What do Goop, Sexual Energy, Jade Eggs and CBD Have in Common?

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Answer: Unproven Health Claims

Goop, a life-style branding company founded by Gwyneth Paltrow, was recently fined $145,000 by a consortium of California Counties for making exaggerated and false advertising claims about its products.  The makers and distributors of everything from clothes to perfume, and face cream to condoms, Goop has a well-documented history of over-the-top marketing claims.  In the action brought by the County District Attorneys, the government took exception to the claim made by Goop regarding its Jade Egg product.  Goop claimed among other things that the egg product, when inserted into the vagina, prevented uterine prolapse and improved sex.  In the parlance of the regulators, this was an unsubstantiated or unapproved new drug claim.

In similar fashion, cannabidiol oil or “CBD” products are at the forefront of aggressive (sometimes overly aggressive) health and medical claims. Everyone knows about “medical” marijuana, and CBD is one of several “active” ingredients found in marijuana and hemp plants which is often associated with the beneficial effects of the plant: pain relief, stress or anxiety relief, anti-nausea, and anti-inflammatory.  This phenomenon has lead to a budding market in consumer products featuring CBD, accompanied by assertive health claims.  The CBD market already covers a wide range of products, including cosmetics (skin creams), food products  (edibles), and even CBD laced beer.  To add to the confusion, a compound found in marijuana was recently approved by the FDA for treatment of a rare seizure disorder.

And this highlights the problem, especially for marketers of cosmetics.  The only FDA-approved medical claim for marijuana compounds is directed to a rare seizure disorder, and this is a tiny market. To make a valid advertising claim that a  skin cream product treats, for example, eczema, psoriasis or a rash, the company or brand would need to have FDA approval of the active ingredient for that particular disease or condition at issue.  Absent such approval, the marketing claim would likely be regarded as an unapproved new drug and subject to regulatory fines and seizure.  Thus, for example, if you want to make a skin-protectant claim for your product, you would need to use one of the FDA approved ingredients for such claims, and limit the claim to the language approved in the FDA monograph for skin protectants.  To illustrate the point, witch hazel is one of the FDA approved skin protectant active ingredients. If you use witch hazel as an ingredient in your product, in the correct percentage, it would allow you to make the claim “[r]elieves minor skin irritations due to either i) insect bites, ii) minor cuts, and/or iii) minor scrapes”.

The point of all this is to make sure that your advertising claims are reviewed and approved by experienced legal counsel.  This is a common area for regulatory action, as well as private class actions.  The FDA routinely polices the internet looking for unsubstantiated and unapproved new drug claims. When the FDA finds a violation, it sends out a warning letter that will look something like this.  You do not want to be the first one on your block to own one of these.  Consult your CK&E attorney before you put a label on your product, make an advertising claim on your website, press send on an email blast promotion, or even drop a product catalog in the mail.  Yes, even old school mailers can get you in trouble.

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New Law Requires Professional Cosmetics Labels to List Ingredients

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Professional cosmetics sold in California must have full ingredient labeling in the same manner as consumer cosmetics, if the products are manufactured after July 1, 2020.  The California legislature unanimously approved AB 2775, introduced by Assembly Member Ash Kalra.  The bill was signed into law by Governor Brown on September 14, 2018 and enacted as new Section 110371 to the Health and Safety Code.

There are over 312,000 professional cosmetologists who are licensed to provide nail and hair services, most often in salons.  The legislature found that “[i]nformation on the ingredients in professional salon products is essential to ensuring that workers and owners can make safer product choices and take steps to protect themselves and their customers against harmful exposures.”

The new law will establish that professional cosmetics must have a label affixed on the container that satisfies all of the labeling requirements for any other cosmetic pursuant to the federal Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 301, et seq.), and the federal Fair Packaging and Labeling Act (15 U.S.C. Sec. 1451, et seq.).  In other words, professional cosmetics must have the same ingredient labeling as consumer cosmetics.

