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U.S. COVID-19: Commercial Leases – Rent Obligations in the United States

March 26, 2020

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While it is true that a number of States and local municipalities have stopped all eviction proceedings and many courts are currently closed, the issue of rent remains front and center between landlords and tenants. The following sets forth some guidelines to begin thinking about these issues:

  • Review your Leases. Payment obligations will generally rest on the specific language of the lease, but the answers may not be as clear as a landlord or tenant might assume. Provisions often relegated to the “Miscellaneous” section in leases (e.g., force majeure, severability, independent covenants etc.) may take center stage.
    • Lease provisions that landlords should focus on include:
      • Requirements that rent be paid without deduction or set-off;
      • Provisions that afford a landlord broad rights to shut down its building in an emergency without any abatement of rent;
      • Force majeure clauses that carve out monetary obligations from their applicability;
      • In the retail setting, operating covenants and, if breached, the effect on percentage rent;
      • Provisions that spell out the independent nature of lease covenants, arguing that the tenant’s obligation to pay rent is independent from the obligation of the landlord to keep its building open; and
      • The availability of their tenants’ credit support – Are letters of credit getting close to expiration and what are the draw procedures (and is the bank’s draw office available for presentment)?
    • Lease provisions that tenants should focus on include:
      • Abatement and other rights in the event of loss of access to the building or cessation of landlord’s

COVID-19: Employee Assistance, Benefits and HR Guidance for Retailers

March 24, 2020

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As retailers continue to respond to the COVID-19 crisis, the following posts from our colleagues at BCLP At Work and Benefits BCLP can help navigate through the various employee assistance and benefits programs, and help answer human resources questions.

For more information, contact the authors or visit our COVID-19 Thought Leadership web page.  You can also seek assistance from our COVID-19 Client Task Force.

 

CRA Advises California Distribution Centers Can Stay Open Under State Order

California Governor Newsom has clarified that distribution centers in California can remain open under his Safer At Home order, stating that “distribution centers are part of critical infrastructure for many industries,” according to the California Retailers Association.  CRA also reports that it has obtained oral confirmation from the governor’s office that online sales and shipping activities can continue under the order.

As we previously reported, Governor Newsom on Thursday issued a statewide order directing all individuals to stay at home “except as needed to maintain continuity of operations of the federal critical infrastructure sectors.” The order went into effect on Thursday, and is in place until further notice.

As to exempt business activities, the order and web page providing more information on the order both refer to the Guidance on the Essential Critical Infrastructure Workforce by the U.S. Dept. of Homeland Security’s Cyber Infrastructure (CISA), which lists 16 federal critical infrastructure sectors, including Food and Agriculture.

The Guidance lists as critical Food and Agriculture workers who support “food, feed, and beverage distribution, including warehouse workers, vendor managed inventory controllers and block chain managers” as well as employees who support “infrastructure necessary to agricultural production and distribution.”

Other exempt Food and Agriculture workers include:

  • Workers supporting groceries, pharmacies and other retail that sells food and beverage products
  • Restaurant carry-out and quick serve food operations – Carry-out and delivery food employees
  • Food manufacturer employees and their supplier employees

More than a dozen California counties and

COVID-19: California Issues Statewide Stay At Home Order; What It Means for Retailers

Following COVID-19 shelter-in-place orders by nearly a dozen different California counties, Governor Gavin Newsom on Thursday evening issued a statewide order directing all individuals in the state to stay home “except as needed to maintain continuity of operations of the federal critical infrastructure sectors.”

The web page providing more information on the order directs residents to stay at home “except for essential needs.”  As under county shelter-in-place orders, it advises that essential services will remain open such as:

  • Gas stations
  • Pharmacies
  • Food: Grocery stores, farmers markets, food banks, convenience stores, take-out and delivery restaurants
  • Banks
  • Laundromats/laundry services

The following are closed statewide:

  • Dine-in restaurants
  • Bars and nighclubs
  • Entertainment venues
  • Gyms and fitness studios
  • Public events and gatherings
  • Convention centers

Governor Newsom’s order expressly orders that Californian’s working in 16 federal critical infrastructure sectors may continue their work “because of the importance of these sectors to Californians’ health and well-being.”  Of particular relevance to retailers, one of the sectors listed is “Food and Agriculture.”

