Food and Beverage Law Update: August 2017
Wage and Hour
Tenth Circuit Aligns with Cumbie on Tip Credits
By Nathan A. Adams IV
In Marlow v. New Food Guy, Inc., No. 16-1134, 861 F. 3d 1157 (10th Cir. June 30, 2017), the court affirmed the district court's ruling, consistent with Cumbie v. Woody Woo, Inc., 596 F. 3d 577, 581 (9th Cir. 2010), that if an employer pays more than the minimum wage without regard to tips, the Fair Labor Standards Act (FLSA) does not restrict the employer's use of tips. Restrictions on the use of tips apply only when the employer uses tips received by the employee as a credit against the employee's minimum wage. The court refused to extend Chevron deference to the U.S. Department of Labor (DOL) regulation to the contrary, which provides, "Tips are the property of the employee whether or not the employer has taken a tip credit...." 29 C.F.R. s. 531.52 (2011). The court disagreed with the agency and with Or. Rest. & Lodging Ass'n v. Perez, 816 F. 3d 1080, 1086-89 (9th Cir. 2016), that its rule fills an ambiguity or gap in the statute. The court ruled, "[S]ilence about employers who decline the tip credit is no 'gap' for an agency to fill. Instead, the text limits the tip restrictions in s. 203(m) to those employers who take the tip credit, leaving the DOL without authority to regulate to the contrary." Justice Neil Gorsuch, who joined the U.S. Supreme Court in April, participated in oral argument, but not in the decision.
Arbitration Clause in Contract with Staffing Agency Not Controlling for Employer
By Nathan A. Adams IV
In Scheurer v. Fromm Family Foods, LLC, No. 16-3327, 2017 WL 3015610 (7th Cir. July 17, 2017), the court affirmed the district court's order denying the defendant's motion to compel arbitration of a sexual harassment and retaliation lawsuit against the defendant based on a contract between the defendant and the staffing agency that employed and directed the plaintiff. The court applied Wisconsin law. The plaintiff alleged that her supervisor employed by the defendant made sexually explicit comments to her in front of other employees, and that the defendant asked the staffing agency to reassign her to another client after she complained. The defendant argued on appeal that equitable estoppel should compel arbitration, but the court disagreed. The defendant dropped a third-party beneficiary argument and raised for the first time on appeal an agency or joint liability theory. The court considered these arguments waived.
Use of Similar Slogans by Restaurants with Different Themes Unlikely to Cause Confusion
By Thomas W. Brooke
Restaurants and other hospitality service providers often use slogans and catchphrases to create a memorable and favorable impression in the minds of consumers. Pinchers Crab Shack, a 12-store chain based in Bonita Springs, Fla., is no exception. Pinchers began promoting its restaurants with the phrase, "You Can't Fake Fresh" in 2004. It now uses this slogan in almost all of its advertising, including billboards, print media, online, and limited radio and television spots. The U.S. Patent and Trademark Office (PTO) granted a Federal Trademark Registration to Phelan Holdings, Inc. (Phelan), the holding company for Pinchers Crab Shack, for the "You Can't Fake Fresh" slogan in 2010, and the registration is now incontestable.
RARE Hospitality Management Inc. (RARE), an Orlando-based subsidiary of Darden Restaurants Inc., began using the phrase "You Can't Fake Steak" in 2012 to promote its LongHorn Steakhouse restaurants. RARE obtained a federal registration for its slogan in 2015. Shortly thereafter, Phelan brought a trademark infringement suit against RARE, alleging that the "You Can't Fake Steak" slogan created a likelihood of confusion with the "You Can't Fake Fresh" slogan. Phelan's claim was one of "reverse confusion," which occurs when a much larger defendant "saturates the market with a trademark similar or identical to that of a smaller, senior user." Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947, 957 (7th Cir. 1992). In reverse confusion, the mark's rightful owner is injured because the public assumes that the owner is somehow affiliated with the larger company or that the owner is actually the infringer. Id. "The result is that the senior user loses the value of the trademark[.]" Id.
