The Conkle Firm Presents at Personal Care Product Council’s Emerging Issues Conference in Marina del Rey

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Conkle, Kremer & Engel attorneys Eric S. Engel and Zachary Page presented to beauty industry professionals on hot and developing legal issues in brand protection, grey market and product counterfeiting at the Personal Care Products Council’s November 20, 2019 Emerging Issues Conference. The Conference was held on the 10th Floor of the Marina del Rey Marriott, with a spectacular view over the nearby marina and beach.

Among the topics covered by Zach were issues of registering U.S. trademarks for CBD products, and other previously unregisterable brands. The 2019 U.S. Supreme Court decision in Fourth Estate Public Benefit Corp. v. Wall-Street.com put new importance on registering important copyrights well in advance of their need for infringement claims, and Zach discussed the close relationship with the Digital Millennium Copyright Act’s “DMCA Clock” to takedown infringing online publications. Trends toward false advertising claims based on “natural” and “organic” labeling were also discussed, as were the dramatic increase in medical claim class action and other lawsuits. Zach also briefed the gathered industry experts on the various issues that affect uses of models and others without adequate documentation of consent, which can raise serious right of publicity as well as copyright concerns.

Eric addressed grey market and counterfeiting case development, including the importance of creating “materially different” packaging for U.S. and foreign products. Simple and low-cost ways to help DHS/CBP protect brands against importation of foreign-labeled versions of their own products, as well as counterfeits, was outlined. Also outlined were cost-effective techniques such as recording trademarks online with CBP’s IPR e-Recordation system, Lever Rule Protection, providing CBP with effective Product Identification Training Guides (PITG), conducting IPR Webinars for CBP distribution, and posting e-Allegations online. On combating counterfeiting, Eric addressed Amazon.com specifically because it now accounts for more than half of U.S. online consumer sales, and more than half of Amazon’s online sales are on behalf of third parties in its “marketplace.” Amazon acknowledges no responsibility for sales in its marketplace, beyond closing seller accounts and refunding its customers’ money when they can show that they were sold counterfeit and defective products. Eric discussed the developments in Amazon’s selling and fulfillment practices and in the law of counterfeiting and products liability that suggest that Amazon’s currently-strong denials of responsibility for third party’s products and sales practices may be less compelling in coming years.

CK&E attorneys regularly give presentations to personal care product industry professionals to help them understand and proactively address the latest legal concerns that affect and can inhibit growth of their businesses.

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New California Law to Classify Employees and Independent Contractors

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On September 11, 2019, California lawmakers passed California Assembly Bill 5 (AB 5), codifying and clarifying the California Supreme Court’s landmark 2018 decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, which fundamentally altered the test for determining the classification of workers as employees or independent contractors in California. We previously blogged about the Dynamex decision, under which workers are presumed to be employees for purposes of claims for wages and benefits arising under Industrial Welfare Commission wage orders, and companies must meet a three-pronged “ABC” test to overcome this presumption and establish that an individual is an independent contractor. AB 5 would codify the ABC test into law.

AB 5 has been sent to Governor Gavin Newsom, who recently endorsed it in an op-ed for the Sacramento Bee, and he is expected to sign it into law.

Under AB 5, a new Section 2750.3 would be added to the California Labor Code. Section 2750.3, subsection (a)(1), will state that, for purposes of the Labor Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
(B) The person performs work that is outside the usual course of the hiring entity’s business; and
(C) The person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

Under the new law, California workers can generally only be considered independent contractors if the work they perform is outside the usual course of a company’s business. Conversely, a company must classify workers as employees if the company exerts control over how the workers perform their duties, or if their work is part of a company’s regular business.

AB 5 has far-reaching implications for California businesses who classify their workers as independent contractors because it extends the scope of the Dynamex ruling from only Industrial Wage Commission Orders to include claims for wages and benefits under the Labor Code and Unemployment Insurance Code. The Dynamex decision applied only to rules governing minimum wages, overtime and meal and rest breaks, but under AB 5, individuals classified as employees must also be afforded workers’ compensation in the event of an industrial injury, unemployment and disability insurance, paid sick days and family leave.

However, AB 5 is also narrower than the Dynamex decision in that it exempts certain occupations from the new test. The new Labor Code section would provide limited exemptions for certain occupations, including direct sales salespersons, licensed estheticians, licensed electrologists, licensed manicurists (until January 1, 2022), licensed barbers and licensed cosmetologists from the application Labor Code Section 2750.3 and the holding in Dynamex, provided that the individual:
• Sets their own rates, processes their own payments, and is paid directly by clients;
• Sets their own hours or work and has sole discretion to decide the number of clients and which clients for whom they will provide services;
• Has their own book of business and schedules their own appointments;
• Maintains their own business license for the services offered to clients; and
• If the individual is performing services at the location of the hiring entity, then the individual issues a Form 1099 to the salon or business owner from which they rent their business space.

