Regulating Social Media in the Workplace
The proliferation of social media creates new and difficult situations for employers. Many employers wonder to what extent they can regulate their employee’s social media activities or legally take an employment action based on an employee’s off-duty conduct.
For better or worse, most of us carry smart phones with the capacity to text, email, comment, and upload photos and videos instantaneously. Platforms like Facebook, Twitter, Instagram and YouTube allow us to easily share our personal, and potentially controversial, opinions publicly. In addition, our viewpoints or activities can easily be disseminated by others. Take, for example, an employee is recorded saying something offensive outside of work and the video is published on someone else’s social media account.
Navigating these situations is not simple. While the First Amendment’s right to free speech generally does not apply to actions taken by private employers, there are other privacy laws in California that do. For example, the California Constitution, at Article I, Section 1, gives every citizen a right to privacy, and California Labor Code Section 980 prohibits employers from asking employees for their social media log-ins and passwords or asking them to access their social media accounts on demand. However, depending on the circumstances, once an employee publishes on social media, the right to privacy may be considered waived.
California law, found at Labor Code Section 96(k), protects employees’ rights to engage in lawful off-duty conduct, and provides remedies when employment is adversely affected in violation of these laws. However, off-duty conduct that harms or potentially harms the employer’s business interests or involves a crime may be a valid basis for an employment decision. Since these are tricky situations, the individual facts must be considered and an employer may want to consult with legal counsel before taking action.
We recommend employers adopt a standard policy to handle these situations. Below are some guidelines to keep in mind when adopting a social media policy.
What Employers Can Regulate
Employers can restrict an employee’s social media behavior in the following ways:
- Use of personal social media during work time or on the employer’s equipment (company computers, phones)
- Use of the employer’s name, logos, brand names, slogans or trademarks and appearing to speak on behalf of the employer
- Communications about confidential or proprietary employer information including non-public information that may be valuable to competitors, such as client lists, product information, and pricing
- Posts about co-workers, supervisors, or the employer, competitors or suppliers that are vulgar, obscene, threatening, harassing, libelous, or discriminatory based on a protected class (but be careful about regulating negative posts made in the context of discussing terms and conditions of employment protected by the National Labor Relations Act, discussed below)
- If the employee chooses to identify themselves as an employee of the employer on any social media network, you can require them to state in clear terms that the views expressed on the social media network are theirs alone and that they do not necessarily reflect the views of the company
- Unlawful conduct, even when it occurs off-duty
What Employers Can’t Regulate
Employers should not prohibit or restrict the following:
- An employee’s communications about wages, hours, or other terms and conditions of their employment as these may be protected under the National Labor Relations Act
- Disclosure of facts related to sexual harassment in the workplace, as these may be protected depending on the circumstances
- An employee’s communications about their political beliefs, political associations or affiliations, engaging or participating in politics, and/or becoming candidates for public office
Before taking any adverse action against an employee based on a social media post or other off-duty conduct, employers should consider the following:
- Does the activity negatively affect the employer’s business? How?
- Does the activity violate the employer’s social media policy?
- Is the employer enforcing the policy uniformly? For example, have other employees posted similar content or about similar topics without being disciplined?
- Can the employer legally take action, or is the activity in question protected under the law? Consult legal counsel if you have any doubts.
- How did the employer learn of the posting or conduct? Did they learn in a way that could be considered an invasion of privacy?
- How will taking action affect employee morale?
- How will the action be perceived by the employer’s customers, community and the public if it is publicized?
Taking action based on an employee’s off-duty conduct or social media activity can be challenging for employers, and there are many factors to consider. Employers should think about the legal risks involved and adopt a legally compliant policy. As always, we recommend employers work with legal counsel when handling these sensitive issues.
ABC Launches New Online Portal for Mandatory Alcohol Beverage Server Training
The California Department of Alcoholic Beverage Control (ABC) has launched a new Responsible Beverage Service (RBS) portal to provide mandatory alcohol beverage service training and certification.
Under the Responsible Beverage Services Training Act, starting on July 1, 2022, all California licensees with on-premise consumption privileges (including bars, restaurants, and wineries, breweries, and distilleries with tasting rooms) must require all alcohol beverage servers and managers to attend responsible beverage service training. All servers and managers in licensees’ employment as of July 1, 2022, must attend this training and pass an online RBS exam by August 30, 2022. If any servers or managers were hired after July 1, 2022, then they must attend training and pass the RBS exam within 60 days after their hire date.
The ABC designed the RBS portal to be a one-stop shop for servers, managers, licensees, and RBS trainers and provides customized access based on user roles. Servers and managers can use the RBS portal to register as servers with the ABC, search for approved training providers, and, after completing training, take an alcohol server certification exam on the RBS portal. Licensees can soon use the RBS portal to confirm server certification and maintain online records. In addition, prospective RBS trainers who will provide training to servers on safe and responsible beverage service can submit their applications using the RBS portal.
The purpose of the mandatory training is to provide licensees, servers, and managers with tools and knowledge to promote responsible consumption and community safety and to reduce underage drinking, including by educating trainees on alcohol beverage control laws and on the impact of alcohol on the body.
All licensees with on-sale privileges should become familiar with the RBS portal and begin preparing their servers and managers to meet the training and certification deadlines above. Although the RBS training does not become mandatory until July 1, 2022, servers may use the RBS portal to search for RBS training providers and take the online certification exam now. There is no harm in fulfilling RBS training and certification requirements before July 1, 2022, so servers may want to register and complete their requirements on the RBS portal sooner rather than later. The RBS portal is available here. For any specific questions, please reach out to Bahaneh Hobel (Head of Alcohol Beverage Law) or Michael Mercurio (Law Clerk).
Governor Newsom Signs New Employee Recall Law (SB-93) – Effective Immediately
SB-93 was signed by Governor Newsom on April 16, 2021 and is effective immediately. The new law requires certain employers to recall eligible workers who were laid-off for reasons related to COVID-19 if their prior positions become available. Here are the key parts of the law employers need to know:
- Covered Employers: SB-93 only applies to employers who operate an “enterprise,” which is defined as a “hotel, private club, event center, airport hospitality operation, airport service provider, or the provision of building service to office, retail, or other commercial buildings” regardless of the number of employees.
- Hotel means a building offering overnight lodging to the public with 50 or more guest rooms, or suites of rooms.
- Private club means a membership-based business that operates a building with 50 or more guest rooms, or suites of rooms, for overnight lodging for members.
- Building service means janitorial, building maintenance, or security services for office, retail, or other commercial buildings.
- Laid-Off Employees: Laid-off employees are eligible to be offered employment if they were: (1) employed for six months or more from January 1, 2019 to January 1, 2020, full-time or part-time; and (2) most recently separated from active service due to a “reason related to the COVID-19 pandemic.” Reasons related to COVID-19 include: a public health directive, government shutdown order, lack of business, a reduction in force, or other economic, non-disciplinary reason due to the COVID-19 pandemic.
- Requirements: Covered employers must offer laid-off employees open positions that (1) become available after April 16, 2021, and (2) are the same or similar to the laid-off employee’s position at the time of the employee’s most recent layoff. Employers must make an offer within five business days of establishing the position, and give the employee five business days to accept or decline the offer.
- The offer must be made in writing and delivered in person or by mail to the employee’s last known address, and by email and text message if the employer has that contact information.
- If more than one laid-off employee qualifies for a position, the employer must offer the position to the employee with the longest length of service, which is the total of all periods the employee worked for employer since their hire date including time when they were on leave or vacation.
- If the laid-off employee is not qualified for the open position, the employer must provide written notice within 30 days stating the length of service of the individual who was hired and the reasons for the employer’s decision not to hire the laid-off employee.