In Phelan Holdings, Inc. v. Rare Hospitality Mgmt., Inc., No. 8:15-CV-2294-T-30TBM, 2017 WL 1135266 (M.D. Fla. Mar. 27, 2017), Phelan was unable to show that anyone had actually been confused. Although such a showing is not required, "actual confusion" is a key factor when assessing likelihood of confusion. Not only was there no confusion, but also Phelan admitted that RARE's restaurants do not look like Phelan's restaurants and have different atmospheres. Because the slogans themselves were not identical and the restaurant themes and menu offerings were also different, the court found no likelihood of confusion and granted summary judgment to RARE.
Labor and Employment
NLRA Does Not Protect Disparaging Comments about Employer
By Nathan A. Adams IV
In Miklin Enterprises, Inc. v. National Labor Relations Bd., 861 F. 3d 812 (8th Cir. 2017), the court of appeals in an en banc opinion reversed the National Labor Relations Board's (NLRB) holding that MikLin Enterprises, Inc. (MikLin), owner of 10 Jimmy John's franchises, violated the National Labor Relations Act (NLRA) when it discharged and disciplined employees who distributed disparaging posters in connection with a campaign for paid sick leave. Organizers began by posting on bulletin boards in MikLin stores two identical images of a Jimmy John's sandwich. Above the first were the words, "YOUR SANDWICH MADE BY A HEALTHY JIMMY JOHN'S WORKER," and above the second were the words, "YOUR SANDWICH MADE BY A SICK JIMMY JOHN'S WORKER." The poster asked: "CAN'T TELL THE DIFFERENCE?" It answered, "THAT'S TOO BAD BECAUSE JIMMY JOHN'S WORKERS DON'T GET PAID SICK DAYS. SHOOT, WE CAN'T EVEN CALL IN SICK. WE HOPE YOUR IMMUNE SYSTEM IS READY BECAUSE YOU'RE ABOUT TO TAKE THE SANDWICH TEST." When MikLin did not reform its policy, the Industrial Workers of the World (IWW) carried out its threat to "plaster the city with a new version of the posters" that listed the co-owner's personal telephone number.
The court ruled that the NLRA does not protect these communications because they amount to a type of disloyalty unnecessary to carry on the workers' legitimate concerted activities and "a sharp, public, disparaging attack upon the quality of the company's product and its business policies, in a manner reasonably calculated to harm the company's reputation and reduce its income." Interpreting NLRB v. Local Union No. 1229, IBEW, 346 U.S. 464 (1953) (Jefferson Standard), the court ruled that this test includes an objective element that focuses not on the employee's purpose, but on the means used and includes disparagement that is part of or directly related to an ongoing labor dispute. The court declined to extend so-called Chevron deference to the NLRB's decision because, inter alia, 1) the NLRB purported to interpret Jefferson Standard, not apply its own contrary interpretation of the NLRA; 2) statutory construction is first and foremost a judicial function and 3) the NLRB was attempting to give a narrow construction to a prior Supreme Court opinion attributing a meaning to a statute intended to limit the NLRB's authority.
The IWW did not lose on all counts. The court enforced the NLRB order in connection with an assistant manager's Facebook postings. The manager listed an IWW supporter's telephone number and suggested that employees text him to "let him know how they feel," and added, "F__k you David! Forever." The court agreed that the assistant manager's posts violated section 8(a)(1) of the NLRA by encouraging employees to harass the IWW supporter for protected activities. The court also agreed that the NLRA was violated when management removed postings on the bulletin board responding to the company's explanation as to what the settlement of certain unfair labor practice charges meant. The court observed that "[w]hile employees have no statutory right to use their employer's bulletin boards, 'where by policy or practice, the company permits employee access to bulletin boards for any purpose, section 7 [of the NLRA] ... secures the employees' right to post union materials."
Massachusetts Court: Medical Marijuana May Be Reasonable Accommodation
By Amanda G. Orcutt and Paul G. Lannon
An employee's use of medical marijuana to treat a qualified disability may be a reasonable accommodation under the Massachusetts anti-discrimination law, General Laws chapter 151B. In Barbuto v. Advantage Sales and Marketing, LLC, 477 Mass. 456, 78 N.E. 3d 37 (2017), the Massachusetts Supreme Judicial Court held that an employee stated a claim against her former employer for disability discrimination after being fired for testing positive for marijuana that she had been legally prescribed under state law to treat her disability. The court stressed that, like with other qualified disabilities, employers must engage in an "interactive process" with the employee to determine the best course of action with respect to accommodations. (For more details, see Holland & Knight's alert, "Medical Marijuana Use May Be Reasonable Accommodation Under Massachusetts Law," July 18, 2017).
