F&B Legal Roundup – July 2018

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.

Supreme Court Win for American Express  On June 25, the Supreme Court held in a close 5-4 decision that American Express’s anti-steering rules did not violate the federal antitrust laws. As part of its merchant agreement, American Express forbids retailers and restaurants from steering the customer toward other credit cards that charge a lower transaction fee.  Ohio and sixteen other states sued American Express, claiming that these anti-steering laws were anti-competitive and a violation of the Sherman Act.  The majority of the Supreme Court found that the states failed to prove that the American Express rules harmed cardholders. The decision limits the ability of restaurants or retailers to try to control their expenses from credit card processing fees by directing customers to use credit cards that charge lower transaction fees.

California Supreme Court Protects Yelp On July 2, the California Supreme Court ruled in Hassell v. Bird that Yelp could not be ordered to remove negative reviews posted by a user, even if the reviews were defamatory. This decision was hotly contested, and came down to a very close 4-3 ruling. Ultimately, the court held that Yelp could not be forced to take down negative reviews from users of the website, even if the reviews were found to be defamatory.  The case is discussed in more detail here.

In-N-Out Button Ban Rejected by Fifth Circuit  On July 6, the Court of Appeals for the Fifth Circuit ruled in favor of the National Labor Relations Board (“NLRB”) on a decision involving badges worn by In-N-Out employees in Austin, Texas. Employees had worn “Fight for $15” badges advocating for higher minimum wages.  In-N-Out managers asked the employees to remove the badges, pointing to a company rule that prohibited employees from wearing any type of pins on their uniforms. The NLRB found the company’s rule violated Section 7 of the National Labor Relations Act (“NLRA”).  Both the NLRB and The Court agreed, finding that Section 7 of the NLRA protected the right of employees to wear items, including buttons and pins, relating to terms and conditions of employment, including wages and hours and unionization.  In-N-Out argued that both the company’s particular image and special circumstances of post safety should exempt them from Section 7 and permit them to enforce this ban, but the Court rejected this argument.

Ninth Circuit Victory for Taco Bell on Meal Breaks – On July 18, the Court of Appeals for the Ninth Circuit ruled that Taco Bell could require employees consuming a subsidized lunch during their breaks to remain inside Taco Bell. An employee had brought a class action lawsuit alleging that Taco Bell’s policy violated California law.  California Wage Order 5-2001 requires that employees be relieved of all duty during a requisite meal period.  The plaintiff argued that requiring employees who purchased a discounted meal to stay on the premises was a violation of that order.  However, the Court found that Taco Bell properly relieved employees of their duties during the meal break period and exercised no control over their activities under California law.

Pennsylvania Supreme Court Upholds Philadelphia Beverage Tax – On July 18,  the Pennsylvania Supreme Court upheld Philadelphia’s tax on soda in a 4-2 decision. The city’s 1.5 cent/ounce tax, which was passed in 2016, is applied at the manufacturer level and earmarked to fund city programs. Opponents of the tax argued that it constituted double taxation, because distributors could raise consumer prices, and consumers already paid the state sales tax.  Philadelphia was the first major U.S. city to pass a soda tax, and the fate of the tax has been closely watched by the beverage industry and would-be regulators.

California Supreme Court Rules Off-the-Clock Work Must Be Paid – On July 26, the California Supreme Court ruled 7-0 that under state law, employers had to compensate employees for all their time, including “de minimis,” time of a few minutes a day. Starbucks required a shift manager to clock out his time before he uploaded sales records to the computer system. The shift manager alleged that he spent 4-10 minutes of time on work-related tasks that he was not compensated for, which added up to approximately 13 hours over 17 months. The Court rejected Starbucks’ argument that this time was minimal, holding that “What Starbucks calls ‘de minimus’ is not de minimis at all to many ordinary people who work for hourly wages.”  This decision means that employers in California must accurately calculate employee time for hourly employees and compensate employees for all time worked.

Eleventh Circuit Extends ADA Accessibility Requirements to Restaurant Websites – On July 31, the Court of Appeals for the Eleventh Circuit ruled that restaurant websites were covered by the Americans with Disabilities Act (“ADA”) and needed to be accessible to disabled patrons. A blind plaintiff had sued Dunkin’ Donuts in Florida, claiming that the company violated Title III of the ADA by not maintaining a website compatible with screen reading software.  The district court dismissed the case, but the Eleventh Circuit reversed the lower court in a 3-0 unanimous opinion.  The Court held “the website is a service that facilitates the use of Dunkin’ Donuts shops which are places of public accommodation. And the ADA is clear that whatever goods and services Dunkin’ Donuts offers as a part of its place of public accommodation, it cannot discriminate against people on the basis of a disability, even if those goods and services are intangible.”