- Record Retention: For each laid-off employee, employers must maintain the following records for three years from the date of the written notice of layoff:
- The employee’s full legal name
- The employee’s job classification at the time of separation from employment
- The employee’s date of hire
- The employee’s last known residential address
- The employee’s last known email address
- The employee’s last known telephone number
- A copy of written layoff notices provided to the employee, and
- All records of communications between the employer and the laid-off employee concerning offers of employment made pursuant to SB-93
The law allows laid off employees to file a complaint with the Division of Labor Standards Enforcement (“DLSE”) for violations of SB-93, and employers who violate the provisions of the law may be subject to penalties. The full text of the law can be found here.
Spring Employment Law Update
Join firm co-managing partner, Jennifer Douglas, along with Marissa Buck and Sarah Hirschfeld-Sussman, on Wednesday, April 7th, 10:00 AM – 12:00 PM for a complimentary webinar on current employment law issues.
In particular, the webinar will address recent changes to employment laws affecting California employers, and COVID-19 issues including vaccination. This webinar is open to all clients.
DP&F’s Employment Law practice advises firm clients in all manner of employment issues including wage and hour, discrimination, reasonable accommodation, leaves of absence, and implementing state and federal regulations.
The team often analyzes legal risks associated with hiring, disciplining and firing in order to counsel clients with these employment decisions. Although counseling is the key to DP&F’s employment practice, the team includes trained and experienced litigators who protect firm clients’ interests when litigation becomes necessary.
The employment law team recognizes the importance human resources plays in every business and an in-depth understanding of human resources enhances the team’s ability to counsel their clients in all areas of employment law.
Employer Focused Summary of American Rescue Plan Act and California COVID-19 Supplemental Paid Sick Leave Act
The American Rescue Plan passed and signed into law by President Biden on March 11, 2021 extends and resets the FFCRA after its expiration on March 31. The extension and reset goes into effect on April 1 through September 30, 2021.
In addition, Governor Newsom signed a new COVID-19 Supplemental Paid Sick Leave Act (SB-95) into law this past Friday, March 19 which is retroactive to January 1, 2021 and extends through September 30, 2021.
The relevant portions of the two laws are summarized below.
Federal: American Rescue Plan Act (“ARPA”)
- <500 Employees: The provisions of the ARPA only apply to employers with less than 500 employees.
- Additional Leave as of April 1: Amount of FFCRA leave available is reset to up to 80 hours (10 days) of emergency paid sick leave (“EPSL”) and up to 12 weeks of emergency FMLA leave (“EFMLA”).
- Leave taken prior to April 1 will not count toward the reset cap
- Providing Leave Not Required: Employers are not required to provide paid leave, but if they choose to they will receive payroll tax credits for doing so until September 30, 2021.
- New Qualifying Reasons for Leave: ARPA expands the qualifying reasons for taking leave under both the EPSL and EFMLA to include:
- Seeking or awaiting results of COVID-19 test after an exposure or at an employer’s request;
- Vaccination appointments;
- Conditions or complications related to receiving the COVID-19 vaccine.
- Changes to Paid Leave for EFMLA: ARPA expands the amount of paid leave available under the EFMLA as follows:
- Eliminates the requirement that the first 10 days of EFMLA is unpaid;
- Increases the total tax credit cap for EFMLA from $10,000 to $12,000 per employee.
- Additional Qualifying Reasons and Pay for both EPSL and EFMLA: Under the ARPA, both EPSL and EFMLA can be taken for the following qualifying reasons (in addition to the new reasons listed above). Note that this is an expansion of the EFMLA leave, which was previously only allowed for childcare purposes.
- Additional Qualifying Reasons and Pay for both EPSL and EFMLA: Under the ARPA, both EPSL and EFMLA can be taken for the following qualifying reasons (in addition to the new reasons listed above). Note that this is an expansion of the EFMLA leave, which was previously only allowed for childcare purposes.
- Qualifying Reasons Related to the Employee’s Own Health:
- Subject to quarantine or isolation order due to COVID-19;
- Advised to self-quarantine by heath care provider due to COVID-19;
- Experiencing symptoms of COVID-19 and seeking medical diagnosis.
- Under the EPSL this is paid at the employee’s regular rate of pay, up to $511/day (capped at $5,110) total; under the EFMLA it is limited to 2/3 of the employee’s regular rate of pay, up to $200/day (capped at $12,000 total)
- Qualifying Reasons Related to Employee’s Need to Care for others:
- Caring for a family member who is subject to quarantine, or has been advised to self-quarantine;
- Caring for a child whose school or child care is closed due to COVID-19.
- Under both EPSL and EFMLA this is paid at 2/3 employee’s regular rate of pay, up to $200 per day.
- Qualifying Reasons Related to the Employee’s Own Health:
- New Non-Discrimination Rule: The new law prohibits the tax credit for employers that discriminate in giving FFCRA paid leave by favoring highly compensated employees, full-time employees, or employees on the basis of tenure with the employer. If employers do not make FFCRA paid leave available to all employees without respect to their compensation level, job category or seniority, they could be denied the tax credit.
California: SB-95 – COVID-19 Supplemental Sick Leave
- 26+ Employees: The law requires employers with 26 or more employees to provide supplemental paid sick leave for COVID-19 reasons. The law does not apply to employers with 25 or fewer employees, however these employers are covered under the federal ARPA discussed above. Employers with 500+ employees will be covered by SB-95 and not by the federal ARPA.
- Retroactive to January 1 and through September 30: The requirement to provide the paid sick leave will take effect on March 29 (10 days after law enacted), at which point it will be retroactive to January 1, and extend until September 30, 2021. This means that if you did not provide paid sick leave for qualifying reasons as of January 1, but instead provided unpaid leave, you will need to provide pay for that leave retroactively by the next full pay period to comply with this law (note that you may qualify for FFCRA tax credits for doing so).
- Reasons for Leave: Employers must provide supplemental paid sick leave for employees that are unable to work or telework due to any of the following reasons:
- Subject to quarantine or isolation order or guidelines due to COVID-19;
- Advised to self-quarantine by heath care provider;
- Attending vaccine appointment;
- Experiencing symptoms of COVID-19 and seeking medical diagnosis;
- Caring for a family member who is subject to quarantine, or has been advised to self-quarantine;
- Caring for a child whose school or child care is closed or unavailable due to COVID-19.
- Amount of Leave: Full-time employees (work at least 40 hours per week on average) are entitled to 80 hours of supplemental paid sick leave. Other employees are entitled to the average amount of hours they normally work over a 14-day period.
- Amount of Pay: Employees get their regular pay during leave, up to a maximum of $511 per day, and $5,110 total.
- Separate from Sick Leave on Wage Statement: The COVID-19 Supplemental Paid Sick Leave is a separate entitlement from other paid sick leave provided by the employer, and must be listed separately on the written notice or wage statement provided to employees.
- Model Notice Forthcoming: The Labor Commissioner shall make a model notice available by the end of this week that employers can send to employees.
If you have questions or need further information please feel free to reach out to DP&F’s Employment Team, Jennifer Douglas, Marissa Buck and Sarah Hirschfeld-Sussman. This post is provided for general informational purposes only and should not be construed as legal advice. The various governmental agencies tasked with enforcing these laws will likely publish FAQs addressing some of the uncertainties that may develop as to how these laws will work in practice. We encourage you to check with those agencies frequently for regulatory guidance.
