Do You Have to Pay Your Summer Interns?

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Do I Have to Pay My Interns?

Spring will soon draw to a close.  As you prepare for the arrival of your summer interns, make sure you have asked yourself this question: Do I need to pay my interns?

The easiest answer is generally, YES!  But the easiest answer is not the whole story, because you do not have to pay your interns in accordance with wage and hour laws if the company-intern relationship meets the federal (and state, as applicable) test.

The U.S. Department of Labor’s New Test

Earlier this year, the U.S. Department of Labor helped private businesses out.  It announced that it would be using a new (more employer-friendly) test to determine whether an intern is an “employee” that must be paid in compliance with wage and hour laws.  Whether an intern must be paid in compliance with federal wage and hour laws now depends on seven factors:

  • The extent to which the intern and the company clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa;
  • The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;
  • The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  • The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
  • The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
  • The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
  • The extent to which the intern and the company understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

According to the DOL, “no single factor is determinative.”  Thus, companies need to conduct a case-by-case analysis of each internship position to determine whether that intern should be paid.

I’m Located in California.  Do I Need to Be Concerned About State Laws Controlling Wage and Hour Requirements?

Here, the clear answer is YES!  For many years, the California Department of Labor Industrial Relations, Division of Labor Standards Enforcement (“DLSE”) has relied on the DOL’s old six-factor test.  For now, California businesses should also look to the DOL’s old six-factor test to determine whether they need to pay their interns.

The DOL’s adoption of this new seven-factor test this year followed a decision in the Ninth Circuit (which covers California).  In 2017, the federal Ninth Circuit Court of Appeals made a predictive statement, that the California Supreme Court would no longer use the old DOL test, and would instead apply a test more similar to the one set forth above.  Benjamin v. B & H Educ., Inc., 877 F.3d 1139 (9th Cir. 2017).  However, this statement is only predictive of what the federal court thinks the California courts would do, so it is not actually controlling law in California.

Thus, until the California state agencies and courts take a position on whether they will follow the Ninth Circuit and the DOL, companies should also check that they have considered the DLSE’s interns test to make their decision to pay (or not pay) interns.  That requires an analysis under the DOL’s old six-factor test:

  • The internship, even though it includes actual operation of the facilities of the company, is similar to training which would be given in an educational environment;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • The company that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The company and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If you have not examined your internship programs with these federal and state legal considerations in mind, you should do so immediately, before your summer interns arrive.  Review your internship materials, including your recruitment postings, company policies, and any other documents you anticipate having the intern sign before starting the summer program.

Conkle, Kremer & Engel attorneys are experienced with counseling employers in the face of a constantly changing legal landscape in employment law, and with helping companies identify and reduce areas of exposure to liability for employment claims, including wage and hour, discrimination, harassment, and retaliation claims.

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The Conkle Firm to Attend Craft Brewers Conference and BrewExpo America

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Attorneys Evan Pitchford and Zachary Page of Conkle, Kremer & Engel will be attending the 2018 Craft Brewers Conference and BrewExpo America in Nashville, Tennessee from April 30 to May 3.  The Conference, presented by the Brewers Association trade group, is one of the largest craft brewing-centric trade shows in the world, with thousands of industry professionals and exhibitors in attendance annually.

Mr. Pitchford and Mr. Page will attend to take meetings and keep abreast of the latest industry trends, including legal developments, craft brewing distribution and business issues, and evolving beer styles.  Conkle, Kremer & Engel brings its expertise to bear on a number of beer industry-specific issues, such as brand protection and intellectual property, distribution and vendor relations, regulatory issues, advertising and labeling, employment law, and litigation and alternative dispute resolution in state and federal courts.

If you’re an industry professional or craft beer-related business who will be at the Craft Brewers Conference and would like to connect with Mr. Pitchford and Mr. Page before, during, or after the event, please contact them at e.pitchford@conklelaw.com and z.page@conklelaw.com.  They would be happy to arrange initial discussions about particular issues you may be facing.

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Consumers are Exposed to Extreme Risks from Counterfeit Products

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Some consumers may view offers of brand name goods from sellers not within the manufacturer’s regular distribution chain as just a way to “get a good deal.”  But those offers can result in purchasers receiving counterfeit products, which are no bargain and can expose unknowing consumers to some of the worst risks imaginable.

