CA ABC Provides Additional Coronavirus Regulatory Relief; CA ABC and TTB Postpone Due Dates for Certain Payments and Filings

Over the past forty-eight hours, the California Department of Alcoholic Beverage Control (“CA ABC”) has provided additional regulatory relief to licensees, including information relevant to industry members engaged in fundraising in connection with Coronavirus-related charities.  In addition, CA ABC and the Alcohol Tobacco Tax and Trade Bureau (”TTB”) announced that industry members will be permitted to delay certain payments and filings.  We have summarized each of these notices below, but the full text of these notices can be accessed through the links below:

  1. CA ABC Second Notice of Regulatory Relief
  2. CA ABC Notice re Renewal Fees
  3. TTB Industry Circular re Postponement of Payments and Filings 

1. CA ABC Second Notice of Regulatory Relief

CA ABC issued a Second Notice of Regulatory Relief on April 1, 2020 (the “Second Notice”) temporarily loosening  it’s enforcement of certain regulations during the period that shelter-in-place restrictions are in place..  CA ABC had previously announced certain regulatory relief measures in its first Notice of Regulatory Relief (“First Notice”) on March 19, 2020 and we summarized that notice in this blog post.

Below is a summary of ABC’s Second April Notice.

FREE DELIVERY OF ALCOHOLIC BEVERAGES TEMPORARILY ALLOWED: ABC has temporarily provided licensees that can ship or deliver alcoholic beverages, whether pursuant to  the ABC Act or pursuant to the First Notice, the right to deliver or ship to consumers for free, without violating  Business and Professions Code Section 25600, which prohibits licensees from providing any “premium, gift, or free goods” in connection with the sale or marketing of alcoholic beverages.

DELIVERY HOURS OF ALCOHOL TO RETAILERS EXTENDED TO MIDNIGHT: Licensees (including manufacturers, winegrowers, and wholesalers) may now deliver alcoholic beverages to retailers between 12 AM and 8 PM (rather than starting at 3AM). The prohibition against Sunday deliveries remains in effect.  Note that if a retail licensee has a condition on its license limiting the hours during which it may allow deliveries, such condition shall remain in full effect.

CERTAIN CHARITABLE PROMOTIONS RELATED TO SALES OF ALCOHOL:  The CA ABC is relaxing its enforcement of restrictions on charitable promotions during this challenging time. Manufacturers, wholesalers, or other supplier-type licensees may advertise that a portion of the purchase price of the alcoholic beverages will be donated to a specified charitable organization related to Coronavirus-related relief, subject to the following limitations:

  1. The donation and promotion involve a bona fide charitable organization providing relief related to the COVID-19 pandemic;
  2. The promotion is in connection with the sale of sealed containers and does not encourage or promote the consumption of alcoholic beverages; and
  3. The donation and promotion do not identify, advertise, or otherwise promote or involve any retail licensee.

Any promotions under this provision must conclude no later than June 30, 2020. ABC has stated it will reassess this measure at that time and determine if it should be extended further.

ABC previously stated in its FAQs that donations to nonprofits benefiting restaurant and hospitality workers in general are permissible, so long as it is just a donation to an organization and does not identify or involve any quid pro quo with specific retailers. In addition, gifts or donations (such as meals or gift cards) may not be made directly to retailer employees.

DISTILLED SPIRITS MANUFACTURERS PROVIDING HIGH-PROOF SPIRITS FOR DISINFECTION PURPOSES: Licensed distilled spirits manufacturers (Type 04) and craft distillers (Type 74) may produce denatured high proof spirits if such distilled spirits are produced for use in accordance with guidance from the Food and Drug Administration, which may be found in the FDA’s Policy (PDF). Undenatured distilled spirits are not included in this relief as they are considered alcoholic beverages. Licensees may provide such distilled spirits for free to any person, including retail licensees, if they are not used to promote the manufacturer’s alcoholic beverage products and are not provided in exchange for an agreement to purchase anything produced or distributed by the manufacturer.

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Licensees should note that all of the above changes are only temporary and ABC will provide the industry 10 days’ notice before these guidelines terminate.  And although these provisions relax ABC’s enforcement of certain provisions of the ABC Act, the ABC did remind industry members that “[a]ll provisions of the Alcoholic Beverage Control Act, including …tied-house and trade practice restrictions, remain in effect and subject to enforcement unless the Department has provided express notice that specific provisions will not be enforced.”

As we noted in our earlier post, local regulations and restrictions may restrict the ability of licensees to engage in these activities, so you should always confirm that any activity in which you engage is permitted by local zoning or use permits.

2. CA ABC Grants 30 Day Grace Period for License Renewal Fees and Penalties

The CA ABC is providing licensees a 30 day grace-period for paying their annual renewal fees.

For Licensees who have previously missed their license renewal deadline and owe penalties as a result of failing to pay their renewal fee in a timely manner, the ABC is also granting a 30 day grace period.

The ABC has provided helpful tables in its notice that lay out the exact deadlines that have been extended and new due dates for license renewals.

3. TTB Postpones Tax Payment and Filing Deadlines

To help ease the burden on the alcohol beverage industry dealing with the impact of COVID-19 the TTB is postponing several filing and payment due dates for 90days where the original due date falls on or after March 1, 2020, through July 1, 2020. The TTB’s relief actions include:

  1. Postponing tax payment due dates for wine, beer, distilled spirits, tobacco products, cigarette papers and tubes, firearms, and ammunition excise taxes.
  2. Postponing filing due dates for excise tax returns.
  3. Postponing filing due dates for submission of operational reports.
  4. Postponing filing due dates for claims for credit or refund by producers.
  5. Postponing filing due dates for claims by manufacturers of non-beverage products.
  6. Postponing due dates for submission of export documentation.
  7. Considering emergency variations from regulatory requirements for affected businesses on a case-by-case basis.
  8. Reviewing requests for relief from penalties based on reasonable cause.

For a list of Coronavirus related resources, please see our Resources Page.  

If you have any questions regarding alcohol beverage licensing, please contact John Trinidad or Bahaneh Hobel.

 

Additional Information on Paycheck Protection Program and SBA Disaster Loan Programs

The U.S. Department of the Treasury announced today, March 31, that the SBA and the Treasury expect the CARES Act programs to be up and running by this Friday, April 3, 2020. You can find resources related to the CARES Act programs on Treasury’s website here, which is updated often and currently includes an application for borrowers for the Paycheck Protection Program (PPP). Additionally, the SBA has a resource page for small business that can be accessed here.

Significantly, the SBA is now indicating that 75% of PPP loan amounts will need to be spent on payroll as opposed to other allowed uses in order to qualify for loan forgiveness.  It has also provided details on the loans, which will have relatively short, two year terms for the balance that is not forgiven, but with very low interest rates of 1%.

The Treasury and the IRS also have posted resources regarding the Employee Retention Tax Credit.  But note that you cannot receive the payroll tax credit if you receive a PPP loan.  Additional information on the tax credit is now on Treasury’s Frequently Asked Questions page here, and on the IRS FAQ page here. The IRS has created a new tax form for advance credits and is currently in the process of finalizing the instructions for the form.

Here are some additional details on the available loan programs:

The Paycheck Protection Program (PPP) in the CARES Act will be administered under the U.S. Small Business Administration’s loan provisions.  The SBA and Treasury Department will be releasing additional regulations and guidance to lenders on the program.  The loans will be obtained directly from banks, so you should contact your bank to learn if and how it plans to participate in the program.

Eligible employers can borrow 2.5 times their monthly payroll costs  and other specific costs as described below.  Loan amounts can be up to $10 million.  An employer must either already meet the list of eligibility by number of employees maintained by the SBA, or have up to 500 employees, whichever is greater.  Wineries can have up to 1,000 employees; other employers can check their industry size limit at https://www.sba.gov/size-standards/.

The PPP loans have significant benefits, most notably that 8 weeks of payroll costs and other specific expenses will be forgiven as long as the employer maintains its prior headcount, with some ability to reduce salary levels (discussed below).  Employers that have already reduced headcount can rehire employees and still obtain the full forgiveness amount.  The loans are capped at 4% interest, and have deferred payments for at least six months, and up to one year.  The interest on the loans will not be forgiven, so some payments on the loans need to be made.  The loans can have up to 10 year terms; have no recourse to a businesses’ shareholders, partners or members; and require no collateral or personal guarantee.

The PPP is a separate program from the SBA’s existing Economic Injury Disaster Loan (EIDL) program.  Businesses apply directly to the SBA for these loans, at https://covid19relief.sba.gov.  The EIDL program provides loans of up to $2 million to cover economic injuries incurred in a disaster.  The CARES Act has broadened the eligibility for those loans as well, similar to the Paycheck Protection Program.  For now, a borrower can apply for an EIDL loan and also be eligible for a Paycheck Protection Loan, and can refinance the EIDL loan into a future paycheck protection loan.  However, the EIDL loan is still a loan, and needs to be paid back.  It will not be forgiven, and the proceeds of an EIDL cannot go to cover payroll or other costs that a business would seek to borrow and have forgiven under the PPP.  Note that once the PPP loans become available, business will no longer be eligible for both programs, and there is thus a narrow window to obtain an EIDL and still participate in the PPP.  Also, participants in the PPP loan forgiveness will not be able to use the employment tax credit or payroll tax deferrals in section 2301 and 2302 of the CARES Act.

As for the PPP loans, the loan amount can include 2.5 times the prior year’s average total monthly payroll costs (modified for seasonal employers or new businesses), subject to important limits below.  Payroll costs include:

(aa) the sum of payments of any compensation with respect to employees that is a—

(AA) salary, wage, commission, or similar compensation;

(BB) payment of cash tip or equivalent;

(CC) payment for vacation, parental, family, medical, or sick leave;

(DD) allowance for dismissal or separation;

(EE) payment required for the provisions of group health care benefits, including insurance premiums;

(FF) payment of any retirement benefit; or

(GG) payment of State or local tax assessed on the compensation of employees; and

(bb) the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period…

Importantly, in calculating the payroll costs, the total does not include:

(aa) the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period;

(bb) taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period;

(cc) any compensation of an employee whose principal place of residence is outside of the United States;

(dd) qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116–127); or

(ee) qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act (Public Law 116–127)….

