May/June 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.


Restaurant Revitalization Fund Replenishment Act Introduced: On June 8, 2021, a bipartisan group of Senators and U.S. Representatives introduced legislation to replenish the Restaurant Revitalization Fund with a $60 billion second round of restaurant relief.  The SBA received requests for more than triple the allocated funds.  More than 362,000 applications for a total of $75 billion in funding were received in the first three weeks the RRF application portal was open

Arkansas Enacts Food Freedom Act: On April 30, 2021, Arkansas enacted the Food Freedom Act that exempts certain producers of homemade foods or drinks products from any state food safety licensure, certification, or inspection. The act replaces previous regulations on the cottage food industry.

Utah Microenterprise Home Kitchen Law Goes into Effect: On May 5, 2021, Utah’s microenterprise home kitchen law went into effect.  Utah is now the second state (after California) to adopt legislation permitting microenterprise home kitchen operations. The law allows home cooks to prepare meals from their homes and sell to consumers without being a licensed kitchen.  Microenterprise home kitchen operators are still required to obtain permits from the health department, but are subject to less stringent requirements than commercial kitchens.  

Texas House Passes Restrictions on Plant-Based Food Labeling: On May 10, 2021, Texas lawmakers passed HB316, a bill that would prohibit plant-based, cell-based, or insect-based food products that do not contain meat from slaughtered animals from using terms like “meat,” “beef,” “pork,” or “poultry product” on food labels.  The bill is now being considered by the Texas Senate.

California Narrowly Rejects Sweeping FAST Act: On June 3, 2021, AB-257, the Fast Food Accountability and Standards Recovery Act (the “FAST Act”) was defeated in the California Assembly, coming up three votes short of the 41 votes needed.  The bill would have had a dramatic impact on fast food franchises.  It imposes a requirement for fast food restaurant franchisors to ensure that their franchisees comply with certain employment and worker public health and safety laws by making them jointly and severally liable for penalties or fines imposed because of violations of these laws by their franchisees.  Additionally, fast food restaurant franchisees would be permitted to file legal actions against their franchisors. Waivers and indemnification agreements given by fast food restaurant franchisees in favor of their franchisors would be invalid and unenforceable.  The bill also proposed the creation of a council to set state minimum wage and worker conditions for all restaurants with over 30 locations nationwide.  The bill will likely be back before the California legislature in January 2022.

San Francisco Passes Permanent 15-Percent Delivery Fee Cap: On June 22, 2022, San Francisco’s Board of Supervisors unanimously passed a 15% permanent delivery fee cap on delivery fees charged to restaurants.  While other cities have passed temporary caps for the duration of the COVID-19 state of emergency, San Francisco is the first major city to pass a non-emergency, permanent cap on these fees.

NYC’s “Just Cause” Law for Fast Food Workers Goes into Effect: On July 4, 2021, two New York City laws adding extra protections for fast food workers will go into effect.  These laws, passed as Int. No. 1415-A and Int. No. 1396-A, grant union-style protections to fast-food employee.  These include a prohibition on fast-food employers from terminating or cutting employees’ hours without just cause.  Additionally, employers that lay off employees due to bona fide economic reasons are required to do so in order of seniority. 

Administrative Developments

SBA Rescinds Thousands of RRF Priority Grants: As a result of lawsuits filed in Texas and Tennessee, the SBA is rescinding and reversing Restaurant Revitalization Fund priority grants made to economically disadvantaged and women-owned businesses during the 21-day RRF priority period.  These lawsuits argued that prioritizing distribution of RRF funds to groups based on race and gender was unconstitutional.  As of June 21, 2021, the SBA has informed over 2,900 applicants that their grant approval has been rescinded and that they will no longer be receiving funds.

FDA Announces “Healthy” Claims Consumer Research: On May 6, 2021, the FDA issued a procedural notice on the preliminary quantitative consumer research it plans to conduct on symbols that could be used in the future to convey the nutrient content claim “healthy.”  

