Welcome to your monthly legal insights on the trends impacting the Retail, Hospitality, and Food & Beverage Industries.
Cybersecurity/Privacy
Cybersecurity Requirements
Last month the Federal Acquisition Regulatory (FAR) Council announced a major proposal regarding cybersecurity incident reporting and information. The new proposal would also require the adoption and implementation of cybersecurity policies. The FAR proposal would become mandatory for federal contract actors. Comments currently are now due by February 2, 2024.
The proposed reporting changes raise several significant challenges. Please click here to review a discussion of the proposal by Clark Hill’s Melissa Ventrone and J. William Eshelman.
IT Companies Continue to be Targets for Cybersecurity Attacks
Two more IT companies were recently the victim of cybersecurity attacks, continuing the trend of IT companies being targeted by hackers. The first, Okta, announced on November 30 that hackers had stolen information on all of its users in an attack that occurred in September. In the second, IT company Zeroed-In Technologies announced on November 27, that the names, dates of birth, and Social Security numbers of two million people, including thousands of employees of Dollar Tree and Family Dollar stores was accessed by unauthorized actors.“ Retailers, Hospitality companies and Food & Beverage operators are encouraged to use care and undertake due diligence when selecting vendors to assist with their IT needs.
Only 3% of UK Organizations Avoided Supply Chain Cybersecurity Breach in 2023
BlueVoyant recently reported that a poll of 1200 C-level executives with responsibility for managing supply chain risks across the UK, US, Singapore, Canada, Germany and the Netherlands found that 97% of those surveyed in the UK reported a cybersecurity breach in some part of their supply chain in 2023. These numbers are an increase over the 82% of such companies who reported supply chain cybersecurity breaches in 2022.”
Labor & Employment
Come Together Now: The NLRB Issues Final Rule on Joint Employers
In a final regulation released on Oct. 26, the National Labor Relations Board (the “Board”) again redefined the concept of joint employment, this time expanding the definition and, as a result, also expanding the potential liabilities and obligations faced by employers. This may impact the retail, hospitality, food, and beverage industry exposing employers who use leased or temporary employees to expanded liability, or for those employers who provide management services for businesses in this industry.
For detailed information on the new regulation, visit here. Richard Fanning of Clark Hill provides a great overview of the new NLRB guidance.
An Earlier Than Expected Effective Date to the Repeal of the Right To Work Acts in Michigan
The Michigan Legislature ended its 2023 session much earlier than normal-on Nov. 14, instead of in late December as it has done in years past. As a result, the effective date of 2023 PA 8, which repealed Michigan’s Right to Work Act, will take effect on the 91st day after final adjournment of the 2023 Regular Session, which is Feb. 13, 2024. For more details, visit here to read Richard Fanning and Joshua Wilk of Clark Hill’s discussion of the impact of the repeal of these acts.
Chicago City Council Passes Expanded Paid Leave Requirements
On November 9, 2023, the Chicago City Council passed an expansive and complex paid-leave ordinance (the “Ordinance”). The Ordinance goes into effect on December 31, 2023, and requires all private Chicago employers to provide their employees with not less than ten (10) days of paid time off per year. For more detailed information on the new ordinance, please visit here to review Clark Hill’s Jonathan Vegosen and Renee Fell’s article on the new requirements.
Too Dangerous to Work Here
Retailers can anticipate a continuing surge of lawsuits brought by their employees due to the dangers posed by shoplifters. For example, a retail manager is suing The Gap in New Jersey because she feels unsafe in the workplace due to a lack of security. For more information, visit here.
Diversity and Inclusion in the US Retail Workforce
Diversity is more than just race and gender, but includes differences in age, ethnicity, religion, sexual orientation, physical abilities, and more. In the retail and hospitality industry where customer interactions are “key” diversity and inclusion play a more prominent role for a business’ success. A diverse workforce will best equip the company to meet the preferences and needs of its diverse customer base. To read more about the benefits of diversity and inclusion in this industry, see here, which also highlights some of the programs adopted by Target, Best Buy, Nike and others to implement their DEI efforts.
Food and Beverage News
Virginia Court Clarifies Licensing for Shipments
Our Retail, Hospitality, Food & Beverage Team Member’s, Jason Canvasser and Bryan Schatz authored an article ”Virginia Court of Appeals Clarifies “Place of Business” Licensing Requirement” for companies serving direct-to-consumer alcohol beverage sales and shipment. The court found that out-of-state shippers seeking to ship to consumers in Virginia were required to have a license to ship wine in Virginia.
Bars Across NC to Get Health Inspections and Sanitation Scores, like Restaurants
A new law will require many bars across North Carolina to be subject to health inspections like restaurants are. According to the state’s health and human services department, bars that will face new requirements are those that prepare and serve food. Specifically, bars that sell food that requires temperature control for safety, designated as TCS food, must obtain a permit from local health departments. These bars will be subject to health inspections, which are often associated with the sanitation scores posted in venues for the public to see. For more details on this new law, visit here.