Thus, in determining eligible loan amounts, the pro rata monthly portion of salary for an employee earning over $100,000 per year is not included (but the amount under $100K annualized is included.)

The loan proceeds can be spent on a variety of business costs and expenses set out in the SBA Act; however only a narrow category of costs can be forgiven under the CARES Act.  These are the amounts incurred and payments made over the 8 weeks after the loan is obtained (not to exceed the principal amount of the loan) for:

(1) Payroll costs.

(2) Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation).

(3) Any payment on any covered rent obligation.

(4) Any covered utility payment.

PPP loan proceeds used for any other purpose will not be forgiven.  The lender will require documentation to prove that the funds to be forgiven were spent on allowed items.  The Treasury Department will be providing regulations as to how the loan forgiveness program is to be implemented.

The amount of forgiveness will be reduced if the business reduces its employee headcount below its previous average full-time employee level, based on the average number of full-time equivalent employees for each pay period within a month, either during the period from February 15, 2019 to June 30, 2019; or from January 1, 2020 to February 29, 2020, at the business’s election.  Seasonal employers are required to use the February to June period.  Employers have the opportunity to re-hire employees that have been released as a result of the current crisis and still take advantage of the full loan forgiveness amount, as long as employee full-time equivalent returns to their prior levels by June 30, 2020.

There is more flexibility as regards to salary reductions without losing the full forgiveness amount.  The amount of forgiveness will be reduced by the amount of any reduction in salary that exceeds 25%, but only for each employee that did not make more than $100,000 on an annualized basis during any single pay period in 2019.  In other words, salaries for those making less than $100,000 per year can be reduced by up to 25% without impacting the loan forgiveness amount.  This also means employees who earned more than $100,000 on an annualized basis in any pay period in 2019 (even those that received a raise to $100,000 annualized only in the last pay period of 2019) could have their salaries reduced by more than 25% without decreasing the available loan forgiveness.  Employers also have the opportunity to remedy any reductions in salary by June 30, 2020 as well.

For a list of Coronavirus related resources, please see our Resources Page.  

Employer Focused CARES Act Summary

While numerous summaries and reports on the stimulus bill enacted on Friday are circulating, the following are the key provisions in the CARES Act that will impact employers, and small employers in particular.  “Small” under the CARES Act includes all business of up to 500 employees in addition to the existing definition of small business maintained by the U.S. Small Business Administration.  For wineries, that limit is 1,000 employees.  Other employers can check their industry limits at https://www.sba.gov/size-standards/.

Important Changes to Families First Coronavirus Response Act (“FFCRA”):

  • Allows an employee who was laid off by an employer on March 1, 2020 or later to have access to paid leave under the EFMLA if they are rehired by the employer and they worked for the employer for at least 30 of the last 60 calendar days prior to being laid off.
  • Allows employers to receive an advance of the payroll tax credit provided under the FFCRA for qualified wages paid for EMLA and EPS leave. Forms and instructions for this process are to be provided by the Secretary of the Treasury.

Unemployment Benefits:

  • Emergency increase in unemployment compensation benefits:
    • Provides an additional $600/week recipients of UI benefits or Pandemic Unemployment Assistance from the date the State enters into the agreement with the Secretary of Labor through July 31, 2020.
    • Payments will be processed through each State along with regular state UI benefits and can be provided in the same check or a separate check, but must be provided on a weekly basis.
  • Federal Funding For First Week of Unemployment Period with No Waiting Period:
    • Provides 100% reimbursement to States for benefits paid during the first week of unemployment if States waive the one week waiting period for UI benefits. California has already waived the 1 week waiting period.
  • Pandemic Unemployment Assistance Program:
    • Creates a new Pandemic Unemployment Assistance program (through December 31, 2020) to help those not traditionally eligible for unemployment insurance (UI) benefits, including self-employed individuals, independent contractors, those with limited work history and those who are unable to work as a result of the coronavirus public health emergency.
  • Pandemic Emergency Unemployment Compensation:
    • Provides an additional 13 weeks of UI benefits to those who remain unemployed after all weeks of state unemployment are no longer available.
    • The amount provided is the same as above – the regular amount provided by the State plus an additional $600/week.

SBA Loan and Loan Forgiveness Provisions

  • Creates a loan program for employers with fewer than 500 employees and other SBA defined small businesses to borrow up to 2.5x their monthly payroll (with a maximum loan amount of $10 million).  Sole proprietors and independent contractors are also eligible.
  • Loans can be used to cover payroll and other specified compensation including: healthcare costs, mortgage interest (but not principal), rent, utilities, and interest (but not principal) on other preexisting debt obligations.
    • Payroll costs means any compensation given to employees that is a salary, wage, commission, payment of cash tip or equivalent, payment for vacation, family, medical, or sick leave (but not wages paid under the FFCRA), allowance for dismissal or separation, health care benefits including premiums, retirement benefits, and state or local tax assessed on compensation.
    • Payroll costs cannot exceed $100,000 annually for an individual employee (prorated).
    • Payroll costs do not include qualified sick and family leave wages under the FFCRA for which a credit is already allowed, among other specified exclusions.
  • Interest rates cannot exceed 4%, and all payments must be deferred for at least 6 months and up to 1 year. Note that interest on the loans will not be forgiven.
  • Loans do not require a personal guarantee or collateral, and are nonrecourse to businesses’ shareholders, partners and members. Employers are also not required to show that they were unable to obtain credit elsewhere.
  • The principal amount that is used to cover payroll, mortgage interest, rent and utilities (but not the other allowed uses) for the 8 weeks following the loan approval will be forgiven as long as employee numbers and payrolls are maintained
    • Allows forgiveness for extra wages provided to tipped employees.
  • The forgiveness amount is reduced proportionately by any decrease in the number of employees as compared to the prior year. Forgiveness is also reduced if any employee who earns under $100K on an annualized basis has their wages reduced by more than 25%. There may be de minimis exceptions to these restrictions described in forthcoming regulations.
    • Exemption for Re-Hires: To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period. This applies to a reduction in force or reduction in salary for 1 or more employees during the period beginning on February 15, 2020 and ending 30 days after the enactment of the Act. Employers must re-hire employees (or eliminate the reduction in wages) no later than June 30, 2020.
  • The remaining balance after forgiveness can have a maturity up to 10 years.  Prepayment penalties are not allowed.

Additional Business Provisions

  • Payroll Tax Credit for Employee Retention:
    • The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose: (1) operations were fully or partially suspended, due to a COVID-19-related shutdown order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
    • The credit is based on qualified wages paid to the employee.
      • For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related shutdown order.
      • For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shutdown order.
    • The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. This does not include any wages paid to employees under the FFCRA for EFMLA or EPS leave.
    • The credit applies to wages paid after March 12, 2020, and before January 1, 2021.
    • The credit is reduced by any amounts credited under the FFCRA for wages paid under EMFLA or EPS leave.
    • Employers who receive a covered loan from the SBA (see above) are not eligible for the credit under this section.
  • Delay of payment of payroll taxes:
    • Allows employers to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees.
    • The deferred employment tax is required to be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
    • The payroll tax deferral period runs from the date of enactment of the Act until December 31, 2020.
    • This section does not apply if an employer had their indebtedness forgiven under the provisions of this Act for a covered SBA loan.
  • Modification of Net Operating Losses (“NOL”):
    • An NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. It also temporarily removes the taxable income limitation to allow an NOL to fully offset income.
  • Modification of Limitation on Business Interest:
    • Temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.
  • Amendment Regarding Qualified Improvement Property:

Enables businesses, especially in the hospitality industry, to write off costs associated with improving facilities immediately, instead of having to depreciate those improvements over the 39-year life of the building.

For a list of Coronavirus related resources, please see our Resources Page.  

Coronavirus (COVID-19) Resources

In addition to our periodic blog posts on Coronavirus related news, DPF has compiled a list of Coronavirus resources, including those specifically aimed at the alcohol beverage and hospitality industries,  that may be of interest to our clients. 

CALIFORNIA STATE RESOURCES

CA Coronavirus Portal:  https://covid19.ca.gov/

CA Dept. of Public Health Resource Page:  https://www.cdph.ca.gov/Programs/CID/DCDC/Pages/Immunization/ncov2019.aspx

03/19/2020 Governor’s Executive Order re Shelter in Place Order:  https://covid19.ca.gov/img/N-33-20.pdf

03/20/2020 List of Designated Essential Workforce under Executive Order:  https://covid19.ca.gov/img/EssentialCriticalInfrastructureWorkers.pdf

COUNTY RESOURCES

Napa County

County Coronavirus site: https://www.countyofnapa.org/2739/Coronavirus

04/02/2020 Shelter at Home Order Extension:  https://www.countyofnapa.org/DocumentCenter/View/17112/Shelter-at-Home-Order-4-3-2020–?bidId=

03/20/2020 Shelter at Home Order (Updated 03/22/2020): https://www.countyofnapa.org/DocumentCenter/View/16684/Shelter-at-Home-FAQ_ENGLISH

Sonoma County

County Coronavirus site: https://socoemergency.org/emergency/novel-coronavirus/

04/01/20 Extension of Shelter in Place Order:  https://socoemergency.org/order-of-the-health-officer-shelter-in-place-extended/

Original Shelter in Place Order: https://socoemergency.org/order-of-the-health-officer-shelter-in-place/

Other County Shelter in Place Orders and county-specific COVID-19 sites Information:

https://covid19.ca.gov/state-local-resources/#top

https://www.counties.org/sites/main/files/file-attachments/2020-mar20-ca-map-shelter_in_place-19-final.pdf

ALCOHOL BEVERAGE INDUSTRY RESOURCES

U.S. Department of Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB) Coronavirus Specific Information (updated 3/30/2020): https://www.ttb.gov/coronavirus

03/31/2020 TTB Industry Circular re Postponement of Tax Payment and Filing Due Dates:  https://www.ttb.gov/industry-circulars/ttb-industry-circulars-2020-2

California Department of Alcoholic Beverage Control COVID-19 Updates:  https://www.abc.ca.gov/law-and-policy/coronavirus19/

03/20/2020 Notice re Regulatory Relief: https://www.abc.ca.gov/notice-of-regulatory-relief/

03/21/2020 FAQ re Regulatory Relief: https://www.abc.ca.gov/law-and-policy/coronavirus19/frequently-asked-questions/

04/01/2020 Notice re Additional Regulatory Relief: https://www.abc.ca.gov/notice-of-regulatory-relief/

California Wine Institute COVID-19 Resources Page:  https://wineinstitute.org/news-alerts/coronavirus-covid-19-update

California Craft Breweries COVID-19 Resources Page:  http://californiacraftbeer.com/covid-19-resources-for-craft-breweries-ongoing-list/

Brewers Association Coronavirus Resource Center:  https://www.brewersassociation.org/brewing-industry-updates/coronavirus-resource-center/

Distilled Spirits Council of the U.S. COVID-19 Page:  https://www.distilledspirits.org/news/discus-monitoring-covid-19-industry-news/

California Artisanal Distillers Guild Updates:  https://twitter.com/CADISTILLERS

Note that regional trade associations are also providing their members with significant helpful information regarding the Coronavirus outbreak and regulatory response.