USPTO Celebrating Women in Wine and IP
The U.S. Patent and Trademark Office is celebrating Women’s History Month by highlighting the numerous and remarkable accomplishments of women in all fields. To celebrate the many successes of women in the world of wine, the USPTO is offering a free event on March 24, 2021, that will showcase the stories of women working at the integral intersection of wine and intellectual property. Speakers will include Katja Loeffelholz of DP&F and Elizabeth Schneider, host of the podcast Wine for Normal People. Join to learn more about these women and their efforts, often behind the scenes, as they strive to keep the wine world swirling. Free registration at https://www.eventbrite.com/e/wine-ip-women-innovators-in-the-wine-industry-registration-143884760191?aff=ebdssbonlinesearch
Prop 65 Warnings Streamlined for Alcohol Beverages Sold Online
California’s Proposition 65 warning regulations were recently amended to modify the delivery of the required state warnings for alcoholic beverages. The modified regulations somewhat ease compliance, as they will now allow for the required warning to be provided to the customer electronically for alcoholic beverages ordered online or via catalog. However, they muddle the standard for other orders that are placed for delivery.
Proposition 65, adopted in 1986, generally requires in California for a statement to be provided before the purchase of products that contain certain chemicals that may cause cancer or reproductive toxicity. Stores are generally required to post signs along-side listed products. The warning methods and language are product-specific, but there is also a requirement that, for products that are sold on line, the warning be provided via electronic device to the customer, without requiring the purchaser to seek out the warning, prior to or during the purchase of the product. Under the existing regulations for internet purchases of products, including alcoholic beverages, the warning or a clearly marked hyperlink using the word “WARNING” must be provided on the product display page or by otherwise prominently displaying the applicable warning to the customer prior to completing the purchase on the website. This rule is not changing.
In addition to the warning on the website, a copy of the alcohol beverage exposure warning was also required to be included on or in all alcohol packages when delivered in California. This portion of the rule is changing, making it easier for online orders, but more convoluted in the case of orders placed other than via the internet or catalog.
Going forward, for an order that is to be delivered to customers in California at a location other than the point of sale that is not made online or from a catalog – for example, for wines ordered in a tasting room for delivery to the customer at another location within California – the product-specific warning must be provided prior to or during the purchase of the wines. The regulation does not specify how the warning must be provided however, but presumably notice should be provided by signage similar to in-store sales, a printed warning on a sales document, or – although not spelled out specifically in the regulation –verbally for phone orders. The regulation is specific though that the warning be provided prior to or at the time of the purchase – not at the time of delivery as was the case previously.
While such transactions are now less clear, with respect to internet or catalog orders of alcoholic beverages, the warning has gotten simpler to deliver. The prior method of a warning on or in the package is still allowed, but the rule has been streamlined to instead allow the required warning to be included in an email or text message with the purchase confirmation rather than having to be printed and included with the shipment. Providing the warning as part of the electronically delivered receipt or confirmation should simplify shipping and can potentially reduce liability for inadvertent warning omissions in shipments to California.
All businesses that employ more than 10 employees that produce or sell alcoholic beverages to consumers in California are subject to Proposition 65 and must be in compliance with the modified regulations by April 1, 2021. Because the definition of “employee” under the regulations is imprecise, we recommend that all applicable Proposition 65 warnings be complied with, even if a winery or retailer has fewer than 10 employees.
For more on this and related issues, please contact Josh Devore.
TTB Adds New Standards of Fill for Wine and Distilled Spirits
On December 29, 2020, the U.S. Tax and Trade Bureau (TTB) published a final rule in the Federal Register that, among other things, expands the number of available standards of fill (or container/bottle sizes) for wine and distilled spirits, effective immediately.
Under the final rule, wine may now use the following new standards of fill: 200 mL, 250 mL, and 355 mL. No previously existing standards of fill were removed. As a result, the complete list of available standards of fill for wine are: 50 mL, 100 mL, 187 mL, 200 mL, 250 mL, 355 mL, 375 mL, 500 mL, 750 mL, 1 L, 1.5 L, and 3 L. In addition, wine can also be bottled in containers larger than 4 L if such containers are filled and labeled in quantities of whole liters (e.g., 4L, 5 L, 6 L).
Similarly, distilled spirits may now use the following new standards of fill: 700 mL, 720 mL, 900 mL, and 1.8 L. No previously existing standards of fill were removed. As a result, the complete list of available standards of fill for distilled spirits are: 50 mL, 100 mL, 200 mL, 375 mL, 700 mL, 720 mL, 750 mL, 900 mL, 1 L, 1.75 L, and 1.8 L. In addition, distilled spirits in metal containers that are generally shaped and designed like a can (i.e., cannot be readily reclosed after opening), can be filled at the following sizes: 50 mL, 100 mL, 200 mL, and 355 mL.
Furthermore, the final rule codifies the TTB’s current policy that distilled spirits may be labeled with the U.S. equivalent measurement in addition to the mandatory metric measurement, and that malt beverages may be labeled with the equivalent metric measure in addition to the mandatory U.S. measure.
The TTB expressly declined to eliminate standard of fill requirements generally and also declined to adopt an administrative approval system that would have allowed the TTB to approve additional container sizes. The TTB also noted, however, that it was committing to a future rulemaking proposing new standards of fill for wine of 180 mL, 300 mL, 360 mL, 550 mL, 720 mL, and 1.8 L, in accordance with the U.S.-Japan Free trade Agreement.
This final rule provides greater flexibility for both importers and domestic producers. Importers may now import into the U.S. certain bottle sizes that are already standard in the global marketplace and approved in other countries. Likewise, domestic producers now have more options for bottling or canning their products. In particular, the newly available 250 mL and 355 mL container sizes for wine make canned wine more viable; these can sizes are readily available since they are already mass-produced for beer and soda, and cans are often preferable to glass or large containers at certain venues or occasions.
NEW Cal/OSHA Emergency Standards for COVID-19 Prevention
On November 30, the Office of Administrative Law reviewed and approved the Emergency Standards for COVID-19 Prevention proposed by the California Occupational Safety and Health Standards Board (Cal/OSHA). The new rule goes beyond Cal/OSHA’s guidance issued to date, and employers must comply immediately.
Cal/OSHA has indicated it plans to take enforcement action based on the new standards. As a result, employers need to critically review any existing COVID-19 policies and procedures and bring them in line with these new regulations.
Which employers must comply?
The emergency rule applies to all California employers and employees except:
- workplaces with one employee who does not have contact with others;
- employees that are working from home; and
- employees subject to Cal/OSHA’s Aerosol Transmissible Diseases standard (such as healthcare facilities, nursing homes, paramedics and emergency responders).
Written COVID-19 Prevention Program
Covered employers must maintain a written COVID-19 Prevention Program, which can be integrated into the employer’s IIPP or maintained in a separate document. The requirements of a written COVID-19 Prevention Program are extensive and will need to be tailored to each employer’s circumstances.
An employer’s COVID-19 Prevention Program must include the following categories of information summarized below. Employers should review the regulations for more details and reach out to legal counsel with any individual concerns.
1. System for Communicating
OSHA requires employers to communicate with employees about certain topics, including asking employees to report any symptoms, exposures or hazards in the workplace, providing information about access to testing and COVID-19 hazards, policies and procedures.
2. Identification of COVID-19 Hazards
Employers have an obligation to identify, evaluate and respond to hazards. The Prevention Program must include:
- A process for screening employees for COVID-19 symptoms (which can include self‑screening at home prior to reporting to work)
- Policies and procedures to respond to COVID-19 cases, taking into account a workplace-specific evaluation of potential COVID-19 hazards
- Strategy for maximizing quantity of outdoor air when possible and increasing filtration efficiency
3. Investigating and Responding to COVID-19 Cases
Employers must have an effective procedure to investigate COVID-19 cases in the workplace, including a procedure for verifying cases, collecting information and contact tracing to determine potential exposure to others.