California Extends ABC Regulatory Relief: On June 3, 2021, California Governor Gavin Newsom announced the extension of some pandemic alcohol measures designed to help restaurants and bars. These measures include expanded outdoor operations in areas such as sidewalks and parking lots, and the sale of to-go alcoholic beverages with food deliveries.

FDA Announces $134M Budget Increase: On June 7, 2021, the FDA released its Fiscal Year 2022 budget outlining key investments for food safety. The request details how the FDA plans to use funds in FY 2022 to support food safety and nutrition. The budget provides increases to core food safety programs and outlines emerging issues of concern for the agency.  The agency’s FY 2022 Budget provides $1.6 billion in budget authority for food safety, an increase of $134 million from the previous year.

DOL Issues Proposed Tip Credit Rule: On June 23, 2021, the U.S. Department of Labor published a Notice of Proposed Rulemaking to limit the amount of non-tip producing work that a tipped employee can perform when an employee is taking a tip credit.  Under the proposed rule, if a tipped employee spends either more than 20 percent of their workweek, or more than 30 uninterrupted minutes at any time on non-tipped work, the employer must pay the entirety of the federal minimum wage for that time.  Work that does not directly support tip-earning would be considered non-tipped sidework for which the employer must pay at least the federal minimum wage.  Written comments to the rule are due by August 23, 2021.

New York Ends To-Go Alcohol Sales for Restaurants: On June 24, 2021, New York Governor Andrew Cuomo ended New York’s state of emergency due to the COVID-19 pandemic, and ended an alcohol sale loophole that allowed restaurants to sell alcohol to-go.  The legislature did not codify this relief measure, and restaurants who offered the service are now left with packaging equipment and supplies that they can no longer use for to-go alcohol sales.

FTC Announces Open Meeting: On June 24, 2021, the Federal Trade Commission (“FTC”) announced that it would hold an open meeting that members of the public can attend.  During the meeting, the FTC will vote on the final Made in USA rule and discuss streamlining enforcement procedures and the investigation process for unfair competition and false advertising.   


Sixth Circuit Affirms Dismissal of FACTA Claim for Lack of Standing: On May 11, 2021, the Sixth Circuit Court of Appeals affirmed dismissal of a Fair and Accurate Credit Transactions Act of 2003 (“FACTA”) claim against a restaurant for printing credit card receipts containing the first six and last four digits of the credit card number.  FACTA requires that only the last five digits of a credit card number be printed. The district court dismissed the complaint for lack of subject matter jurisdiction because the plaintiff had not alleged a concrete injury.vvThe appellate court affirmed the dismissal, finding that the injury in fact requirement under Article III is not automatically satisfied by a statutory violation.  Instead, a plaintiff must still plead a concrete injury, whether it is actual harm or a risk of material harm to the plaintiff. The court found that the plaintiff had not alleged an injury in fact because plaintiff did not allege she was the victim of identity theft and  the disclosure of the first six digits of a credit card, which reveal only the card issuer and card type, does not inevitably lead to or increase the risk of identity theft.

Ninth Circuit Throws Out Trader Joe’s Poultry Labeling Case: On June 4, 2021, a panel of judges from the Ninth Circuit Court of Appeals affirmed the dismissal of consumer poultry labeling claims against Trader Joe’s on the ground that those claims were federally preempted. The consumer claims alleged that Trader Joe’s labels on poultry were misleading under California law because they had different percentages of retained water than was displayed on their labels. 

Red Lobster Sued Over Sustainability Claims: On June 11, 2021, California consumers filed a deceptive advertising class action lawsuit against Red Lobster’s parent company.  The lawsuit alleges that the chain’s promise of “Seafood with Standards” and claims on the website that it has a “traceable, sustainable and responsible” approach to its supply chain are not true.  This case is part of an increasing number of lawsuits filed against seafood retailers and foodservice outlets about their sustainability claims.