United States: Food And Beverage Law Update: August 2016

Nathan Adams IV and Shannon Hartsfield Salimone are Partners in Holland & Knight's Tallahassee office
Colin Barnacle is Senior Counsel in Holland & Knight's Denver office
Renee Lewis is a Senior Counsel in Holland & Knight's Chicago office


Cyber Liability in the Food and Beverage World

By Shannon Salimone

When food and beverage companies think of their largest risks, data breaches have not historically come to mind, but this is changing because of reports in the past few months of major breaches by companies such as Noodles & Company, Albertsons, Supervalu and Cicis Pizza that have impacted hundreds of stores. The vast majority of states have laws that require notification to individuals and government entities if personal information in electronic form, such as bank account numbers, credit card data, Social Security numbers, and email addresses and passwords, are acquired by unauthorized individuals. The federal government is also actively enforcing data privacy and security laws. For example, the Federal Trade Commission (FTC) is committed to protecting consumer privacy. The FTC brings enforcement actions against businesses that do not comply with statements made to customers about how their data will be used and disclosed. The FTC has advised businesses to collect only the data they need, maintain it safely and dispose of it in a secure manner. Restaurants and other companies that maintain websites that may collect information from children must also conform to the Children's Online Privacy Protection Act (COPPA), which is also enforced by the FTC.

Businesses can take a number of measures to protect the data they hold. A thorough and accurate analysis of the information an organization maintains, how it is used and disclosed, and the potential risks to that data is a good first step. To preserve confidences and privileges to the extent feasible, your counsel should be involved early in this process. Once risks are identified, it will be important to take proactive measures to mitigate those risks and protect against security incidents and data breaches. Mitigation should include policies and procedures, as well as training of those who have access to personal data. Responding to data breaches can be extremely expensive, so preventive measures, as well as appropriate cyber liability insurance, can be invaluable for protecting a business. Cyber liability insurance varies radically in scope of coverage and value; therefore, it is wise for organizations to have their coverages reviewed by a specialist. Taking reasonable steps to protect personal data is critical for any business that handles this type of personal information.


How to Avoid the "Front Page"

By Colin L. Barnacle

Over the past several years, being on the "front page" has taken on a new meaning. It used to signify being the next Wall Street pundit and foodie darling – the up-and-coming food rage or a successful initial public offering (IPO). Today, however, it can just as easily signify a national food safety crisis.

With food consumers demanding more fresh, natural, organic and farm-to-fork options, the risks of pathogen infiltration and food-borne illness grow exponentially. As demand skyrockets, the onus falls squarely on food retailers and restaurateurs to up their food safety game. With the legal and regulatory changes brought by the new Food Safety Modernization Act (FSMA), the legal risks and consequences associated with a pathogenic outbreak (e.g., salmonella, E. coli and listeria) are severe. In fact, anyone who handles, buys or sells food, and certainly anyone who prepares and serves food to consumers, needs to know a great deal about FSMA. FSMA is the greatest expansion of food safety requirements and the U.S. Food and Drug Administration's (FDA) powers over food safety issues in the agency's history.

So, what steps should food retailers and restaurateurs of all sizes take to avoid being on the "front page" for all the wrong reasons? Start with an internal audit of the current food safety program in order to identify the strengths, weaknesses, priorities and gaps. Some key features ought to include a) understanding FSMA and the requirements for operations, b) developing supplier testing and auditing programs, c) utilizing an appropriate level of pathogen testing for uncooked, fresh food products, and d) employing appropriate food storage, preparation and handling requirements.

There are no "one-size-fits-all" food safety programs. Each program ought to be tailored to the particular food-related organization. However, all food retailers and restaurateurs need to take a long, hard look at their programs and make the necessary changes to be safe for consumers and FSMA compliant. If not, the chances of making it to the "front page" are all too real.


If You Are Considering Selling Your Business, Have You Considered an ESOP?

By Renee P. Lewis

Baby boomers are retiring, and for many, that means they are selling their businesses, including businesses in the food and beverage industry. The first quarter of 2016 saw the most sales of small businesses in seven years, according to an annual survey conducted by Bizbuysell.com, an internet marketplace for sales of businesses. If you are a business owner thinking about selling your business, you should consider whether selling to an employee stock ownership plan (ESOP) is an option. There are close to 7,000 ESOP companies in the U.S., according to the National Center of Employee Ownership, and many ESOP companies are in the food and beverage industry, including King Arthur Flour, New Belgium Brewing, Left Hand Brewing Company, Harpoon Brewery, Harp's Food Stores, RAM Restaurant and Brewery, KeHE Distributors, Brookshire Brothers and WinCo Foods.

An ESOP is a tax-qualified, defined-contribution employee benefit plan designed to give employees an ownership stake in their employer by investing primarily in the stock of the employer. As a tax-qualified plan, an ESOP provides meaningful tax benefits to the employer and its owners. ESOPs also can help achieve multiple corporate ownership goals and can play a unique role in employee compensation and corporate succession not achievable in traditional merger and acquisition exits.