Bill In Congress Aims To Stop Kombucha From Being Taxed Like Beer
Senate Finance Chairman Ron Wyden (D-Ore.) and U.S. Representative Earl Blumenauer (D-Ore.) have reintroduced legislation to put a stop to federal alcohol taxes on kombucha companies. For more details, visit here.
Texas Fights Court Challenge to Plant-Based Food Labeling Law
Texas officials like Gov. Greg Abbott have filed their support of a recently passed law requiring companies that make foods that are plant-based to disclose that fact prominently. For more details on this law, visit here.
Utah’s Liquor Agency to Launch Online Ordering Next Year
Utah’s alcohol control authority is moving forward with plans to launch an online ordering system for its state-run liquor stores. The digital infrastructure for online ordering is being built out right now and the hope is to offer it in summer 2024. For more details, visit here.
Environmental Compliance
Biden Administration Targets PFAS in Retail
Retailers, Hospitality Companies and Food & Beverage Purveyors would be well advised to continue focusing on regulation of Per- and Polyfluorinated Substances (“PFAS”) in consumer goods as these substances continue to be a priority for the Biden administration. New regulations from the US Environmental Protection Agency became effective on November 14, 2023. The regulations require “manufacturers” that import certain categories of PFAS chemicals to make a one-time report of information relating to the uses, production volumes, byproducts, disposal, exposures and known environmental or health impacts of the PFAS. Importantly, the definition of “manufacturer” is broad and includes importers of articles that may contain PFAS, which can have a substantial impact on the retail industry. To read the new rule, check here.
International Trade
New Antidumping and Countervailing Duty Petitions Filed on Imports of Frozen Warmwater Shrimp from Ecuador, India, Indonesia, and Vietnam
Clark Hill’s international trade team authored an article “New Antidumping and Countervailing Duty Petitions Filed on Imports of Frozen Warmwater Shrimp from Ecuador, India, Indonesia, and Vietnam. The Department of Commerce and the International Trade Commission will be conducting investigations to determine if the imports threaten to injure the US economy.
Intellectual Property
Understanding Licensing Agreements in the Consumer Good Industry
Because the consumer goods industry thrives on brand recognition, many businesses seek to expand their market presence and leverage their established intellectual property through licensing. This typically occurs through license agreements, which are generally entered between two parties (the Licensor (owner of the intellectual property) and Licensee (the “renter” of such rights)) and fall into one of the following categories. Brand licensing, design licensing, patent licensing, character licensing, and music licensing are all of great interest to retailers of consumer goods.
Premises Liability
Four Steps to Better Manage Premises Liability Claims
While the last few years have brought new challenges to retailers, restaurants, and others in the hospitality industry, the traditional risks posed by premises liability claims has remained and will continue to impact businesses into the future. Managing and reducing the risks of premises liability claims should remain a key part of a robust risk management program.
A primer written by Clark Hill’s Jason Canvasser and Ashley MacNamara discusses some simple steps businesses in the retail and hospitality industry can take to help avoid premises liability claims and to be better prepared to defend such claims when they occur.
Franchising Issues
Franchise Associations Call for FTC Investigations
Franchise Associations have been active recently asking the FTC to investigate 11 major franchisors under Section 6(b) of the FTC Act and advocating for the NASAA Statement of Policy Regarding the Use of Franchise Questionnaires and Acknowledgments. Some states are also reviewing their franchise laws. There are also challenges to the adequacy of franchisor disclosures. See, for example, here.
Fintech Possibilities for Retail, Hospitality, and More
FinTech Pioneer Transforms Missouri’s Lead Bank
FinTech Guru Jackie Reses is applying the lessons she learned during Covid when she convinced the Treasury Secretary to approve her company, Square, to provide Paycheck Protection Program (“PPP”) loans. Reses has now purchased a community bank in Missouri, Lead Bank, fueling it with her team from Square to build a “technology-first FDIC-insured fintech friendly” bank. Reses’ long-term goal is to offer financial services within all types of apps and environments, a term called “embedded finance” which would enable payment features directly within fitness apps, shopping apps, hospitality apps, and so on. Read more about this forward-thinking fintech approach and its implications for the retail, hospitality, food, and beverage industries in Forbes’ Daily, November 14, 2023, “Fintech Titan in Community Banker’s Clothing.”
Predictions and Trends
Gen Z Shift: In-Store Shopping Experience
An interesting and important impact on the retail landscape, especially moving into the holiday gift giving season, is the preference of Gen Z shoppers for physical stores rather than relying solely on the convenience of online shopping.
“For Gen Z, a trip to the mall isn’t just about purchasing gifts; it’s about having an experience that involves the convenience of gathering, shopping, and dining with friends in person.” Savvy retailers that link online behaviors with a social and community based in store experience may reap big rewards.
“With smartphones in hand, Gen Z is discovering a newfound sense of purpose at the mall. Armed with recommendations from their favorite influencers and social media platforms, they are engaging in immersive experiences that bridge the online and offline worlds, such as embarking on a treasure hunt to seek the perfect gifts for their loved ones.” Read the full Forbes article here.