At the very least, counterfeit products are frauds – they are not from the manufacturer whose trademark appears on the product, so the consumer is cheated out of the quality that the brand represents.  But in reality, the consumer has absolutely no idea what the contents and construction of a counterfeit product may be – it is a product of unknown origin, regardless of whether the consumer purchased from a known reseller.  Because virtually any product a consumer can purchase can be counterfeited, consumers can be placed in great danger from unknowingly purchasing substandard products.  A couple of recent events in the news highlight the extreme risks of counterfeit products.

In April 2018, the Los Angeles Police Department announced that it had raided sellers of supposedly discount brand name cosmetics, and seized $700,000 of counterfeits.  Consumers had complained to the brand manufacturers that makeup products they purchased were causing rashes and bumps on their skin.  The products were determined to be counterfeits that tested positive for high levels of bacteria and animal waste.  This is undoubtedly because the counterfeits are not manufactured with any quality controls or regulatory oversight – they are the result of a black market, pirate operation.  LAPD Detective Rick Ishitani was quoted in the press as saying, “Those feces will just basically somehow get mixed into the product they’re manufacturing in their garage or in their bathroom — wherever they’re manufacturing this stuff.”  One of the brands asserted to be counterfeit was Kylie Cosmetics. Kylie Jenner’s sister, Kim Kardashian West, tweeted:  “Counterfeit Kylie lip kits seized in LAPD raid test positive for feces. SO GROSS! Never buy counterfeit products!”

The risks to consumers of counterfeits unfortunately do not stop even there.  An even more extreme case of product counterfeiting hit the press a few days later.  Tragically, famed rock artist Prince died in April 2016.  It was soon determined that he had died from an overdose of fentanyl, an extremely powerful and dangerous synthetic opioid.  But in April 2018, local prosecutors announced that Prince had consumed the fentanyl by taking tainted counterfeit Vicodin, a brand name medication of AbbVie, Inc.  There was no determination as to how Prince obtained the counterfeit Vicodin pharmaceuticals.  “In all likelihood, Prince had no idea he was taking a counterfeit pill that could kill him.  Others around Prince also likely did not know that the pills were counterfeit containing fentanyl,”  Carver County, Minnesota Attorney Mark Metz was quoted as saying at a news conference.

Some believe that counterfeits can be identified by the price alone, and warn against buying brand name products at steep discounts.  While an inexplicably low price is certainly a red flag of a potential counterfeit, in fact counterfeit products are often sold to consumers at prices very close to those of the brand name product.  This is often because many intermediaries have handled the product, taking a profit with each transaction, in the course of a murky gray market distribution process.

The popularity of online sales make the risks even worse for consumers, as it is nearly impossible for the consumer to inspect the product before purchase and delivery, and it is often very difficult for consumers to determine who is actually selling the product online.  For example, many popular online sellers act as marketplaces for innumerable third party sellers, and a purchaser cannot always determine which seller will actually deliver the product purchased.

If you are a consumer, you really need to exercise great caution when considering purchases of brand name products from sellers who are not in that manufacturer’s authorized distribution channels.  It generally matters little whether the seller is known to the consumer – it only matters where the seller obtained the product.

If you are a brand name manufacturer or trademark holder who suspects that unauthorized parallel market sellers may be offering counterfeit products, you are well advised to promptly contact counsel well-versed in the issues and methods of enforcement of your intellectual property rights.

 

 

 

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CK&E Attorneys Lobby California Legislature with PCPC

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On March 20, 2018 Conkle, Kremer & Engel attorneys Eric S. Engel and Aleen Tomassian helped the Personal Care Products Council fulfill part of its mission by organizing and executing an effective lobbying day to advance the legislative interests of the industry.  Led by PCPC Senior Vice President Government Affairs Mike Thompson and PCPC Director of Government Affairs Karin Ross, a group of personal care product industry members, lobbyists and advisors heard presentations by pivotal regulatory agencies and then met with key legislators and their staffs to address issues of importance to the industry.

PCPC Chief Scientist Alex Kowcz seminar to Calif Legislative Staff

The PCPC held a luncheon at which it presented its first Legislator of the Year Awards to congresspersons who have been the most effective in advancing the important interests of both business and consumers in relation to personal care products.  Legislative staff also received an educational presentation from PCPC’s new Chief Scientist, Alex Kowcz, to help bring to Legislators the most current scientific information about issues affecting personal care products.  After a long day of meetings, participants unwound and connected at an informal reception for legislators, the governor’s office and administration officials at Ella, a popular restaurant near the State Capitol.