The law already defines the term “cosmetic” as “any article, or its components, intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to, the human body, or any part of the human body, for cleansing, beautifying, promoting attractiveness, or altering the appearance.”  (Health and Safety Code Section 109900)  The newly-enacted law introduces a new definition of “professional cosmetic,” meaning a cosmetic “that is intended or marketed to be used only by a professional on account of a specific ingredient, increased concentration of an ingredient, or other quality that requires safe handling, or is otherwise used by a professional.”  In turn, “professional” is defined for this purpose as “a person that has been granted a license by the State Board of Barbering and Cosmetology to practice in the field of cosmetology, nail care, barbering, or esthetics.”

There is arguably some ambiguity in that the new statute could be read to define a “professional cosmetic” in a circular manner as including a cosmetic that “is … used by a professional.”  Such an ambiguity is not likely a concern in this particular Act.  This is because the effect of this new law is just to require the same type of ingredient labeling for both consumer and professional cosmetics, so it should not matter whether a licensed professional uses a resalable consumer or professional cosmetic for purposes of compliance with this law.  However, if in the future the same definition of “professional” is incorporated into other enactments (much like “the definition of cosmetics” was incorporated here from a different statute), the circular definition may become more problematic.

The new law was enacted with widespread industry support, including the Personal Care Products Council, the Professional Beauty Association, California Chamber of Commerce, and Unilever.  Many manufacturers have already listed product ingredients on their professional cosmetic lines in a manner consistent with that required for retail cosmetics, and so may already be in compliance.  But manufacturers should review their professional cosmetic product labeling well ahead of the July 1, 2020 effective date in order to determine whether they comply.  Further, manufacturers should be aware that there is no specific “professional cosmetic” exception to other warning label requirements, such as Proposition 65, which requires warnings if use of a product on a consumer in California would result in significant exposure to identified chemicals that are known to cause cancer, birth defects or other reproductive harm.

Manufacturers are well-advised to seek qualified counsel to review their circumstances before committing to potentially costly label changes, to be sure they comply with all legal requirements.  Conkle, Kremer & Engel attorneys stay up to date on important regulatory developments affecting their clients in the professional salon products industry, and are ready to help clients apply navigate the changing regulatory landscape in California and elsewhere.

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CBD is Turning Up Everywhere – But is it Allowed?

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One of the hottest trends in many industries is the addition of cannabis-derived extracts to consumer product formulas.  This is likely driven by the widespread popularity of local and state attempts to legalize medical or recreational marijuana use.  The personal care product industry is no exception to the trend, as any number of new product lines from moisturizers to mascara are being released with cannabis extracts in their formulations.  Cannabidiol (CBD) is turning up in all types of consumer food and drink products, from honey to craft beers.Honey with CBD

The cannabis plant contains over 113 known cannabinoids, or naturally-occurring compounds that interact with receptors in the human body, including cannabidiol (CBD) and THC. Since psychoactive effects are often attributed to the THC ingredient, it is generally avoided in consumer products, but CBD is considered to have no psychoactive properties and is becoming a popular ingredient, as is its cousin, hemp seed oil.  Some believe CBD can have health benefits – but more about that later.  In the current confusing state and federal legal environment concerning marijuana, many consumer product companies are wondering, is it legal to include CBD in my products?  The short answer is no. The long answer is “it’s complicated.” And the most important answer is that the environment is changing fast, so in the near future the question may become moot.

To understand the current complications, a little background on cannabis extracts is essential.  First, hemp and marijuana are both varieties of the cannabis sativa plant.  Various cannabis extracts can be sourced from different parts of the cannabis plant in a variety of ways. The most common cannabis extracts used in personal care and many other products are hemp seed oil and CBD oil. Hemp seed oil is produced by cold-pressing the seed of a hemp plant, while CBD oil is generally produced from the leaves and flowering tops of either a marijuana plant or a high-CBD hemp plant. Marijuana has high amounts of THC, the psychoactive ingredient that produces the “high” of marijuana. Hemp, on the other hand, typically contains only trace amounts of THC, but can be bred to have high amounts of CBD. While hemp seed oil differs from CBD oil, the legality of the two are intertwined. In short, hemp seed oil imported from abroad is legal, while hemp seed oil sourced from hemp grown in the United States may be legal in certain circumstances. CBD oil, on the other hand, is at present illegal under federal law under all circumstances.