An employer must give notice of potential COVID-19 exposure within one business day to any employees, contractors or other employers who may have been exposed without revealing personal identifying information. (This is the same requirement as AB-685.)
Cal/OSHA requires that employers offer COVID-19 testing, at no cost to employees during their working hours, if they have had a potential exposure in the workplace, and inform them of any benefits they may be entitled to (such as workers’ compensation and protected leave laws).
4. Correction of Hazards
Employers must implement effective policies and/or procedures for correcting unsafe or unhealthy conditions, work practices, policies and procedures in a timely manner based on the severity of the hazard.
Employers must provide training and instruction on the employer’s policies and procedures, how COVID spreads and how to minimize the spread using various methods.
6. Physical Distancing
The standard requires that employees must be separated by at least six feet, unless the employer can demonstrate that such separation is not possible, in which case employees should be as far apart as possible.
7. Face Coverings
Employers must provide face coverings and ensure they are properly worn by employees (over the nose and mouth when indoors, or outdoors and less than six feet away) with limited exceptions.
8. Other Controls and PPE
Based on the employer’s workplace environment, the employer must put controls and procedures in place to minimize transmission, such as disinfection and cleaning protocols, handwashing stations, erection of barriers and usage of PPE.
9. Reporting and recordkeeping
Employers must follow certain recordkeeping and reporting requirements, including reporting any COVID-19 case that results in the hospitalization or death of any employee to Cal/OSHA, and documenting steps taken to implement the COVID-19 Prevention Program and comply with Cal/OSHA regulations.
Employers must record and track all COVID-19 cases with the employee’s name, contact information, occupation, location where the employee worked, the date of the last day at the workplace and the date of a positive COVID-19 test, and this information shall be made available to employees with personal identifying information removed.
10. Exclusion of Cases
Employers must take steps to ensure COVID-19 cases are excluded from the workplace until return to work criteria is met.
Importantly, the regulation specifies that excluded employees must continue to receive earnings, seniority and other rights and benefits of employment as if they had not been removed from their job, with some exceptions.
11. Return to Work criteria
Generally, employees with symptoms cannot return to work until:
- At least 24 hours have passed since a fever of 100.4 or higher has resolved without the use of fever-reducing medications;
- COVID-19 symptoms have improved; and
- At least 10 days have passed since COVID-19 symptoms first appeared.
Employees without symptoms who test positive cannot return to work until a minimum of 10 days have passed since the date of specimen collection of their first positive COVID-19 test.
A negative COVID-19 test shall not be required for an employee to return to work. This has been interpreted by most in the community to mean that employers cannot require a negative test in order to return to work.
There is different return to work criteria when an employee is subject to an isolation or quarantine order, or when an employee’s removal would create an undue risk to community health or safety.
Response to Multiple Infections & Outbreaks
The Cal/OSHA regulations provide requirements in the event a workplace suffers from multiple COVID-19 infections or an “outbreak.”
An “outbreak” occurs (under the Cal/OSHA regulations and according to the California Department of Public Health) if there are three or more COVID‑19 cases within a 14-day period, or if a local health department identifies a workplace as an outbreak location. In the event of an “outbreak,” the employer must:
- Provide immediate no-cost testing to all employees at the exposed workplace who were present during the period of outbreak, and then another test one week later. Then, employers must provide continuous testing of employees who remain at the workplace at least once per week, until no new COVID cases are detected in the workplace for a 14-day period;
- Exclude any cases and exposed employees from the workplace;
- Investigate and determine possible workplace factors, implement any changes necessary, and document any steps taken;
- Notify the local health department within 48 hours after the employer discovers an outbreak . (This is the same timeframe as required by AB-685. Note that AB-685, and the regulation described above also requires employers notify any employees within one business day that they may have been exposed if they were on the worksite during the infectious period.)
Response to Major Outbreaks
The Cal/OSHA regulations provide requirements in the event a workplace suffers from a “major outbreak” which occurs when there are 20 or more COVID-19 cases in a 30-day period. In such instances, employers must provide testing at least twice weekly until there are no new cases detected in a 14-day period. In the event of a major outbreak, in addition to taking all the same steps for an “outbreak,” an employer must conduct a thorough investigation and take preventative steps such as installing high efficiency air filters and evaluating whether to halt some or all operations temporarily.
Requirements for Employer-Provided Housing & Transportation
The new Cal/OSHA regulations provide specific requirements for employers that have employer-provided housing and transportation, including prioritizing assignment of housing and transportation, cleaning and disinfection protocols, hand hygiene, physical distancing and the use of face coverings.
For more details, a full copy of the approved Cal/OSHA regulations can be found here.
HOW THE PASSING OF PROPOSITION 24 WILL CHANGE THE CCPA
In 2018, California adopted the most extensive privacy provisions in the United States, the California Consumer Privacy Act of 2018 (CCPA.) Emulating provisions adopted in Europe’s General Data Protection Regulation (GDPR), the CCPA gives California consumers of certain, generally larger, businesses rights relating to the use and sale of personal information like names, addresses or internet purchasing history. In general, the CCPA provides consumers with the right to learn what categories of personal information are collected or sold; to request businesses delete their personal information or opt-out of the sale of their personal information; and creates liability for failing to reasonably protect consumers’ personal information.
California residents voted 56%-44% in the November 2020 election to amend and expand the CCPA through the passage of Proposition 24, the California Privacy Rights Act (CPRA). Proposition 24 imports more of the GDPR’s provisions, providing additional consumer privacy rights over sensitive information. It also expands penalties established through the CCPA, and creates a new agency in California to oversee and enforce consumer data privacy laws. Most of the provisions of CPRA go into effect on January 1, 2023, although the creation of the new state agency and requirements for developing new regulations will immediately go into effect. Businesses must comply with the regulatory provisions of the CCPA until those new regulations are in place.
Most notably, the proposition 1) creates a new administrative enforcement agency and eliminates the existing 30-day period to cure CCPA violations to avoid penalties; 2) slightly narrows which businesses are subject to the consumer data privacy requirements; and 3) provides customers with new data privacy rights, including limiting the sharing of personal data.
Changes to Administrative Enforcement Procedures and Penalties
Under the existing CCPA, a business can be penalized for violation of the regulations only if it does not cure any alleged noncompliance within 30 days after being formally notified by the California Attorney General’s office. Prop 24 creates a separate agency to enforce the CPRA – the California Privacy Protection Agency — and eliminates the existing 30 day opportunity to cure compliance oversights (but provides instead for discretion in whether to impose penalties or allow time to cure), effective January 2023. As a result, all businesses subject to the CPRA will need to be in compliance with the CPRA to avoid the potential issuance of administrative fines once the provisions go into effect in 2023. The new California Privacy Protection Agency will be responsible for investigating violations and assessing administrative penalties, although violations will still be subject to enforcement actions brought by the Attorney General as well. Among other changes, Prop 24 also increases the penalty up to $7,500 on businesses that violate the consumer privacy rights of minors.
Changes which Businesses Must Comply with Consumer Data Privacy Laws
Proposition 24 changes which type of businesses will be subject to California’s consumer data privacy requirements. To be subjected to the CPRA, a business must either:
- Derive at least 50% of its annual revenue from selling or sharing (as opposed to just selling under CCPA) the personal information of California consumers;
- Have gross revenue over $25 million (unchanged); or
- Buy, sell, or share the personal information of more than 100,000 (increased from 50,000 under CCPA) California consumers/households. (Helpfully, the standard now counts only California consumers or households; the CCPA also counted “devices.”)