Although still illegal under federal law, therapeutic use of medical marijuana by registered patients with qualified medical conditions certified by a physician became legal in Massachusetts in 2012.
As reported in Holland & Knight's previous Food and Beverage Law Update, at least 10 other states impose an affirmative duty to accommodate employee use of marijuana (i.e., Arizona, Arkansas, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, Pennsylvania and Rhode Island). In contrast, laws in three states (Georgia, Montana and Ohio) protect employers from medical use lawsuits. The remainder of the states are either silent about employer's rights and obligations or state laws — such as Florida's newly amended constitution, Fla. Const. Art. X, §29 — contain generic language referencing an employer's right to prohibit and/or its lack of duty to accommodate medical marijuana use "in the workplace." Employers should revisit their company policies regarding drug use and solicit legal advice relating to them to be sure the policies still conform with state and federal law.
EEOC Pattern and Practice Lawsuits Lead to Large Settlements
By Nathan A. Adams IV
The U.S. Equal Employment Opportunity Commission (EEOC) has recently entered into several large settlements in high-profile nationwide pattern and practice discrimination lawsuits. In July 2017, Bass Pro Outdoor World LLC agreed to pay $10.5 million to settle a nationwide pattern or practice race discrimination and retaliation lawsuit. Bass Pro agreed to appoint a director of diversity and inclusion, to make affirmative outreach efforts to increase diversity in the workforce, update EEO policies and hiring practices, and annually train management and non-management employees.
In March 2017, the EEOC announced that it entered into a $12 million settlement with Texas Roadhouse Inc. after its case for pattern or practice of age discrimination ended in a mistrial, as reported in the previous Food and Beverage Law Update. As part of the settlement, the defendants agreed to change their hiring and recruiting practices. Texas Roadhouse will establish a diversity director as well as pay for a decree compliance monitor charged with ensuring that the company complies with the decree's terms. Texas Roadhouse also will increase its recruitment and hiring of employees ages 40 and older for front-of-the-house positions.
NLRA Violated by Restaurant Franchisee Declining to Hire Union Organizer
By Nathan A. Adams IV
In National Labor Relations Bd. v. EYM King of Mo., LLC, No. 16-3415, 2017 WL 2672669 (8th Cir. June 21, 2017), the court ruled that substantial evidence supports the NLRB's order finding that EYM King of Missouri LLC, which operates fast-food restaurant franchises in four states, violated the NLRA by declining to hire an individual for having engaged in protected labor activity.
Plaintiff Lacked Standing to Challenge Parking Barriers
By Nathan A. Adams IV
In Rocca v. Den 109 LP, Nos. 15-56407, 15-56643, 2017 WL 1089550 (9th Cir. Mar. 23, 2017), the court affirmed the district court's ruling that the plaintiff lacked standing under the Americans with Disabilities Act (ADA) to challenge three parking-related physical barriers at Denny's because 1) he was not injured by any of those violations on his one visit and parked with no problem, 2) he neither intended to return nor was deterred from doing so and 3) the plaintiff's stated purpose for visiting Denny's (i.e., a convenient stop en route to the beach) contradicted his true purpose (i.e., "to identify potential ADA violations"). The plaintiff did not testify that he had an intent to return, let alone provide detailed reasons for the long-distance visit, such as a regular business trip, annual amusement park visit or a family member nearby. However, the court ruled that the district court erred in denying the plaintiff's request for attorney's fees as a result of the district court's grant of summary adjudication for him on three claims, obligating Denny's to remedy certain ADA violations and making the plaintiff the "prevailing party."