In order to help determine what businesses and workers qualify under this and other sectors, the federal government has provided a “Guidance on Essential Critical Infrastructure Workforce”  Under food and agriculture, the Guidance lists, among others:

  • Workers supporting groceries, pharmacies and other retail that sells food and beverage products
  • Restaurant carry-out and quick serve food operations – Carry-out and delivery food employees
  • Food manufacturer employees and their supplier employees …
  • Employees engaged in the manufacture

COVID-19 in 19 Teleconference: Force Majeure Provisions

March 19, 2020

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In the first of our series of 19-minute teleconferences on the impacts of COVID-19, leaders of our COVID-19 Task Force will discuss force majeure provisions and the doctrine of impracticability as they apply to commercial contracts in the United States.

Presented by Meryl Macklin and Mark Duedall

Event Details

Date Friday, March 20, 2020 Time 10:30 a.m. to 10:49 a.m. PT 11:30 a.m. to 11:49 a.m. MT 12:30 p.m. to 12:49 p.m. CT 1:30 p.m. to 1:49 p.m. ET Dial-In Instructions Provided to registrants in advance of the teleconference.

Register

COVID-19: Four Steps to Help Protect Supply Chains in Face of Shelter-in-Place Orders

Effective March 17, 2020, San Francisco and six other Bay Area counties passed “Shelter in Place” ordinances preventing workers not engaged in providing Essential Activities, working at Essential Businesses or providing Essential Government Services from leaving their homes to go to work. Such laws are now being considered throughout the country. This alert provides actionable steps companies can take to ensure that Shelter in Place laws in their jurisdictions do not inadvertently block employees from getting to work at their Essential Businesses.

First, be proactive, contact your state and local government officials to make sure they understand why your business is essential. If your product or service is truly essential, no government official is going to want to be blamed for inadvertently causing a shortage of that product. Note the Bay Area Orders define Essential Businesses to include “Businesses that supply other essential businesses with the support or supplies necessary to operate.” If your business falls into that category, you may want to have that business explicitly enumerated as an Essential Business rather than rely on a judgment call that this catch all provision applies. To proceed, identify to make sure they know. BCLP can help (a) identify the appropriate officials at the State and local level and reach out to them, (b) develop the message to be delivered as to why your employees should not be required to Shelter In Place and (c) draft language to clarify why your business and its supply chain should be exempt from the

FDA Labeling Guidance: Making Structure/Function Claims for Dietary Supplements

Dietary supplement manufacturers seeking to explain and market their products must carefully craft statements on supplement labels to ensure compliance with the Food and Drug Administration’s (“FDA’s”) regulations regarding supplements.

The FDA permits supplements to so-called “structure-function claims,” which are claims that describe the role of a nutrient or dietary supplement “intended to affect the structure or function in humans” or characterize the “documented mechanism” by which the nutrient acts to maintain such structure or function, but do not claim to “diagnose, mitigate, treat, cure, or prevent a specific disease or class of diseases.”  21 U.S.C.A. § 343.  Structure/function claims are permissible without pre-approval by the FDA if the statement satisfies three criteria:

(a) the manufacturer possesses “substantiation” that such statement is truthful and not misleading;

(b) the product label “prominently displays” the following statement: “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.”; and

(c) the manufacturer notifies the FDA within 30 days after the product is first marketed with the claim.