Business owners are using ESOP for many purposes, such as:

  • to create a market for owners of closely held companies who wish to sell their shares on a tax-deferred basis and allow the companies to use tax-deductible dollars to pay for those shares
  • to allow shareholders with management responsibilities in closely held companies to sell gradually on a tax-deferred basis and ease out of the business over a planned period
  • to affect ownership transition and provide liquidity to shareholders, in a structure that enables the company to operate free of federal income taxes, resulting in increased cash flow to service debt and grow the value of the business
  • to enhance corporate performance and job satisfaction by creating a corporate "ownership" culture
  • to reward employees with a benefit tied to corporate performance while affording the company substantial benefits

New DOL Overtime Exemption Rules Serve Uncertainty with Side of Trepidation for the Restaurant Industry

By Colin L. Barnacle

The U.S. Department of Labor (DOL), on May 18, 2016, released its rule updating overtime regulations for executive, administrative and professional employees (commonly referred to as white collar employees) under the Fair Labor Standards Act (FLSA). The new rule more than doubles the salary threshold (from at least $455 per week/$23,660 per year to $913 per week/$47,476 per year) to equal the 40th percentile of weekly earnings for full-time, salaried employees in the lowest income region of the country (the South), as reported in the U.S. Census. The DOL rule is expected to expand overtime coverage to roughly 4.2 million employees. The new rule is set to take effect on Dec. 1, 2016.

Restaurants are one of the industries most affected by this new ruling that increases the overtime threshold limit. The change will affect existing exempt salaried workers, such as entry and mid-level management, chefs, bakers and supervisors. According to the Bureau of Labor Statistics (BLS), there are 696,730 "first-line supervisors/managers of food preparation and serving workers," most of whom are exempt. A significant portion of these workers will be impacted, given their average annual income is $32,410.

Restaurant owners/operators will need to decide how to effectively and legally manage the new regulation if existing exempt employees who fall under the new pay threshold are working more than 40 hours in a workweek. In practice, compliance with the new overtime standards will involve a variety of approaches to labor management as well as other creative adjustments.

For example, options may include cutting hours, creating multiple positions, job sharing, paying eligible employees overtime, raising salaries above the threshold and/or reverting existing exempt salaried employees to "non-exempt" hourly employees. Each of these alternatives has different consequences to consider. In instances where employees are not far from the threshold, it could make sense to increase their salaries, but this option may not be feasible for small, independent operations with small profit margins. There is also the issue of communicating changes to the employees and being cognizant of resulting morale and performance issues.

In any event, employers who have not yet planned for the change in the overtime exemption rules should begin doing so immediately to minimize the disruption to their operations and bottom lines.

Mandatory Gratuities and the Law

By Nathan A. Adams IV

State and local minimum wage laws in several parts of the county and other factors have led some restaurants around the country to require mandatory tipping as a way to manage rising labor costs and to ensure equity between the front and back of the house. A mandatory or automatic gratuity is an automatic tip added to a customer's bill by management. Before you take this step, there are several repercussions to consider. First, some localities such as New York City have prohibited restaurants from assessing a surcharge on listed menu prices. 6 RCNY §5-59. Although there may not be a related private right of action, local government obviously has the authority to file claims under these laws. In these jurisdictions, mandatory gratuities raise an enforcement threat.

Second, in 2014, the Internal Revenue Service (IRS) began enforcing its mandatory gratuity rules, which classify an automatic gratuity as a service charge instead of a tip. The IRS treats service charges as regular wages, subject to payroll tax withholding. The IRS has identified the following four factors that must be present in order for a customer's extra payment to be treated as a tip, and not as a service charge: 1) the customer's payment must be made free from compulsion, 2) the customer must have the unrestricted right to determine the amount, 3) the payment should not be the subject of negotiation or dictated by the employer policy and 4) the customer has the right to determine who receives the payment.

Lastly, some enterprising plaintiffs have begun claiming that mandatory gratuities are a type of deceptive trade practice. Requiring customers to pay a price for an item above the price advertised, without first informing the consumer of the total cost, may be a basis to claim violation of deceptive trade and practice law. Specifically informing customers of any mandatory gratuity is an important defense to such a claim.


The FDA, on July 13, 2016, released the Final Rule on Amendments to Registration of Food Facilities, which are applicable to food facilities that manufacture and process, pack or hold food for consumption in the U.S. Registrations now must occur every two years and contain additional information such as the email address for the contact person for the facility and an assurance that FDA will be permitted to inspect the facility. The new rules also provide that in determining the primary function of a retail food establishment, the sale of food directly to consumers by such an establishment counts the following: 1) the sale of food products or food directly to consumers by the establishment at a roadside stand or farmers' market when such stand or market is located other than where the food was manufactured or processed, 2) the sale and distribution of such food through a community supported agriculture program, and 3) the sale and distribution of such food at any other such direct sales platform as determined by the FDA secretary.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Holland & Knight
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Holland & Knight
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions