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Retailers Face False Advertising Cases on Discounts From Original Prices, Rewards Points

December 22, 2016


Retailers that advertise sale prices in comparison with regular prices in California should ensure that the products were actually offered for sale at those regular prices within the preceding three months, in order to avoid potential litigation.

Los Angeles prosecutors have sued four national retailers for allegedly failing to do just that, accusing them of misleading shoppers into believing they got bigger discounts than they actually did by falsely stating the original prices in advertising sales prices on thousands of products.

The lawsuits assert false advertising and unfair competition based on alleged violation of a state law that prohibits advertising a former price unless it was “the prevailing market price” within three months before the ad runs, unless the ad “exactly and conspicuously” states the date when that price was in effect.  California law also prohibits as a deceptive practice “[m]aking false or misleading statements of fact concerning reasons for, existence of, or amounts of price reductions.”

“Customers have the right to be told the truth about the price they’re paying – and to know if a bargain is really a bargain.”  City Attorney Mike Feuer said in a statement.

The lawsuits, which were filed in Los Angeles County Superior Court, seek civil penalties as much as $2,500 for each violation and injunctions to stop so-called false reference pricing to increase sales.

Class Action Alleges Consumers Using Coupons Were Deprived of Rewards Points

In a separate lawsuit, Staples is facing a consumer fraud class action lawsuit

NYC Passes Sweeping Freelance Worker Protection Law

Retailers who contract with freelance workers in New York City should be aware of landmark legislation just passed to protect the wages of freelance works, including artists. The law takes effect on May 15, 2017.

The Act, appropriately named “Freelancers Aren’t Free” protects these workers by (1) requiring freelancer contracts to be in writing, (2) requiring timely payment, (3) prohibiting retaliation, and (4) providing specific remedies and damages available to aggrieved freelance workers. The law does not apply to sales representatives, attorneys or licensed medical professionals.

Writing Requirement: Contracts with freelancers for services of $800 or more (including the amounts for contracts between the same parties in the immediately preceding 120 days) must be in writing. The contract must include the name and address of the hiring party and the freelance worker, an itemization of the services the freelancer will provide and a price schedule for those services, and the date for final payment to the freelancer.

Payment Provision: The hiring party must pay the freelancer on or before the date specified in the contract. If there is no date set in the contract, the law requires the hiring party pay the freelancer no later than 30 days after the completion of the freelancer’s work.

Retaliation: Hiring parties may not threaten, harass, deny an opportunity to or take any action against a freelance worker that deters the freelancer from exercising any right under the Act.

Damage Provisions:

  • A plaintiff who proves he or she requested but was denied a

New Illinois Leave Laws to Take Effect

Retailers with employees in Illinois should be aware of four new leave laws that may require revisions to leave policies and procedures:

  • Illinois Employee Sick Leave Act: Effective January 1, 2017, this act requires Illinois employers to permit employees to use half of their accrued sick leave under an employer’s existing sick leave policy for absences related to the illness, injury, or medical appointment of certain family members.
  • Illinois Child Bereavement Leave Act: Effective July 29, 2016, this act requires Illinois employers covered by the federal Family and Medical Leave Act (FMLA) to allow employees to take off up to ten work days per year as unpaid bereavement leave following the death of a child (or up to six weeks if the employee experiences the death of more than one child).
  • Chicago Paid Sick Leave Ordinance:  Effective July 1, 2017, this ordinance allows workers in Chicago to earn up to 40 hours of paid sick time per year.
  • Cook County Earned Sick Leave Ordinance:  Effective July 1, 2017, this ordinance allows workers in Cook County to earn up to 40 hours of paid sick time per year.

More information regarding each of these laws can be found by clicking here.

Congress Passes Consumer Review Fairness Act of 2016 to Protect Online Reviews

December 9, 2016


New legislation passed by Congress attempts to curb aggressive tactics against the authors of negative online reviews. The legislation bans the practice of contractually prohibiting consumers from posting negative reviews on websites. President Barack Obama has indicated that he will sign the legislation.