HOSPITALITY, TOURISM AND TRAVEL INDUSTRY RESOURCES

California Restaurant Association Coronavirus Resources:  https://www.calrest.org/coronavirus-resources

National Restaurant Association COVID-19 Resources:  https://restaurant.org/covid19

California Hotel & Lodging Association: https://calodging.com/coronavirus-information-resources

U.S. Travel Association: https://www.ustravel.org/toolkit/emergency-preparedness-and-response-coronavirus-covid-19

Napa County Tourism (Visit Napa Valley):  https://www.visitnapavalley.com/

Sonoma County Tourism: https://www.sonomacounty.com/

EMPLOYER RESOURCES:  FEDERAL

Cares Act Resource (added 04/01/20)

The U.S. Department of the Treasury CARES Act Resource page: https://home.treasury.gov/cares

The SBA CARES Act Resource page: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

IRS – CORONAVIRUS TAX RELIEF:  https://www.irs.gov/coronavirus

The following were added on 04/01/20

The IRS FAQs regarding tax credits for paid leave under the FFCRA: https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs

The IRS FAQs regarding CARES Act: https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

IRS new tax form, Form 7200, that can be used to request the advance tax credits under both the FFCRA and the CARES Act. The form and the draft instructions (final instructions are expected shortly), can be found here: https://www.irs.gov/forms-pubs/about-form-7200

CYBERSECURITY AND INFRASTRUCTURE SECURITY AGENCY (CISA) GUIDANCE ON ESSENTIAL CRITICAL INFRASTRUCTURE WORKERS: https://www.cisa.gov/sites/default/files/publications/CISA-Guidance-on-Essential-Critical-Infrastructure-Workers-1-20-508c.pdf

FEDERAL MOTOR CARRIER SAFETY ADMINISTRATION: https://www.fmcsa.dot.gov/newsroom/us-department-transportation-issues-national-emergency-declaration-commercial-vehicles

U.S. SMALL BUSINESS ADMINISTRATION:  https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

U.S. OFFICE OF PERSONNEL MANAGEMENT TELEWORK GUIDANCE: https://www.telework.gov/guidance-legislation/telework-guidance/emergency-telework/

EMPLOYER RESOURCES:  STATE AND COUNTY

STATE OF CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT

COVID-19: https://www.edd.ca.gov/about_edd/coronavirus-2019.htm

COVID-19 FAQ: https://www.edd.ca.gov/about_edd/coronavirus-2019/faqs.htm

Work Sharing Program: https://www.edd.ca.gov/unemployment/Work_Sharing_Program.htm

DEPARTMENT OF INDUSTRIAL RELATIONS (DIR):

Cal/OSHA requirements: https://www.dir.ca.gov/dosh/coronavirus/Health-Care-General-Industry.html

COVID-19 FAQ: https://www.dir.ca.gov/dlse/2019-Novel-Coronavirus.htm

GOVERNOR’S ORDERS:

Exception to Cal WARN Act 60-day notice requirement for layoffs: https://www.gov.ca.gov/wp-content/uploads/2020/03/3.17.20-EO-motor.pdf

Waiver of one-week waiting period for UI benefits and SDI: https://www.gov.ca.gov/wp-content/uploads/2020/03/3.12.20-EO-N-25-20-COVID-19.pdf

The latest orders can be found on the Governor’s website here: https://www.gov.ca.gov/newsroom/#:~:text=

LABOR AND WORKFORCE DEVELOPMENT AGENCY: https://www.labor.ca.gov/coronavirus2019/

CALIFORNIA GOVERNOR’S OFFICE OF BUSINESS AND ECONOMIC DEVELOPMENT: https://business.ca.gov/coronavirus-2019/

STATE OF CALIFORNIA FRANCHISE TAX BOARD: https://www.ftb.ca.gov/about-ftb/newsroom/news-releases/2020-2-more-time-to-file-pay-for-california-taxpayers-affected-by-the-covid-19-pandemic.html

NAPA/SONOMA SMALL BUSINESS DEVELOPMENT CENTER (Includes Coronavirus-specific Business Assistance Webinars and Small business “survival guide”):   https://www.napasonomasbdc.org/covid-19

HEALTH SERVICES RESOURCES

For the latest information about the coronavirus in Sonoma County and advice from health experts on prevention and care, call 2-1-1, text your zip code to 898-211 or visit (copy/paste) https://socoemergency.org/

For the latest information about the coronavirus in Napa County visit https://www.countyofnapa.org/2739/Coronavirus. You may also call Napa County’s information line at (707) 253-4540 (Monday – Friday, from 9am to 12pm and 1pm to 5pm).

CDC – CENTERS FOR DISEASE CONTROL & PREVENTION

Coronavirus – How to Protect Yourself/If You Think You Are Sick

https://www.cdc.gov/coronavirus/2019-ncov/prepare/prevention.html

https://www.cdc.gov/coronavirus/2019-ncov/if-you-are-sick/steps-when-sick.html

EPA EXPANDS COVID-19 DISINFECTANT LIST: https://www.epa.gov/newsreleases/epa-expands-covid-19-disinfectant-list

CAL/OSHA GUIDANCE ON REQUIREMENTS TO PROTECT WORKERS FROM CORONAVIRUS: https://www.dir.ca.gov/dosh/coronavirus/Health-Care-General-Industry.html

CA ABC Loosens Regulations for Alcohol Beverage Retailers and Delivery

The California Department of Alcoholic Beverage Control issued a notice on March 19, 2020 temporarily loosening certain regulations during the current state of affairs.  While primarily focused on retailers, there are some potentially helpful provisions that impact alcohol beverage producers, too.

A few things to keep in mind.  First, local regulations and restrictions may also govern and restrict the ability of licensees to engage in these activities.  Second, this move by the ABC is temporary.  ABC plans to notify the industry 10 days before these guidelines terminate.

Below is a summary of ABC’s March 19 notice.

3/21/2020 Update:  CA ABC has issued a FAQ for it’s 3/19/2020 Notice of Regulatory Relief

For a full list Coronavirus-related links and resources compiled by DPF attorneys, please click here.  

ON-PREMISE RETAILERS SELLING ALCOHOL “TO GO”

ALCOHOL IN MANUFACTURER PRE-PACKAGED CONTAINERS:  If you hold an on-premise retail license that allows you to sell beer and wine or beer wine and spirits, you can sell that beer and wine to go for off-premise consumption in the original container/bottle (barring any condition on your license).  That was true prior to the ABC notice, and still holds.  However, if you hold an on-premise retail license that allows you to sell beer, wine and spirits, you can now sell all those beverages (beer, wine and spirits) in the original container/bottle.

ALCOHOL IN RETAILER PACKAGED CONTAINER:  Under ABC’s new notice, if you operate a restaurant / “bona fide eating place”, you can now package whatever alcohol your license allows you to sell (beer and wine only for a Type 41; beer, wine, and premixed cocktails/drinks if you are a Type 47) in a container with a “secure lid or cap” so long as that cap does not have a sipping hole or opening for a straw, or could otherwise be consumed without removing the lid/cap.  However, that container must be sold in conjunction with a meal prepared for pick-up or delivery.

Retailers that want engage in this type of activity must have a prominent posting (either on the premise, online, or in any way possible to alert consumers or the person transporting the beverage) that states, “Alcoholic beverages that are packaged by this establishment are open containers and may not be transported in a motor vehicle except in the vehicle’s trunk; or, if there is no trunk, the container may be kept in some other area of the vehicle that is not normally occupied by the driver or passengers (which does not include a utility compartment or glove compartment (Vehicle Code section 23225)).  Further, such beverages may not be consumed in public or in any other area where open containers are prohibited by law.”  UPDATE 3/24/2020:  ABC has created a PDF of that notice so that retailers can easily print and post.

TAKE OUT WINDOWS:  Some licensees have conditions on their license that prohibit the sale / delivery of alcohol to persons in cars or to consumers outside of the licensed premises through a take-out window or slide-out tray.  Those prohibitions are temporarily lifted.

DELIVERY TO CONSUMERS:  Even before the emergency notice, most business that hold a license that permits them to sell alcohol to consumers for off-premise consumption can also deliver those beverages to the consumer, so long as the sales transaction (other than the delivery) takes place at the licensed premise.  In other words, the order must be received at the licensed premise, and payment is processed there.  You can’t just show up at someone’s door and swipe a credit card there.

The temporary notice now allows for the following:

  • If you are allowed to sell to consumers for off-premise consumption, you can accept payment, including cash, at the point of delivery.
  • Although  the CA ABC Act is silent as to whether Craft Distillers have the right to make deliveries away from the premises, the notice now allows Type 74 craft distillers can also deliver to consumers, but must limit sales to 2.25 liters per consumer per day.
  • These delivery privileges are not limited to delivery to a consumer’s residence, but also allow for curbside delivery to consumers immediately outside the licensed premises.

