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 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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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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What’s in Your Packaging? Prop 65 Applies to PVDC

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Can your product wrap subject you to Proposition 65 warning requirements?  You bet.  California has added vinylidene chloride to its long list of chemicals to which Proposition 65 applies, effective on December 29, 2017.  The Office of Environmental Health Hazard Assessment (OEHHA) has not established a safe harbor level for vinylidene chloride, although that remains under consideration.

Vinylidene chloride is used in the production of polyvinylidene chloride (PVDC) copolymers. PVDC was developed by Dow Chemical Company, and was at one point used in the production of the popular food wrap product, Saran Wrap. PVDC has characteristics ideal for food packaging because it has low permeabiltiy to water vapor and gasses. While use of PVDC in Saran Wrap was later phased out due to cost and environmental concerns, other copolymers of vinylidene chloride are still commonly used in food packaging, including box overwrap, vertical form fill seal, horizontal form fill seal, and pre-made bags. Vinylidene chloride is also extensively used in a variety of other packing materials, as flame retardant coating for fiber and carpet backing and in piping, coating for steel pipes, and adhesive applications. Other common consumer products that may contain vinylidene chloride include cleaning cloths, filters, screens, tape, shower curtains, garden furniture, artificial turf, doll hair, stuffed animals, fabrics, fishnet, and shoe insoles.

Manufacturers, distributors and retailers are required to provide Prop 65 warnings to workers and consumers who are exposed to vinylidene chloride.  Companies have one year from the listing date to comply with Prop 65.  Companies that have not reformulated their products to remove vinylidene chloride, or that fail to provide a Proposition 65 warning on products containing it, by December 29, 2018 are at risk of receiving a “Notice of Violation” from private enforcers seeking to gain thousands of dollars in penalties and attorneys’ fees.  A Notice of Violation typically precedes a lawsuit for violation of Proposition 65.

The listing of vinylidene chloride as a chemical known to cause cancer by OEHHA is a reminder that not only product contents, but also packaging materials, are included within Prop 65 compliance requirements.  As we previously reported, since December 2014, products sold in California that contain diisononyl phthalate (DINP) have required a Proposition 65 warning.  DINP is found is many soft plastic and vinyl products, and purported violations have been found in seemingly innocuous packaging, such as gift bags for cosmetic products.

Conkle, Kremer & Engel has many years of experience advising clients with respect to Proposition 65 and other regulatory compliance issues. CK&E attorneys help clients stay out of legal crosshairs by working with them to ensure their products continue to meet all legal requirements, and helping them plan for foreseeable changes in the law.

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Counterfeits Can Take the Joy Out of the Holidays

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As the holiday shopping season reaches peak fervor and consumers seek out the best deals available on hot products, gift-givers are more at risk of purchasing counterfeit products of all kinds.  Recently, news articles have warned of counterfeit Fingerlings – the latest “it” toy – along with fake versions of popular electronics, clothing, personal care products, and many other types of goods.  Government bureaus like the U.S. Customs and Border Patrol regularly release holiday bulletins advising of the escalating volume of phony products entering the United States (for example, https://www.ice.gov/news/releases/buyer-beware-counterfeit-goods-and-holiday-shopping-season).  Counterfeits are far from harmless.  Not only are these counterfeit goods generally inferior to authentic products in both quality and safety, fake products are fraud, theft, and infringements of valuable trademarks and other intellectual property.  Sales of counterfeit products can even be criminal.

As a consumer, what can you do to help ensure you’re receiving the genuine article?  The most obvious method is to avoid unfamiliar sources and to buy directly from the manufacturer’s website or from an authorized retailer whenever possible.  If buying on websites like Amazon and eBay (where products are often actually sold by unrelated third parties), it helps to make sure that the seller of the product is the manufacturer or Amazon itself, not an unknown third party.  Often times, third party sellers do not have the ability or desire to properly perform checks on the goods they are selling, and in many cases the third party sellers never actually possess the products – when they receive your order they simply forward the product from a warehouse they have never even seen.  While outlets like Amazon and eBay have some anti-counterfeiting policies and procedures, experience has shown that not every fake product will be screened out.  Consumers should also check the price of the goods to ensure that it is not abnormally low, and examine the packaging and presentation of the product as depicted on the website to help determine whether the product might be fake or foreign-labeled goods.  Compare the look of the product offered with the same product on the manufacturer’s website – if it’s different, that’s a red flag.  Consumers should also not hesitate to contact the manufacturer if they suspect that they have received counterfeit or foreign-labeled goods – in addition to being the primary victims, consumers are often the first line of defense in the fight against counterfeiting.