Other notable changes include:
- Delays the applicability of the CCPA to personal information of a business’s own employees and other business-to-business communications until 2023.
- Requires rulemaking for the protection of trade secrets from disclosure as a result of a consumer request.
- Expands consumer “right to know” requests beyond the prior 12-months, beginning with data collected after January 1, 2022.
IMPACT OF CALIFORNIA’S NEW MARKETPLACE FACILITATOR ACT ON ALCOHOL BEVERAGE LICENSEES
During all the chaos that has been 2020, alcohol beverage licensees and third party providers may have missed the enactment of a new law that actually went into effect near the end of 2019. The Marketplace Facilitator Act (the “Act”) has changed the rules and regulations regarding which businesses must collect and remit sales tax for transactions occurring on third party “marketplaces,” which include electronic platforms, apps or websites where a marketplace seller or third party provider sells or offers for sale tangible merchandise for delivery in California In brief, the Act provides that third party providers, referred to as marketplace facilitators, must collect and remit the sales tax for each sale facilitated through the third party provider’s website. The Act applies to marketplace facilitators that either (1) have physical presence in California or (2) have economic nexus with California (i.e. annual sales of tangible personal property delivered to California consumers greater than $500,000).
This new regulation may seem unusual and contrary to ABC requirements for alcohol beverage licensees, who are the actual seller of the alcohol beverage products on a third party provider website. Typically, where alcoholic beverages are sold on a third party provider’s website or marketplace, the third party provider of alcohol beverages does not hold a license from the California Department of Alcoholic Beverage Control (“ABC”). Because only licensees may sell alcoholic beverages and exercise license privileges, including sales and controlling all funds arising from such transactions, the third party provider would not be considered the seller of the alcoholic beverages since it does not hold a license. All sales of alcoholic beverages are made by the licensee. This is problematic since the Act defines the third party provider as the seller.
The ABC recently addressed this contradiction in an industry advisory. Finding that the collection and remittance of sales tax does not constitute sharing in the profits or revenue from the sale of alcoholic beverages, the ABC stated that the third party provider could be the seller for tax purposes, while the licensee would be the seller of the alcoholic beverages for purposes of exercising license privileges, ABC licensees must continue to keep control over the revenue from sales facilitated by the marketplace facilitator on the marketplace, but may segregate the sales tax component of the transaction and provide those funds directly to the marketplace facilitator for remittance.
As the seller under the Act, a third party marketer either located in California or with nexus in California must therefore register with the California Department of Tax and Fee Administration (“CDTFA”) for a Seller’s Permit or Certificate of Registration, and report and pay sales tax on all retail sales of alcoholic beverages sold on its platform for delivery to California customers. A licensee selling alcohol on a third party marketplace for delivery to consumers in California will also report such sales as part of its total sales to the CDTFA, but would claim an “other” deduction since no tax is owed. Note that these new provisions only apply to sales made for delivery in California, and thus a third party provider would not collect and remit taxes for sales made by alcohol beverage licensees for delivery outside of California.
TTB Increases Flexibility for Calorie Labeling and Advertising in Wine, Spirits, and Malt Beverages
On September 28, 2020, the U.S. Tax and Trade Bureau (TTB) issued TTB Ruling 2020-1 and TTB Procedure 2020-1 expanding the tolerance range for voluntary calorie statements in labeling and advertising alcohol beverages – making the TTB’s rules more consistent with the food labeling requirements of the US Food and Drug Administration (FDA).
The TTB permits alcohol beverage industry members to make voluntary nutrient content statements – such as calorie or carbohydrate content – on their products’ labels and advertisements, provided such statements are truthful and not misleading. The TTB periodically verifies nutrient content claims by analyzing samples of alcohol beverage products. In analyzing such claims, the TTB has certain “tolerance ranges” to allow for normal production and analytical variables, while continuing to ensure that the labeling or advertising does not mislead the consumer.
The new rules expand the TTB’s tolerance range for calorie content statements. Such statements will now be considered acceptable as long as the TTB’s analysis determines that the calorie content of the products are either:
- Within a “reasonable range” below the labeled or advertised amount (within good manufacturing practice limitations); or
- Not more than 20% above the labeled or advertised amount.
Previously, the TTB tolerance range for calorie content claims was only a range of plus 5 or minus 10 calories of the labeled or advertised amount. The new rules have no impact on the TTB’s tolerance ranges for carbohydrates and fats (20% tolerance for understatements) and proteins (20% tolerance for overstatements).
Importantly, the TTB clarified that industry members may use a number of reasonable methods to support their calorie content claims. Lab analyses of each product batch are not required; industry members may instead rely on databases and “typical value” charts. Regardless of the method used to support their calorie content claims, industry members remain responsible for ensuring that their claims are reliable, accurate, and fall within the tolerance ranges set by the TTB.
The new rules are a boon for both producers and restaurants. Producers now have greater flexibility for making calorie content claims on their labels and advertisements, if they choose to do so. Restaurants that are subject to the FDA’s menu labeling requirements also often rely on the nutrient content claims of alcohol beverage products, and the new rules may incentivize producers to provide calorie statements on more alcohol beverage products.
TTB Ruling 2020-1 is available here. TTB Procedure 2020-1 is available here. For questions regarding the above or general labeling questions, please contact Bahaneh Hobel (Partner) or Michael Mercurio (Law Clerk).
Napa County Moves to Orange Reopening Tier
On Tuesday, October 20, Napa County was approved to move to the Orange, Moderate Risk Level reopening tier under California’s Blueprint for a Safer Economy. As a result, effective Wednesday, October 21, many businesses will be able to expand their activities under the Orange Tier guidelines.
Wineries will begin to be allowed indoor tasting, with capacity limited to 25% or 100 people, whichever is less.
Restaurants will be allowed to increase their inside dining capacity to 50% or 200 people, whichever is less.
Bars, breweries and distilleries that have not previously been allowed to open without food service will be allowed to reopen, though only for outside activities.
Information on other businesses and their allowed activities under different tiers is available at https://www.countyofnapa.org/2739/Coronavirus-COVID-19
Napa County is expected to issue additional specific local guidance on reopening requirements in advance of the official change to Orange Tier operations. Additional information from the County and answers to Frequently Asked Questions can be found on the County website.
New Law Expands California’s Cannabis Geographical Indications And Mandates Terroir-Based Appellations of Origin
On September 29, 2020, Governor Gavin Newsom signed Senate Bill 67 into law, expanding the range of geographical indications for cannabis to include city of origin and limiting the use of appellations of origin to cannabis grown outdoors and in the ground. DP&F’s client, Origins Council, representing the legacy cannabis producing regions of California, worked tirelessly with legislators to promote and define terroir-based appellations.
The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) required that the California Department of Food and Agriculture (CDFA) establish the standards by which a licensed cultivator may designate a county of origin and an appellation of origin for cannabis. These requirements are codified in Section 26063 of the Business and Professions Code (B&P).
Senate Bill 67, introduced by Senator Mike Maguire, who represents the 2nd Senate District – North Coast / North Bay, modifies the language of B&P Section 26063(a) to include a city, or city and county, of origin for cannabis products. The statute’s advertising, labeling, and marketing provisions were modified to encompass the city or city and county designation and to prohibit any use of a similar name that is likely to mislead consumers as to the kind of cannabis contained in a product, when the cannabis was not produced in that county, city, or city and county.
Further, the bill prohibits the use of a name of a California county, city, or city and county, including any similar name that would be misleading to consumers, in advertising, labeling, marketing, or packaging of cannabis products unless 100% of the cannabis contained in the product was produced in the named geographic area. These new provisions would, for example, prohibit a licensed cultivator or manufacturer from labeling a product containing 5% cannabis from Riverside with the city or county name of “Mendocino”, even if the product contained 95% cannabis from the city or county of Mendocino.
