Mid-Summer 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.


Canada Bans Single Use Plastics: Prime Minister Justin Trudeau announced that the Government of Canada would ban multiple categories of single-use plastics, including plastic bags, straws, cutlery, plates, and stir sticks beginning in 2021.  The government will conduct a scientific analysis to decide which products to ban first.  

San Francisco Bans Cashless Restaurants and Stores: On May 7,  the San Francisco Board of Supervisors voted unanimously to require that brick-and-mortar businesses accept payment in cash in connection with the purchase of goods and services other than professional services.  The law is now awaiting Mayor London Breed’s signature.

California Permits Customers to Bring Their Own Containers to Restaurants: On July 12, Governor Gavin Newsom signed AB-619 into law.  This law makes it easier for consumers to bring their own reusable containers to restaurants.  Restaurants must then follow written procedures to prevent cross-contamination and sanitize surfaces after using these containers.

Arkansas “Truth In Labeling” Law Targeting Meatless Food Goes into Effect: Arkansas’s law broadly restricting the advertising options available for vegan and meatless products went into effect in July 2019.  The stated purpose of the law is “to protect consumers from being misled or confused by false or misleading labeling of agricultural products that are edible by humans.”  The law targets specific advertising procedures used by vegan food manufacturers such as referring to a product as meat if it is not derived from livestock or poultry, and calling a product rice that is not actually rice.  Multiple businesses are planning challenges to the law in court based on the First Amendment.

Chicago Approves Fair Workweek Ordinance; Large Restaurants Will Be Affected: On July 24, the Chicago City Council passed the Chicago Fair Workweek Ordinance, requiring large employees to provide workers earning less than $26/hour at least two weeks’ advance notice of their work schedules and compensation for any last-minute schedule changes.  The ordinance will only apply to restaurants that have at least 30 locations globally and at least 250 employees in the aggregate; and will not apply to restaurants operating under a sole franchise.

New Jersey Bans Salary History Inquiries: On July 25, New Jersey enacted a law prohibiting employer inquiries about workers’ past wage and salary history.  The law prohibits employers from screening applicants based on their prior salary history and prevents employers from requiring a past salary history to qualify for a position.  The law will take effect on January 1, 2020.  New Jersey’s law has some exceptions and is more nuanced and limited than salary history laws recently enacted in other states.  


California Court Holds That Slip-Resistant Shoes Are Not a Reimbursable Expense: On June 4, a California appellate court ruled that California’s business expense reimbursement law did not require BJ’s Restaurants to reimburse employees for the cost of slip-resistant shoes.  BJ’s safety policy required restaurant employees to wear black, slip-resistant, closed-toes shoes and did not reimburse employees for purchasing these shoes. Section 2802 of the California Labor Code requires employers to indemnify employees for “all necessary expenditures…incurred by the employee in direct consequence of the discharge of his or her duties…”  The court found that because the policy did not require employees to purchase a specific brand or style of shoes and did not prohibit employees from wearing the shoes outside of work, they were not considered necessary expenditures under the statute.

Supreme Court Prevents FOIA Disclosure of Retailer Identities: On June 24, the Supreme Court ruled 6-3 in Food Marketing Institute v. Argus Leader Media, that the U.S. Department of Agriculture could keep the names of retail stores participating in the SNAP food-stamp program confidential and did not have to disclose it in response to a Freedom of Information Act (FOIA) request.  Argus Leader Media had filed a FOIA request with USDA seeking the names and addresses of all retail stores that participate in the SNAP program.  The USDA declined to disclose the store-level SNAP data, invoking FOIA's Exemption 4, which shields from disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential." The Court held that the USDA had the discretion to with records from a FOIA response that were submitted by a private entity as long as the entity submitting the information treated the records as confidential and the agency promises to keep the records private. 

Supreme Court Strikes Down Tennessee Residency Requirement for Alcohol Retailers: On June 26, the Supreme Court struck down parts of Tennessee’s alcohol retailer licensing structure in a 7-2 opinion in the case Tennessee Wine and Spirits Retailers Association v. Thomas. Tennessee’s law provided that alcohol retailers needed to be a resident of the state for two years before being granted a license to sell in that state. The Court held that Tennessee's two-year durational-residency requirement for initial retail liquor store license applicants violated the Commerce Clause of the Constitution.  The Court found that the state law discriminated against out-of-state economic actors and did not meet the required burden of advancing a legitimate local purpose.  The Court also considered Section 2 of the 21st Amendment, which allows each state to ban alcohol if it so chose.  The Court found that while the amendment gives states the ability to regulate alcohol, it did not allow state to violate the nondiscrimination principles of the Commerce Clause.

Connecticut Liquor Law Upheld Against Antitrust Allegations: On July 24, the Court of Appeal for the Second Circuit upheld Connecticut’s Liquor Control Act against an antitrust challenge made by Total Wines.  Total Wines had alleged that multiple provisions of the statute, including the minimum retail price provisions, volume discount provisions, and “post-and-hold” practice prevented meaningful price competition from retailers. The Court held that none of the provisions were preempted. The Second Circuit initially upheld the law in an opinion issued on February 20, 2019, and then issued a related opinion on July 24, 2019.

Gatorade Prevails in “Sports Fuel” Case: On August 2, the Seventh Circuit found that Gatorade’s use of the slogan: “Gatorade: The Sports Fuel Company” was a fair use protected by the Lanham Act, after two years of litigation.  A company called Sports Fuel, Inc. held two registered trademarks for “SportsFuel” and sued Gatorade and its parent company PepsiCo for trademark violations.  The Court found that Gatorade’s use of “sports fuel” fell within the fair use exception of the Lanham Act and was not in bad faith, and that customers were not likely to be confused by Gatorade’s use of the phrase. 

Administrative Developments

FDA Holds Public Hearing on CBD: On May 31,  the FDA held a public hearing with stakeholders regarding the use of CBD.  Acting Commissioner Ned Sharpless opened the hearing by reiterating that the FDA currently prohibits hemp-derived CBD in food products and dietary supplements. Most of the public comments presented at the hearing we in favor of creating a pathway for the legality of these products with consistent federal regulation.  The hearing did not end with any definitive path for legalization.

New York City Embargoes CBD Food Products: On July 1, New York City’s Health Department began embargoing food and drink products that contain CBD.  The embargo means that those products will have to be returned to the supplier or discarded. This embargo will escalate on October 1, 2019, when the Department will begin issuing violations to food service establishments and retailers for offering food or drink containing CBD. 

California Agency Rejects Cancer Warnings on Coffee: California’s Office of Environmental Health Hazard Assessment confirmed that coffee will not be required to carry warnings about risks of cancer or reproductive harm mandated by the state’s Safe Drinking Water and Toxic Enforcement Act (Prop. 65). The agency found that the chemicals “created by and inherent in roasting coffee beans or brewing coffee, do not pose a significant cancer risk,” and indicated that the regulation will take effect October 1, 2019.  This agency regulation was first proposed in June 2018, after a state court judge ruled that coffee needed to have warning labels