 

Eric S. Engel and Aleen Tomassian at PCPC Calif Lobby Day Reception

Some of the highlights of the 2018 PCPC California Lobby Day included a presentation by Meredith Williams, Deputy Director of Department of Toxic Substances Control (DTSC), and Rick Brausch, Chief of DTSC’s Policy and Program Support Division, Hazardous Waste Management.  The mission of the DTSC is the Safer Consumer Products (SCP) program, directed toward advancing the design, development and use of products that are chemically safer for people and the environment.  The aim is to reduce toxic chemicals in consumer products and create new business opportunities in green chemistry.

Dr. Williams advised the PCPC group that DTSC’s SCP program intends to focus over the next three years on nail salon products, particularly to assure a safe working environment for salon employees as well as customers, such as by assuring adequate ventilation and safety equipment.  Dr. Williams also noted that Volatile Organic Compounds (VOCs) are not only within the ambit of California’s Air Resources Board (ARB) as to their effect on the environment, but they are also within the scope of DTSC’s authority when regulation of VOCs can meaningfully enhance protection of human health.

On February 8, 2018, DTSC released a draft 2018-2020 Priority Product Work Plan for public review, in which “Beauty, Personal Care and Hygiene Products” are identified as targets for possible regulation.  Of some concern to PCPC, the Priority Product Work Plan includes DTSC’s interest in broad classifications of chemicals without defining exactly which chemicals in what formulations are of concern.  For example, DTSC’s Priority Product Work Plan identifies oxybenzone, BPA, DEA, formaldehyde, phthalates, parabens, triclosan, titanium dioxide, tolulene and VOCs as classes chemicals being considered for possible regulation, but there are a great many specific chemicals, formulations and uses within such classes, and not all of them are likely to be of concern to DTSC.  PCPC expressed its concern that broad classifications can cause confusion among manufacturers and consumers, and unnecessarily inhibit product development and sales.  For example, oxybenzone (aka Benophenone-3) is one of just 16 chemicals approved by the US Food and Drug Administration (FDA) as safe and effective for use as an ultraviolet (UV) filter to achieve broad-spectrum sun protection.  The health benefits of effective UV sunscreens are well documented, but the broad suggestion of “endocrine toxicity” or “dermatoxicity” in DTSC’s identification of oxybenzone is on shaky scientific footing.  Dr. Williams noted that the 2018-2020 Priority Product Work Plan is only in draft form, and that DTSC recognizes the broad nature of the chemical groups identified and is working on identifying specific chemicals of concern rather than entire classes of chemicals.

DTSC’s Richard Brausch spoke of the hazardous waste logistics issues facing the personal care product industry, affecting the entire supply chain from manufacturers to retailers.  The issue often occurs when products are returned from retailers, and questions arise as to whether they may be regarded as hazardous waste if they are no longer considered fit for regular sale, such as when new product labeling is introduced.  Issues can arise as to who has responsibility for proper transportation and disposal of the products, whether by sale in secondary markets, repair or refurbishment, donation to charities or recycling.  It is notable here that improper transportation and disposal has led some local authorities to sue retailers and wholesalers for failing to use hazardous waste transporters.  That in turn has caused retailers to impose anticipatory disposal charges on manufacturers and wholesalers for a wide range of products.  PCPC therefore supports Assembly Member Bill Quirk’s introduction of new legislation, AB 2660, which places the onus on the disposal company to determine the correct method of transportation, as that is not within the expertise expected of retailers.

The overriding hazardous waste concern is that California uses an “aquatic toxicity” (aka “fish kill”) test that is grossly out of alignment with federal law, and which results in most cosmetic products being characterized as hazardous under California law.  The “fish kill” test is exactly like it sounds – it tests only whether quantities of the subject product added to a water tank will kill fathead minnows.  The test is not regarded as especially accurate, notably because high viscosity products that are otherwise harmless can kill the fish by clogging their gills.  Further, the test presents a significant problem for the personal care products industry, which has taken a strong stand against animal testing, so manufacturers generally do not conduct this “fish kill” test on finished products.  PCPC therefore advocates a more modern approach to accomplish the same goal, by use of a more recently developed fish embryo test (FET), in which live fish are not killed.

An interesting side note is that SB 1249 was introduced by Senator Cathleen Galgiani to prohibit importation or retail sale of any cosmetic that was developed or manufactured using animal testing after January 1, 2020.  While PCPC takes a strong stand against animal testing, it could not support the bill as written because it included no exception for products marketed in countries (notably China) which require that products be subject to animal testing.  Rather, the PCPC has been working to obtain an amendment of the proposed legislation to make it conform to that of the European Union, which has strong anti-animal testing regulations but allows for accommodations to make products acceptable for sale in China.