In contrast, “disease claims” are not permissible without FDA pre-market review and authorization under the rules for health claims or drugs, as appropriate. It is thus important to distinguish permissible structure/function claims from impermissible disease claims. A “disease” means “damage to an organ, part, structure, or system of the body such that it does not function properly (e.g., cardiovascular disease), or a state of health leading to such dysfunctioning (e.g., hypertension)

Retailers Face Class Actions Based on Automatic Renewal of Fee-Based Loyalty Programs

March 2, 2020

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Retailers are being targeted by class action lawsuits alleging that automatic renewal of loyalty programs requiring an annual fee violates California law. In the past year and a half, more than 100 lawsuits have been filed alleging violation of California’s Automatic Renewal Law, or ARL.[1]

The ARL took effect July 1, 2018 and prohibits automatic renewal of subscription or service fees without first presenting consumers with certain terms, and obtaining their affirmative consent.  Prior to charging a consumer a loyalty program fee, retailers should ensure that:

  • They obtain affirmative consent of the consumer to “automatic renewal offer terms” that are presented in a “clear and conspicuous” manner. The law specifies that this means in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language.
  • Their automatic renewal offer terms include (1) that the subscription will continue until the consumer cancels; (2) the description of the cancellation policy that applies; (3) the recurring charges that will be charged as part of the automatic renewal, and that the amount of the charge may change, if that is the case, and the amount to which the charge will change, if known; (4) the length of the automatic renewal term, unless the length of the term is chosen by the consumer; and (5) the

FDA Extends Enforcement of New Nutrition Facts Label Another 6 Months

Although January 1, 2020 was the deadline for many companies to implement the new Nutrition Facts label, the FDA states on its Industry Resources on the Changes to the Nutrition Facts Label web page that it will not take any enforcement actions for the first six months, or until after July 1, 2020.

The FDA initially set a general compliance date of July 2018. Manufacturers with annual food sales of less than $10 million were given an additional year to comply. In May 2018, the FDA extended those compliance dates “by approximately 1.5 years.”

The FDA has provided the following example illustrating what’s different about the new Nutrition Facts label:

Importantly, the new label requires:

  • Declarations for “added sugars” in grams and as a percentage of Daily Value (% DV);
  • Updated list of declared nutrients. Disclosure of vitamin D and potassium will be required. Calcium and iron will continue to be required. Vitamins A and C will no longer be required but can be included on a voluntary basis.
  • Continuing to retire “Total Fat,” Saturated Fat,” and “Trans Fat,” but no longer require “Calories from Fat,” since research shows the type of fat is more important than the amount.
  • Updated daily values for nutrients like sodium, dietary fiber and vitamin D; and
  • Updated serving sizes and labeling requirements for certain package sizes.

The FDA has also issued a

U.S. Department of Labor Targets Forced Labor in Fashion Industry

The U.S. Department of Labor (“DOL”) has allocated $22 million to target the growing issue of abusive labor practices in the fashion industry, and specifically, to combat the use of child and forced labor in supply chains, especially in South America, Africa, and Southeast Asia.

Clothing production is booming. In fact, according to a report by sustainability consultant McKinsey & Company, clothing production doubled from 2000 to 2014.  The global market now produces more than 100 billion garments a year, according to a report by the Ellen MacArthur Foundation.  At the same time, driven by “fast fashion,” the amount of wear we get from clothes has dropped by 36 percent, with almost 65 percent of all garments ending up in a landfill or being incinerated.

With more clothing being produced, production supply chains have already become a concern, raising concerns for the potential of forced labor, human trafficking, and/or indentured child labor. The DOL estimates that there are currently 25 million people in forced labor, and of those, over 4 million are children.

There are efforts to counteract this problem. For example, the DOL maintains a list of products (and corresponding locations) that are believed to be at higher risk of being produced by forced or indentured child labor.  Importantly, there probably many more international occurrences that are not identified on this list.

Where Are the Funds Going?

