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Friday
Jun162017

Old Grounds: A Lack of Prop 65 Warnings Brew Trouble for Coffee Franchisors

 

by Stephen T. Holzer and Barry Kurtz

 

California Prop 65 warnings – many residents barely notice these anymore, as we’ve lived with Safe Drinking Water and Toxic Enforcement Act notices for over 30 years now. They appear at gas pumps; in apartment and office buildings; on packaging for food, toys and other products; and in retail establishments all over the state.

The ubiquitous but largely ignored warnings are clear, generally stating that a consumer may be exposed to certain chemicals that may cause cancer or reproductive harm.

But if the average citizen of California no longer notices the signs, who does? Bounty hunters. More specifically, an opportunistic group of consumers and lawyers who notice the lack of Prop 65 signs and labels. They then file lawsuits on behalf of the public good. Most businesses settle the claims rather than engage in expensive litigation.

This leads to a whole new trend in tort litigation aimed at restaurants, though Starbucks and Dunkin’ Donuts were named (along with approximately 80 other coffee co-defendants) in a suit brought by the Council for Education and Research on Toxics (CERT) back in 2010. CERT's complaint is that these businesses failed to warn customers of potentially harmful, carcinogenic chemicals in coffee, specifically acrylamide.

In the latest news on this particular CERT suit, Dunkin’ lost its argument for summary judgment. The franchisor claimed it needn’t put warning labels on its coffee because technically, the franchisor doesn’t sell coffee in California. Dunkin’ Brands Inc. oversees a corporation – it doesn’t buy, sell, roast, distribute or even possess coffee.

A Los Angeles Superior Court Judge found that argument weak, and so to court will Dunkin’ go, along with its codefendants. 

More Acrylamide and Other Chemically-Based Acrimony

The chemical acrylamide isn't just found in coffee. It forms on starchy foods as they cook, so toast, French fries and a host of other popular menu items carry trace amounts. Really, just about any one operating a restaurant in California can become a target for this type of tort.

But environmental plaintiffs worry about other chemicals and ingredients too.

Prop 65 and Restaurant Businesses

According to the Mercury News, plaintiffs filed lawsuits last year because of Bisphenol A (BPA) found in receipt paper and bottled water.

Sugar is also on the chemical hit list, though not considered a Prop 65 chemical. California lawmakers introduced Senate Bill 300, the Sugar-Sweetened Beverage Health Warning Act, which could require anyone selling closed container beverages to add warnings to their containers, and any business with vending or beverage dispensing machines to add signage to those machines.

The warning as written now, would read:  STATE OF CALIFORNIA SAFETY WARNING: Drinking beverages with added sugar(s) contributes to obesity, type 2 diabetes, and tooth decay.

Some franchisors have already stated an intention to remove food dyes from the ingredients of their menu items, Dunkin' Donuts and Baskin Robins among them. But California has a bill targeting products with these chemicals too.

Senate Bill 504 would amend the state's Health and Safety Code to direct the Office of Environmental Health Hazard Assessment (OEHHA) to review literature regarding the potential risks to children who may be consuming these chemicals.

A report from the OEHHA would be due in 2019. Chances are good the chemicals in food dyes will make their way to the hundreds of chemicals already flagged on California's Prop 65 list of potentially toxic agents.

Prop 65 Compliance

So what should restaurant owners know about Prop 65, and more importantly, what should they do?

1. Size Matters: Understand that the law affects businesses employing 10 or more people. Small café and food truck owners are probably safe if they employ a skeleton staff. In fact, that was another argument Dunkin' Brands Inc. attempted when it tried to get out of the coffee labeling suit.

2. The List is Long: There are about 900 chemicals cited as dangerous on the OEHHA list as of January (there are 1,000 rows on the Excel sheet – some of the data contains delisted chemicals, some are header information rows, etc.). Chances are good every business in California with 10 or more employees should be posting a warning of some sort.

3. Prop 65 Has Evolved: The rules regarding this law changed recently. Warning labels and signs gave general warnings in the past, now businesses must name the specific chemical present on the premises or in the product. That could get rather daunting, e.g. "This establishment sells products for consumption that may contain acrylamide, BPA, benzidene (found in food dyes), ethanol (found in alcoholic beverages), etc. The new rules will be enforced as of August 30, 2018.

4. Violation Penalties: Up to $2,500 per day, per violation.

5. Some Good News: Businesses could argue that the levels of the chemicals present in food or other products are so low, there is little risk of harm. This type of defense requires expert, scientific testimony however, and may be financially out of reach for many businesses.

Franchisors and franchisees should beware and be diligent. 