As a manufacturer or trademark owner, what can you do when you discover your products being sold in an unauthorized channel, with risk of counterfeiting?  Conkle, Kremer & Engel has extensive experience helping manufacturers and distributors to investigate and, when necessary, litigate counterfeit and other trademark- and intellectual property-infringement claims.  CK&E attorneys are well-versed in the careful initial steps that should promptly be taken when sales of illicit products are suspected.  If the seller is cooperative, litigation can often be avoided.  But if the seller is not, that is a strong indicator that the seller has been selling, and will continue to sell, infringing products unless stopped through litigation.  Whatever you choose to do, consult experienced counsel and decide on your course of action promptly – unreasonable delays can seriously harm your ability to protect your rights.

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Sunscreen Ingredient Restrictions in Maui, Hawaii?

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Sunscreen manufacturers and distributors should take note:  Maui County in the state of Hawaii could become the first county in the United States to ban the sale and use of sunscreen products containing oxybenzone and octinoxate, two active ingredients approved by the U.S. Food and Drug Administration (FDA) for use in sunscreens.

In November, a Maui Hawaii County Council committee introduced and recommended for approval a bill for an ordinance that would prohibit the sale and use of sunscreen containing the ingredients oxybenzone and octinoxate. These ingredients are commonly used in commercial chemical sunscreens as protection against ultraviolet (UV) light radiation.  The county-level move came after Senate Bill 1150 – introduced in 2017 by Hawaii Senator Will Espero to ban the use and application of sunscreens containing oxybenzone throughout the state of Hawaii – stalled at the end of the legislative session.

The FDA currently approves of only 16 active ingredients for use in over-the-counter (OTC) sunscreens, generally recognizing them as safe and effective.  Among the ingredients are oxybenzone and octinoxate, which are commonly found in commercial sunscreen products, including from major sunscreen brands such as L’Oreal, Neutrogena and Supergoop.  The European Union already imposes strict limits on the use of oxybenzone in sunscreen products as well as warning requirements.

The Maui County proposal was prompted by environmental concerns and intended to promote the health and welfare of Maui’s coral reefs and marine life. The bill’s supporters claim that oxybenzone and octinoxate have a significant impact on the marine environment, noting that both ingredients have been detected in the ocean surrounding Maui at levels that well exceed the toxicity range for coral reefs.  Opponents of the ban, on the other hand, contend that the ingredients are safe for use, as they have been approved for use by the FDA.

The proposal to ban sunscreen products containing oxybenzone and oxtinoxate, other than prescription products, is now before the full Maui County Council. If approved, manufacturers, retailers and distributors of sunscreen products containing oxybenzone and oxtinoxate would have a year to ensure that their products no longer contain the banned ingredients. Businesses or persons found in violation of the law would be subject to civil penalties and administrative enforcement procedures. As of now, the bill does not contain a private right of action to allow consumers to bring actions for violations.  If passed, Maui’s outright ban could still face enforcement and legal challenges – including state preemption and federal Commerce Clause challenges.

While this is a unique development, local efforts to protect against health and environmental concerns are nothing new, but they do not always remain confined to their original purpose.  For example, California’s Safe Drinking Water and Toxic Enforcement Act of 1986, commonly known as Proposition 65, was originally passed to protect the state’s drinking water sources from being contaminated with chemicals known to cause cancer or reproductive harm.  However, Proposition 65 does not act to ban the use of any chemicals; instead, it imposes warning requirements prior to consumer exposure to certain chemicals known to the state to cause cancer or reproductive harm.  The 2012 listing of benzophenone to the state’s list of regulated chemicals has already caused many sunscreen manufacturers using octocrylene, another FDA-approved active ingredient that may contain small amounts of benzophenone, to reformulate or use a more purified form of the ingredient.

