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California’s Glove Law: Second Thoughts

April 16, 2014

by Gabriella Agostinelli

Last January, California became the 42nd state in America to enact a law prohibiting bare-hands contact with ready-to-eat foods and beverages.  Under the law, human skin cannot touch anything that has been cooked or can be served immediately, such as bread, fruit, deli meat, sushi, and cocktail garnishes. In the face of major opposition to the new law, the State Assembly’s Health Committee – the very committee that proposed the law – has now unanimously voted for the law’s repeal.  A new bill, which would restore the health code to its previous standards, is now on track to be considered on the Assembly floor.

California had strong public policy concerns when enacting the law. Nearly 1 in 6 Americans (48 million people) are sickened annually by food poisoning. A new study released this month also indicates Americans are twice as likely to get food poisoning from food prepared at a restaurant than from food prepared at home.

Despite lawmakers’ good intentions, the California food and beverage service industry has been swift to point out the law’s many impracticalities. Under the law, you can throw a steak on the grill barehanded, but you better glove-up when plating the cooked meat. Want some lime or ice in your cocktail? Give your bartender time to grab some latex, tweezers, or other kitchen tools first. And don’t forget: every time a bartender takes your money, she will need to replace her gloves. Every time a bartender grabs a glass you have sipped from, it becomes “contaminated” and she will once again need to change her gloves. Sushi chefs, notorious for their reliance on “touch” when crafting seafood delicacies, contend that wearing gloves interferes with this crucial sense. Beyond the inconvenience of wearing and replacing gloves, critics also suggest wearing gloves will affect the taste of food and beverages. (Think: the essence of latex and powder in your mojito.)

Since January 1, more than 18,000 individuals have signed petitions asking for the law’s repeal or to exempt bartenders from the law. Opponents of the law condemn the cost and environmental impact of buying and disposing of millions of latex gloves annually. They also argue that glove use presents a risk of cross-contamination, that the law affords inconsistent exemptions, and that it may create a false sense of security.

The story of California’s glove law demonstrates that, when creating food law in the name of public safety, legislators may not give due attention to practical concerns and costs to industry. It is encouraging that the Legislature is now considering these practical issues.

Legal Tools for Food Hubs, Part 3: Planning to Minimize the Burdens of FSMA

April 11, 2014

by Lauren Handel

Food hubs and the farmers who supply them will be significantly impacted by the new regulations FDA is promulgating under the Food Safety Modernization Act (FSMA) — in particular, the rules relating to produce safety and preventive controls. The rules are only in draft form now, and new drafts are due to be released this June. So it remains to be seen exactly how the exemptions will be defined. We will be looking closely at what changes, if any, are made to the exemptions for small businesses. Businesses that might qualify for the exemptions also should pay attention and plan ahead to minimize their regulatory burdens to the extent possible.

Under both the preventive controls and produce rule, businesses will be exempt from all or most requirements if their annual food sales are below certain dollar amounts. Both rules provide a qualified exemption from most of the requirements if a business’s average annual food sales are less than $500,000 and if the majority of its sales are direct to consumers or to local retailers or restaurants. The preventive controls rule also provides a qualified exemption for “very small” businesses, meaning those with annual food sales less than $250,000, $500,000 or $1 million (FDA has not yet decided which limit to use). Also, if a farming business’s annual food sales do not exceed $25,000, it would be completely exempt from the produce rule.

What food sales count toward these limits differs under the two rules. For the preventive controls rule, all food sales of affiliated companies count. In other words, all food sales of separate food processing or handling facilities under common ownership or control will be counted toward the exemption limit. In contrast, for purposes of the produce rule exemptions, the relevant food sales are those of a “farm,” which is defined as a physical place. Thus, as the produce rule is currently drafted, a farming business with multiple farms in different locations might qualify for an exemption on one farm, but not another, depending on the relative food sales from each farm.

When the rules are finalized, small food and farming businesses should consider whether they can structure their businesses or operations to avoid taking on more of a regulatory burden than necessary. It may be possible for a food hub enterprise to keep various parts of the operation under separate ownership and control so that their total food sales will not be aggregated for purposes of determining whether any one facility is exempt from the preventive controls rule. Similarly, a farming business with more than one farm location should consider the exemption criteria when planning what crops to plant on each farm. Of course, such considerations will have to be weighed against business needs and practical concerns.

We will be monitoring this issue as the FSMA rules continue to take shape. If you would like to discuss strategies you might employ in your small food or farming business to plan ahead for FSMA, feel free to contact me or Jason at (888) 908-4959 or info@foodlawfirm.com.