The Consumer Review Fairness Act of 2016 (the “Act”) voids, from inception, clauses in form contracts that:

  • Prohibit or restrict the ability of an individual from providing an online review; or
  • Impose a penalty or fee against an individual for submitting an online review.
  • Such chilling gag clauses had been wielded by various businesses against customers who had written or encouraged negative reviews of those businesses’ products and services through online forums such as Yelp.

    The Act further restricts any claim to ownership of the underlying intellectual property in such reviews except to the extent that a limited license is provided to display the content. Accordingly, a business cannot claim IP rights in a negative review such that the business could assert infringement if the negative review remains viewable.

    The Federal Trade Commission is empowered to enforce the Act under its powers against deceptive trade practices and unfair competition, and will issue best practices for compliance within 60 days of the Act’s enactment. State attorneys general are also empowered to bring actions under the Act.

    Importantly, the Act’s application is limited to the specifically identified contractual clauses. The Act does not, for example, prevent parties from adopting clauses related to legal duties of confidentiality or to

    Avoid ADA Lawsuits for the Holidays by Ensuring Stores are Accessible

    December 1, 2016


    In order to help retailers improve access to all customers and reduce potential liability, this is the first in a three-part series offering tips for compliance with the Americans With Disabilities Act (ADA). This week we offer tips to improve access to brick-and-mortar stores and their facilities.

    Title III of the ADA prohibits discrimination against individuals “on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages or accommodations of any place of public accommodation,” which includes retail stores.

    Allegations concerning the accessibility of parking spaces, entrances and aisles, checkout and sales counters, and restrooms continue to attract the most ADA lawsuits. Detailed federal regulations covering all of these areas appear in the 2010 Standards for Accessible Design (ADA Standards), and state building codes may provide additional requirements. ADA requirements may differ depending on the construction date of your stores, and alterations and remodeling may trigger an obligation to comply with more recent ADA regulations.

    Entrances and Aisles: There should be an accessible route of travel extending from the street or parking lot through the store. Aisles should generally be 36 inches wide. Merchandise and displays, even temporary displays, should not restrict this accessible route. Although “[i]solated or temporary interruptions in service or access due to maintenance or repairs” are permissible under federal regulations, obstacles should not remain in the accessible route. A good practice is to have store employees walk through the aisles with a yardstick at least daily,

    Retailers Prepare to Meet New Salary and Overtime Requirements

    By now, most retailers and other employers have evaluated the impact, if any, that the new Department of Labor (DOL) regulations will have on their workforce beginning on December 1, 2016, when the minimum salary requirement for exempt status will increase to $913 per week ($47,476, annually). For many retailers, a portion of their workforce will now be classified as non-exempt workers and eligible for daily and/or weekly overtime compensation.   Implementation of the new rules, however, also requires careful consideration of the retailer’s payroll and timekeeping practices to ensure compliance with other state and federal laws that affect non-exempt employees.

    Be mindful of “off the clock” work:

    Reclassification of employees to hourly, non-exempt positions not only changes the way employees are paid, but also requires employees to think differently about how their work activities affect their pay. Employees, who previously were paid a salary regardless of the number of hours worked each pay period, must now track their actual working hours. Compensable work time may include a variety of work-related activities that occur before/after an employee’s regularly-scheduled shift. To avoid potential claims for unpaid “off the clock” work, retailers must be mindful that the following work activities may be considered compensable work time under federal and state law:

    • Checking and responding to emails and phone calls before/after work hours
    • Computer boot-up time
    • Pre-shift work (e.g., setting up retail store before a shift, loading or warming up trucks, transferring equipment or preparing a worksite)
    • Post-shift work (e.g., cleaning up a workstation or returning to

    California Upholds Statewide Plastic Bag Ban

    November 10, 2016


    California Upholds Statewide Plastic Bag Ban

    November 10, 2016

    Authored by: BCLP and Merrit Jones

    Californians narrowly validated the statewide plastic bag ban previously passed by the state Legislature, while rejecting a proposition that would have required retailers to remit money charged for single-use carry-out bags to an environmental fund.

    Proposition 67 was approved by 52 percent of voters. It continues the statewide ban prohibiting grocery stores and other selected retailers from handing out single-use plastic bags, but allows them to sell recycled paper bags and reusable bags for a minimum of 10 cents.

    The state Legislature approved the ban and the governor signed it into law in 2014, but a referendum forced the issue onto the ballot. The law applies to the following retailers:

    • Full-line, self-service retail stores with gross annual sales of at least $2 million that sell dry groceries, canned goods, or nonfood items, and some perishable items.
    • Pharmacies with at least 10,000 square feet of retail space.
    • Convenience stores, foodmarts, or “other entities” with a liquor license and partial grocery line or that sell goods to be consumed off premises.
    • Other retailers that voluntarily agree to comply with the plastic bag ban.

    Retailers Can Retain Fees Charged for Carry-Out Bags

    California voters rejected a separate initiative that would have required retailers to remit fees charged for carry-out bags to an environmental fund. The fees must be used for the costs of providing recycled paper or reusable bags, costs associated with the retailer’s education materials encouraging the use of reusable bags, or other costs associated with complying with the law. 

    Election Day: Time Off to Vote Requirements

    Election Day: Time Off to Vote Requirements

    November 4, 2016

    Authored by: BCLP, Sarah Bloom and Jay Warren

    Election Day is less than a week away and employees may have begun already requesting time off to go to the polls. The law varies state-by-state for when employers must honor these requests and grant employees voting leave. It is important to know the laws in your state, as certain states can subject the employer to civil or even criminal liability for failing to comply.

    Please click here to view a summary of employers’ obligations to provide employees with time off to vote in the following eight states: Arizona, California, Colorado, Georgia, Illinois, Missouri, New York, and Texas. Each of these states has a law that governs which employees must be given time off, whether advance notice is required, and whether this time must be paid. This list is non-exhaustive and focuses on states where our firm has offices.

    Florida, New Jersey, North Carolina, Pennsylvania, and Washington DC do not have specific laws requiring employers to give employees time off to vote.

    For information about states not covered in the chart as well as any other questions about voting requirements, please contact an attorney in the Labor and Employment practice group or your regular Bryan Cave LLP contact.

    What to Look for When Buying Cyber Insurance

    October 27, 2016


    What to Look for When Buying Cyber Insurance

    October 27, 2016

    Authored by: BCLP

    Most retailers know they need insurance to cover risks to their property such as fire or theft, or their risk of liability if someone is injured in the workplace.  As numerous high-profile breaches demonstrate, retailers also need to carry coverage for data breaches.  While many insurance companies offer cyber insurance, not all policies are created equal.

    Why is buying cyber insurance difficult?

  • There is little standardization among competing policies; as a result, it is hard to comparison shop.
  • Policies’ exclusions often swallow coverage; as a result, assessing the value of a policy is difficult unless you have extensive experience with the types of liabilities that arise following data breaches.
  • Policies often cover security but not privacy risks.
  • Items to review when shopping for cyber insurance:

  • Do the sub-limits on coverage match the corresponding risks?
  • Does the policy include sub-retentions (sub-deductibles) that are unlikely to be reached?
  • Does exclusion prevent payment for the largest risks, e.g.,charges that arise following a credit card breach, common theories alleged in class actions, etc.?
  • Is voluntary notification of affected consumers covered?
  • Will credit monitoring for affected consumers be covered?
  • Who does the insurer have on panel for legal representation, forensic investigations and/or crisis management?
  • Yelp Cannot Be Held Liable for Negative Review

    October 20, 2016


    Yelp Cannot Be Held Liable for Negative Review

    October 20, 2016

    Authored by: BCLP and Flora Sarder

    Retailers are familiar with as a ratings website with a star rating system that allows customers to rate products and services they receive, as well as add individual reviews and comments. Positive reviews can generate business for retailers, and negative reviews can be a source of concern.

    The Ninth Circuit Court of Appeals has ruled, however, that Yelp’s multiple-choice star rating system does not make the review site a publisher or provider of allegedly defamatory content that may be subject to liability. In Kimzey v. Yelp! Inc., the Ninth Circuit affirmed dismissal of an action by a small business owner seeking to hold Yelp liable for a one-star rating by a third party, and challenging Yelp’s immunity under Section 230 of the Communications Decency Act of 1996.

    Section 230 Immunizes Interactive Service Providers From Liability

    Under Section 230, a provider of an “interactive computer service” is immune from liability for allegedly defamatory comments and content by third parties. This is how service providers such as Google, Youtube, and Facebook are able to host user content and comments without being held liable for defamatory comments and content posted by third parties.

    The Ninth Circuit held that Yelp clearly falls under Section 230’s immunity. It rejected Kimzey’s arguments that Yelp created or developed content by causing a review from another site to appear on its page, and that providing a star-rating feature and causing the allegedly defamatory statement to appear as a promotion on Google’s search engine transformed the review into

    Retailers Seek Perfect Balance Between In-Store, Online and Mobile Customers

    Retailers are increasingly under pressure to evaluate their business models and, in particular, the mix of their in-store, online and mobile offerings. Just as there are few pure-play e-tailers, there are very few retailers solely operating a bricks & mortar strategy because today’s customer wants to access their favorite brands in an omnichannel way: browsing online to get a sense of trends, dropping into a store to check the fit and shopping via mobile for impulse or last minute buys. But how do retailers find balance within the omnichannel world?

    In our experience working with national and international retailers, getting the online and mobile experience right requires critical focus and serious investment in the three Ds: Distribution, Delivery and Data.

    Successful ecommerce platforms require well located (and well managed) distribution centers capable of handling the nearly 24-hour demand profile.

    Careful consideration needs to be given to whether an existing distribution center supporting stores can also support online, or whether it would be better to invest in an expanded footprint of distribution centers while reducing the number of stores. Retailers prepared to serve an international online market also need to understand the logistics landscape and either partner with a logistics expert with a solid track record of supporting international online retailers or build in-house expertise to manage not only export and customs issues (so customers can enjoy a hassle free experience) but also local law compliance relating to product labeling and hazardous materials.

    Retailers shouldn’t underestimate that customers want an instant

    Congress Considers Legislative Solutions to Internet Sales Tax War

    October 6, 2016


    As we reported on September 15,  several states have enacted or proposed laws related to the collection of sales tax from online retailers without a physical presence in those states, as required by United States Supreme Court case Quill v. North Dakota.  South Dakota’s current lawsuit against several internet retailers was specifically brought by the state to force reconsideration of Supreme Court precedent.

    However, there is a small change that Congress may decide the issue before it reaches the Supreme Court, with three bills having been introduced and a fourth pending.

    One of the three bills, cited as the “No Regulation Without Representation Act of 2016“, is more or less a proposal to codify the decision in Quill.  Needless to say, the states who have challenged Quill are highly opposed to this bill.

    The other two bills, the “Marketplace Fairness Act of 2015” and the “Remote Transactions Parity Act of 2015“, both similarly propose a destination-based sales tax system which will allow states the authority to require the collection of sales tax from out-of-state retailers. Among a few differences, the former provides an exception for sellers who have $1,000,000 or less in gross annual sales while the latter does not.

    A fourth proposal not yet formally introduced would base the taxability of purchases on the law of the seller’s location but at the tax rate of the buyer’s location.  The “Online Sales Simplification Act” would require the seller to collect and remit sales tax to

    How to Respond to Civil Subpoenas and Document Requests That Ask For Personal Information

    September 28, 2016


    Litigants in a civil dispute often use subpoenas, subpoenas duces tecum, and discovery requests to obtain personal information about individuals who may not be present in the litigation. A request for documents and information that include personal information about third parties may conflict with legal obligations imposed upon an organization not to produce information.

    For example, if an organization promises within its privacy policy that it will never share personal information with a “third party,” and does not include an exception for requests made in civil litigation or through judicial process, a consumer could argue that by producing information pursuant to a subpoena or discovery request an organization has violated its privacy policy and committed an unfair or deceptive practice in violation of federal or state law.