Conkle, Kremer & Engel has many years of experience representing clients in the beauty and skin care industry address challenging regulatory compliance issues.  CK&E attorneys help clients stay out of legal crosshairs by working with them to ensure their products continue to meet all legal requirements, and helping them plan for foreseeable changes in the law.

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WARNING: Are Your Products and Websites Ready for the New Prop 65 Requirements?

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California’s Office of Health Hazard Assessment (OEHHA) has issued new Proposition 65 Warning Regulations that will go into effect on August 30, 2018. It is important for companies to understand the changed regulations and be proactive in adapting their product labels and even internet marketing to adapt to the new regulations.  The coming changes have introduced a variety of new concepts, imposing additional burdens on businesses selling their products in California, and making it easier for plaintiff Prop 65 attorneys and groups to bring costly private enforcement actions.

The OEHHA has made significant changes to the safe-harbor language requirements that govern the language, text, and format of such warnings. The new regulations introduce the concept of a “warning symbol,” which must be used on consumer products, though not on food products. The “warning symbol” must be printed in a size no smaller than the height of the 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.

Warnings must now also specifically state at least one listed chemical found in the product and include a link to OEHHA’s new website www.P65Warnings.ca.gov.  These are examples of the new format for more specific warnings:

  • For exposure to carcinogens: “ WARNING: This product can expose you to chemicals including [name of one or more chemicals], which is [are] known to the State of California to cause cancer. For more information, go to www.P65Warnings.ca.gov.”
  • For exposure to reproductive toxins: “ WARNING: This product can expose you to chemicals including [name of one or more chemicals], which is [are] known to the State of California to cause birth defects or other reproductive harm. For more information, go to www.P65Warnings.ca.gov.”
  • For exposure to both carcinogens and reproductive toxins: “ WARNING: This product can expose you to chemicals including [name of one or more listed chemicals], which is [are] known to the State of California to cause cancer, and [name of one or more chemicals], which is [are] known to the State of California to cause birth defects or other reproductive harm. For more information, go to www.P65Warnings.ca.gov.”

Certain special categories of products, such as food and alcoholic beverages, have a specialized URL that must be used. For example, warnings on food products must display the URL www.P65Warnings.ca.gov/food.

Recognizing that many consumer products have limited space “on-product” to fit the long-form warnings, the OEHHA has enacted new regulations allowing abbreviated “on-product” warnings. This short warning is permissible only if printed on the immediate container, box or wrapper of the consumer product. An example of the required format for the abbreviated warnings is:

  • WARNING: Cancer and Reproductive Harm – www.P65Warnings.ca.gov

The new regulations also specifically address internet sales for the first time. 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.

The particular requirements for each specific product can vary, so manufacturers and resellers are well-advised to seek qualified counsel to review their situation 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.

Although the new regulations take effect August 30, 2018, and the new warning labels are required for products manufactured after that date, companies can begin using the changed labels now. It is definitely not advisable to wait until August 2018 to begin making the required changes.

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California Employers’ Risks of PAGA Exposure

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If you’re a California employer, you may have heard people refer to “PAGA” and wondered what it’s all about.  PAGA is a legal device that employees can use to address Labor Code violations in a novel way, in which employee representatives are allowed to act as if they are government enforcement agents.

The California Labor and Workforce Development Agency (CLWDA) has authority to collect civil penalties against employers for Labor Code violations.  Seems simple enough.  But in an effort to relieve an agency with limited resources of the nearly impossible task of pursuing every possible Labor Code violation committed by employers, the California legislature passed the Private Attorney General Act of 2004 (“PAGA”).  PAGA grants aggrieved employees the right to bring a civil action and pursue civil penalties against their employers for Labor Code violations, acting on behalf of the State of California as if they were the CLWDA.  If the aggrieved employees prevail against the employer, the employees can collect 25% of the fines that the state of California would have collected if it had brought the action.