HOURS OF OPERATION:  State law prohibits the retail sale of alcohol between 2:00am and 6:00am.  Some licensees have even more restrictive hours through conditions placed on their license.  However, those license conditions are now lifted for off-premise sales, though the 2am-6am state law is still in place.

RETURNS:  Generally, there are restrictions on the ability of producers and wholesalers from accepting returns from retailers.  Those restrictions are temporarily lifted.  It doesn’t mean that wholesalers and producers are required to accept all returns from retailers, just that they can if they choose to.  However, producers/wholesalers cannot condition the acceptance of a return on a requirement to purchase in the future.  This is consistent with TTB latest guidance on returns as well.

RETAILER-TO-RETAILER SALES:  Under California law, retailers cannot purchase alcohol from other retailers.  Under the temporary guidance, an off-premise retailer (grocery store, bottle shop, etc.) can now buy inventory from on-premise retailers (such as bars and restaurants).

EXTENSION OF CREDIT:  Normally, California law imposes a maximum 30 day credit on the purchase of alcohol by a retailer from a wholesaler or producer.  That 30 day limit is temporarily lifted.  Note, however, once the temporary guidance is revoked, the extended credit term will also terminate (i.e., the retailer will have to pay the amount due at that time).

For a list of Coronavirus related resources, please see our Resources Page.  

If you have any questions regarding alcohol beverage licensing, please contact John Trinidad or Bahaneh Hobel.

Employer’s Summary of Families First Coronavirus Relief Act

The Families First Coronavirus Relief Act (“FFCRA” or “Act”) was signed into law by the President on Wednesday. Prior to the Senate’s vote to pass the law, the House made additional changes to the bill limiting some of the provisions related to paid leave that were required in the original version of the bill. The expanded FMLA provisions are notably less than originally expected. The Act will officially go into effect within 15 days and will remain in place until December 31, 2020. The following is a summary of the key portions of the Act that are relevant for employers. If you have more specific questions please feel free to reach out to us.

  • Expansion of FMLA leave (“Emergency Family and Medical Leave Expansion Act” or “EFMLA”):
    • Qualifying Reason: The EFMLA provides up to 12-weeks of protected leave for employees who are unable to work entirely (including working remotely) due to the need to care for the employee’s son or daughter (under 18) because their son or daughter’s school or child care service is closed due to coronavirus.
    • Employers: The EFMLA applies to all employers with less than 500 employees. The Secretary of Labor has the authority to provide an exemption for employers with less than 50 employees when the imposition of such requirements would jeopardize the viability of the business. (Currently, it is unclear if this will be considered an automatic exemption or how an employer would obtain it.)
    • Employee Eligibility: Workers who have been on payroll for at least 30 calendar days are eligible for EFMLA benefits.
    • Paid/Unpaid: The first 10 days of leave are unpaid, but employees may elect to use accrued sick or vacation time to cover these days (employers cannot require them to use accrued vacation or sick leave). After the first 10 days, the remaining leave must be paid by the employer in an amount not less than 2/3rds of the employee’s regular rate of pay. However, the amount of paid leave is capped at $200 per day per employee or $10,000 total per employee.
    • Reinstatement: Just as with any other FMLA leave, an employee who uses this EFMLA leave is entitled to reinstatement to the same or equivalent position.
      • For employers with less than 25 employees, reinstatement is not required if the following conditions are met: the position held by the employee at the time the leave started no longer exists due to economic conditions or other operating conditions caused by coronavirus; the employer has tried to restore the employee to an equivalent position but no position is available; and the employer makes a reasonable effort to contact the employee if an equivalent position becomes available within a year.
  • Emergency Paid Sick (“EPS”) Leave Act:
    • For COVID Purposes Only: The EPS Leave Act provides additional paid sick leave for all employees for various coronavirus related issues listed below.
    • Available Immediately: The EPS leave is granted (not accrued) so it is available for immediate use by all employees (once the FFCRA is in effect).
    • New and Separate Entitlement: The EPS leave is provided in addition to any sick leave or PTO already provided by the employer. Thus, the EPS leave under the FFCRA should be tracked separately and employers cannot require employees to use up other accrued paid sick leave or PTO prior to using the emergency sick leave.
    • Employers: The EPS Leave Act applies to all employers with less than 500 employees. The Secretary of Labor has the authority to provide an exemption for employers with less than 50 employees when the imposition of such requirements would jeopardize the viability of the business. (Again, it is unclear how the exemption will be obtained)
    • Amount of Paid Sick Leave: The EPS Leave Act provides 80 hours of EPS leave for full-time employees and part-time employees are eligible for EPS leave equivalent to the average number of hours they work over a two-week period.
    • Reasons for EPS Leave and Caps on Amount Paid: EPS leave must be provided to all employees who are unable to work entirely (including working remotely) due to any of the reasons listed below. The amount of paid leave is capped at certain amounts depending on the reason for the leave.
      • EPS leave related to the employee’s own health – Paid at the employee’s regular rate of pay (or the applicable minimum wage rate, whichever is greater) capped at $511 per day or $5,110 total.
        • The employee is subject to a federal, state, or local quarantine or isolation order for COVID-19;
        • The employee is advised by a health care provider to self-quarantine due to COVID-19 concerns; or
        • The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
      • EPS Leave related to the employee’s need to care for others – Paid at 2/3rds of the employee’s regular rate of pay (or the applicable minimum wage rate, whichever is greater) and capped at $200 per day or $2,000 total
        • The employee is caring for an individual who is under a quarantine or isolation order or has been advised to self-quarantine;
        • The employee is caring for their son or daughter whose school or child care has been closed due to COVID-19; or
        • The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
    • The sick leave under the Act does not carry over to the next year and is not payable upon termination.
    • Employers may not require an employee to search for or find a replacement employee to cover the hours during which the employee is using paid sick time as a condition of using sick time provided under the Act.
    • Employers may require employees on sick leave to follow reasonable notice procedures in order to continue receiving such paid sick time.
    • Employers are required to post a notice informing employees of their expanded sick leave rights. A model notice is to be provided by the Secretary of Labor within 7 days.
  • Other Provisions:
    • Payroll Tax Credits are available to employers that provide either the EPS leave or paid FMLA to employees for the specific Coronavirus-related purposes defined by the Act. Employers will be entitled to a payroll tax credit for each calendar quarter equal to 100% of the qualified EPS leave wages or EFMLA paid by the employer in the quarter, however, it is capped at the same limits as the wages above (i.e. $511 per day for EPS leave related to the employee’s health or $200 per day for leave related to the care of an individual or child; or $200 per day or $10,000 total for paid leave for school purposes).
    • The Act also provides for $1 billion in 2020 for emergency grants to states for activities related to unemployment insurance benefits. There are no direct federal unemployment benefits provided to employees.

If you would like further information about this contact Jennifer Douglas or Marissa Buck.

For a list of Coronavirus related resources, please see our Resources Page.  

Resources for Addressing Economic Losses due to the Public Health Emergency

The ongoing COVID-19 public health emergency, including the directive to close winery tasting rooms, is causing significant disruption to California’s businesses.  Businesses that have, or are unsure whether they may have, insurance coverage for losses caused by this situation should contact their carriers promptly to inquire into their potential claims.

In addition, because there is a declared disaster including many counties in the San Francisco Bay area and other wine regions, affected wineries and other businesses typically are eligible to borrow up to $2 million under the U.S. Small Business Administration (SBA) Economic Injury Disaster Loans (EIDLs) program.  Major employers may be able to borrow more than the typical $2 million limit.

These low-interest loans can provide working capital to cover ordinary and necessary financial obligations that cannot be met due to the ongoing public health emergency.  Rates are set by a formula that is capped at 4%. Loans can be obtained to cover the actual economic injury, as determined by the SBA.  The loans are intended to help businesses through the disaster and recovery period.

The approval of a loan is not guaranteed and loans must go through an underwriting process.  Approved loans generally require collateral. The available amounts may be reduced or offset by the availability of business interruption or other insurance that covers the same losses.  The SBA also assesses ability to repay as well as other potential contributions to cover the losses from business owners and affiliates in considering whether to approve the loans. To learn more or apply for a loan, go to https://disasterloan.sba.gov/ela.

Whether or not you are interested in an SBA loan, be sure to contact your insurer to confirm whether you may already have coverage for the ongoing interruption.  For more information on the current declared disaster allowing for SBA EIDLs in California, including eligible counties and other terms, a fact sheet is available at https://disasterloan.sba.gov/ela/Declarations/ViewDisasterDocument/3429.  Those in other states can visit https://disasterloan.sba.gov/ela/Declarations/Index to determine if they are in an eligible location.

For a list of Coronavirus related resources, please see our Resources Page.  

Additional Guidance For Wineries in Light of Recent Government Actions

Since the Governor’s announcement on Sunday recommending the temporary suspension of on-premise alcoholic beverage businesses, including winery tasting rooms, certain cities and counties have instituted “Shelter-in-Place” ordinances, and both the California ABC and the California Wine Institute have issued additional guidance on the operation of alcohol beverage licensed premises, including wineries.

Given the various orders and guidance currently in place, we have provided below a brief summary of the current state of play for wineries. Please note that things are rapidly changing and while we will do our best to issue updates, we highly recommend that all licensees sign up for the California ABC email updates, and also keep an eye on orders from their local governments.

GOVERNOR’S DIRECTIVE – Statewide Recommendations

  • On Sunday, March 15, 2020, Governor Gavin Newsom announced that he was directing the closure of “all bars, nightclubs, wineries, brewpubs, and the like.”
    1. The California ABC has since clarified that the directive is aimed at suspending on-premise retail privileges (that is, the service of alcohol for consumption at the licensed premises).  For wineries, the directive applies to their tasting room and event operations in pouring wine and serving customers for on-premise consumption.  It has no impact on their production operations, and wineries can continue to have consumers purchase and pick up wine for off-premise consumption, subject to any further local restrictions such as the shelter-in-place orders discussed below.
    2. After discussing the directive with the Governor’s office, Wine Institute has recommended that wineries take the following steps:
      • Ensure visitor and employee safety by intensify cleaning and sanitation procedures;
      • Operate the facility in compliance with social distancing guidance (such as instituting procedures to keep individuals 6 feet apart);
      • Implement recommendations from the CDC and California Department of Public Health re washing hands, avoiding close interpersonal contact, encouraging employees to remain at home when sick, and instituting additional precautions for older employees and customers.