If a company can meet its burden of showing that the individual meets the above criteria, then the determination of proper classification for that individual would be governed by S.G. Borello & Sons, Inc. v. Department of Industrial Relations, the 1989 decision that has been the prevailing law for wage order cases in California prior to Dynamex. Borello established an 11-factor inquiry into the degree of control a company exerts over the worker’s performance of his or her duties: whether the hiring entity has the right to control the manner and means of accomplishing the result desired; the right to discharge at will, without cause; whether the worker is engaged in a distinct occupation or business; the kind of occupation and the skill required in the particular occupation; who supplies the instrumentalities, tools and the place of work for the person doing the work; the length of time for which services are to be performed; the method of payment; whether or not the work is part of the hiring entity’s regular business; and whether or not the parties believe they are creating an employer-employee relationship.

Another aspect of AB 5 worth noting is that it would not allow an employer to reclassify an individual who was an employee on Janaury 1, 2019 to an independent contractor due to the measure’s enactment.

With the law set to become effective on January 1, 2020, companies, particularly in the salon and beauty industry, would be wise to reassess the classification of their workers to ensure compliance with the new law. The attorneys at Conkle, Kremer & Engel have extensive experience advising businesses on best practices regarding proper worker classification, and will be continually monitoring developments related to AB 5 as they occur.

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FTC Warns Manufacturers About CBD Claims

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The Federal Trade Commission (FTC) announced today that it had sent warning letters to three companies over their advertising of products containing cannabidiol or CBD, one of the many active compounds of the cannabis plant. The letters reinforce the FTC’s position that advertisers may not make health-related representations for CBD products without satisfying FTC substantiation standards.

According to the FTC’s press release, the companies – which have not been identified publicly – advertised oils, tinctures, capsules, “gummies” and creams containing CBD as treating or curing serious diseases and health conditions. Disease claims require scientific proof, making it illegal for companies to advertise that a product can prevent, treat or cure human disease without competent and reliable scientific evidence to support such claims.

The FTC took issue with the following:
• A claim that CBD “works like magic” to relieve “even the most agonizing pain” better than prescription opioid painkillers
• A claim that the company has participated in “thousands of hours of research” with Harvard researchers, to bolster its claims that CBD has been “clinically proven” to treat cancer, Alzheimer’s disease, multiple sclerosis (MS), fibromyalgia, cigarette addiction, and colitis
• A claim that CBD products are proven to treat autism, anorexia, bipolar disorder, post-traumatic stress disorder, schizophrenia, anxiety, depression, Alzheimer’s disease, Lou Gehrig’s Disease (ALS), stroke, Parkinson’s disease, epilepsy, traumatic brain injuries, diabetes, Crohn’s disease, psoriasis, MS, fibromyalgia, cancer, and AIDS
• A claim that CBD is a “miracle pain remedy” for both acute and chronic pain, including pain from cancer treatment and arthritis
• A claim that CBD gummies are highly effective at treating “the root cause of most major degenerative diseases, including arthritis, heart disease, fibromyalgia, cancer, asthma, and a wide spectrum of autoimmune disorders”
• A claim that CBD cream relieves arthritis pain
• A claim that CBD oil may effectively treat depression, PTSD, epilepsy, heart disease, arthritis, fibromyalgia, and asthma

According to the FTC, the letters urge the recipient companies to review all claims made for their products, including consumer testimonials, to ensure they are supported by competent and reliable scientific evidence, and also include a warning that selling CBD products without such substantiation could violate the FTC Act and may result in legal action that could result in an injunction and an order to return money to consumers.

The recent warning letters follow similar joint warning letters issued by the FTC and the U.S. Food and Drug Administration (FDA) in March 2019 to three sellers of CBD supplements – Nutra Pure LLC, PotNetwork Holdings, Inc., and Advanced Spine and Pain LLC d/b/a Relievus. The letters alleged that the companies made false or unsubstantiated health claims in violation of the FTC Act as well as sold unapproved drugs in violation of the Federal Food, Drug & Cosmetic Act (FD&C Act).

As the market for CBD goods – including cosmetics and supplements – continues to explode, companies vying for market position must be aware of action taken by the FTC and FDA and stay away from making health or drug claims that could subject them to enforcement by these agencies. Conkle, Kremer & Engel attorneys stay current on the latest developments to help those how manufacture, distribute and sell products containing CBD avoid regulatory trouble.

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California Expands Sexual Harassment Training Requirements to Most Employers

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As usual, a new year means new laws, especially in California.  For 2019, one law that all employers need to be aware of is SB1343, which amended Government Code Sections 12950 and 12950.1 to impose new sexual harassment training requirements on most employers.  Previously, only employers of at least 50 employees were required to train their supervisory employees.  Starting now, if you have 5 workers, including both employees and contract workers, you have to comply with several training requirements:

  • – Within the next year, all supervisory employees must complete two hours of sexual harassment training.