Penalties available for Labor Code violations can be steep – for some violations, the state of California can recover fines of $100 for an initial violation to $200 for subsequent violations, per aggrieved employee, per pay period.  These penalties can add up to serious money, especially if the aggrieved employee was with the company for some time.  But what makes PAGA particularly dangerous for employers is the ability of employees to bring a representative action (similar to a class action), in which they can pursue these penalties for violations of the Labor Code on behalf of not only themselves, but also all others similarly situated.  Under this scheme, an aggrieved employee can bring an action to pursue penalties on behalf of an entire class of current and former employees, thereby multiplying the penalties for which an employer can be on the hook and ballooning the risk of exposure.  That risk is further amplified because PAGA also permits plaintiff employment attorneys to recover their fees if their claim is successful.

There is an upward trend in use of PAGA against California employers.  A July 2017 California Supreme Court decision, Williams v. Superior Court, exacerbated the problem for employers:  The California Supreme Court decided that plaintiff employment attorneys can obtain from employer defendants the names and contact information of potentially affected current and former employees throughout the entire state of California.  This means the PAGA plaintiffs can initiate an action and then pursue discovery of all possible affected employees and former employees throughout California, which can greatly expand the pool of potential claimants and ratchet up the exposure risk for employers.

Employers in California need to be attuned to Labor Code requirements and careful in their manner of dealing with employees, so that they avoid exposure to PAGA liability to the extent possible.  Conkle, Kremer & Engel attorneys are familiar with the latest developments in employment liability and able to assist employers avoid trouble before it starts, or respond and defend themselves if problems have arisen.

 

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Manufacturers, Distributors and Reps Must Be Familiar with California’s Sales Rep Act

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Independent sales representatives are a vital part of many industries, from beauty products and electronics to simple plumbing materials like tankless water heater valves.  Independent sales reps often develop considerable expertise in both the customer base in their territories and their manufacturers’ or distributors’ products, while saving resources that the principal can better use toward product development and customer service after the sale.  Conkle, Kremer & Engel attorneys have extensive experience on behalf of both representatives and manufacturers/distributors/importers in strengthening those agency-principal relationships, and resolving commission, territorial or termination disputes when they arise.

In California, there is a relatively little-known statute that governs certain contractual requirements and responsibilities in a principal-sales representative relationship, called the Independent Wholesale Sales Representatives Contractual Relations Act (the “Sales Rep Act”) (California Civil Code § 1738.10).  The Sales Rep Act can be a powerful tool for sales reps, particularly because it offers the possibility of treble damages and attorney fees awards when the representative prevails.  For example, CK&E was counsel for a sales rep who was cheated out of his earned commissions by a principal who denied that it had ever agreed to pay those commissions.  After a jury trial, the sales rep received a jury award of $2.1 million that was then trebled to $6.2 million, plus attorney fees, after CK&E showed that the Sales Rep Act was properly applied in the situation at hand.  When the judgment was affirmed on appeal, that case became one of the most important published California court decisions about the correct application of the Sales Rep Act.   (Reilly v. Inquest Technology, 218 Cal. App. 4th 536 (2013)).

But like many powerful tools, the Sales Rep Act can be hazardous to either side when it is misapplied.  For sales representatives, distributors, manufacturers and importers alike, it is critically important to understand the requirements and potential effects of various factors to both the application and exceptions to the Sales Rep Act.  For example, in a recent matter, CK&E attorneys Eric S. Engel and Evan Pitchford represented a Southern California importer-distributor of plumbing parts that was sued by a terminated sales rep who sought treble damages for commissions claimed owed, plus attorney fees, under the Sales Rep Act.  CK&E was able to demonstrate in a pretrial motion that the sales rep had engaged in prohibited sales of certain parts to a purchaser who did not qualify under the Sales Rep Act.  Those sales precluded the sales rep from claiming the benefits of the Sales Rep Act, and limited the sales rep to just ordinary contract damages at most.  After the Court agreed that the claim under the Sales Rep Act was not available for this sales rep, the lawsuit was quickly settled.

These two examples demonstrate that intimate knowledge of how the Sales Rep Act operates is crucial for both sides of disputes between sales representatives and importers, manufacturers and distributors.  If you are an independent sales representative, distributor, or manufacturer that is facing commission, territorial or termination disputes, you would be well served to consult with counsel who is familiar with the very precise requirements of the Independent Wholesale Sales Representatives Contractual Relations Act (California Civil Code § 1738.10).

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