Legal Tools for Food Hubs, Part 2: Contracts Are Not Evil

April 10, 2014

by Lauren Handel

Earlier this week, I wrote about intellectual property as a valuable legal tool for food hubs and all food businesses.  This second installment on legal tools for food hubs is about contracts. In particular, supply and sales agreements can be important tools for risk management and to take advantage of special protections afforded to produce sellers.

First, I feel the need to dispel some misconceptions about contracts. Contracts are critically important legal tools for food businesses. Yet, so many values-based businesses seem to feel that contracting is a hostile act. But legal contracts are not inherently antagonistic, unfair, or devoid of values. To the contrary, a contract should be the foundation for a cooperative, mutually beneficial relationship. And a contract can be instilled with the parties’ values — for example, by requiring that suppliers use sustainable practices, raise animals humanely, and pay workers fairly. Parties to a contract have enormous flexibility to define the terms of their relationship and transactions. However, if parties do not spell out their agreement in a contract, the law will apply default rules, which may not be consistent with the parties’ intent. 

Contracts are an essential part of an overall risk management strategy. Food can be a risky business. And every seller in the supply chain — from the farmer or manufacturer to the distributor to the retailer — is potentially on the hook if a consumer gets sick from tainted food. Therefore, food hubs, or anyone selling food produced by someone else, should use their supply contracts to ensure that producers and processors use safe practices, that the buyer will be indemnified for harms it did not cause, and that the suppliers have sufficient insurance coverage. With regard to insurance, buyers should require that their suppliers name them as additionally insured on the suppliers’ general liability policy which must include product liability coverage. Contracts also can address what will happen in the event of a product recall by defining the parties’ roles and their responsibilities for the costs of the recall.

In addition, food hubs should use their sales contracts and invoices to take advantage of the special protections afforded to produce sellers under the Perishable Agricultural Commodities Act (PACA). PACA applies to dealers, brokers and commission merchants of fresh or frozen produce who, on any given day, buy/sell/broker the sale of at least 2,000 pounds of produce. The law does not apply to retailers until they sell at least $230,000 worth of produce in a calendar year. In general, food hubs are subject to PACA and, therefore, required to be licensed by the US Department of Agriculture.

PACA provides some extraordinary protections for produce sellers, including food hubs, provided that they take steps to preserve their rights. PACA requires produce sellers to be paid promptly, which means within 10 days unless the parties agree in writing to a longer term, not exceeding 30 days, before the transaction takes place. The law also creates a trust for the benefit of unpaid produce sellers, by which the buyer must hold in trust all produce in the buyer’s possession, all of the buyer’s inventory of goods derived from produce, and any proceeds the buyer receives from the sale of produce until full payment is made to the seller. These rights can be lost, however, if the seller does not notify the buyer of its intent to preserve its rights under PACA. If the seller is a PACA licensee, such notice may be given in the invoice using particular language specified in USDA regulations.

It is not possible to discuss here all of the contract tools available to food hubs and other food businesses. Feel free to contact us at (888) 908-4959 or info@foodlawfirm.com to discuss your business’s contracting concerns.

Legal Tools for Food Hubs, Part 1: Intellectual Property

April 7, 2014

by Lauren Handel

I recently spoke on Legal Tools for Food Hubs at a conference put on by the Wallace Center’s National Good Food Network. (By the way, the conference was truly excellent, and I recommend that anyone working in food hubs, or local food generally, attend next year.) For those who don’t know, a “food hub” is a business that connects farmers to local markets by providing various services, such as aggregating products, marketing, and distribution. There are many legal tools that are potentially useful for food hubs or any food business. I focused my presentation on three issues of particular relevance to food hubs: (1) intellectual property; (2) contracts; and (3) business planning to minimize upcoming regulatory burdens associated with the Food Safety Modernization Act (FSMA). I thought I would share here some of what I told the group. Today’s post is about intellectual property. Later this week, I’ll cover contracts and FSMA issues.

Every business should have a strategy for identifying, protecting, and leveraging its intellectual property (IP). Food businesses are no different. Trade secrets, copyrights, and trademarks are valuable assets. But, if these assets are not carefully protected, they will be lost. The first step in protecting IP is to know what you have. An IP audit should be done and periodically updated to consider what IP the company has, what it is doing to protect that IP, and whether any steps should be taken to better protect the IP. The audit should consider the company’s patents or patentable inventions, copyrighted works, trade secrets or other confidential business information, and trademarks.

Each form of IP is acquired differently and protected differently under the law. For example, patent rights exist only if a patent is obtained from the government, but copyright is protected by law as soon as an “author” creates an original work in a fixed, tangible form. A trade secret is a property right in some piece of information or know-how — such as a proprietary recipe, formula, customer list, or pricing information — that gives the owner a competitive advantage precisely because it is not generally known. A trade secret is protected under the law only if it is kept secret. Thus, if a company with trade secrets does not take steps to maintain confidentiality, it loses the ability to protect those secrets legally, and competitors will be free to use the information. A trademark is a symbol, logo, words, or anything that distinguishes goods or services as coming from a particular source (i.e., the manufacturer or service provider). Trademark rights are derived from the use of a mark in connection with the sale of goods or services in commerce. A trademark owner who does not continue to use the mark, or who freely allows other people to use the mark or similar marks, will be deemed to have abandoned his or her rights.

Company policies and contracts are key to protecting and maintaining IP rights. For example, when a company hires a designer to create a website or marketing materials, the designer generally will be the owner of any copyright in the works created unless the company and the designer enter into a work-for-hire agreement or assignment of copyright to the company. Companies with valuable trade secrets should have internal policies in place to maintain confidentiality and nondisclosure agreements with employees and outsiders to whom trade secret information is disclosed. Whenever a company allows someone else to use its trademark, it should have a written license agreement controlling the use of the mark. Without such control, the trademark owner risks abandoning its rights.

Trademarks are especially important to “good food” businesses because the only way that a small, local, sustainable food company can compete in the marketplace is by distinguishing itself from conventional, industrial food. Even though the owner of a trademark has legal rights without registering the mark with the US Patent and Trademark Office, registration is a good idea. Without federal registration, a trademark owner’s rights extend only to the geographic area where the mark is used in commerce. That means that a trademark owner has no right to block a competitor in another state from using the same or a similar mark. In contrast, national registration on the Principal Register confers nationwide rights to block trademark infringement. Federal registration of a trademark provides other benefits as well, such as a presumption that the mark is valid and, after 5 years, “incontestability” status, which makes it much harder for anyone to attack the mark in court.

A particular challenge for local food businesses is to choose a brand name that can be protected under trademark law. A brand that includes the name of a geographic place (for example, “Pleasantville Food Hub”) is descriptive and, therefore, would not qualify for full trademark protection. Because trademarks are meant to distinguish the source of goods or services, the less distinctive the mark, the less likely it is to be protected. If a mark is descriptive, one option is to register it on the Supplemental Register. Although such registration does not confer the full set of rights that comes with registration on the Principal Register, it can deter others from using a similar mark and will block the registration of confusingly similar marks. Through continuous use and marketing, a descriptive mark can acquire so-called “secondary meaning” — that is, it comes to be associated with the owner of the mark such that it then can be registered on the Principal Register.

This is far from a comprehensive discussion of IP issues that may be relevant to food hubs or other food businesses. Feel free to contact us at info@foodlawfirm.com or (888) 908-4959 to discuss your business’s IP concerns.

 

 

Proposed FDA Rule Will Revamp Nutrition Labels

April 4, 2014

by Gabriella Agostinelli

For the first time in two decades, the FDA has proposed significant changes to nutrition labeling. The agency’s proposed nutrition labels will affect all packaged foods except meat, poultry and processed egg products, which are regulated by the Department of Agriculture rather than the FDA.

 

Proposed Label

Proposed Label

The proposed changes include:

  • Serving sizes will be updated.

Serving sizes would more accurately reflect the amounts people actually eat, rather than what they should eat. The proposal modifies the serving size in about 17 percent of the 150 categories of packaged food. For example, a 20 oz. bottle of soda would constitute one serving, rather than the 2.5 servings currently listed. Ice cream servings would increase from half-cup to a more realistic one-cup serving.

  •  “Added sugars” will be incorporated into the labels.

After the 2010 Dietary Guidelines for Americans stated that intake of added sugar is too high in the U.S. population and should be reduced, the FDA has included a separate line on the label to alert consumers of any added sugars.

  • Calories from fat will be removed.

Studies now show that the type of fat matters more to our health than the number of calories from fat. Labels for unsaturated, saturated, trans and total fat will remain.

  •  Daily values for nutrients will be revised.

To better reflect current nutrition knowledge, several daily value estimates will change, including sodium and fiber.  For example, the agency may reduce the daily recommendation on sodium from 2,400 mgs to 2,300. 

  • Vitamin emphasis will shift.

Vitamins A and C will be replaced by Vitamin D and potassium, as many Americans are not getting enough of these important nutrients.

  • Key nutrition data will be highlighted.

The proposed label format emphasizes elements such as calories, serving sizes and Percent Daily Value, as they are vital in addressing current public health problems like obesity and heart disease.

  • For larger packages, a new dual column format would be required.

The agency has proposed “dual column” labels to indicate both “per serving” and “per package” calorie and nutrition information for larger packages that could be consumed in one sitting or multiple sittings.

 So far, reviews have been mixed regarding the value of these changes. Critics suggest that only a small portion of Americans actually pay attention to the proposed labels, which would cost the food industry an estimated $2 billion. Supporters of the proposed rule maintain that the changes will improve consumer awareness, incentivize producers to make their food products more healthful, and lead to smarter food purchasing decisions by consumers.

The proposal is open to public comment until June 2, 2014, and months will pass before the final rule is announced. Once a rule is finalized, food companies will have two years to put the changes into effect.

New Labeling Requirements under the Affordable Care Act

March 17, 2014

-by Gabriella Agostinelli

Under the 2010 Patient Protection & Affordable Care Act (ACA), the Food & Drug Administration (FDA) became responsible for issuing new rules regarding nutrition labeling in retail food establishments and vending machines.

Section 4205 of the ACA requires “restaurants or similar retail food establishments” with twenty or more locations to provide clear labeling of the calorie counts of their standard menu items. A business qualifies as a “restaurant or similar retail food establishment” when it sells restaurant-type food and its primary business activity is the sale of food to consumers. All affected businesses are required to display a statement of daily recommended calorie consumption as well as written nutrition information when requested – listing the calories, fat, cholesterol, sodium, carbohydrates, sugars, fiber, and protein amounts.

Section 4205 also calls for similar requirements to be enacted for vending machines when the owner operates 20 or more machines.

Mobile Vending

No longer compliant

 

While the ACA mandated the FDA to issue labeling implementation rules by March 2011, no such final rule has been created. FDA Commissioner Margaret Hamburg recently stated that writing a new menu labeling law “has gotten extremely thorny” due in large part to strong lobbying by supermarkets, convenience stores and other retailers that sell prepared food.  In theory, new labeling requirements could affect thousands of items in each supermarket – including prepared foods, cut fruit, bakery items and other store items that aren’t already packaged and labeled. If that were the case, each store would likely be required to send each of those items out to be lab-tested, do paperwork to justify the ingredient and nutritional information for each item to the FDA, and then create new labels and train employees to use them.

In sum, compliance costs are coming for restaurant groups and vending machine owners, but we don’t know when. Stay tuned.

Media Round-up: The Limits of Food Progressivism

March 3, 2014

by Jason Foscolo

Public health advocates have sought to change the food system along a handful of major axes. Right up there with calls for greater clarity in nutrition labeling are initiatives to solve the “food desert” problem and to change the nutrition content of the national school lunch program.

The media is just now beginning to percolate with indications that some of these efforts do not immediately have their intended effect. Today the Kansas City Star reports that some schools are seeing an increase in their food waste as children reject the healthier foods they are being given. Earlier in February, the L.A. Times reported on this study which said that low-income neighborhoods did not in fact pounce on the opportunity to eat healthier after more nutritious shopping options were introduced into their neighborhoods.

The benevolent intent of food policy leaders seems to be too easily frustrated by consumers and school children. Granted these stories are based on preliminary reporting, but they leave me wondering about Act II of the drama (or comedy, as you may prefer). Human volition continues to obstruct the aims of those who encourage people to eat healthier, and this undeniable fact leaves me wondering what public health advocates will call for on the next round of change.

Why I Am a Food Lawyer

February 27, 2014

by Lauren Handel

LaurenEarlier this week, we announced the launch of this firm and Jason had very kind things to say about me. I too would like to take the opportunity to express how proud and fortunate I feel to be working with Jason as co-owners of the Food Law Firm. Jason had the vision and guts to create a law practice focused on serving independent food and farming businesses. He inspired me to become a food lawyer, and for that I am so grateful.

When I first met Jason, I had been working for 10 years at a very large law firm doing mostly product liability and environmental litigation. Although there were many things about that job that I liked, it was not personally rewarding work, and I knew I had to leave. The only problem was I had no idea what else I would do. My biggest passion was food, but I was not sure I could turn that into a career. When I heard about Jason’s law practice, that was the moment the light bulb went off in my head. For the first time, I realized that I could use my skills and the things I loved most about being a lawyer – problem solving and advocating for clients – to help ensure the success of good food businesses.

Now that Jason and I have begun this law practice, I have my dream job. Every day, we get to help people who produce and sell excellent food and beverages. Our clients are creative and care deeply not only about quality, but also about integrity. We, likewise, aim to be an innovative, different kind of law firm — one that delivers quality legal services, but also shares our clients’ values and cares about their success. Like so many of our clients, we are just starting our business. I look forward to seeing how we grow together.

Foscolo & Handel PLLC, The Food Law Firm

February 24, 2014

by Jason Foscolo

JasonIt is with great pride that I publicly announce the launch of Foscolo & Handel PLLC, a new law practice dedicated to servicing the legal needs of farmers and food entrepreneurs. Earlier this year, Lauren Handel and I officially teamed up to combine our skills, experience, and resources for the benefit of our rapidly growing base of clients. Foscolo & Handel PLLC can now offer the community of food entrepreneurs more services, such as litigation, and with greater flexibility and availability than ever before.

I am particularly excited to be working alongside an attorney of Lauren’s caliber. Her incredible dedication to the burgeoning field of food law is truly inspirational. After 10 years at a prestigious “BigLaw” firm in New York and Washington, D.C., she chose to reorient her professional life to help support the kinds of clients that matter to her personally, those in the food industry. Her professionalism, commitment to her new clients, and her remarkable passion for food law inspire me to be a better attorney every day that we work together. The knowledge and experience she brings to this partnership will prove to be invaluable assets to our clients.

I’d also like to take this opportunity to thank our clients and colleagues, whose support and trust in our unique legal expertise has sustained the rapid growth of this firm since its founding in 2011. Their continuing commitment to our firm is a testament to the usefulness of food law to their businesses.

Foscolo & Handel PLLC, the full service, general practice Food Law Firm, is now officially open for business.

Jensen Farms Sues Food Safety Auditor

November 22, 2013

by Gabriella Agostinelli

In 2011, Colorado-based Jensen Farms was thrust into the national spotlight after its cantaloupes were linked to a 28-state listeria outbreak, which resulted in 33 deaths, sickened 150 people, and caused one miscarriage. Jensen Farms claimed bankruptcy soon afterwards and pleaded guilty last month to six counts of introducing adulterated food into interstate commerce (a misdemeanor). Ryan and Eric Jensen now await sentencing. (Note: prior to entering guilty pleas, each brother faced up to six years in prison and $1.5 million in fines.)

Eric Jensen’s attorney explains the brothers entered guilty pleas “because [the contamination] happened on their watch.” Despite accepting criminal responsibility, however, the brothers are now placing blame on their former food safety auditor for failing to warn them of contamination risks in 2011. Last month, the Jensens filed civil charges against auditor Primus Labs for negligence, breach of contract and unfair and deceptive trade practices.

In an audit conducted just weeks before the outbreak, Primus Labs’s subcontractor observed the equipment believed to have caused the Listeria contamination and yet gave Jensen Farms a score of 96% and a “superior” rating at the conclusion of its audit.  An FDA senior advisor for produce later found the audit “seriously deficient in its inspection and findings.”

A Congressional investigation of the Jensen Farms incident also identified the following problems with the third-party auditing system, which allowed the outbreak to occur:

  • Auditors’ findings not based on best farming practices or FDA guidance;
  • Auditors missing important food safety deficiencies;
  • Auditors lacking any regulatory authority and not reporting identified problems to the FDA or other authorities;
  • Auditors not ensuring that problems were resolved;
  • Auditors providing advance notice of site visits and spending only a short period of time on-site; and
  • Auditors having multiple conflicts of interest.

The Jensen Farms story is a cautionary tale for those who rely on auditors. Many large buyers require third-party food safety audits of growers and producers. Yet, as the Jensen Farms story demonstrates, such audits may not insulate the producers or buyers from the risk and liability of an outbreak. Although FDA has proposed new rules for accreditation of third-party auditors of imported foods, it does not regulate domestic auditors. Thus, farmers and producers must be careful to select well-qualified, rigorous auditors and to independently ensure they are meeting the strictest food safety standards. Hiring and following the advice of a food safety “expert” is no defense to either criminal or civil penalties for food facility owners – ultimate responsibility lies entirely with the farmer or processor.