Under MAUCRSA, CDFA was also tasked with establishing, by January 1, 2021, a process for licensed cultivators to establish appellations of origins which would encompass standards, practices, and cultivars specific to cannabis products from particular geographical areas in California. Currently, CDFA is engaged in rulemaking to develop appellation regulations that will govern the establishment as well as the enforcement of cannabis appellations of origin.
Senate Bill 67 establishes a terroir baseline for cannabis appellations of origin. Specifically, CDFA may not approve an appellation of origin unless the appellation requires that the cannabis is planted “in the ground in the canopy area.” The bill also prohibits the practice of “using structures,” including greenhouses, hoop houses, glasshouses, conservatories, hothouses, or any similar structure, or “any artificial light in the canopy area” to grow cannabis that qualifies for an appellation of origin. The practical impact of Senate Bill 67 is that only licensed outdoor cultivation with plants “in the ground,” flowering under full sun, will be able to establish an appellation of origin.
The bill also expands the advertising and marketing restrictions for appellations of origins to prohibit any use of a similar name that is likely to mislead consumers as to the kind of cannabis in any advertising, labeling, marketing, or packaging of cannabis. If an appellation of origin is used on a package or label, 100% of the cannabis contained in the product must meet the appellation of origin requirements, and 100% of the cannabis must be produced in the designated geographical area.
On October 2, 2020, CDFA announced modifications to the proposed appellations regulations which take into account Senate Bill 67. This is the second public comment period. Written comments on the proposed regulations will be accepted until October 19, 2020.
2020: The Year Testing Availability and Technology Failed Our Wine Industry Economy
Accurate, available and cost-effective diagnostic tools have never been more critical to economic survival than in 2020. While the world waits for a COVID-19 vaccine, large segments of our economy have been closed or hamstrung by government restrictions or voluntary measures implemented to slow the spread of the novel coronavirus. The lack of readily available, quick and accurate COVID-19 testing has been a primary contributor to the implementation of restrictions that have put millions out of work and slowed or recessed economic growth. Now, California and other west coast wine regions have been placed in another impossible situation as a result of the lack of testing resources and technologies available to make timely decisions about the quality of wine grapes.
The 2020 fires, the first round of which was caused by the lightning storms of August 16-19, occurred earlier in the harvest season than the fires and smoke exposure of previous years. The timing and breadth of these fires has caused an enormous demand for smoke taint testing at the go-to laboratory for smoke taint analysis- ETS Laboratories- although ETS and the Napa Valley Vintners have compiled a list of other testing resources available in state and abroad. Because of the enormous and unprecedented demand for ETS services, even with technicians working around the clock, some wineries and growers are shipping their samples overseas in hopes of getting results prior to the pick date.
Smoke taint tests primarily come in two forms: (a) whole berry testing where grape berries are analyzed for “free” guaiacol and 4-methylguaiacol (two of the primary indicators of smoke taint); and (b) wine tests where guaiacol and 4-methylguaiacol are measured in wine that has been fermented or micro-fermented. In the second test, where smoke taint is present, the guaiacol levels will be higher because some or most of the guaiacol that had been bound to sugars in the grapes will have released from the sugars through fermentation.
Whole berry testing was generally considered the most reliable testing option after the 2017 fires. However, it was known that smoke taint characteristics would increase after sugar bonds broke during fermentation and would continue to exacerbate through aging. In 2018, wineries started harvesting small batches of grape clusters to perform in-winery micro-fermentations to then test for smoke taint. Many growers objected to this process because of a lack of transparency regarding the micro-fermentation methodology or any uniformly recognized industry standard protocol. Some growers suspected that grape rejections were based on business factors, such as a wine supply glut, rather than actual smoke taint.
Now in 2020, the demand for testing is so intense that ETS is posting timing updates to receive test results on the landing page for their website. That is, please accept our condolences- ETS is currently reporting results from samples received on August 26 and samples received on September 10 will be reported by October 20.
This delay causes significant problems for wineries and growers. First, wineries cannot evaluate smoke impacts to grapes in real time to make informed grape harvest and acceptance decisions. Second, even if a winery will rely on an “old” test, the delay in receiving even dated information may result in grapes passing maturity and being subject to other defect liabilities. For growers, the problem is more severe and immediate. Growers across the state are watching grapes mature on the vines and many have no definitive answers from the wineries regarding a pick and delivery date or rejection.
In other cases, wineries are offering to process fruit but delay determination on quality until after fermentation. This risk for growers may payoff if smoke taint fears are worse than their reality, but if the fermented wine is ultimately rejected, some growers may be left without any compensation or insurance claim for an entire year of farming and nurturing the 2020 crop. Growers should be speaking regularly with their crop insurance agents and adjusters to determine whether they can maintain claim rights for rejections that occur in the winery, an option that had not previously been available.
In circumstances where pick decisions have not been made because of the lack of timely technical analysis, the delay will result in effective rejection and a much more complicated crop insurance claim process. For every fraction of increased Brix in grapes, the grapes also lose water, or desiccate, meaning that there will be lower tonnage, negatively impacting the purchase price for tonnage-based grape purchase agreements. Two extreme heat spikes over the past 30 days have further exacerbated the rate of desiccation. The delay in making informed pick or rejection decisions may also negatively impact growers’ ability to deliver sound and merchantable fruit and meet any contractual quality standards even if the grapes are shown not to be adversely impacted by smoke conditions.
For growers who have crop insurance, and want to make a claim for unharvested fruit, they need the winery to reject the crop, evidence of an independent analysis of the crop showing smoke taint, and the crop insurance adjuster to evaluate the tonnage of the crop in the vineyard. Any crop insurance payment will be based on either the contract price, or the average price set by the government-backed insurance program, multiplied by the crop tonnage and then reduced further by the policy coverage, which is based on the historic average yields on the vineyard, the amount of coverage purchased, the manner in which the farm units were defined by the policy and broken up by contract and less a deduction because the crop was not harvested. The longer that winery and grower are delayed in determining whether smoke taint is present, the lighter the tonnage and further reduced crop insurance claim. For growers who have recently planted vineyards, add to the insult the inability to show the progressive increase in crop yield on the vineyard for future crop insurance policies.
On top of all this, most Grape Purchase Agreements have provisions that allow for acceptance or rejection of grapes at the time of delivery, but while such a provision may be suitable to reject raisinated grapes or grapes that don’t meet the contractual Brix requirements, they are not well suited for rejection/acceptance based on smoke taint where meaningful inspection cannot occur on the crush pad at delivery. Even contracts that have specific smoke provisions, those provisions were predicated on the assumption that smoke taint test results could be obtained in a timely manner for a contract where time is of the essence in performance. With contracts that don’t adequately address the unexpected inundation of testing needs and a crop insurance program that doesn’t accommodate in-vineyard rejection without test results, wineries and growers are also challenged to consider contract amendments that attempt to mitigate the crop quality risks of this season.
I have always believed that strong relationships between wineries and growers are the cornerstone of this industry that I love and the basis for making beautiful wines that I love to drink. This harvest, like this year, is pushing many of us to the edge. And while testing resources are available and good people are doing their best, for a fire season that has cost lives and livelihoods, this 2020 harvest has shown that we do not have the testing and technology available to support the wine industry economy in the face of climate change.