Sterilized seeds and oil and cake made from the seeds of the cannabis plant (we’ll refer to these as “Hemp Oil” for the sake of simplicity) do not fall under the purview of the Controlled Substances Act (the CSA), which regulates federal U.S. drug policy. Hemp Oil is not deemed to be a controlled substance, so the production, distribution and possession of Hemp Oil is legal.  However, there are heavy regulations on the cultivation of “industrial hemp” (cannabis plants with THC concentration <0.3% by dry weight) from which Hemp Oil is derived. In simplified terms, Hemp Oil must be either imported into the U.S. or derived from industrial hemp legally grown pursuant to a 2014 Farm Bill. Pursuant to the 2014 Farm Bill, industrial hemp may only be grown for commercial purposes under specific pilot programs that have been adopted in particular states.

Unlike Hemp Oil, CBD is most easily derived from the leaves and flowering tops of cannabis plants.  CBD sourced from the leaves and flowering tops of the marijuana plant is illegal under the CSA, because the leaves and flowers of cannabis plants are not exempt from the definition of the CSA. But CBD can also be derived from industrial hemp, and since the passage of the 2014 Farm Bill it was commonly believed that CBD derived from legally grown industrial hemp would be legal. But it’s not that simple.  In 2017 the DEA implemented a final rule specifically targeting cannabinoid extracts, which includes CBD extract, regardless of its source. The final rule defined a new category of “marihuana extract” under the CSA that specifically rendered cannabinoid extracts a controlled substance illegal in general distribution and use. The DEA reiterated that any such cannabinoid extracts substance “will continue to be treated as Schedule I.”

The legality of the DEA’s new “marihuana extract” definition is questionable, but at present the new category of “marihuana extract” stands under the CSA, making CBD illegal under federal law. Hemp Oil is still legal and available for use in personal care products if imported into the US or grown pursuant to the state-licensed commercial hemp grower pilot programs. In May 2018, the DEA issued an internal directive acknowledging that products and materials made from the cannabis plant that fall outside of the CSA’s definition of marijuana (such as “sterilized seeds incapable of germination, and oil or cake made from the seeds”) can be “sold and otherwise distributed throughout the United States without restriction under the CSA or its implementing regulations.” But this directive does not make CBD legal in the DEA’s view.

Despite the dubious legal status of CBD oil and to a lesser extent Hemp Oil, many companies are choosing to forge ahead and add cannabis extracts to their products. Many such risk-takers believe that DEA enforcement against CBD-containing products is virtually nonexistent, and demand for consumer products containing CBD is high, so the potential risk is outweighed by perceived market benefits.

That conclusion is reinforced because there is a widespread perception that soon all these concerns could go up in smoke. Congress has begun action to remove industrial hemp from the definition of marijuana under the CSA. Such a move would also remove any extracts derived from hemp from the new definition of “marihuana extract.” Reports indicate that Congress may pass the bill before the end of 2018, effectively making CBD oil derived from hemp legal across the United States.  If that comes to pass, the product manufacturers who decided to jump the market and add CBD to their products even when it was legally dubious to do so may feel vindicated.

Honey with CBD Benefits ClaimedBut CBD is not a magic elixir that relieves brand owners from overreaching in their labeling and advertising.  In a future blog post, we’ll address the hazards of claiming health benefits from use of non-medical products, including those containing CBD.

Conkle, Kremer & Engel attorneys stay up to date on important regulatory developments affecting their clients in the manufacturing and resale industries, and are ready to help clients navigate the fast-changing regulatory federal and state landscape.  If you have questions in this or other consumer product regulatory areas, contact CK&E at counsel@conklelaw.com or 310 998-9100.

 

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Cosmoprof North America Features Challenging CBD, Natural and Organic Product Lines

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On July 29 and 30, 2018, Conkle, Kremer & Engel continued its annual firm attendance at Cosmoprof North America in Las Vegas, visiting with longtime and new clients and observing new brands and trends in the personal care industry.  This year’s edition of Cosmoprof had over 36,000 attendees with a record-breaking 1,278 exhibitors from 45 countries.  CK&E attorneys attend to connect with clients and others in the cosmetics, personal care, packaging, labeling and professional beauty markets, to help clients secure distribution agreements, and to learn about the newest industry innovations and issues.

