes the FDA could make to existing standards of identity.  This is part of the FDA's Nutrition Innovation Strategy, an initiative designed to encourage industry innovation to improve the nutrition and healthfulness of food. As part of the NIS, FDA is seeking to modernize food standards of identity in a manner that will: (1) protect consumers against economic adulteration; (2) maintain the basic nature, essential characteristics and nutritional integrity of food; and (3) promote industry innovation and provide flexibility to encourage manufacturers to produce healthier foods. 


Fifth Circuit Panel Upholds Texas Alcohol Rules; Wal-Mart Files for Full En Banc Review: On August 15, the Fifth Circuit ruled against Wal-Mart in Wal-Mart v. Texas Alcoholic Beverages Commission.  The case concerns a challenge brought by Wal-Mart to four Texas statutes that govern the issuances of permits that allow for the retail sale of liquor in Texas. The Texas statues prohibit public corporations from obtaining retail sale permits for liquor.  Wal-Mart argued that the ban violated the dormant Commerce Clause of the United States Constitution and the Equal Protection Clause of the Fourteenth Amendment.  A panel of judges from the Fifth Circuit Court of Appeal held that the public corporation ban did not violate the Equal Protection Clause, and rejected Wal-Mart’s challenge.  Following the decision, on August 29, Wal-Mart filed a petition to have the entire Fifth Circuit review the decision, claiming that the panel of judges committed legal error. Wal-Mart’s petition states that the panel decision “undermines three important Commerce Clause doctrines, contradicts Circuit and Supreme Court precedent, creates or deepens two circuit splits and breaks with the Court’s guidance in Tennessee Wine.”