Dr. Michael Benjamin, Air Resources Board Chief of Air Quality Planning and Science spoke about the substantial product data that ARB had collected from product manufacturers selling in California, through extensive annual surveys conducted over the past three years.  From that data, ARB is working to identify trends in emissions of VOCs.  Of particular interest is a February 15, 2018 publication in the academic journal Science of a study of VOC emissions from consumer products.  The Science publication (Volatile Chemical Products Emerging as Largest Petrochemical Source of Urban Organic Emissions, by Brian C. McDonald, Joost A. de Gouw, Jessica B. Gilman and others), Science Vol. 35, Issue 6377, pp. 760-764 (Feb. 16, 2018)) caught popular attention and some popular press because it found that vehicle emissions had become so much cleaner over the past decades that they were now responsible for less than half of VOC emissions.  Overall, the total volume of VOCs had diminished greatly.  Further, while the Science article authors made many assumptions on which they based their assessment of VOC contributions of consumer products, Mr. Benjamin pointed out that ARB has the actual data from its industry surveys to determine whether the author’s assumptions and conclusions are well founded.  ARB therefore intends to do its own assessment of the points made in the Science article to determine what further action is appropriate.

PCPC’s first Legislator of the Year Awards were presented to Senator Ed Hernandez, Assembly Member Bill Quirk and Senator Galgiani.  In his comments to PCPC members, Senator Hernandez emphasized, “We want business to stay here in California, we want businesses to be successful.  There’s a lot of people here that purchase your products.”   Assemblyman Quirk addressed the need for common sense limitations on legislation such as Proposition 65, remarking that “[Someone] sent me a package of Coors beer with a Prop 65 warning on it.  We now have cases in court where people want Prop 65 warnings on coffee. * * * One study after another shows it’s not a health risk. * * * We’ve got to do something about this.  I’m definitely going to be working as time goes on in the legislature so that we don’t end up with things that are harmless being labeled.”  Finally, Senator Galgiani observed that good legislative policy is not a zero sum game:  “It’s not about having a proposal that’s just good for the environment or just good for business but we can meet in the middle and have regulations and policies that work for both sides and help everybody involved.  It’s just harder to get there – it takes more work, it takes more time and it takes patience, and all of you [at PCPC] have done a great job.”

 

 

 

 

 

 

 

 

 

 

See the Beauty Industry Report article on the PCPC California Lobby Day here.

 

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2018 Changes to the California Alcoholic Beverage Control Act

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Each year brings changes to the California Alcoholic Beverage Control Act, and 2018 is no exception.  Most of the changes for 2018 are quite esoteric, relating only to the provision of licenses in particular counties or venues, or allowing some additional rights to non-profit corporations who use temporary licenses for events.

However, a chief new feature of the ABC Act that will have state-wide impact is the Responsible Beverage Service (RBS) Training Program Act of 2017 (California Business and Professions Code § 25680 et seq.).  The RBS Act provides that the California ABC will develop a best-practices training program by 2020 that all on-premises servers of alcohol (and their managers) throughout the state will need to complete in order to be certified to serve alcohol.  Servers employed prior to July 1, 2021 must complete the program by August 31, 2021, and all servers hired after July 1, 2021 must complete the program within 60 days of being hired.  ABC advisories indicate that food servers, bartenders, cashiers, doormen, and bouncers all may be considered “servers” for purposes of the RBS Act.

The RBS law appears to encompass a wide manner of licensees that operate on premises – bars, restaurants, brewpubs, tasting rooms, clubs.  For non-profit special events/temporary licenses, the licensee is required to designate one certified server who must remain on site for the entire event.  Covered licensees are required to maintain records of their various certifications, and violators are subject to unspecified “disciplinary action.”

The 2018 ABC Act also permits for the first time beer manufacturers to provide free or discounted ground transportation rides for consumers (i.e. from the brewery taproom to local hotels, etc.) for purposes of public safety.  (California Business and Professions Code § 25600.)  This harmonizes the treatment of beer manufacturers with winegrowers and distillers.  The manufacturer cannot, however, make the transportation contingent on the purchase of an alcoholic beverage, and beer wholesalers cannot have any interest in the transportation arrangement.