– The definition of “supervisor” is fairly broad and covers more than just your managers. Under California Government  Code 12926(t), “Supervisor” means “any individual having the authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or the responsibility to direct them, or to adjust their grievances, or effectively to recommend that action, if, in connection with the foregoing, the exercise of that authority is not of a merely routine or clerical nature, but requires the use of independent judgment.”

  • – Within the next year, all nonsupervisory employees must complete one hour of sexual harassment training.
  • – For all employees, the training must be provided within six months of the employee’s assumption of a position with the company.
  • – After January 1, 2020, each employee must receive sexual harassment training once every two years.
  • – Beginning January 1, 2020, seasonal and temporary employees, and any employees hired to work for less than six months, must receive sexual harassment training within 30 calendar days after the hire date or within 100 hours worked, whichever occurs first. If the temporary employee is employed by a temporary services employer (i.e., a temporary staffing agency), the temporary services employer is required to provide this training, not the client.

California’s Department of Fair Employment and Housing (DFEH) is required to develop online sexual harassment training courses.  DFEH has stated that it expects to have such training programs available on its website by late 2019.  If they are available on time, employers can direct their workers to those online courses, but otherwise employers must develop or provide their own training.

Employers should also take this as a reminder to check your work site and make sure you have prominently displayed the required posters.  For example, California law requires employers to display the DFEH poster regarding workplace discrimination and harassment in a prominent and accessible location in the workplace, and to distribute a sexual harassment prevention brochure to their employees.

Constant vigilance is required for employers to comply with rapidly changing requirements.  Employers should consult with experienced counsel particularly in regard to interpretation of new requirements such as these.  Conkle, Kremer & Engel attorneys are experienced with counseling employers in the face of the changing legal landscape in employment law.  CK&E attorneys help 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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Breakthrough: CBD is Almost Legal

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We have posted previously about the difficult circumstances facing consumer product manufacturers who want to follow the popular trend to include CBD in their products, ranging from food to cosmetics and beyond.  We are now pleased to report that some clarity had been added in the just-enacted 2018 U.S. Farm Bill, and the path to including CBD in consumer products is becoming much easier.

The big breakthrough in the 2018 Farm Bill is that it legalized hemp by changing troublesome language in the federal Controlled Substances Act (CSA) in two important ways. First, it removes hemp and any hemp derivate from the definition of “marihuana.” Hemp is defined as any part or derivative of the cannabis plant with 0.3% or less THC (dry weight). This change means that CBD derived from hemp will no longer be considered a controlled substance under the CSA. Second, the Farm Bill amends the definition of “Tetrahydrocannabinols” or THC to exclude the THC that is found in trace amounts in hemp.  This was important because THC is a psychoactive ingredient, and trace amounts that are too small to cause psychoactive effects might otherwise compel hemp and its products to be treated as controlled substances.

This change is exciting news for companies who are eager to follow the market trends of adding CBD to products.  Even though CBD remained technically illegal under federal law prior to the passage of the 2018 Farm Bill, sales of consumer products containing CBD already exceeded $350 million in 2017. That number is expected to jump significantly with the availability of legal CBD and the entry into the market of companies who were hesitant to incorporate CBD into their products because of the questionable legality.  Still, companies that are eager to incorporate CBD into their products should proceed with caution if they want to ensure that their products are legal under federal law.

While some might believe that all CBD is now legal, that is not correct.  Not all CBD will be legal, and manufacturers must take care to assure and document that the CBD they use comes from legal sources.   For one example, CBD derived from cannabis plants with more than 0.3% THC (dry weight) remains illegal under federal law.  CBD is only legal if it is: (1) derived from hemp, and (2) produced by a licensed grower in a manner consistent with the Farm Bill and associated federal and state regulations.

The Farm Bill invites states to submit a plan to the US Department of Agriculture that outlines how the state will monitor, license, and regulate the production of hemp. State departments of agriculture must consult with the state’s governor and chief law enforcement officer on the plan. If a state does not have a plan approved by the USDA, the USDA will have available a federal program for monitoring, licensing, and regulating hemp production. Hemp and its derivatives are only legal if grown under license pursuant to these state or federal programs.

It is clear that not all CBD has become legal overnight. The state and federal licensing and regulatory programs under which hemp can be legally grown will take months to establish.  Once such programs are established, businesses should engage in due diligence to ensure that the CBD they are purchasing is derived from hemp grown under license from state or federal programs, and they should maintain documents to be able to demonstrate the chain of production.

This welcome development is a major crack in the dam that prevented cannabis-derived products from entering consumer markets.  Watch for more soon, as other federal regulatory agencies such as the FDA consider controlled ways to permit CBD to be added to foods and pharmaceuticals.

CK&E attorneys will continue to monitor and stay up to date on the development of state and federal CBD ingredient and hemp cultivation programs, and are ready to help clients navigate complex and rapidly-changing federal and state regulatory schemes. If you have questions in this or other regulatory areas, contact CK&E at counsel@conklelaw.com or 310-998-9100.

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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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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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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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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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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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