This year, trends included substantial expansion of the mens’ care and beard care sector, along with CBD-infused cosmetics and hair care products and natural and organic hair regrowth formulas.  Organic products sold in California must meet strict requirements, and Products with “natural” claims can present special challenges and risks, as CK&E has addressed in previous blog posts, such as “What are Natural Products Anyway?”  A new twist has been recent growth (no pun) in “hair regrowth” products labeled as “natural” or “organic” .  Those classes of products face special issues in addition to whether they can fairly be called “natural” or “organic,” in that hair regrowth claims can at times run afoul of federal prohibitions on products that make drug-like claims without FDA approval, as well as federal and state labeling and advertising regulations.  Finally, a new class of beauty and hair care products are based on Cannabidiol (CBD) content, taking advantage of increased acceptance of cannabis-based products.  Yet CBD products continue to pose their own special issues, which will be the subject of an upcoming www.conklelaw.com blog post.  CK&E is well-versed in counseling clients on all such issues, from brand protection, vendor and distribution issues to the latest CBD, natural and organic product concerns.

Lastly, foremost on the minds of many manufacturers and distributors who sell in California were the new requirements for Proposition 65, the well-known California law requiring “Prop 65” warnings for products which contain chemicals known to cause cancer or reproductive harm.  New warning label requirements go into effect on August 30, 2018, which CK&E has already summarized on its blog.  CK&E is actively advising manufacturers about the most efficient and effective ways to address the changes and avoid the risks of inadvertent violations.

CK&E’s attorneys continue to pride themselves on keeping abreast of developments in the personal care market, along with assisting clients of all sizes with growth and protection of their brands and interests.  CK&E is an active member of the Professional Beauty Association, the Personal Care Products Council, and other important industry trade organizations.

 

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It’s Time: New Prop 65 Warnings are Required August 30, 2018

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In November 2017, we advised readers of Conkle, Kremer & Engel’s blog that products sold in California would become subject to new Proposition 65 warning requirements beginning August 30, 2018.  The new “Clear and Reasonable Warning Regulations” from California Office of Health Hazard Assessment (OEHHA) significantly changed warning requirements for affected products that are manufactured on or after August 30, 2018.  Among other changes, the new regulations affect the safe-harbor warning requirements that govern the language, text, and format of such warnings, and also impose downstream warning mandates through retail, online and catalog sales channels. Generally, some of the major changes that companies selling consumer products should be aware of include:

  • The “warning symbol” :  A graphic “warning symbol” is now required on consumer products, other than food products. The “warning symbol” must be printed in a size no smaller than the height of the bolded word “WARNING,” and should be in black and yellow, but can be in black and white if the sign, label, or shelf tag for the product is not printed using the color yellow. The entire warning must be in a type size no smaller than the largest type size used for other “consumer information” on the product, and in no case should be smaller than 6-point type.
  • Listing of a specific chemical:  Warnings must now specifically identify at least one listed ingredient chemical for each toxicological endpoint (cancer and reproductive toxicology) and include a link to OEHHA’s new website P65Warnings.ca.gov. Certain special categories of products, such as food and alcoholic beverages, have a specialized URL that must be used instead.
  • New warning language:  Warning language must now warn of an exposure to a chemical or chemicals from the product, rather than just warn that the product contains the chemical or chemical. For example, “ WARNING: This product can expose you to diethanolamine, which is known to the State of California to cause cancer. For more information go to www.P65Warnings.ca.gov.”
  • Internet and catalog requirements:  For internet sales, warnings must be provided with a clearly marked hyperlink on the product display page, or otherwise prominently displayed to the purchaser before completion of the transaction. It will not be sufficient if the product sold on the internet bears the required label, but the internet point of purchase listing does not. For catalog sales, a warning must be provided in a manner that clearly associates it with the item being purchased.
  • Short-form warnings:  The regulations allow the use of certain abbreviated “short-form” warnings, which may omit the identity of any specific chemical, only if the warning is printed on the immediate container, box or wrapper of the consumer product or is affixed to the product.  For example, “ WARNING: Cancer – www.P65Warnings.ca.gov.”  If a short-form warning is used on the product, the same short-form warning may be used for internet and catalog sales.

