November/December 2020 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.

Litigation

• Restaurants Challenge Dining Bans: Restaurants across the country are challenging city, county, and state bans on indoor and outdoor dining due to COVID-19.  These challenges are continuing to go through the courts in California, Michigan, Philadelphia, Oregon, Texas, and Wisconsin, among others.  For the most part, courts have upheld dining restrictions due to public safety concerns.  However these cases should progress to the state appellate court and supreme court level in the next month or two.
• Ninth Circuit Dismisses Popcorn Class Action: On December 4, 2020, the Court of Appeals for the Ninth Circuit affirmed a district court’s dismissal of a class action lawsuit regarding partially hydrogenated oils in Pop Secret popcorn, finding a lack of Article III standing.  In its ruling in McGee v. S-L Snacks Natl’l (No. 17-55577), the panel held that the plaintiff in the case did not plausibly allege that she suffered either economic or immediate physical injury as a result of her purchase and consumption of Pop Secret popcorn.  The panel also noted that the Pop Secret packaging disclosed the presence of partially hydrogenated oils as an ingredient in the product.
• California Appeals Court Declines to Enforce Arbitration for Postmates Drivers: On December 9, 2020, a California Court of Appeal upheld a lower court decision denying Postmates’ petition to compel arbitration of claims made under the Private Attorney General Act of 2004.  The case Rimler v. Postmates Inc., was brought by two couriers for Postmates who had signed a courier agreement including an arbitration provision.  Plaintiffs sued Postmates seeking PAGA penalties for the company’s alleged Labor Code violations, and Postmates then sought to compel arbitration.  The Court ruled that under California law, PAGA claims could not be compelled into arbitration.

Legislation

• $900 Billion Stimulus Bill Provides Some Relief for Restaurants: On December 21, 2020, Congress agreed to a $900 billion stimulus bill, passed as The Consolidated Appropriations Act, 2021 (“the Act”). The 5,593-page Act includes funds designated for direct relief, additional money for forgivable Paycheck Protection Loans and tax relief measures, but does not include a special pool of funding specifically for restaurants or hotels, which had been contemplated by the RESTAURANTS Act.  The Act sets aside $300 billion in additional Paycheck Protection Loans. Of that, $15 billion is earmarked for live entertainment venues and $20 billion is set aside for businesses in low-income communities. Businesses with fewer than 300 employees are eligible for a maximum of $2 million in loans.  Second draw borrowers in the food and hotel industry are permitted to receive a second loan of up to 3.5 times their monthly average payroll costs (compared to the 2.5 times monthly average payroll cost limit for initial PPP loans). These borrowers are still subject to the $2 million cap. Additionally, the Act provides for temporary IRS full deductions for business meals provided at a restaurant. The full deduction will apply to expenses incurred after December 31, 2020. 
• Laws Banning Unauthorized Restaurant Listing on Third Party Sites Gain Steam: On January 1, 2021, California’s Fair Food Delivery Act of 2020, which was passed in September 2020, officially went into effect.  The law requires food delivery platforms to get explicit authorization from restaurants before listing them on their app or website.  New York lawmakers are considering a similar law, Assembly Bill 784.
• NYC Requires “Just Cause” to Fire Fast Food Workers: On December 17, 2020, the New York City Council passed two bills modifying employment laws for fast food workers in the City.  One bill prohibits fast food employers from terminating or substantially reducing the hours of a worker without “just cause.”  “Just cause” is defined as “demonstrated misconduct or poor performance,” but the law provides that employees may also be terminated for “bona fide economic reasons.”
• No Mask, No Service Rules: On November 9, 2020, the City of Los Angeles adopted an ordinance permitting businesses to refuse entry to anyone entering the premises without a face covering.  Several states and cities have issued similar laws, regulations, or executive orders with varying degrees of success.  On July 8, 2020, Maine Governor Janet T. Mills issued an executive order stating that retail stores, eating establishments, bars, and other businesses “shall implement measures requiring customers to wear face coverings” and that such measures may include denial of entry or service.  New York Governor Andrew Cuomo issued a similar executive order in June.  In some cases, individuals have sued alleging that the mask laws create discrimination under the ADA, and these suits are still pending.

Administrative Developments

• EPA, FDA, and USDA Renew Food Wase Reduction Plan: On December 17, 2020, three U.S. agencies: The U.S. Environmental Protection Agency (“EPA”), U.S. Food and Drug Administration (“FDA”) and U.S. Department of Agriculture (“USDA”)  announced the renewal of the Formal Agreement Among EPA, FDA and USDA Relative to Cooperation and Coordination on Food Loss and Waste. The renewed agreement has a three-year term.
• Sources of Foodborne Illness Report: On December 18, 2020, the Interagency Food Safety Analytics Collaboration (IFSAC) issued its 2018 Annual Report  2018 Annual Report) on the Sources of Foodborne Illness.  The report collects and analyzes foodborne-illness outbreak data for four pathogens – Salmonella, Escherichia coli O157, Listeria monocytogenes, and Campylobacter – and specific foods and food categories that are responsible for foodborne illnesses in the United States. The CDC estimates that, together, these four pathogens cause nearly two million cases of foodborne illnesses in the U.S. each year.
• Department of Labor Issues Final Tip Pooling Rule: On December 22, 2020, the Department of Labor (“DOL”) announced  a final rule revising its tipped employee regulations. The final rule is designed to address and incorporate amendments made to section 3(m) of the Fair Labor Standards Act (“FLSA”) by the Consolidated Appropriations Act of 2018 (“CAA”). That amendment prohibits employers from keeping tips received by their employees, regardless of whether the employer takes a tip credit. It also prohibits employers from allowing managers or supervisors to keep any portion of employee’s tips.
• California Agency Fines Meatpackers for COVID-19 Safety Violations: On December 23, 2020, the California Department of Industrial Relations announced that state agency Cal/OSHA had cited eight employers for not protecting workers from COVID-19 during inspections at meat processing facilities across the state. The inspections were opened upon learning of a COVID-19 fatality and several illnesses, and after receiving complaints. The employers cited failed to take required steps to prevent COVID-19 infection in the workplace such as safe physical distancing procedures or proper face covering usage for workers in production areas.  This announcement is in addition to a $100,000 fine imposed by Cal/OSHA against Smithfield Foods in November for similar violations.
• FTC Imposes Conditions on Winery Acquisition Due to Antitrust Concerns: On December 23, 2020, the Federal Trade Commission announced that it was imposing conditions on E. & J. Gallo Winery’s acquisition of assets from Constellation Brands, Inc. due to concerns that the acquisition would substantially lessen competition.  The FTC noted that the two companies were among the largest suppliers in the U.S. of six categories of wine and spirits products: entry-level on-premise sparkling wine, low-priced sparkling wine, low-priced brandy, low-priced port, low-priced sherry, and high color concentrates.  The FTC expressed concerns that the proposed $1.7 billion acquisition would violate federal antitrust law.  As a result, E. & J. Gallo winery agreed to divest several product lines and removing other lines from its asset purchase agreement.