For other operational recommendations, please see our Employer Guide to Navigating COVID-19 from earlier this week.

LOCAL GOVERNMENT “SHELTER-IN-PLACE” ORDERS – Enforceable Restrictions

  • As of March 18, 2020, a number of counties in Northern California (including Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Santa Cruz, and Sonoma) have issued shelter-in-place orders.
  • Wineries that have operations in any jurisdiction that have implemented such an order have legal obligations to alter their current operations to comply with their specific county’s order.
    1. In its recent guidance, issued prior to the Sonoma County order, Wine Institute concluded that winery businesses meet the definition of “essential businesses” because they constitute “businesses that supply other essential businesses (grocery stores and other food outlets) with the support or supplies necessary to operate.”  According to Wine Institute, wineries can engage in the following activities in those Shelter in Place jurisdictions:  “vineyard management, wine production operations, bottling, warehousing, sales, delivery and shipping.”  However, this “does not include wine tasting and events ….”
    2. The Sonoma County order includes a provision that more directly addresses winery operations.  Specifically, the following activities are deemed “essential” under the Sonoma County Ordinance:  “Agriculture, food, and beverage cultivation, processing, and distribution, including but not limited to, farming, ranching, fishing, dairies, creameries, wineries and breweries in order to preserve inventory and production (not for retail business).”  It is unclear whether, by excluding “retail business,” Sonoma County is restricting wineries and tasting rooms from engaging in the sale of wine in sealed containers for off-premise consumption, or whether the language is only meant to address retail sales for on-premise consumption.
    3. Napa County’s order goes into effect at 12:01am on Friday March 20.  It includes a provision that deems the following businesses as “essential”:  “Any form of cultivation of products for personal consumption or use, including farming, ranching, livestock, and fishing, and associated activities including but not limited to activities or businesses associated with planting, growing, harvesting, processing, cooling, storing, packaging, and transporting such products, or the wholesale or retail sale of such products, provided that, to the extent possible, such businesses comply with Social Distancing Requirements set forth in subsection (j) of this Section 10 and otherwise provide for the health and safety of their employees.”

Please note that this is a rapidly evolving situation, and many more cities and counties may implement Shelter-in-Place measures over the next days and weeks ahead.  It is also possible that the ordinances on which this blog post, and Wine Institute’s guidance are based, may be revised.

ADDITIONAL ABC GUIDANCE

  • ABC has issued additional guidance regarding the Governor’s directive on steps licensees can take to minimize risk.
  • ABC has stated that retail licensees that comply with the Governor’s directive or local government restrictions will not have their licenses suspended.
  • ABC offices in shelter in place jurisdictions are closed to the public.  ABC Staff will be available to answer questions over the phone, and you can still mail applications to those local offices.  Other ABC local office closures will be posted here.
  • ABC is not currently accepting, processing, or approving special event or daily licenses in light of guidance on gatherings.

ADDITIONAL WINE INSTITUTE INFORMATION

Wine Institute has a helpful resource page dedicated to Coronavirus related updates, which can be accessed here.

If you have any questions regarding alcohol beverage licensing, please contact John Trinidad or Bahaneh Hobel.

For a list of Coronavirus related resources, please see our Resources Page.  

Employer Guide to Navigating COVID 19

Below is an outline of topics designed to assist California employers in navigating COVID 19 and the related economic fallout.  Everything is changing quickly and this is based on what is currently known and available.

Communications with Employees:

  • Number one priority in this situation continues to be the safety of your employees.
  • It is crucial to regularly communicate with your employees regarding the status of office closures, layoffs, pay or any other updates that affect your business.
  • Make sure you have cell phone and/or personal email addresses to communicate outside work hours.
  • Consistent with the Governor’s order, all employees older than 65 or those with a chronic illness should not return to work. These employees should work from home if possible, or if they are unable to work from home, let them know who they should contact to discuss their options for taking time off.
  • All other employees should work from home if they are able to do so. If employees still need to come to work, they should follow the CDC’s recommended social distancing requirements and stay at least 6 feet away from others. Advise employees to stay in their office or designated workspace as much as possible, and not to congregate in meal or break areas.
  • Note that if the Bay Area Counties March 16, 2020 “Shelter in Place” Order extends to your county, most employees will be required to stay home and will be unable to come to work. Certain workplaces considered essential are allowed to remain open.  A list of the Essential Businesses can be found in the order linked here.
  • All in person meetings should be cancelled if possible and phone conference or webinars should be used instead.
  • Advise employees to immediately notify you if they develop symptoms of COVID-19 or are exposed to someone who has tested positive for COVID-19.
  • Ensure that you have updated contact information for all employees and you are able to reach them when they are outside the office to provide necessary information.

Reduction in Hours or Pay and Layoffs:

  • If a reduction in force or pay is necessary, let your employees know as soon as possible.
  • Whether a temporary closure results in a furlough (with the idea of employees returning on a certain date) or a layoff (uncertain date of return, if ever) can impact whether accrued vacation/PTO needs to be paid out. With so much uncertainty, our general recommendation is to pay out the accrued time, but financial constraints may make this impracticable.
  • You can reduce hours for non-exempt employees and reduce work schedules as needed. You do not need to pay out any accrued PTO for employees in order to make up the difference in hours.
  • You can also reduce salaries for your exempt employees, as long as the reduction in salary does not result in the employees getting paid less than the minimum threshold required for employees to retain their exempt status. Currently the minimum threshold for exempt employees is $54,080 per year for employers with 26 or more employees and $49,920 for employers with less than 26 employees. This reduction can be made before the beginning of a full workweek.
  • Talk with your insurance broker about continuing health benefits for employees on furlough and or a temporary layoff situation.
  • Make preparations for how you will continue to receive mail at your office or do other essential functions as needed during the period when you have a reduced work force. If your office needs to close temporarily, make sure clients and customers are notified.

Employer Resources:

  • The Employment Development Department (“EDD”) has a helpful website with information about the COVID 19 impacts.
  • Employers might be able to avoid potential layoffs by participating in the Unemployment Insurance Work Sharing Program, which allows you to retain your workers by reducing their hours and wages no more than 60 percent and partially offsetting the wage loss with UI benefits. More information can be found here.
  • There is pending legislation at the Federal level that may expand FMLA leave and paid sick time leave for employees that need to take time off due to the coronavirus. We will keep you updated as soon as the emergency law is finalized.

Employee Resources:

  • Employees who are unable to work due to having or being exposed to COVID-19 can apply for disability insurance through the state. The Governor’s order waived the one-week waiting time period so employees can collect disability insurance during their first work off of work.
  • Employees who are unable to work because they are caring for an ill or quarantined family member with COVID-19 can apply for Paid Family Leave (“PFL”), which provides up to 6-weeks of benefit payments for eligible employees.
  • Employees who have to miss work to care for their children due to school closures caused by the coronavirus outbreak may be qualified to received unemployment insurance benefits. The Governor’s order also waived the one-week waiting time period for unemployment insurance.
  • Employees who have reduced hours or lose their jobs (either permanently or in a temporary layoff) can apply for unemployment insurance as well. The Governor’s order waived the one-week waiting time period for unemployment insurance so employees can collect unemployment in their first week out of work.
  • Employees can access the EDD website for answers to FAQs regarding the various benefits they may be entitled to.

Our goal is to help employers navigate this difficult situation. For more information contact Jennifer Douglas or Marissa Buck.

For a list of Coronavirus related resources, please see our Resources Page.  

TTB Allows Returns of Products Purchased for Events Cancelled due to CORONAVIRUS

Today, TTB announced that it would permit returns of alcoholic beverages that were originally purchased for events that have been canceled due to Coronavirus. As TTB stated:  Given the unexpected and widespread nature of the concerns involving COVID-19, TTB will not consider returns of alcohol beverage products purchased to sell during such cancelled events to violate federal consignment sales rules provided the products were not initially purchased or sold with the privilege of return.”

Federal regulations typically prohibit consignment sales, which they interpret broadly to include the sale or purchase of alcohol beverage products with the privilege of return. (27 CFR 11.21).Typically, returns for ordinary and usual commercial reasons are not permitted, but returns because a product is overstocked or slow-moving does not constitute a return for ordinary and commercial reasons and are prohibited. (27 CFR 11.45.)

Acknowledging that wholesalers and retailers likely had already purchased product for various events such as festivals, concerts and sporting events that have seen widespread cancellations in recent days, TTB has taken the position that returns resulting from these cancellations would be permitted.

Local officials and event organizers have begun announcing cancellations of widely-attended events, such as parades, festivals, fairs, concerts, and sporting events based on concerns about COVID-19. These announcements may be made after wholesalers and retailers purchased large quantities of products to sell during.

Note that returns of alcoholic beverages to retailers would still be considered consignment sales under California law and we are working with California ABC to understand their position on such returns given the mass cancellations of events and gatherings.

For more information about how to address the return of alcoholic beverage products, please contact Bahaneh Hobel.

For a list of Coronavirus related resources, please see our Resources Page.  

Governor Issues Guidance / Directive on Closure of CA Bars, Clubs, Winery Tasting Rooms, On-Premise Retailers

On Sunday, March 15, 2020, Governor Gavin Newsom announced that due to efforts to reduce the potential spread of the novel coronavirus, he was directing the closure of “all bars, nightclubs, wineries, brewpubs, and the like.”  Restaurants, however, are not directed to close at this time, but are subject to reduction of occupancy and social distancing guidelines.  Although the Governor did not explicitly state as much, the closure directive appears aimed at suspending on-premise retail privileges (i.e., the service of alcohol for consumption at the licensed premises), whether those privileges are exercised at stand-alone premises or at locations tied to alcohol beverage production facilities, such as tasting rooms.