In instances where small beer manufacturers (License Type 23) and winegrowers have adjacent production facilities, the 2018 revisions also permit a common-licensed area in which consumers can drink both wine and beer.  (California Business and Professions Code § 25607.)  This is a new exception to the general prohibition of anyone possessing alcoholic beverages on a manufacturer’s premises other than the types that manufacturer is licensed to produce.

Staying up to date on laws and regulations affecting the industry is vital to successfully protecting and growing alcoholic beverage businesses.  For assistance navigating beer-industry specific legal issues, contact Conkle, Kremer & Engel.

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The Unintended Industry of Proposition 65: Plaintiffs’ Lawyers

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One of the unfortunate and unintended consequences of California’s extensive regulatory efforts has been to create a small industry of plaintiffs’ law firms and repeat clients apparently determined to extract settlement money from businesses.  Proposition 65 was implemented with the best spirit of consumer protection in mind.  But those regulations have since transmogrified into tools that primarily profit a small group of plaintiffs’ attorneys, to an extent that has become increasingly burdensome for consumer product manufacturers, resellers and property owners.

Proposition 65 provides for private enforcement actions, which enable individuals or groups to enforce the statutes against consumer products companies, property owners and others.  Prop 65 is a “right to know” law intended to help consumers make informed decisions about their purchases. The combination of a growing list of substances, difficulty in determining exposure levels with scientific certainty, sparse judicial and government oversight, and a right to attorneys’ fee awards under the statute, have transformed Prop 65 into a lucrative business model for a handful of law firms and closely-related consumer groups.  Hundreds of Prop 65 actions are settled each year, with about 70% of the settlement money paid being allocated to attorneys’ fees for the plaintiffs’ lawyers.

California’s published statistics from 2013-2017 show an accelerating trend of more Notices of Violations filed each year.  In 2016 alone, for example, 1,576 Notices of Violation were sent to businesses selling products in California, while 2,710 Notices of Violation were sent in 2017.  The attorneys’ fee provisions of Prop 65 undoubtedly have much to do with that trend.  In 2016, 760 judgments or settlements were reached totaling $30,150,111, of which $20,062,247 was paid as attorneys’ fees to plaintiffs’ lawyers.  In 2017, 688 judgments or settlements were reached totaling $25,767,500, of which $19,486,362 was paid as attorneys’ fees to plaintiffs’ lawyers.

With that kind of monetary motivation, it is easy to see why some law firms make a practice of filing and serving Prop 65 Notices of Violations.  This effectively creates a small industry of lawyers who pursue Prop 65 claims, often for a small group of repeat-plaintiffs who appear again and again with the same lawyers.  Public records identify at least the following law firms, attorneys and their associated plaintiff clients, who pursue multiple Prop 65 claims:

  • The Chanler Group
    • Represents repeated Prop 65 plaintiffs Anthony Held, Ph.D., P.E.; Whitney R. Leeman, Ph.D; Mark Moorberg; John Moore; Paul Wozniak; and Laurence Vinocur
  • Lexington Law Group
    • Represents repeated Prop 65 plaintiff Center for Environmental Health
  • Yeroushalmi & Yeroushalmi
    • Represents repeated Prop 65 plaintiff Consumer Advocacy Group, Inc.
  • Aqua Terra Aeris Law Group
    • Represents repeated Prop 65 plaintiffs Environmental Research Center; and Center for Advanced Public Awareness, Inc. (“CAPA”)
  • Law Office of Daniel N. Greenbaum
    • Represents repeated Prop 65 plaintiff Shefa LMV, Inc.
  • Klamath
    • Represents repeated Prop 65 plaintiff Mateel Environmental Justice Foundation
  • Lucas T. Novak
    • Represents repeated Prop 65 plaintiff APS&EE, LLC
  • Custodio & Dubey
    • Represents repeated Prop 65 plaintiff Ecological Alliance, LLC
  • Sheffer Law Firm
    • Represents repeated Prop 65 plaintiff Susan Davia
  • O’Neil Dennis, Esq.
    • Represents repeated Prop 65 plaintiff Alicia Chin
  • Bush & Henry, Attorneys at Law, P.C.
    • Represents repeated Prop 65 plaintiff Michael DiPirro
  • Brodsky & Smith, LLC
    • Represents repeated Prop 65 plaintiffs Gabriel Espinosa; Kingpun Chen; Precila Balabbo; Ema Bell; and Anthony Ferreiro
  • Law Offices of Stephen Ure
    • Represents repeated Prop 65 plaintiff Evelyn Wimberley
  • Lozeau Drury
    • Represents repeated Prop 65 plaintiffs Environmental Research Center, Inc.; and Community Science Institute
  • Robert Hancock of Pacific Justice Center
    • Represents repeated Prop 65 plaintiff Erika McCartney
  • Khansari Law Corporation
    • Represents repeated Prop 65 plaintiff The Chemical Toxin Working Group, Inc.
  • Law Office of Joseph D. Agliozzo
    • Represents repeated Prop 65 plaintiff Sara Hammond
  • Glick Law Group
    • Represents repeated Prop 65 plaintiff Kim Embry