The regulations seek to minimize the burden on retail sellers of consumer products, but there are some obligations affecting resellers. Manufacturers, producers, distributors, and other upstream businesses comply with warning requirements if they affix a clear and reasonable warning to the product, or provide written notice and warning materials to an authorized agent of a retailer, among other requirements.  Retailers who receive products with a Proposition 65 warning on the label, or who receive proper notice that a warning is required, are responsible for placement and maintenance of internet warnings for those products before selling to consumers in California.  Retailers should only be liable for Proposition 65 violations under limited circumstances, such as if they cover, obscure, or alter a product’s warning label, or if they receive notice and warning materials but fail to display a warning, including catalog and internet warnings preceding consumer sales into California.

The particular requirements for each specific product can vary, so manufacturers and resellers are well-advised to seek qualified counsel to review their circumstances before committing to potentially costly label and website changes that may not comply with the new requirements.  Conkle, Kremer & Engel attorneys stay up to date on important regulatory developments affecting their clients in the manufacturing and resale industries, and are ready to help clients navigate the changing regulatory landscape in California and elsewhere.

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October 2018 Update

H. Kim Sim of CK&E was interviewed and quoted extensively in ChemicalWatch about the difficulties manufacturers face in implementing the “very confusing and very complex” requirements of the new warning label requirements of Prop 65.  For example, as Kim said, “The requirement that manufacturers name at least one substance for which they are providing warning has proven particularly challenging. Determining which one to include ‘can be tricky for companies to decide’, she said. ‘Is one more scary to the public than another?'”

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GDPR is Coming: If Your Business is Online, Beware the New EU Privacy Regulation

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If you sell or offer goods to EU residents, even from the U.S., it is now necessary to re-examine your data processing and privacy procedures. There is a new EU privacy law that will go into effect on May 25, 2018, with significant penalties for violations. The EU General Data Protection Regulation, or “GDPR,” covers any website, including a U.S.-based website, selling to EU residents and processing personal data of those EU residents.  Here are some basic questions and issues to address concerning your online presence:

Do you collect, store, or use Personal Data? You are subject to this regulation if your website collects, organizes, stores, disseminates, uses or otherwise processes personal data of EU residents, regardless of where your website keeps or uses such information.

“Personal Data” will likely be broadly interpreted. The GDPR defines “Personal Data” very broadly to include any information that can be used to identify an individual. This can include all sorts of data, like names, e-mail addresses, office addresses, and even IP addresses.

Can your users easily revoke consent? The GDPR takes consent seriously. The GDPR requires you to demonstrate consent was “freely given, specific, informed and unambiguous” by a “clear affirmative action” on the part of the user for the processing of personal data. When you ask for the user’s consent, you must articulate “specified, explicit, and legitimate purposes” for processing the data. Limit the data you collect to what is necessary to achieve these articulated purposes. Be extra careful if you are collecting sensitive personal data – the GDPR raises the bar for obtaining consent to process “special categories of personal data.” And make sure it is as easy for the user to withdraw consent as it is to give consent.

Can you respond quickly and effectively when the user exercises rights under the GDPR? The GDPR grants users, or “data subjects,” quite a few rights, including but not limited to knowing where and why you are taking the data and anything that happens to it, objecting to its collection or use, obtaining a copy of it, correcting or erasing it, or restricting its use. Make sure you have procedures in place to respond appropriately in the event a user exercises rights under the GDPR.

Penalties for failure to comply can be steep. Failure to comply with the GDPR can expose companies to administrative fines of up to 20 million Euros or 4% of the total worldwide annual turnover of an “undertaking” of the preceding financial year, whichever is greater. Even if you use vendors to process your data, you are still responsible for monitoring compliance. You are required to “implement appropriate technical and organizational measures to ensure and to be able to demonstrate that processing is performed in accordance with this Regulation.”

The EU GDPR is a minefield of regulatory requirements that require a close examination of your data processing and privacy procedures. Some companies, such as Microsoft, are implementing a single system worldwide to comply with the EU’s requirements, effectively granting greater-than-required  rights to non-EU residents.  There will likely be considerable uncertainty and confusion as the GDPR requirements are implemented and enforcement begins.  Contact Conkle, Kremer & Engel to help bring your data processing and privacy procedures into compliance.