The directive is not an order, but has the same force as the Governor’s guidance last week regarding non-essential social functions over 250 attendees.

While the Governor announced that the directive would apply to “wineries,” it appears that this may only apply to a winery’s tasting room operations, and does not impact production operations.  A number of on-premise licensees may also have off-premise retail privileges. It is unclear whether the Governor’s directive allows these licensees to sell sealed bottles for consumption off the licensed premises during the closure period.

We have been in contact with representatives of the California Department of Alcoholic Beverage Control and expect further guidance on Monday, March 16.  We will update this post with any additional information.

If you have any questions regarding alcohol beverage licensing, please contact John Trinidad or Bahaneh Hobel.

For a list of Coronavirus related resources, please see our Resources Page.  

Proposed CCPA Regulations Zig-Zag On Logo, Personal Information

Remember a few weeks ago when we said to be on the lookout for a new “Do Not Sell My Information” button that looked like this?

 

 

Never mind.

The latest version of the proposed California Consumer Privacy Act (CCPA) regulations, released for comment on March 11, 2020, has struck the prior version’s proposed opt-out button.  But it hasn’t replaced it with a new one.  The latest version of the regulations thus only creates more uncertainty as to how the “Do Not Sell My Information” provisions of the CCPA are to be implemented.  With enforcement scheduled to begin July 1, 2020, time is growing short for clarity on the regulations.

The latest revision has also undone the significant provision added in the prior version that IP addresses not linked to a particular identifiable consumer are not considered “personal information.”  Without that clarification, one is left to wonder whether that suggests that IP addresses unlinked to a particular consumer are nevertheless personal information.

The new version of the proposed regulations does provide some minor further clarification on the content of privacy policies, requiring that both the source and business or commercial purpose for information collected or sold be described in a “manner that provides consumers a meaningful understanding of the information being collected” and why the information is collected or sold.

Other minor modifications have been made to regulations addressing the sale of data of minors; responses to requests to delete; requirements of “service providers;” opt-out control functions; and how data can be valued.

The text of the revised regulations can be found here.

A further comment period is open until March 27, 2020.

Communicating with Employees about COVID 19

It is important that employers stay on top of their employees’ workplace safety.  We recommend disseminating information to your employees about the COVID 19 outbreak and staying on top of developments. Below is a sample communication, but, of course, you should make sure it accurately reflects your workplace and the steps you are taking.  One of the biggest issues will be how to handle pay if extended absences become necessary. There is no one size fits all answer.  It should be handled consistently within your company and will depend on your current policies, any government assistance that may become available and the extent to which your employees may be out of work.

SAMPLE NOTICE:

Given the spread of coronavirus disease 2019 (COVID-19) in the U.S. in recent weeks, we ask that you please follow these simple guidelines in an effort to keep all employees healthy and safe. While vigilance is asked of all of you, we do not believe there is cause for panic. If you have any questions or concerns, please contact [insert name].

  • Wash your hands often – Use soap and water and wash for at least 30 seconds, or if soap and water are not available use hand sanitizer that is at least 60% alcohol.
  • Do not touch your face.
  • Clean and disinfect surfaces often.
  • Cover your cough or sneeze with a tissue and then throw it in the trash. If a tissue is not available, use your elbow (not your hands) and turn away from any people nearby.  The CDC does not recommend wearing masks.
  • Avoid shaking hands with people if possible, including clients, customers and guests – this is for your own protection and theirs.
  • Health care providers are requesting that anyone with fever, cough, or shortness of breath contact the doctor or hospital in advance of going and follow any procedures they have in place.
  • We are monitoring our workplace safety, and in order to do that it is important that you notify [Human Resources/person’s name] if you will be out of the office due to any illness. If you are feeling sick, stay home from work. Any specific medical information will be kept confidential.
  • Immediately notify [Human Resources/person’s name] if you were exposed to someone who has tested positive for COVID-19, or if you were exposed to someone who has been put in quarantine due to possible contact with someone with COVID-19.

Information is evolving daily and we encourage you to designate a point person to stay on top of the situation so that you can effectively respond to the needs of your workforce.  For further questions contact Jennifer Douglas.

For a list of Coronavirus related resources, please see our Resources Page.  

Legal challenges to 2020 Employment laws have begun!

As suspected, legal challenges have been made to both AB-51, which prohibits mandatory arbitration in employment, and AB-5, the new independent contractor test.  Below is a brief summary of the challenges and what it may mean for your business.

Arbitration

As of December 30, 2019,  California is prohibited from enforcing AB-51.  Mandatory arbitration is currently still binding.

The United States and California Chambers of Commerce along with other interested parties filed an action to enjoin California’s implementation of AB-51 and sought a temporary restraining order to halt the January 1, 2020 effective date.  The Court determined that it was more likely than not that the moving party (Chamber of Commerce) would prevail at the January 10, 2020 hearing barring implementation of the law.  The primary argument for barring the implementation is that it is preempted by the Federal Arbitration Act (“FAA”).  A link to the Court’s ruling can be found here. At the January 10 hearing, the Court requested supplemental briefing from the parties regarding jurisdictional issues and extended the temporary restraining order until January 31, 2020. The temporary restraining order has been modified to limit its application and protection to arbitration agreements covered by the FAA.  The FAA is applicable to an employment relationship involving interstate commerce, which is interpreted broadly.

We anticipate that the Court will find that AB-51 is preempted and that mandatory arbitration agreements, if lawfully drafted, will continue to be enforceable.

Independent Contractors

AB-5 has faced similar legal challenges, however, there has not been an order providing a blanket prohibition of its enforcement.  As a reminder AB-5 codified a three-part test called the ABC test to determine whether someone providing services to a company is an employee or independent contractor.  All three parts must be shown, which has led many industries vulnerable to claims that contractors are in fact employees.  The law provided numerous exemptions from the ABC test, but not all industries were granted such exemptions.  Independent truck drivers, freelance journalists, and ride-share and delivery drivers (Uber and Postmates) all filed suit against the state of California concerning the enforcement of the law. So far, only truck drivers have obtained a temporary restraining order as to its enforcement. On January 16, 2020, the Court granted a preliminary injunction prohibiting California from enforcing AB-5 against truck drivers during the lawsuit. The state is expected to appeal the decision to the Ninth Circuit. You can read the Court’s decision here.

For now, the law is in effect for everything and everyone else.

If you have any questions about this please contact Jennifer Douglas or Marissa Buck to discuss.

Employment Update: New Laws for 2020

It is that time of year when we look to see what will change for California employers.  We have summarized some important changes to California employment law that may have an effect on your business as we enter the New Year.  There may also be local laws that are not reflected below. If you have any questions about your specific situation, please feel free to reach out to us for a more in depth discussion.

 Minimum Wage

Effective January 1, the state minimum wage has increased for both hourly and salary employees.  The chart below shows the new minimum wage for both, by employer size:

25 or Fewer Employees 26 or More Employees
Minimum Hourly Wage $12.00/hour $13.00/hour
Minimum Exempt Salary $49,920/year $ 54,080/year

Additionally, if you have employees working in any of the cities below in Sonoma County, you need to comply with the local minimum wage ordinances:

City 25 or Fewer Employees 26 or More Employees
Sonoma (City) $12.50/hour $13.50/hour
Santa Rosa* $14.00/hour $15.00/hour
Petaluma $14.00/hour $15.00/hour

*Santa Rosa’s minimum wage increase does not take effect until July 1, 2020.

 Independent Contactors – AB-5

Determining independent contractor status can be challenging.  California has “simplified” the standard to the “ABC” test.  When determining independent contractor status, employers look at three factors – all three of which must be met in order to qualify as an independent contractor:

  1. 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 the work, and in fact;
  2. the worker performs work that is outside the usual course of the hiring entity’s business; and
  3. 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 “ABC” test effectively expands the definition of employee.  AB 5 provides an extensive list of jobs that are excluded from the new “ABC” test and will still be analyzed under the former balancing test known as the Borello factors.  If your business uses independent contractors, this is a good time to re-examine their classification and ensure they are appropriately classified under the new standard, and whether they fall under an exception to the new test and should still be analyzed under the old standard.

 Sexual Harassment

The #metoo movement continued this year and there is a continued growing awareness of sexual harassment and gender equity issues.  Here are a few reminders of the new requirements for employers:

 Training: All employers with 5 or more employees are required to provide sexual harassment training for both supervisory employees (two hours every two years) and regular employees (one hour every two years). All employees must receive the training by the end of 2020, and new employees should receive training within six months of hire. Interactive training videos will be available for use on the DFEH website.

Seasonal/Temporary Employees: For employees hired for less than 6 months, the training must be completed within 30 calendar days or 100 hours worked. If the employees are hired through a temp agency, the agency provides the training and not the hiring client.

Retaliation Against Victim of Sexual Harassment Unlawful: AB 171 creates a rebuttable presumption of unlawful retaliation if an employer discharges, threatens to discharge, demotes, suspends, or takes any other adverse action against the employee (victim) within 90 days following the victim giving notice to the employer or actual knowledge by employer of sexual harassment.

 Additional things to consider:  Harassment laws are broadening and creating new challenges for employers.  The courts are discouraging settlement through summary judgment, which means that harassment claims will be time consuming and expensive to resolve.  As an employer, it’s important to stop harassment before it begins through training, policy and consistent practices.

Lactation Accommodation – SB 142 (Labor Code Sections 1030-1034)

The existing lactation accommodation law has been updated to specify that a location other than a bathroom must be provided for lactation purposes, and the room must include certain features.  The location should be permanent, but temporary locations are acceptable under certain circumstances. Additionally, employers with fewer than 50 employees can seek an exemption if an undue hardship is shown. The new law also requires employers to develop and implement a policy regarding lactation accommodation, which means your employee handbook should be updated to add this policy if it is not already included.