History tells us that when a contingency fee attorney finds one unit in a franchise system in potential violation of these types of consumer-protection laws, litigation on the claims spreads through the franchise system and company-owned units like wildfire. Since the franchisor generally establishes operating standards, specifications and procedures with which the franchisees must follow, both are at risk if they fail to comply with these measures once they become law.

 

Steve Holzer is the Chair of our Environmental Practice Group. Barry Kurtz is the Chair of our Franchise and Distribution Practice Group.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Tuesday
Jan032017

Prop 65 Update: The Rules They Are a Changin'

Litigation AttorneyEnvironmental Litigation

 

Stephen T. Holzer

818.907.3299

 

Proposition 65, known as the Safe Drinking Water and Toxic Enforcement Act of 1986, among other things requires businesses employing ten or more people to warn consumers if the business’ products contain a chemical scientifically shown to cause cancer or reproductive toxicity.

Prop 65 LawyerThe State maintains a list of such chemicals. Such warnings are delivered by placing “clear and reasonable” warning statements on the products, on product packaging, or on signs at retail establishments selling the products. Historically, the warnings were usually sufficient even if they were somewhat generic – e.g., “This product contains a chemical [our emphasis, for illustrative purposes only] known to the State of California to cause cancer or reproductive toxicity.”

New Prop 65 Rules

After 30 years of living under regulations implementing Proposition 65, the Office of Emergency Health Hazard Assessment (“OEHHA”) has promulgated a whole new set of regulations re clear and reasonable warnings designed in part to “make warnings more meaningful to the public.” 

The new regulations require, among other things, the warning specifically to identify the chemical(s) in question – e.g., “This product can expose you to lead [our emphasis] which is known to the State of California to cause cancer or reproductive toxicity.” The new regulations also provide for specialized warnings for certain industries. The specific warning language listed in the new regulations need not be used if affected businesses can show other language provides a “clear and reasonable” warning; but the safest thing for a business to do is to adopt the language in the regulations.

Businesses have until August 30, 2018 until the new regulations become effective but can operate under the new regulations immediately if desired.

Enforcement Actions

Proposition 65 can be enforced by the government, but if the state chooses not to take action after being notified that adequate warnings were not given, individuals may do so by acting as “private attorneys generals.” Businesses in violation of the warning requirements may face a civil penalty of up to $2,500 a day for the period of violation. Typically though, settlements are much smaller than this draconian amount.

A Prop 65 claim is a particularly difficult claim for a business to defend. The most common defense is to show that people exposed during a course of a lifetime to the chemical(s) at issue would not become ill because the levels of the chemical(s) are too low to do any harm. It is expensive to mount such a scientific defense, requiring the testimony of experts. Small to medium-sized businesses generally choose to settle because the financial burden of litigation is too great.

Although case law suggested that a litigation settlement would protect a party from further Prop 65 claims re the same products and associated chemicals placed at issue by the claim, the law was arguably not completely settled in this regard. The new regulations specify that court-approved warnings will shield the businesses involved in a particular claim from future claims over the same issues.

OEHHA provides extensive information about Proposition 65. Additionally, you can contact us with any questions.

Stephen T. Holzer is the Chair of our Environmental Practice Group and a business litigation attorney. 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Apr132016

California Wage & Hour: Employer Q&A

Wage and Hour DefenseEmployment Litigation Defense

by Sue M. Bendavid

818.907.3220

 

Recently, the California Labor Commissioner cited a residential care provider for multiple wage theft violations, including for failure to pay minimum wage and overtime.

Wage Theft DefenseAs a result of the Labor Commissioner’s investigation the company was found to owe approximately $192,000 in pay. However, in addition to back wages, this particular employer will have to pay nearly $450,000 because of penalties, interest, liquidated damages and other fees.

The lesson for all employers is this:

Ensure proper payment of all wages now, or double (or perhaps triple) the costs later.

So what can employers do to stay compliant and reduce the risk of wage claims? Here’s a Q&A regarding some of the bigger pitfalls in timekeeping and payroll.

 

Payroll & Timekeeping FAQs

Q:  When should an employer change an employee’s time entries?

 

A:   An employer should change an employee’s time records when the employee forgets to record his or her start or end time or meal period on a timesheet or time clock. Further, an employer can record an employee’s work time if the employee is out sick, on vacation, or absent on some other form of time off.

If the employee forgets to clock in or out, or record a meal period, the employer may enter the actual in or out time to ensure the employee is paid correctly. If an employee is out sick or out for some other form of time off, the employer can change the time record to show the reason for the time off. 

Important: Employees should initial any changes to their timecards to confirm they are accurate.