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The Conkle Firm Presentation at 2018 PCPC Legal & Regulatory Conference

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On May 9, 2018 Conkle, Kremer & Engel attorney John A. Conkle presented on “The State of the States” panel at the 2018 Personal Care Products Council’s Legal & Regulatory Conference.  The panel focused on the increasingly strong role of state legislatures and state regulatory bodies in addressing issues of importance to the personal care products and cosmetics industries.  The panel featured lively discussion of issues arising from the evolving patchwork of laws and regulations among numerous states, including California’s infamous Proposition 65, slack fill laws, and labeling and ingredient disclosure regulations, ingredient phase-out requirements and outright bans, volatile organic compound limitations to protect air quality, and animal testing regulations.  The discussion included the importance of preservation and presentation of evidence to support manufacturers’ positions, including testimony in depositions and at trial.

The panel’s presentation is available here for review.  Contact John Conkle to discuss the latest issues affecting the state of the personal care products and cosmetics industries.

 

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Common Legal Mistakes Made in Social Media Influencer/Brand Relationships

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With over 2.5 billion social media users worldwide, it is no surprise that social media marketing is booming and partnerships between brands and social media influencers (i.e. individuals with large followings on social media platforms) are becoming increasingly popular.  These partnerships can be great opportunities for both parties – on the one hand, the brand gets promoted to the influencer’s thousands or millions of followers by a person they admire and trust, while the influencer gets compensated for this promotion.  However, these brand/influencer relationships can also expose both parties to lawsuits and fines from the Federal Trade Commission (FTC).  Although social media may seem like an informal marketing platform, the FTC has determined that its Guides Concerning the Use of Endorsements and Testimonials in Advertising apply to social media marketing, just as they apply to other forms of marketing.  This article outlines how to avoid a few of the common legal issues that arise in the course of a brand/influencer relationship.

Disclose the relationship between the influencer and brand. Part of the appeal of hiring an influencer for a marketing campaign is the authentic feel of the endorsement.  However, the FTC’s the Guides Concerning the Use of Endorsements and Testimonials in Advertising require influencers to disclose “material connections” that they have with the brand they are endorsing.  A connection is deemed “material” when the relationship between the influencer and brand may materially affect the weight or credibility of the endorsement from the influencer. 16 C.F.R. § 255.5 (2009).  An obvious example of a material connection is one where the brand is paying the influencer to endorse or review a product, but even friendships or familial relationships between the influencer and brand are material, as the influencer may be more likely to give a product a positive review because of this relationship.  

The disclosure of the material connection must be clear and conspicuous.  For example, a disclosure that consumers can only see if they click to see more of a post, or ambiguous hashtags such as “#ambassador” or “#collab,” are insufficient to meet the FTC’s disclosure requirement.  On the other hand, the FTC has stated that “#ad” close to the beginning of a post is a sufficient disclosure.  Both the influencer and the brand may be liable for the influencer’s failure to disclose a material connection, so brands must be sure to inform influencers of the duty to disclose and monitor the influencers’ posts to ensure compliance with the FTC Guides.

The claims in the endorsement must be truthful.  Claims made by a social media influencer in an endorsement must be truthful and substantiated.  This means that advertising claims cannot be misleading to the average reasonable consumer, and any statements made about a product or service must be supported by evidence.  Even if the influencer makes a misleading or unsubstantiated claim about a product without consulting the brand, the brand will still be liable the influencer’s statements. Again, this highlights the importance of monitoring the influencer’s posts and providing the influencer with guidelines about what claims he or she can legally make about the product or service being advertised.

Determine who owns the intellectual property rights in the content.  In a typical company/influencer relationship, the influencer will post a photograph and accompanying text exhibiting the brand’s products or services on the influencer’s social media account.  If the influencer created this content, the influencer owns the copyrights to it, and the brand could be liable for copyright infringement if it reuses this content without the influencer’s permission.  To avoid this issue, the brand should ensure that there is an agreement in place between with the influencer assigning the copyright to the brand.