Changes in Arbitrations

Arbitration Agreements – AB 51: Employers are now prohibited from requiring that employees enter into arbitration agreement as a condition of employment where the agreements cover California Labor Code or FEHA claims. This applies to all contracts entered into, extended or modified after January 1, 2020. However, the prohibition does not apply to post-dispute settlement agreements or negotiated severance agreements. Employers can still have optional arbitration agreements in their employment contracts as long as entering into the agreement is not a condition of employment. Additionally, this law is likely to be challenged as preempted under federal law.  We expect a great deal of uncertainty about this next year.  Please contact us to discuss if you have questions about your agreement or intention to implement an agreement.

Arbitration Fee Timeline– SB 707: If the party who drafted the arbitration agreement (which is typically the employer) fails to pay the fees and costs required to initiate the arbitration, or any fees or costs required to continue the arbitration, within 30 days after the due date, it will be considered a material breach of the arbitration agreement and the drafting party will be in default under the agreement. Courts are also authorized, and required, to impose monetary sanctions against the drafting party if costs or fees are incurred as a result of such a breach.

Limits on Settlement Agreements – AB 749

Any settlement agreement entered into on or after January 1, 2020 will be void if it contains a provision that prohibits, prevents, or otherwise restricts an “aggrieved person” from working for the employer in the future. However, employers can still agree with the aggrieved person to end a current employment relationship or to prohibit the aggrieved person from obtaining future employment with the employer if the employer has made a good faith determination that the person engaged in sexual harassment or sexual assault.

Protective Hairstyles “Crown Act” – SB 188

The Crown Act, “Creating a Respectful and Open Workplace for Natural Hair,” prohibits discrimination based on natural hair and any hairstyles associated with race, including protective hairstyles like braids, locks, and twists. You should review all dress code and grooming policies to ensure compliance with this provision.

 Overtime for Agricultural Workers – AB 60

California agricultural employers with 26 or more employees need to adjust their overtime calculations this year. Overtime calculations will remain unchanged for agricultural employers with 25 or fewer employees.  The chart below shows how overtime should be calculated based on the hours worked and employer size:

25 or Fewer Employees 26 or More Employees
Daily OT (1.5 X Regular Rate) > 10 hours > 9 hours
Weekly OT (1.5 X Regular Rate) > 60 hours > 50 hours

California Consumer Privacy Act (“CCPA”)

The CCPA of 2018 goes into effect January 1, 2020. The CCPA applies to any business that: has an annual gross revenue in excess of $25 million; derives 50% or more of its annual revenue from selling consumers’ personal information; or alone or in combination annually buys, receives, sells or shares for a commercial purpose the personal information of 50,000 or more California consumers, households or devices.  If you have questions about whether the law will apply to you, please contact us to discuss. As of January 1, 2020, businesses subject to the CCPA will need to comply with the requirements of the statute.  The CCPA is generally not applicable to employee data until January 1, 2021, however, employee data is still subject to the notice of collection requirement and employees have a private right of action against an employer in the event of a data breach.  Additionally, the employee data exemption only applies to data that is collected in an employment or HR context – thus, if an employee is also a consumer outside of the employment context that data remains fully covered by the CCPA. If the CCPA will apply to you, please contact us and we will send you further information about how best to comply.

For more information about any of these updates please contact Jennifer Douglas or Marissa Buck.

Napa County Winery Permitting in State of Flux

The Napa County Board of Supervisors has undertaken a series of major regulatory moves involving winery and vineyard permitting over the course of the past year. Critics of the various regulatory changes abound on all sides of the issues, with the board navigating a difficult path between wine industry, agricultural, environmental and anti-growth interests.

First, on Dec. 4, 2018, the board adopted Resolution No. 2018-164, generally referred to as the “Compliance Policy.” Among other items, the resolution created a March 29, 2018 deadline for applications to cure existing permitting nonconformance; a process to request a “status determination” of existing rights; and a mandatory winery production volume and grape source reporting program. As expected, this Compliance Policy has generated a greater than normal workload for the county, slowing the processing times for most use permit related applications. The Compliance Policy dictates that future applicants with operations exceeding their use permit limits will need to document compliance with existing use permit limitations for one year before any modification to their permit can be considered.

Second, the board passed the Water Quality and Tree Protection Ordinance (No. 1438) on April 9, 2019. A reaction to the narrow defeat of “Measure C” on the June 2018 ballot, the ordinance increased tree and vegetation retention and preservation requirements, tree mitigation ratios, established setbacks from municipal water supply reservoirs and wetlands, and provides for new stream setbacks for smaller order streams. New projects will need to address the additional limitations created by those rules. It remains to be seen how much impact the new rules will have on prospective development.

Third, with the pendulum swinging back towards permit holders and future applicants, the board at its April 23, 2019, meeting adopted Resolution No. 2019-53 to clarify the applicability of the county’s road and street standards. While in the past all use permit modifications triggered the need to comply with the most current driveway fire safe access standards, those standards have seen multiple updates making even relatively new wineries seeking a minor permit modification incur significant costs to upgrade access to the latest 22-foot width requirements. The policy change clarified that only a major modification to a use permit triggered the need for such roadway updates. This small but significant change makes requesting a minor modification to a use permit much more palatable to many applicants, since it avoids the sometime significant costs of constructing driveway improvements that were previously required for even minor operational changes or small remodeling projects.

And fourth, on May 21, 2019, as a continuation of the swing towards addressing project applicant concerns, the board debated and then directed the planning director to study changes to the use permit application and modification process, with an eye towards making permitting for small wineries easier, as well as clarifying what types of permit modifications fall within the minor and major modification categories. The development of new or revised rules in that regard is ongoing, and will continue to be evaluated by the board throughout the remainder of the year.

The true impact or benefit of these rule changes is not entirely clear at this point. But we can see the beginnings of the impacts of the Compliance Policy. Initial reporting in the North Bay Business Journal indicated that the Compliance Policy had generated significantly fewer applications than anticipated – 54 applications, including 33 for use permits and 21 for status determinations. The first key piece of the Compliance Policy – applications to update or conform activities to permit limits – are slowly working through the county’s planning process. The Compliance Policy provided an incentive that those that applied prior to the deadline could continue with their current operations while their applications are processed.

The second key Compliance Policy option – status determinations – have also been working their way through the County’s review process. ModernNapa county Use Permits are lengthy documents, containing a litany of generally-boilerplate standard conditions of approval, which are tailored to each permit as appropriate. Historic permits vary significantly however, with lesser detail than their modern brethren. This variation between older and newer use permits was one of the policy rationales for including this option as part of the Compliance Policy, as a winery owner may not be fully aware of how the county currently interprets its use permit. To allow for wineries to take advantage of this process, the Compliance Policy provided a tolling of the deadline to submit an application for winery owners who applied for a status determination prior to the March 29, 2018 application deadline. This resulted in an extension of time to file a use permit modification, with the Compliance Policy’s benefits of continuing current operations. Once the owner receives the county’s interpretation of its permit, it can then determine what if any use permit modification for which it might want to apply. As those status determinations are issued, additional applications for modifications of use permits are certain to be submitted. While the status determinations have not been released publicly, we have seen the county consistently opine that the operations approved by a use permit include only those anticipated in the applications for those permits, and additionally limited by the specific conditions in the permit approval documentations.

The last component of the Compliance Policy is the mandatory wine volume and grape source reporting requirement, which as with the other deadlines has seen its stated beginning date of July 1, 2019 come and go with no such program being actually implemented. However, this mandatory reporting program is being developed by the county and when ultimately adopted will require submission of documentation setting forth the volume of wine produced and the source of grapes used in that production at each Napa winery. The mandatory volume and grape source reporting policy is slated to trigger an inspection and full evaluation of all permit compliance if that reporting shows a violation of either limit. The promise of such an inspection may have encouraged voluntary applications to cure existing issues, especially if the recent larger than average harvests caused a production limit exceedance. However, that policy has yet to actually be implemented, and it remains to be seen when it will be put into practice.

In sum, there have been a number of developments that have put the focus on winery permitting in Napa county over the last year. The landscape is likely to change further as additional permitting process changes are evaluated and debated, and the mandatory reporting process goes into effect. Napa county wineries need to stay alert: operating conditions are subject to sudden change.

1 https://www.northbaybusinessjournal.com/northbay/napacounty/9464823-181/napa-wine-vineyard-regulation
2 With some limited exceptions for wineries not in Agricultural Preserve or Agricultural Watershed zoning districts, or not subject to the 75% Napa County grape source rule, which do not need to provide grape source data. Volume reporting requirements still apply to all wineries however.

Authored by Joshua S. Devore.

© 2019 North Bay Business Journal. Reproduction in any form prohibited without permission. • Reprint from August 26, 2019 Pages 14 & 15

New Sexual Harassment Training Requirement Delayed One Year

On Friday, August 30, 2019, Governor Newsom signed into law SB 778, clarifying requirements for mandatory sexual harassment training.  The bill is an urgency statute, which means it shall go into immediate effect.  The law can be found here.

The key points of the clarifying statute are:

All employers with five or more employees required to provide sexual harassment training under AB 1343 have one more year to do so.  The training must now be complete by January 1, 2021, instead of January 1, 2020.  It no longer needs to be complete in 2019.  This applies for both the one-hour non-supervisory and the two-hour supervisory training (unless the employer was previously required to provide supervisory training under AB 1825).

Employers with 50 or more employees who were already providing two-hour supervisor sexual harassment training under the old AB 1825 requirement remain on the same schedule of training every two years.  Supervisors who had been trained in 2018 do not need to be retrained in 2019.

New supervisors (either direct hires or internal promotions from non-supervisor to supervisor) must be trained within six months of starting the position.

If you have any questions about your specific situation, contact Jennifer Douglas.

Uncertain Immigration Climate – What Can Employers Do?

Since the 2016 election there has been speculation of wide-spread immigration actions by the United States Immigration and Customs Enforcement (“ICE”).  Repeated announcements from the President for “round-ups”, recent mis-match letters from the Social Security Administration (“SSA”) and court action concerning the census citizenship have many in the community on edge.

While it is difficult to predict what will happen, employers should be prepared in the event ICE raids or audits their workforce.  Employers are in a difficult spot – caught between federal and state law.  They must not knowingly employ an individual who is not authorized to work in the United States, but they also must not discriminate against an individual because of the individual’s immigration status, citizenship or national origin.  And for many, the legal reality is overshadowed by the human reality that many long term employees with family and ties to the community may be undocumented and at risk.