According to the DOL, the funding will be used to:

  • Support the International Labor Organization’s work with

FCC Urged to Take Action on Litigation-Fueling Autodialer Issue Under TCPA

February 14, 2020

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Retailer groups, including the National Retail Foundation, the U.S. Chamber of Commerce, and the Restaurant Law Center, are part of a coalition urging the Federal Communications Commission to clarify what constitutes an automatic telephone dialing system under the Telephone Consumer Protection Act (TCPA) following a recent decision by the Eleventh Circuit that deepened the legal divide over the issue.

The TCPA prohibits “using any automatic telephone dialing system” to call a cellular telephone number, except for emergency purposes or with the prior express consent of the called party, or to collect a debt owed to the U.S. government.[1]

The statute defines an “automatic telephone dialing system” (or autodialer) as “equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”[2]

Last month, the Eleventh Circuit narrowly interpreted the TCPA as stating that an autodialer requires random or sequential number generation, and does not include equipment that dials from a preexisting list of numbers. This directly conflicts with a prior Ninth Circuit decision, which broadly interpreted an autodialer to include all devices with the capacity to automatically dial numbers even if not randomly generated.

A previous FCC order defining what constitutes an autodialer was invalidated by the D.C. Circuit in 2018, because it could have subjected “ordinary calls from any conventional smartphone to the Act’s coverage.”

Since that time, despite two rounds of public comment, the FCC has remained largely inactive

Survey of Privacy Practices: One Quarter of U.S. Retailers Block European Visitors

January 31, 2020

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Our Survey of the Retail Industry’s Privacy Practices discloses that 25 percent of U.S. retailers have decided to block European visitors from reaching their websites.

There are two situations in which the GDPR purports to apply extraterritorially to companies that have no contact to the European Union. The first situation, described in Article 3(2)(a) of the GDPR, occurs when a company that has no contacts with the European Union “offer[s] goods or services” to a person that is located in the European Union.  The second situation, described in Article 3(2)(b) of the GDPR, occurs when a company that has no contacts with the European Union “monitor[s]” the “behaviour” of someone “as far as their behaviour takes place within the Union.”[1]

While the GDPR implies that merely having an internet website that is accessible to European Union residents is not enough for the GDPR to attach, there is uncertainty about whether a European supervisory authority might attempt to apply the GDPR to a website that is accessible to European Union residents.  Some companies have attempted to mitigate that risk by geofencing their websites – i.e., blocking any individual from visiting their website from a European IP address.

In order to help companies understand and benchmark industry practices, BCLP randomly selected a sample of 33 percent of the Fortune 500 companies identified as being predominantly within the “retailing” sector and then visited their homepages from a server with an IP address in the United States and from a server

Do Your New Year’s Resolutions Include Steps to Prevent Slavery and Human Trafficking?

January is National Slavery and Human Trafficking Prevention Month in the US (culminating in the annual observation of National Freedom Day on February 1, 2020) and this year is the 20th anniversary of the Trafficking Victims Protection Act (US) that established trafficking and related offenses as federal crimes.

Human trafficking and modern slavery are often hidden and pervasive crimes that know no boundaries and include forced and compulsory labour, debt bondage / bonded labour, human trafficking, child slavery, descent based slavery or forced / early marriage. As many as 40.3 million people – adults and children — are trapped in a form of modern slavery around the world, including in the United States.  However, in an inter-connected and transparent global business environment not only are these crimes increasingly visible but also the focus of targeted US domestic, US inter-agency and international governmental cooperation and business action.  It is clear that human trafficking and modern slavery are an intolerable blight on any society dedicated to freedom, individual rights, and the rule of law, but these crimes fundamentally leverage economic exploitation and are often also financial crimes (or linked to other criminal economic activity).  Human trafficking and modern slavery are an intolerable blight on any society dedicated to freedom, individual rights, and the rule of law, but these crimes fundamentally leverage economic exploitation and are often also financial crimes (or linked to other criminal economic activity).