The industry should demand and advocate for necessary and appropriate changes to crop insurance claim requirements that reflect the reality that smoke impacts are not like other grape defects that can be evaluated in the vineyard. For wineries that are partnering with their growers and taking the risk on grapes that they cannot adequately evaluate in the vineyard, a holistic approach is required to support these efforts and collaborations both on the production side and for the grower who has been left, in many cases, with no better option as a result of conditions they could not control. Much like the emergency relief put in place to allow businesses to adapt to the restrictions required to respond to the COVID-19 pandemic, state and local emergency action can support this industry now.
This year will end and that sounds great, but the challenges of climate change won’t go away on December 31. It is time to use our creativity and resources to prepare for the challenges of the future, at least so we can drink beautiful wine at the end of a long, hard-fought day trying to solve these problems.
Join DP&F’s Richard Mendelson for Free Webinar: Doing Business in the Time of COVID
DP&F’s Richard Mendelson will be the moderator for a star-studded panel of Napa business executives in a free Zoom webinar on Doing Business in the Time of COVID. Giving the perspective of the wine industry will be Jean-Charles Boisset, owner of Raymond Cellars and JCB Collection, and Emma Swain, CEO of St. Supery Estate Vineyards & Winery. They will be joined by Lindsey Gallagher, President and CEO of Visit Napa, who will address the tourism challenges of COVID on the Napa Valley. The webinar is being presented as part of the North Bay Business Journal’s Impact Napa conference and will take place on Wednesday, September 30, 2020 from 10:00-11:30 a.m. It is FREE for all to attend, just register at the following link:
Trademarks at the Supreme Court: The Court Extends Trademark Registration to “Generic.com” Brands
On June 30, 2020, the Supreme Court issued its second and final trademark opinion of the 2019 – 2020 term. The first opinion resolved a circuit split on the availability of profit remedies for trademark owners; the second determined the eligibility for trademark registration of compound generic marks.
In Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), decided in April, the Court addressed whether the Lanham Act required a plaintiff to show that the defendant willfully infringed in order to recover the defendant’s profits from a violation under 15 U.S.C. 1125(a). The parties in that case had entered into an agreement in which the plaintiff provided fasteners for the defendant’s leather goods. The plaintiff eventually discovered that the defendant’s manufacturers had been producing counterfeit fasteners under the plaintiff’s mark. It alleged and proved a violation under § 1125(a) for false or misleading use of a trademark. The trial jury found that, although the defendant had acted with “callous disregard” of the plaintiff’s trademark rights, it had not willfully infringed. Id. at 1494.
The Court noted that the plain language of § 1117 did not require a “willful” violation of 1125(a) in order for the plaintiff to recover defendant’s profits and further noted that the Lanham Act was generally explicit when it wished to impose such a state-of-mind requirement on a violation or remedy. Defendants relied, instead, on the statute’s qualification that a plaintiff’s ability to recover a defendant’s profits under § 1117(a) was “subject to the principles of equity”; it asserted that courts of equity had long required a willful violation for plaintiffs to recover profits in trademark cases and that the Lanham Act had preserved this tradition. The Court did not find the case law on this point convincing, and concluded that the statute’s “principles of equity” language “more naturally suggests fundamental rules that apply more systematically across claims and practice areas.” Id., at 1496. Although the defendant’s mental state is relevant in a court’s determination of the appropriate remedy for a trademark violation, there is no requirement that a plaintiff alleging a violation of § 1125(a) show that the defendant acted willfully in order for the plaintiff to recover wrongful profits as remedy.
The Court’s opinion in U.S. Patent and Trademark Office, et al. v. Booking.com B.V., No. 19-46, 2020 WL 3518365 (U.S. June 30, 2020), considered whether the addition of a generic top-level domain to an already generic term, thereby creating a “generic.com” mark, necessarily results in a generic compound mark that is incapable of registration. The Patent and Trademark Office (“PTO”) had refused registration to the mark BOOKING.COM, basing its decision on the Supreme Court’s prior ruling in Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598 (1888), that the simple addition of the corporate designation “Company” to an otherwise generic mark did not create a distinctive mark capable of registration. Such an addition “only indicates that parties have formed an association or partnership to deal in such goods.” Id. at 602. A top-level domain, the PTO reasoned, was equivalent to a corporate designation because it simply indicates that the parties operate a website for such goods.
The Court rejected the PTO’s absolute rule and concluded that whether a mark is generic ultimately rests on whether consumers perceive it as so. The Court distinguished the top-level domains in this case from the corporate designations in Goodyear, reasoning that a “generic.com” mark implied an exclusivity that was absent in a “Generic Company” mark because only one company can own a domain name while many companies can add the corporate designation “company” to a generic term. The exclusivity of “generic.com” carried source-identifying significance. The Court also stated that the PTO misunderstood Goodyear as creating an absolute rule that a compound of generic terms is necessarily generic; properly understood, Goodyear stands for the proposition that the combination of generic terms is itself generic “if the combination yields no additional meaning to consumers capable of distinguishing the goods or services.” Booking.com, 2020 WL 3518365 at *6 (emphasis in original). Survey evidence in this case indicated that consumers understood “booking.com” to refer to a single source of goods or services. Accordingly, the Court concluded that “booking.com” was not generic and that consumers did not necessarily perceive “generic.com” marks as generic such that an absolute rule was appropriate.
In his dissent, Justice Breyer disagreed that the case was distinguishable from Goodyear. It was not the non-exclusivity of “company” that animated the Court’s decision in Goodyear, said Breyer, but that “[t]erms that merely convey the nature of the producer’s business should remain free for all to use.” Id. at *12 (Breyer, J., dissenting). A top-level domain term was not capable of distinguishing a mark because it merely conveyed that the producer had an online presence. Therefore, adding “.com” to the generic term “booking” did not elevate the mark from generic to descriptive. Breyer also expressed concern about the anti-competitive effects of the majority’s decision. He worried that the doctrine of likelihood of confusion would not sufficiently preserve competition in generic terms if producers were able to appropriate “generic.com.” Finally, he noted that the survey evidence that the majority relied on was of little probative value in determining whether a mark was generic: evidence that consumers thought that “booking.com” was a brand name was evidence that consumers were familiar with the particular company Booking.com—“such association does not establish that a term is nongeneric” but merely that the business has advertised sufficiently to create the association. Id. at *13.
Both cases are victories for trademark owners. Romag Fasteners clarifies that a trademark owner need not show that a defendant acted willfully in order to recover the profits wrongfully gained through infringement. This decision enlarges the potential damage recoveries for successful infringement plaintiffs. However, willfulness remains relevant in determining the appropriate remedy for infringement, and it is unlikely that courts will often force innocent infringers to disgorge their profits. Booking.com is the more significant decision. It opens the door to trademark registration for companies that have built their brands around “generic.com” constructions and have advertised extensively to create strong consumer associations between domain names and their particular goods or services. By emphasizing that genericness is determined by reference to consumer associations, the Court has paved the way for registration of generic brand names.
The wine industry is already seeing the effects of the Booking.com decision. Wine.com, LLC, took an interest in the Booking.com proceedings and filed an amicus brief (as a member of the “Coalition of .com Brand Owners”) in support of Booking.com. The online wine retailer has been using the WINE.COM mark since the late 90s and has built considerable consumer goodwill in that mark, but the PTO denied registration of its WINE.COM word mark in 2003. Since the Court issued its Booking.com opinion in June, Wine.com has re-applied for registration of its domain name.
WINE.COM appears to be a good candidate for registration after Booking.com. But compound generic marks still face an uphill battle at the PTO—the owner of a “generic.com” domain name will need to show extensive use of the domain name as a trademark and strong consumer associations between the domain name and their company in order to obtain registration for this type of mark.