Obey the reposting rules from each social media platform.  It’s a common misconception that all of the social media platforms have the same rules regarding reposting content from another user.  The reality is that reposting user content on some platforms is perfectly acceptable, while on others it constitutes infringement.  For example, on Twitter you may freely repost Tweets from other Twitter users.  By becoming a Twitter user, you agree to Twitter’s Terms of Service, which permit you to “Retweet” the content of other Twitter users and allows other Twitter users to Retweet your content.  Instagram, on the other hand, does not include any such provision in its terms of service, and even requires users to “agree to pay for all royalties, fees, and any other monies owing any person by reason of Content you post on or through the Instagram Services.”

Make sure the content does not infringe a third party’s rights.  Even if the brand and influencer have reached an agreement regarding the ownership of the content in a social media endorsement post, the post may infringe the rights of a third party if it includes a third party’s image or artwork.  If someone’s image is used in the endorsement, this person may claim a violation of his or her publicity rights.  Similarly, the use of another’s artwork in the content of the endorsement may constitute copyright or trademark infringement, subject to the fair use defense (which is less likely to apply to a social media post that is clearly an advertisement).

To learn more about the formation of and legal pitfalls to be avoided during the course brand/influencer relationships, contact Heather Laird-Vanderpool or Aleen Tomassian.

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The Conkle Firm to Present at 2018 PCPC Legal & Regulatory Conference

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Conkle, Kremer & Engel attorney John A. Conkle will be on the panel opening the 2018 Personal Care Products Council’s Legal & Regulatory Conference.  The panel will present “The State of the States,” which will focus on the increasingly strong interest of state legislatures and state regulatory bodies in addressing issues of importance to the personal care products and cosmetics industries.

States have come to recognize that, with the U.S. Congress largely gridlocked and federal regulatory agencies in a deregulation mood, the path is open for the states to regulate consumer industries in manners that they deem fit.  The result is a continuously evolving patchwork of laws and regulations that can be difficult for industry participants to navigate.

Issues to be discussed at the May 9, 2018 panel presentation include California’s infamous Proposition 65, slack fill laws, and labeling and ingredient disclosure regulations that include even public databases disclosing products’ ingredients found by state governments to be detrimental.  Further, state regulations can include ingredient phase-out requirements and outright bans, volatile organic compound limitations to protect air quality, and even animal testing regulations that can affect industry participants’ ability to compete in international trade.

A lively discussion is inevitable given the rich and topical subject matter and the vital industry interests affected.  The rest of the Legal and Regulatory Conference program should be just as engaging, covering topics such as employment law, cannabis (THC, CBD, marijuana extracts and hemp) in cosmetics and personal care products.  The many other topics to be covered in the three-day conference in Savannah, Georgia can be found in the conference program.

 

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California’s New, Stricter Test for Independent Contractors and Employees

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Does Your Business Pass California’s New, Stricter Test for Independent Contractors Rather Than Employees?

On April 30, 2018, the California Supreme Court issued a decision in Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County that will make it more difficult for employers to classify their workers as independent contractors.  Under the new Supreme Court test, workers are presumed to be employees, not independent contractors.  Incorrect classification can have serious consequences.

Previously, many California employers thought an agreement stating a worker was an independent contractor was enough.  No more.  The Supreme Court has adopted a strict “ABC” test to determine whether a worker is properly classified as an “employee” or as an “independent contractor.”  Under this test, the Court presumes a worker is an “employee” unless the hiring business can establish that the worker meets all three conditions of an independent contractor:

(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) apart from the independent contractor relationship, the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

The presumption means that when in doubt employers should err on the side of classifying their workers as employees.  An employer that misclassifies a worker as an independent contractor can be liable for back wages and wage and hour penalties, including willful misclassification penalties that can range from $5,000 to $25,000 per violation.  These issues may be raised by the worker after the “independent contractor” relationship has ended.

If your workers do not meet this new 3-part test for independent contractors, make sure you re-classify them as employees and pay them all the wages and benefits given to your employees under the wage and hour laws, deduct payroll taxes, cover them under your worker’s compensation insurance, and generally treat them like your other employees.

If you have questions about how the new decision applies, or whether your workers meet the new strict ABC test for independent contractors, you should promptly consult with experienced employment counsel.  Conkle, Kremer & Engel attorneys have years of experience in employment matters, advising businesses and litigating and arbitrating disputes, including class actions.

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