The US Department of Labor’s integrated program to combat these criminal practices domestically and internationally addresses

Survey of Retail Industry’s Privacy Practices

December 30, 2019

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Survey of Retail Industry’s Privacy Practices

December 30, 2019

Authored by: BCLP

There is no one strategy for disclosing privacy practices to consumers, or for complying with the federal and state laws (including the California Consumer Privacy Act, or CCPA) that govern data privacy.  The following summarizes current trends within the retail industry:

  • Privacy notices are, on average, 7.5 months old.
  • Retail industry privacy notices are significantly newer than the privacy notices of companies in other industries.
  • The majority of retailers have not updated their privacy notices for the CCPA.
  • Retailer privacy notices that reference enumerated categories tend to use lists instead of tables.
  • Retailers that discuss the sale of information are evenly split between selling and not selling data. The majority of retailer privacy notices, however, are silent or ambiguous about sale.
  • The majority of retailer privacy notices do not include a “Do Not Sell” option. Retailers are slightly more likely, however, than other companies to include a Do Not Sell option.
  • Some retailers disclose that they sell information, but are choosing not to provide a Do Not Sell option.
  • A small, but significant, number of retailers that don’t sell personal information are still providing a “Do Not Sell” option. That trend departs from companies outside the retail industry.
  • Most retailers are not including a “Do Not Sell” link on their homepage.
  • Some companies provide a Do Not Sell option but are not highlighting the option on their homepages.
  • The percentage of retailers that offer access and deletion rights is significantly less than the percentage of overall companies that offer

Countdown to the CCPA: What is Legally Considered to be a Data Breach?

When the California Consumer Privacy Act (“CCPA”) takes effect in January 2020, California will become the first state to permit residents whose personal information is exposed in a data breach to seek statutory damages of between $100-$750 per incident, even in the absence of any actual harm.  The class actions that follow are not likely to be limited to California residents, but will also include non-California residents pursuing claims under common law theories.  A successful defense will depend on the ability of the breached business to establish that it implemented and maintained reasonable security procedures and practices appropriate to the nature of the personal information held.  The more prepared a business is to respond to a breach, the better prepared it will be to defend a breach lawsuit. To help our clients get ready for the CCPA, Bryan Cave Leighton Paisner is issuing a series of data security articles to empower organizations to focus on breach readiness.

Understanding the Nature and Scope of Data Security Events, Incidents, and Breaches

It has been several years since data breaches first emerged as the lead news story.  In 2016, then attorney general Kamala Harris published the California Data Breach Report to provide a comprehensive analysis of reported data breaches from 2012 to 2015.  During that four-year time period, nearly 50 million records of Californians had been breached, the majority resulting from security failures.  Despite increasing security and technology advancements, companies are still grappling with how to stay ahead of hackers and when

FTC Issues Guidance on Proper Disclosures for Social Media Influencers

November 6, 2019

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Many retailers and online businesses leverage social media to boost brand awareness and promote product sales. The FTC recently has issued guidance on what social media influencers need to do when endorsing products. The rules are common sense, but influencers may not adopt them completely, creating risk for themselves and potentially for businesses whose products they promote. Marketing teams responsible for sponsorships, partnerships and endorsements should review the FTC’s new guidance and ensure that their influencers are being clear and direct about sponsored product placements. While the FTC indicates that influencers have the obligation to ensure their promotions are truthful, plaintiffs, in the context of potential consumer class actions, may attempt to attribute risk back to your business.

FTC’s Disclosures 101 for Social Media Influencers is an easy read (published  November  5, 2019), and according to the FTC’s press release of the same date, it updates the FTC Endorsements Guides and a related Frequently Asked Questions document.   A key overarching theme is that the “endorsement message should make it obvious when [the influencer has] a relationship (‘material connection’) with the brand.”  According to the FTC, good disclosure is “important because it keeps [the influencers] recommendations honest and truthful, and it allows people to weigh the value to [the] endorsement.”

When to Disclose. In this section, the FTC highlights a number of important issues including:

(a) Disclosure is required if the influencer has any “financial, employment, personal, or family relationship with a brand.”

(b) Anything of value,

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