If you are unfortunate enough to receive a Prop 65 Notice of Violation from one of these lawyers or plaintiffs, or from any others, don’t ignore it.  The problem will probably not go away by ignoring it, and prompt action can help keep the matter from getting far worse.  Handling it yourself is also usually not a great plan.  Remember that the plaintiffs who sent the Notice of Violation are almost always represented by counsel experienced in Prop 65 matters.  You should contact experienced counsel to help you respond promptly and handle the matter with minimum disruption to your business.

Conkle, Kremer & Engel attorneys have many years of experience advising clients about how to avoid regulatory compliance issues, and we regularly defend clients against Notices of Violations of Proposition 65 and other California regulations. CK&E uses its extensive experience to help clients who are accused of regulatory violations quickly and effectively resolve claims, so clients can focus on growing their business.

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Women Make Their Presence Known at Natural Products Expo West

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Conkle, Kremer & Engel attorneys Heather Laird and Desiree Ho attended the Natural Products Expo West in March 2018, where they encountered product trends emphasizing simple recognizable ingredient formulations, and business trends emphasizing strong women’s influences in ownership and management.  Demonstrating the growing consumer interest in natural and organic products, attendance at this year’s Expo was reported to be the largest ever, exceeding 85,000 visitors to more than 3,500 exhibitors.  CK&E attorneys visited clients’ exhibit booths and met with entrepreneurs in the beauty, food, and beverage industries to help them strengthen their brands, navigate regulatory and labeling issues, and grow their business.

Exhibitors showed strong cross-cultural influences, with many products and flavors from around the world, all emphasizing the trend toward fewer and more recognizable ingredients in simple formulations.  Businesses clearly demonstrated they are responding and catering to the adventurous interests and palates of health-conscious, worldly, and informed consumers.  Countless product lines were customized for consumers committed to paleo, vegan, and gluten-free diets.  Another popular trend is toward products and businesses that are dedicated to championing charitable causes, so consumers can use their purchases to support causes they are passionate about and can feel loyal to brands that are as committed as they are.

Mirroring recent cultural trends, women-owned and managed businesses were very notable throughout the Expo.  Many entrepreneurs proudly advertised their Women’s Business Enterprise National Council (WBENC) certifications.  The WBENC certification “validates that the business is 51 percent owned, controlled, operated, and managed by a woman or women.”

In the beauty arena, there were a refreshing number of brands actively encouraging women to maintain an open dialogue with the product manufacturer to address issues they regularly face.  The trend of businesses expending great effort to establish dialogue and long-term relationships with their consumers through social media and direct contacts has become clear.  These overlapping trends resulted in prominent presentation of many products “made for women, by women,” ranging from beautifully packaged feminine hygiene products to natural pre-natal and post-natal products promoted as safe for use by pregnant women and around infants.

CK&E attorneys provide full service to businesses in the beauty, food, and beverage industries.  They regularly attend important trade shows to help their clients stay abreast of trends, new regulations, and developments in the law and the marketplace affecting these industries.

 

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UK Bans Sale of Products with Plastic Microbeads

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Beginning on June 30, 2018, the United Kingdom’s ban on the sale of “rinse-off” cosmetic and personal care products containing plastic microbeads in their formulas will take effect as part of the Department for Environment, Food and Rural Affairs’ (“Defra”) efforts to reduce the harmful, pollutive impact that plastic microbeads have on the marine environment.  The sales ban follows the ban on the manufacture of such products in the UK that went into effect on January 9, 2018.  Defra described the prohibition as “one of the world’s toughest bans on these harmful pieces of plastic.”  Notably, the UK ban applies to both biodegradable and non-biodegradable plastic microbeads.