Soy "Milk" and "Evaporated Cane Juice" Labeling Claims Partially Dismissed
By Nathan A. Adams IV
In Gitson v. Trader Joe's Co., No. 13-cv-01333-WHO, 2013 WL 5513711 (N.D. Cal. Oct. 4, 2013), the court ruled that the packaging and labeling on various Trader Joe's products, such as soy milk, yogurt containing "evaporated cane juice," and yogurt and truffles marked "no additive products" violate the unlawful prong of the California Unfair Competition Law (UCL), but do not violate its unfair prong as misleading and deceptive advertising. They fail the unfair prong because the allegations associated with, inter alia, yogurt and no additives products fail heightened pleading requirements, and the labeling claims related to soy milk and evaporated cane juice fail the "reasonable consumer" test. The allegedly misleading term is coupled with an explicit disclaimer on the product label that organic soy milk is "LACTOSE AND DAIRY FREE" and is an "alternative to dairy milk." The nutrition facts section of the evaporated cane juice products discloses that they contain "between 24 and 27 grams of 'sugars' per serving." Nevertheless, the court ruled that the unlawful prong of UCL and the California Sherman Act are violated. The court ruled that "it is plausible," in light of several U.S. Food and Drug Administration (FDA) warning letters to third parties, "that organic soy milk is misbranded because it does not contain milk from a cow" and that use of the term "evaporated cane juice" violates the FDA's common and usual name regulations. The court granted the defendant's motion to dismiss in part and denied it in part, and gave the plaintiffs the chance to amend their complaint.
Deceptive Trade Practices
Generalization About Mislabeling Plus Regular Purchases Confer Standing
By Nathan A. Adams IV
In John v. Whole Foods Market Gp., Inc., 858 F. 3d 732 (2d Cir. 2017), the court ruled that the plaintiff had standing to state a claim for deceptive trade practices, false advertising and unjust enrichment under New York law based on his claim that he made monthly purchases of Whole Foods pre-packaged cheese and cupcakes. The New York City Department of Consumer Affairs' (DCA) press release stated that 89 percent of Whole Foods' pre-packaged products tested were mislabeled, and the DCA concluded that the mislabeling was "systematic" and "routine." The district court was reversed because it believed that the plaintiff's complaint failed adequately to allege that he personally overpaid for any specific purchase.
Florida Alcoholic Beverages Trade Practices Guide Now Available
By Luis J. Gonzalez
The Florida Alcoholic Beverages Trade Practices Guide is a reference tool that addresses Florida Statute §561.42, referred to as the Tied House Evil law. The statute provides prohibitions and limitations related to the relationships and interactions between manufacturers, distributors, importers, brand owners, brokers and sales agents on the one hand, and vendors on the other. Topics covered in the guide include definitions, advertising, signage, tasting and sampling, sweepstakes, trade shows and seminars, among others. The guide is for informational purposes only and is subject to change at any time. The information contained in this guide was derived from Florida Statutes (Fla. Stat.) and Florida Administrative Code (F.A.C.) and is current as of July 2017.
Regulation and Legislation
By Nathan A. Adams IV
The DOL invites comments by Sept. 25, 2017, on the 2016 revisions to the white collar exemption regulations, including whether a different salary level would more appropriately identify exempt employees, the basis for setting a different salary level and why it would be more appropriate or effective.
On June 13, 2017, the FDA announced an indefinite delay in the launch of Nutrition Fact labels on packaged food, even though some companies have already adapted to the proposed rules. Several associations have sued New York City in the U.S. District Court for the Southern District of New York to stop the city from beginning to enforce the labeling law on federal pre-emption and other theories.
Taxes on sugar-sweetened drinks are expanding to non-caloric sweetened drinks in Cook County, Ill., and Philadelphia.
The FDA announced that companies may state that "supportive but not conclusive scientific evidence suggests that eating about 1.5 tablespoons (20.5 grams) daily of soybean oil, which contains unsaturated fat, may reduce the risk of coronary heart disease. To achieve this possible benefit, soybean oil is to replace saturated fat and not increase the total number of calories you eat in a day. One serving of this product contains [x] grams of soybean oil."
The FDA announced that companies may state that "supportive but not conclusive research shows that eating 1.5 ounces per day of macadamia nuts, as part of a diet low in saturated fat and cholesterol and not resulting in increased intake of saturated fat or calories may reduce the risk of coronary heart disease."
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.