PPP Forgiveness Terms Substantially Relaxed
The terms of the usage of PPP loans were just substantially relaxed by the Paycheck Protection Program Flexibility Act of 2020 – H.R. 7010. PPP recipients now have 24 weeks (the “covered period”), to use the loan proceeds instead of the original eight weeks and still receive forgiveness of the loan amounts. However, recipients of already issued loans can elect to still use the original 8 week period for purposes of their forgiveness application calculations if that is more favorable.
The PPP Flexibility Act also provides significant relief involving the provisions that reduce loan forgiveness amounts where staffing levels have declined. It adds additional time to cure cuts in staffing or compensation levels that reduce forgiveness amounts, extending the deadline from June 30 to December 31, 2020. It also adds a provision that allows two exceptions to the forgiveness penalties for staffing reduction. Where the loan recipient can document that it was unable to rehire staff because their prior employees, and similarly qualified employees, were not available, the forgiveness reduction will not apply. It also will not apply where the recipient is unable to return to the same level of business activity as before February 15, 2020 due to sanitation, social distancing or any other customer or worker safety requirements related to federal COVID-19 requirements or guidance.
It also eases the prior restriction developed through the regulatory process that 75% of PPP loan funds were required to be spent on payroll costs. The new PPP Flexibility Act provision requires only 60% of funds be used on payroll costs, allowing 40% to be spent on other specifically allowed costs of mortgage interest, rent and utility payments.
Further, it substantially extends the original PPP loan payment deferral terms. Originally, no payments of principal, interest or fees were required for six months. Now, no payments are required at all until a forgiveness determination is made, so long as the forgiveness application is filed within 10 months of the end of the “covered period.” That works out to a total of more than 15 months from when the loan is originated without any payments – the 10 months begin to run after the end of the extended 24 week period for using the funds. If the forgiveness application is not filed by the 10 month deadline, payments on the loans begin.
Finally, the PPP Flexibility Act removes a restriction on those that receive PPP loan forgiveness from also taking advantage of a delayed payment of employer payroll taxes. Now, PPP loan recipients who seek loan forgiveness will also be able to use the deferred payroll tax payment provisions of Section 2302 of the CARES Act. Those provisions allow for payment of 50 percent of specifically defined applicable employment taxes for 2020 to be paid by December 31, 2021, and the remainder by December 31, 2022.
Updated PPP Guidance Deems Smaller Loans ‘Necessary’
Today, May 13, 2020, the Treasury Department issued a major revision to its interpretation of the Payroll Protection Program’s requirement that loans under the program be “necessary.” On April 24, it had issued proposed rules regarding the required certification that the “current economic uncertainty makes this loan request necessary,” and provided a safe harbor for entities that may have certified this under a misapprehension of the standard to return funds that were obtained previously. It emphasized that borrowers must “certify in good faith that their PPP loan request is necessary,” under the threat of potential criminal prosecution for certifications made without sufficient need.
In a near-complete reversal, it has now said, effectively, never mind. With a newly provided FAQ answer, Treasury now says that all PPP loan recipients of amounts of less than $2 million “will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” While this gives additional comfort to those that accepted and retained loans in the past, it is too late and highly disappointing for those that, in good faith, considered the prior interpretation and decided to return their loans out of fear of the risk it could later be found to be unnecessary.
The potential risk for those with loans above the $2 million threshold has also been substantially pared back. The updated guidance tempers the potential consequences to repaying the funds: “If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.”
Potential Penalty Relief for Late Property Tax Payments Related to COVID-19
Property owners who missed the April deadline for paying the second installment of real property taxes because of the COVID-19 pandemic may be eligible for relief from late payment penalties. But to get this relief, you may need to act soon.
ALERT: On May 6, 2020, Governor Newsom issued Executive Order N-61-20, directing county tax collectors to waive, until May 6, 2021, all penalties, costs, and interest for late payment of the second installment of property taxes under the following conditions:
- The real property is owner-occupied residential property or owner-occupied “small business” property (this includes wineries with up to 1,000 employees);
- The taxes owed were not delinquent on March 4, 2020;
- The taxpayer timely files a claim for relief on a form prescribed by the county tax collector; and
- “The taxpayer demonstrates to the satisfaction of the tax collector that the taxpayer has suffered economic hardship, or was otherwise unable to tender payment of taxes in a timely fashion, due to the COVID-19 pandemic, or any local, state, or federal government response to COVID-19.”
As a result of Executive Order N-61-20, county tax collectors may revise the application forms, deadlines, and review process referenced below, so taxpayers should check the website of their county tax collectors for more information. A link to a list of all county tax collectors and their websites is below.
The second installment of real property taxes was due April 10, 2020. Missing that deadline normally results in a penalty of 10% of any unpaid taxes, and monthly interest of 1.5% also starts accruing on July 1. But, in light of the global COVID-19 pandemic, county tax collectors have indicated a willingness to cancel penalties where the failure to pay by the deadline “is due to reasonable cause and circumstances beyond the taxpayer’s control, and occurred notwithstanding the exercise of ordinary care in the absence of willful neglect.” This authority arises under Revenue and Taxation Code Section 4985.2(a), which allows tax collectors to cancel penalties, costs, and charges resulting from tax delinquency under certain circumstances.
While this is welcome news, tax payers should be aware that the grounds for relief are narrow, the current deadlines are tight (with Napa County’s application for penalty relief due on May 15, 2020), and all delinquent taxes will need to be paid to be eligible for penalty relief.
For example, Sonoma County’s tax collector had, before the governor’s executive order, issued guidelines providing that potential penalty relief requires that the property owner (“Owner”) sign a declaration under penalty of perjury that:
(a) Failure to make a timely payment is due to Owner’s experience of at least one of the following circumstances:
(i) A medical condition directly related to the COVID-19 disease;
(ii) The County Health Officer’s COVID-19 Shelter-in-Place Order No. C19-03, as amended by Order No. C19-05, (“Order”) precluded Owner from working or generating sufficient revenue/income, resulting in severe economic hardship;
(iii) Other reasonable cause or circumstance directly related to COVID-19 and/or the Order;
(b) The circumstance was beyond Owner’s control;
(c) Failure to make a timely payment occurred despite Owner’s exercise of ordinary care and without willful neglect.
Under the latest executive order, all counties will be able to use the same standard of impacts from COVID-19. Applicants will need to provide documents supporting their claim for relief.
Currently, deadlines to request relief are approaching, though those deadlines may change with the governor’s executive order. Napa County requires COVID-19-related penalty relief applications be filed by May 15, 2020, while Sonoma County property owners have until June 10, 2020 to file applications. Napa County does not require payment with the application, but if relief is granted, requires payment by June 10, 2020. In contrast, Sonoma County requires payment with the application. It is important to note that relief only applies to late payment of the second installment of property taxes; payment in full of any prior tax delinquencies plus applicable penalties and interest is required with the application in order to be eligible for relief.
Below are links, from prior to the governor’s order, to information and application forms for COVID-19-related late payment penalty relief, listed in order of the application deadlines.
- Napa County (Filing Deadline: May 15, 2020)
- Tax collector webpage on COVID-19, with links to FAQs and COVID-19 penalty relief application form.
- Payment deadline: June 10, 2020
- Sonoma County (Filing Deadline: June 10, 2020)
- Tax collector webpage on COVID-19, with links to COVID-19 penalty relief guidelines and application form.
- Payment required with application filing.
- Lake County (Filing Deadline: June 30, 2020)
- Tax collector webpage with links to COVID-19 FAQs and COVID-19 penalty relief application form.
- Payment required with application filing.
- Mendocino County (Filing Deadline: June 30, 2020)
- Tax collector webpage with link to COVID-19 penalty relief application form.
- Payment required with application filing.
For counties not listed above, a list of the websites for all California county tax collectors can be found here.