While the Institute for European Environmental Policy (IEEP) and organizations such as Beat the Microbead and Plastic Soup Foundation have pushed for an EU-wide ban on the sale of plastic microbeads, it does not appear that such a ban is being developed at the moment.  However, European countries are trending toward microbead bans: Sweden’s ban on the sale of rinse-off cosmetics with microbeads takes effect on July 1, 2018 (although sellers who obtain such products before that date may continue to sell them until January 1, 2019); Ireland plans to introduce a microbead ban by the end of 2018; and several other countries in the European Union are reportedly in the process of developing their own microbead bans.

Plastic Microbeads in Cosmetics

For decades, plastic microbeads have been used in facial cleansers, soaps and toothpastes for their exfoliating properties.  However, in response to growing concerns about the environmental impact of plastic microbeads in recent years, many companies have reformulated their products to use other non-plastic exfoliants, such as walnut shells, salt, seeds and jojoba beads, among others.

Plastic microbeads make their way from our sinks and showers, to the sewage systems, and into the marine environment.  One scientific study found that in the United States alone as many as eight trillion microbeads end up in our lakes, rivers and oceans every day.  The microbeads absorb toxins and are ingested by marine animals who transport them to other creatures up the food-chain.

UK Follows Example Set by US Ban

The “tough” UK ban follows in the footsteps of the Microbead-Free Waters Act of 2015 in the United States banning both non-biodegradable and biodegradable plastic microbeads, which was signed into law by President Obama on December 28, 2015.  Prior to the federal ban, however, eight of the nine states to pass legislation banning plastic microbeads in personal care products exempted biodegradable plastic beads from the ban.  California was the only state with a plastic microbead ban that included both biodegradable and non-biodegradable plastics within its scope, as studies showed that even the biodegradable microbeads disintegrate quite slowly and create a negative environmental impact.  For more history about the introduction of state-level microbead legislation, see CK&E’s earlier post regarding New York’s Microbead-Free Waters Act and the proposed laws in other states.

While the scopes of the UK and US bans are substantially similar, a violation of the UK ban could come with a much steeper monetary penalty.  While the fine for violating the US ban generally does not exceed $1,000 (assuming that there was no intent to defraud or mislead), a violation of the UK ban could cost the violator up to 10% of its annual revenue in England.

If you are a manufacturer, it is important that you stay up to date with the industry regulations in every territory where you manufacture or distribute your products.  CK&E has decades of experience helping clients adapt their businesses and products to comply with changing regulations all over the world, in a cost-effective and efficient manner.

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California’s Cleaning Product Right to Know Act Requires Ingredient Disclosure

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California became the first state in the nation to have a cleaning products disclosure law, after Governor Brown signed the Cleaning Product Right to Know Act of 2017 (S.B. 258 (Lara)) into law in late 2017.

The Cleaning Product Right to Know Act requires manufacturers of certain cleaning products sold in California to disclose on the product label and on the product’s Internet web site certain information related to known hazardous chemicals contained in the product.  Manufacturers will have until January 1, 2020 to comply with the online disclosure requirements, and until January 1, 2021 to comply with the product label disclosure requirements.  However, any intentionally added ingredient that is regulated by California’s Safe Drinking Water and Toxic Enforcement Act (commonly known as Proposition 65) will not have to be listed until January 1, 2023.

The new law applies to so-called “designated products”, which are defined as a finished product that is an air care product, automotive product, general cleaning product, or a polish or floor maintenance product used primarily for janitorial, domestic or institutional cleaning purposes.  It does not apply to foods, drugs and cosmetics, trial samples, or industrial products specifically manufactured for certain industrial manufacturing processes.

The product label will be required to disclose each intentionally added ingredient contained in the product that is included on any of 22 specified designated chemical lists – including chemicals listed pursuant to Proposition 65.  Alternatively, manufacturers may list all intentionally added ingredients contained in the product unless it is confidential business information.  The Act also requires the disclosure of fragrance allergens greater than 0.01 percent (100 ppm).  Additional requirements include the manufacturer’s toll-free telephone number and Internet web site address on the product label.

As for the online disclosure requirements, manufacturers must list all intentionally added ingredients and state their functional purpose.  All nonfunctional constituents present at above 0.01 percent (100 ppm) must also be listed.  The website must include electronic links for designated lists and a link to the hazard communication safety data sheet for the product.  In addition, specific requirements apply for the disclosure of fragrance allergens online.

The Act also adds a section to the California Labor Code imposing an obligation on employers who are required to provide employees with Safety Data Sheets (SDS).  Those employers must similarly make the printable information from the online disclosure available in the workplace.

Although it is a state law, the effect of the Cleaning Product Right to Know Act is certain to be felt by manufacturers across the country who sell their products into California, as is true of many of California’s other regulatory schemes, including Proposition 65, and will most likely result in a nationwide relabeling of covered products.