    Read More

    Prop. 65 Conference Focuses on Compliance With New Warning and Settlement Regulations

    The Prop. 65 Clearinghouse held its annual conference in San Francisco recently, and the speakers and panelists had a number of recommendations for both retailers and manufacturers following the adoption of Proposition 65’s new warning regulations.

    The New Warning Regulations

    As we reported on September 7th, the Office of Environmental Health Hazard Assessment (OEHHA) has adopted new warning regulations which take effect in two years on August 30, 2018.  Businesses can choose to comply with either the current or new regulations in the interim, but all retailers and manufacturers who sell products in California should review their Prop. 65 compliance protocols to ensure that they will continue to comply.

    The new regulations seek to put the primary responsibility for providing warnings on product manufacturers or suppliers, who must either label their products with any required warnings or provide notice and warning materials to retailers.

    The regulations expressly provide, however, that parties can continue to contractually allocate who has responsibility for providing warnings. Retailers should therefore analyze and consider revising their terms and conditions to clarify who is responsible for providing warnings and in what manner, whether retailers will accept and post shelf warnings provided by vendors, and to whom the notice and warning materials should be sent.

    Complying With New Warning Regulations

    The first panel – which included the chief counsel of OEHHA, the presidents of two enforcement groups, an industry lobbyist, and a defense attorney — focused on some of the challenges that the new regulations

    States Battle E-Retailers and Federal Precedent Over Digital Sales Tax

    September 15, 2016


    South Dakota and several online retailers are currently engaged in a battle over the state’s new internet sales tax law (SB 106) aimed at online businesses who sell products to South Dakota residents but which are not obligated to pay sales tax to the state.

    Decades ago, during the internet’s infancy, the U.S. Supreme Court concluded in Quill v. N. Dakota that states are prohibited from requiring companies without a physical presence in those states to collect sales tax from its residents. Among the four internet retailers sued by South Dakota are the popular and

    The state acknowledges in its complaint that SB 106 is a violation of Supreme Court precedent. However, it has stated that the purpose of the suit is to facilitate Supreme Court review, because Quill is outdated in the internet age.

    Several outcomes to the case are possible, including a grant of summary judgment for either of the parties with a determination of the applicability of Quill and the constitutionality of SB 106.  If South Dakota’s law is struck down as unconstitutional, other states may face legal challenges to their digital sales tax laws.  If it is upheld, more states are likely to pass such laws.

    South Dakota’s suit is just one of several recent actions taken by states to “modernize” sales tax laws for application to online retailers.  Alabama has enacted its own law, which requires out-of-state retailers without a physical presence in the state to collect sales tax

    California Adopts New Prop. 65 Warning Regulations

    California’s Office of Environmental Health Hazard Assessment (OEHHA) has adopted new Proposition 65 warning regulations.  The new regulations will take effect in two years, on August 30, 2018.  In the interim, businesses may choose to comply with either the current or new regulations.

    Prop. 65 prohibits businesses from knowingly and intentionally exposing California consumers to a chemical known to the state of California to cause cancer or reproductive harm without first providing a “clear and reasonable warning.”  As we reported on a draft of the regulations in April 2016, the new regulations substantially change what constitutes a clear and reasonable warning.

    Products with label warnings manufactured prior to the effective date of the new regulations would continue to receive protection from liability. Parties to existing settlement agreements or court-approved consent judgments also can continue to provide warnings that comply with those agreements or orders.

    Regulations Seek to Reduce Burden on Retailers

    The new regulations seek to put the primary responsibility for providing warnings on product manufacturers or suppliers, who must either label their products with any required warnings or provide notice and warning materials to retailers. The manufacturer or supplier must specifically identify the product requiring a warning, provide all necessary warning materials, receive written or electronic confirmation of receipt from the retailer’s authorized agent, and renew the notice every six months for the first year and annually thereafter.  The manufacturer or other supplier of a product must notify a retailer within 90 days if a new

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