In light of announced raids, employers should review current legal authority concerning what they can and cannot do should ICE arrive at the worksite.  A Federal Court temporarily blocked as unconstitutional portions of AB 450, California’s 2017 expansive immigration law.  Most relevant for employers is that California cannot penalize them if they refuse to allow ICE or other enforcement agencies access to employee records or into nonpublic areas without a judicial warrant or subpoena.  Employers may choose to voluntarily allow such access, but they are also not required to provide it.

Employers should communicate to their public facing staff what they want to happen should a federal agency, such as ICE arrive on the premises.  At the very least personnel should know who to contact and should be instructed to ask the agency personnel to wait in a particular area until the designated individual can be reached.

In preparation for any request to see employee records, either with notice or without, employers should conduct an audit of their Form I-9 records.  A Form I-9 (Employment Eligibility Verification form) must be completed for all employees upon hire.  The form is very specific. An audit by ICE will involve whether the form was completed properly by the employer and employee.  ICE may fine employers for technical violations and if it appears that wide spread fraud surrounds the forms the employer can be subject to more substantial penalties and criminal charges. For detailed information about how to properly compete an I-9, the United States Citizenship and Immigration Services has a helpful manual, which you can find here.

While SSA Acting Commissioner Nancy Berryhill recently announced to Congress that no action will be taken against employers who did nothing in response to SSA’s March 2019 no-match letters, the President’s recent statements that he will direct federal agencies to work together to share information about the location of individuals who may be in the United States unlawfully, raises serious concerns that there may be additional scrutiny of employer records.  For employers it is time to make sure your records are in order.

If you have any questions about your specific situation, contact Jennifer Douglas or Lisa Sennott.

Supreme Court Decision is a Victory for Alcohol Beverage Retailers

Alcohol beverage retailers won a significant victory before the U.S. Supreme Court this morning.  The Court held in Tennessee Wine & Spirits Retailers Association v. Thomas that Tennessee’s two-year durational-residency requirement applicable to retail liquor store license applicants violates the Commerce Clause and is not saved by the Twenty-First Amendment.  In doing so, the Court stated that the 2005 decision in Granholm vs. Heald, which prohibited discrimination against out of state alcohol beverage producers, applied with equal force to discrimination against retailers, settling a long dispute in the courts on the applicability of Granholm to retailers.  The end result is that states must now defend any discriminatory or protectionist alcohol beverage laws without the luxury of relying on the Twenty-First Amendment, giving retailers wishing to ship across state lines a leg-up in future legal challenges.  Today’s decision, however, does not mean that retailers can begin shipping across state boundaries legally.  Additional court challenges or legislative changes are needed to fully open the door to retailer direct-to-consumer shipping.

The question of alcohol beverage retailer direct-to-consumer shipping was not directly at issue in the case.  Instead, the case centered on the constitutionality of Tennessee’s  residency requirements on state licensed alcohol beverage retailers.  Petitioner, a Tennessee retail trade association, argued that the residency requirement must be upheld because the 21st Amendment grants states broad authority to regulate alcohol within their borders.  The Court rejected that argument and concluded that:

“[Section 2 of the 21st Amendment] allows each State leeway to enact the measures that its citizens believe are appropriate to address the public health and safety effects of alcohol use and to serve other legitimate interests, but it does not license the States to adopt protectionist measures with no demonstrable connection to those interests.”

Leading up to today’s decision, many hoped the Court would issue a ruling that would not only address the residency requirement question, but also adopt a reading of the 21st Amendment that would open the door to retailer direct-to-consumer shipping.  Given the Court’s reading and application of Granholm, they may have gotten their wish.  States that allow in-state retailers to ship to consumers but prohibit out-of-state retailers from doing so will find such laws difficult to defend in the face of today’s decision.  To avoid legal challenges, states may choose to adopt statutes that allow all retailers, regardless of where they are located, the right to ship directly to consumers, or prohibit retailers from doing so altogether.

Attention will now shift to other cases directly challenging laws that prohibit out-of-state retailers from shipping to in-state consumers, such as the appeal in Lebamoff Enterprises v. Snyder  before the Sixth Circuit Court of Appeals.  The federal district court in that case ruled that, under the precedent set in Granholm, a Michigan state law that permits in-state wine retailers to ship direct to consumers must also grant the same privilege to out-of-state retailers.  Case No. 17-10191, (E.D. Mich. Sept. 28, 2018).  The appeals court stayed the appeal pending the outcome of the Tennessee Wine & Spirits Retailers case.  Retailers now will have significant support for their argument that such state laws are nothing more than protectionist measures that discriminate against out-of-state retailers.  States, on the other hand, will need to defend those laws as necessary in order to protect the health and welfare of their citizens.  However, given that today’s ruling strips states of any defense under the Twenty-First Amendment for any discriminatory or protectionist laws, retailers have gained a clear upper hand in the legal challenges to come.

The Court’s decision is available through the following link:  https://www.supremecourt.gov/opinions/18pdf/18-96_5i36.pdf .

If you have any questions, please contact Bahaneh Hobel or John Trinidad.

Winery Websites and ADA Compliance

The recent news of lawsuits filed against New York wineries has caused industry members to ask if they face any litigation risk if their websites are not accessible to people with disabilities under the Americans with Disabilities Act (“ADA”).  The answer is “maybe.”  There is considerable ambiguity in the law as to which companies are required to make their websites ADA-compliant and what actually constitutes ADA compliance.

This blog post provides a brief overview of the New York litigation and the current status of federal law governing websites and the ADA.  Wineries should check in with their information technology vendors to determine what, if any, accessibility features are currently part of their websites, not only to avoid potential claims, but also to make sure their businesses are open to all consumers.

What’s the New York case all about?

The lead plaintiff in these actions is legally blind and uses screen-reading software to access website content.  That software only functions correctly if the website incorporates certain screen-reading compatible features, such as alternatives text for images and videos.  Plaintiff claims that the ADA requires the winery to make certain information on their websites accessible to visually impaired persons, including:  e-commerce features, wine club membership instructions, ability to book or make reservations, hours of operation, and location of the winery.  Plaintiff ultimately claims that Defendant’s failure to remedy such accessibility barriers is a discriminatory practice against blind and visually impaired people, in violation of the ADA and certain New York laws.  Plaintiffs are seeking injunctive relief on their ADA claim and an order requiring the wineries to take “all the steps necessary” to make their websites compliant with the ADA.

This type of case is not unique to the wine industry.  Over the past two years, there have been a slew of cases filed against businesses for allegedly violating the ADA by not making their websites accessible to people with disabilities.

What is the ADA?

The ADA is a federal civil rights law that prohibits discrimination based on disability.  Under Title III of the ADA, any place of “public accommodation,” such as businesses generally open to the public, must provide individuals with disabilities full and equal enjoyment of goods, services, facilities, and accommodations.  Places of public accommodation include shops and facilities serving food or drink.

States have also adopted their own laws that require businesses to provide access to persons with disabilities.  For example, New York State’s Civil Rights Law and California’s Unruh Civil Rights Act set forth those states’ accessibility requirements.  Local governments may have their own regulations, too.  Plaintiffs in the New York winery lawsuits have claimed that the wineries are also in violation of the New York City Human Rights Law because they operate a physical location in the city.  Note – this blog post focuses solely on the ADA requirements, and compliance with state and local laws regarding accessibility are beyond the scope of this article.

Do winery websites need to be ADA compliant? 

Here’s where things get confusing.  Courts have been all over the board on which businesses must make their websites ADA compatible.

 In general, websites that service places of public accommodation are required to make their websites accessible to visually impaired persons.  In the wine industry context, this means that, wineries that have tasting rooms, or that allow for tours, tastings, and on-site purchases, likely need to make their website accessible to the visually impaired under the ADA.

Wineries that have no physical location of their own for customers to visit, taste, or purchase wine are less at risk from an ADA claim.  The Ninth Circuit Court of Appeals has held that a website that is not tied to a place of public accommodation or that is attached to a place that does not qualify as a public accommodation is not subject to the ADA. (eg. Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104 (9th Cir. 2000)). That being said, there are cases in which courts have concluded that a stand-alone website service without a physical location can itself be considered a place of public accommodation, and subject to ADA requirements.  Moreover, in 2014, the DOJ entered into several settlements agreements with online-only vendors, requiring each time, compliance with the WCAG (see below).  In other words, not having a physical location may not be enough.

How do I make my website ADA-compliant? 

Ready for even more confusion?  Currently, there are no federal guidelines for how to make a website ADA compliant.  The Department of Justice (“DOJ”) had contemplated adopting a new rule to outline how private companies’ websites can comply with the ADA.  But in 2017, the department decided to halt its proposed rulemaking activity on this front.

Although the DOJ failed to issue guidance on website accessibility requirements, the World Wide Web Consortium, an international standards organization, has published coding standards for accessibility, the Web Content Accessibility Guidelines, often referred to as WCAG 2.0 AA.

While there is nothing in federal law that states that implementation of WCAG 2.0 AA automatically means a website is ADA compliant, the complaints filed against the New York wineries all seek relief that would require the wineries to comply with WCAG 2.0 AA.  Moreover, the DOJ has previously argued in ADA enforcement actions that companies can comply by making their websites and mobile apps conform to WCAG 2.0 AA standards.

 Action Items for Wineries

Given the fluid state of the law surrounding the application of the ADA to websites, there is no clear answer as to which businesses must make their websites ADA-compatible, or even what is required for a website to be considered ADA-compatible under federal law.

Wineries should check in with their IT vendors and professionals to determine if their websites, apps, and mobile sites have implemented accessibility features per the WCAG 2.0 AA, and if not, assess if the cost of doing so would cause hardship to the company.  Implementing such features may not only help stave off legal actions, but would also signal that your winery is accessible to all consumers.

 For more information about these issues, please contact John Trinidad or Louise Mercier.

 

UPDATE (11/13/2018):  The Wine Institute recently circulated additional information regarding the ADA and winery websites.