 

Q:  What are some of the common mistakes employers make when tracking time?

 

A:  Don’t assume an employee only works 8 hours a day or 40 hours in the week or takes a 30-minute or 1-hour meal break each day, regardless of the hours the employee was scheduled to work or the Company’s meal break policy or practice.

An employer may not change a time record to show fewer hours than actually worked. For example, an employer may not reduce an employee’s time record from 10 hours in a work day to 8 hours to avoid overtime payment. This is true even if the employee consents to the change.

If an employee wants to take personal time off during a particular day and make up the time later in the same week, consider whether the “makeup” rules can apply.  If done correctly these rules can allow an employee to work up to 11 hours in a workday (3 hours of makeup time) without triggering overtime, as long as the employee does not work more than 40 hours in a workweek).

 

Q:  What are some of the potential claims if the employer fails to accurately pay an employee?

 

A:  Under California law, if an employer does not pay an employee correctly, they can expect to see some or all of the following claims: 

  • Failure to pay minimum wage (for off the clock work/hours that may not have been recorded on time records)

  • Failure to pay wages for hours worked

  • Failure to pay overtime

  • Waiting time penalties (up to 30 days wages)

  • Paystub violations (up to $4,000 in penalties or damages)

  • Failure to keep accurate records

  • Penalty claims under the Private Attorneys General Act (PAGA)

  • Liquidated damages

  • Missed Meal Break Penalties (one additional hour of pay per day missed)

  • Missed Rest Break Penalties (one additional hour of pay per day missed)

  • Violation of Business & Professions Code Section 17200 (restitution and injunctive relief)

  • Interest

  • Attorneys’ fees

  • There is risk of both civil and statutory penalties under various Labor Code provisions.    

Not only is the employer potentially liable, there is a recent move to try and hold individuals liable for penalties (against those who caused the violations to occur).

 

Q:  What is the statute of limitations on these claims?

 

A:  Under California Business & Professions Code Section 17200, employees can assert various wage claims going back up to four years. This includes claims for wages, meal breaks, rest breaks, overtime, minimum wage, failure to pay all wages, etc. Some claims go back one – three years, depending on the particular statute at issue.

 

Q:  How can an employer avoid (or at least reduce the risk of) claims?

 

A:  Strict compliance is critical. Employers should minimize unnecessary changes to time records, including requiring all employees to accurately record and maintain their own time records. Employers should prohibit changes to time records unless pre-approved and signed off by the employee.

Employers should develop policies prohibiting off-the-clock work, ensure employees are authorized and permitted to take all rest periods and meal periods as required by law, and have employees review, sign and date their own time records each pay period.

All work hours must be recorded, even if the work is performed remotely or before or after regular work hours.

PAGA DefenseEmployers who may be exposed to litigation risk because of previous violations should consider a payroll audit (under the attorney-client privilege) to determine the scope of potential liability. Ensure you have non-retaliation policies in place and inform employees there will be no retaliation if they complain about errors or “wage theft” or raise questions about timekeeping, breaks or pay.

It is also important to analyze classification of workers as independent contractors vs. employees and exempt vs. non-exempt. Non-exempt employees are entitled to overtime premiums. Exempt employees must be paid at least two times minimum wage on a salaried basis. Recent minimum wage increases must be complied with and there are many local minimum wage ordinances to be aware of as well.

Pay stubs must be reviewed to ensure accuracy and compliance with the law.

 

Q:  What documentation would be important when changes are made to time records?

 

A:  When changes are made to a time record, employers should keep the original and create a modified record, or line through the error on the original, make the correction, and have both the employer and employee sign and date the corrected record. The reason for any changes should be noted and signed.

If engaging in a wage audit, enlist the help of an experienced employment attorney.

 

Paying Employees in California

Don’t forget the new laws that went into effect in various metro areas like Los Angeles, as well as new state laws affecting pay, including: 

  1. The Fair Pay Act, ensuring equal pay for all genders.

  2. Senate Bill 3, signed by Governor Jerry Brown earlier this month, SB3 amends the Healthy Workplaces, Healthy Families Act and provides an increase in minimum wage as of January 1, 2017.

  3. The Los Angeles Minimum Wage Ordinance also mandates a minimum wage increase as of July 1, 2016. 

Remember, in cases where a city or county law conflicts with state or federal law, employers should always pay the higher standard.

 

Sue M. Bendavid is the Chair of the Employment Practice Group at our firm. 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

LEWITT HACKMAN | 16633 Ventura Boulevard, Eleventh Floor, Encino, California 91436-1865 | 818.990.2120