Given the Act’s numerous and in some cases highly technical requirements, manufacturers of cleaning products would be well advised to determine whether any of their products are subject to the Act, and take steps now to ensure compliance by 2020.  Conkle, Kremer & Engel attorneys stand ready to help manufacturers handle all that is coming their way.

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Big Beer, Craft Beer, and Trademark Infringement: Harm to Premium Brands

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As the craft beer market continues to expand in popularity and threaten the market share of older “macrobrewery” giants like Molson Coors and Anheuser Busch, courts have seen increased legal disputes in the beer industry as brands fight for both their independence and the attention of consumers.  Most recently, Molson Coors has been sued in federal court in San Diego by Stone Brewing Co., one of the oldest and largest independent craft brewers in the United States.  In its complaint, Stone Brewing claims that Coors is infringing the “STONE” trademark by rebranding Coors’ sub-premium, low cost “Keystone” brand as “KeySTONE,” with a particular emphasis on the single word “STONE” in packaging and marketing materials.  Because of this, Stone Brewing alleges, Coors is sowing consumer confusion between the two brands.

Keystone Rebranding Comparison from Stone Complaint

Unless there is a swift settlement, one can assume that Stone Brewing will make good on the threat in its complaint that it will move for a preliminary injunction in order to stop the sale of Coors’ “KeySTONE” branded products during the pendency of the lawsuit.  A motion for a preliminary injunction is often a critical juncture in such trademark infringement lawsuits, and Stone Brewing will need to show that it will be “irreparably harmed” if the injunction is not granted.  This showing has in recent years become more difficult, as courts no longer presume irreparable harm when the plaintiff shows that consumers are likely to be confused by trademark infringement, but rather require an additional showing of likely irreparable harm.  “Irreparable harm” (also known as “irreparable injury”) generally means injuries that cannot be readily compensated by money damages, and since money damages are usually available for trademark infringement this standard presents special hurdles for infringement plaintiffs that can be difficult to overcome early in a case.

To show irreparable harm, one argument Stone Brewing will likely make is that its “premium brand” is being tarnished by confusion with Coors’ “value brand.”  This argument is presaged throughout Stone Brewing’s complaint (referring to Keystone’s beers as “watered down” and “fizzy yellow offerings,” as opposed to Stone Brewing’s “bold” and “artisanal” products).  The argument, which has been judicially adopted in relatively few cases, is essentially that the premium or niche brand is irreparably harmed by the association with the value, mass-market brand, which usually is of lesser quality.

Conkle, Kremer & Engel, which has experience in both trademark litigation and issues specific to beer production, distribution, and marketing, has succeeded in making this premium-vs.-value argument in federal courts in California.  For example, in Moroccanoil, Inc. v. Zotos International, Inc. (230 F. Supp. 3d 1161 (USDC C.D. Cal. 2017)), a 2017 trademark infringement case with similarities to the dispute between Coors and Stone Brewing, CK&E represented the manufacturer of Moroccanoil Treatment, a luxury oil-infused hair care product sold in distinctive packaging.  The defendant Zotos, part of a large personal care products conglomerate, had created a low-cost “value” hair oil product called “Majestic Oil” that, in addition to its similar name, used packaging that was a close likeness of Moroccanoil’s trade dress.

CK&E, in its successful motion for preliminary injunction, argued that sales of low-cost “value” Majestic Oil products would erode Moroccanoil’s carefully-built premium image.  The presentation included evidence establishing that once a product is no longer perceived by consumers as “premium,” it is difficult or even impossible for the seller to regain that perception.  The court agreed with CK&E and Moroccanoil, finding a likelihood of irreparable harm and granting a preliminary injunction against further sale of the Majestic Oil products.

Preliminary injunctions can be dramatic turning points in infringement cases.  In Moroccanoil’s case, the court’s preliminary injunction prevented Zotos from any further sales, advertisement or distribution of its infringing products, and required Zotos to recall all of its infringing products already in the market.  As could be predicted, the case settled swiftly thereafter and Zotos made permanent substantial changes to its product name and packaging to avoid infringing Moroccanoil’s intellectual property rights.

Click here to learn more about CK&E’s Moroccanoil v. Zotos matter or contact CK&E attorneys who work on beer industry matters, such as the brand protection that can make or break participants in the crowded craft beer market, including John Conkle, Evan Pitchford and Zachary Page.

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