September 8, 2016 | Leave a Comment
Whether an employee is considered exempt or non-exempt depends on the employee’s salary and their duties. In California, an employee will be classified as a non-exempt employee for purposes of California overtime laws, regardless of their duties, if they earn an annual salary less than two times the minimum wage (currently $41,600 per year). In addition to this salary requirement, there is a duty requirement that must be satisfied to be classified as exempt. Generally, if the duties require the employee exercise discretion and independent judgment in performing their job the employee can be considered exempt, but the rules governing the duties test are a topic for a future post.
New federal regulations are coming that impact the “white collar” exemptions (e.g. administrative and executive exemptions) for federal overtime law purposes (hours worked over 40 in one work week). Effective December 1st, to utilize the white collar exemptions, an employee would have to make a minimum salary of $47,476.00 per year to be considered exempt for purposes of federal overtime laws. The new rule also provides that the salary threshold will be revisited every three years, to see if adjustments need to be made.
Keep in mind that California minimum wage is set to increase over the next five years, and if no changes are made to the new federal regulations, California will again surpass the federal minimum salary threshold on January 1, 2019. But for now, employers should review their salaried employees’ compensation plans, and determine whether they need to be re-classified as non-exempt for federal overtime purposes on December 1st.
New Decision on Changes in California Labor Code Affecting Employers Who Use a Piece-Rate Pay Structure
July 26, 2016 | Leave a Comment
The California Legislature recently adopted changes to its Labor Code which impacts employers who pay employees on a piece rate basis. A “piece rate” system is one where an employee is paid a fixed amount of money for a given piece of work. For instance, a picker who is paid a certain amount per pound of grapes picked would be considered a piece rate worker. The new law provides that California piece rate workers must also be compensated for “other nonproductive time,” which is defined in the statute as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece rate basis.” For example, if an employer directed a piece rate worker to drive to another section of the vineyard to pick up equipment, this could be considered “other nonproductive time.”
The statute also provides an affirmative defense for employers to any claim for recovery of wages, damages, or other penalties based solely on the employers failure to pay the employee compensation due for rest and recovery periods and other nonproductive time for time periods prior to and including December 31, 2015. To qualify for the affirmative defense the employer must make payments to its employees for previously uncompensated or under-compensated rest and recovery periods and other non-productive time from July 1, 2012 – December 31, 2015. The payments must be either the actual amount due to each employee or 4% of the employees gross earnings in pay periods in which any work performed was on a piece-rate basis during the applicable time period.
However, the statute also provided that in order to qualify for the affirmative defense, the employer must provide written notice to the Department of Industrial Relations (“DIR”) of its plans to make payments to its current and former employees in accordance with the terms of the statute. Initially, this notice had to be given by no later than July 1, 2016. However, that deadline was put on hold while the Courts heard a challenge to the new law.
The Nisei Farmers League (NFL), an organization representing the interests of many California farmers and grape growers, recently brought and action for Preliminary and Permanent Injunctive and Declaratory Relief against the California Labor and Workforce Development Agency seeking to invalidate the statute on a number of grounds, including vagueness and retroactive punishment. A temporary order was issued that put off the deadline to give notice to the DIR until the NFL’s challenge could be heard on the merits. That hearing took place on July 18, 2016, and the Court issued its ruling yesterday denying the NFL relief on the grounds that it was unable to show a likelihood of success on the merits. The Court ruled that Labor Code 226.2 was the codification of existing case law imposing the same obligations on employers. The court stated that, “insofar as activities prior to its enactment are concerned, no new obligations were created; either employers had fully compensated their employees for their work or they had not been fully compensated.” If the employer chooses not to take advantage of the affirmative defense, the court reasoned the employer could still argue that it does not owe any back pay to its employees. The Court’s ruling thus reactivated the notice requirement, and all employers choosing to take advantage of the safe harbor provision must give notice to the DIR by no later than July 28, 2016.
It is important for all California employers who use a piece rate system to make sure they understand Labor Code section 226.2 and that they are in compliance with the new rules.
In late May, a federal grand jury in Maryland indicted Republic National Distribution Company, LLC and its three employees on charges of wire fraud conspiracy, wire fraud, and money laundering. If convicted the three employees could each face up to 20 years in prison and a $250,000 fine. Further the Government seeks forfeiture of funds traceable to the offense, which the indictment estimates to be $9 million.
The charges result from a scheme to transfer liquor from Maryland, where the excise tax is $1.50 per gallon, to New York City, where the excise tax is $7.44 per gallon. Republic National is a wholesale distributor of liquor located in Maryland. The indictment alleges that Republic National’s employees knowingly sold liquor in Maryland to New York retailers for retail sale in New York City. The New York retailers then sold the liquor they obtained from Republic National without paying New York excise taxes. Further, Republic National allegedly filed false reports with the Maryland State Comptroller’s Office indicating that all liquor sold was intended for resale in Maryland.
This case illustrates the importance of understanding excise taxes. The typical reason for imposing an excise tax is to discourage consumption of the type of good in question. For this reason excise taxes are often referred to as “sin taxes.” Also, as one would expect, excise taxes raise a substantial amount of revenue for the state. Excise taxes are imposed on a specific good, such as alcohol, gasoline, or cigarettes. Unlike sales tax, which impose a tax on the total amount spent by the consumer, excise taxes are imposed per unit of good regardless of price. All fifty states impose an excise tax on alcohol. In California the excise tax is $3.30 per gallon of liquor (100 proof or less). In Oregon the excise tax is $1.00 per gallon. In Nevada the excise tax is $3.60 per gallon of liquor. Generally, the tax is paid by distilled spirits wholesalers based on sales to in-state retailers. In recent years, there have been calls on California’s legislature to increase the California excise tax. Proponents hope that it would raise additional revenue for the state, and also deter people from drinking which they claim will result in fewer drunk-driving accidents. However, the measures have been unsuccessful due in large part to the argument that the alcohol taxes are regressive, or in other words that they disproportionately affect the poor. Whether California decides to increase the excise tax or not, there is no denying that excise taxes greatly influence the economy, white collar crime, and our society as a whole.
In the heavily-regulated, three-tiered system that governs America’s alcohol sales, staying on top of all of the protocols can be tricky. Even well-meaning licensees can inadvertently exceed the privileges allowed by their license if they aren’t very careful. One tricky relationship to navigate is that between a distributor and a retail location. The law is pretty clear that distributors are not allowed to provide anything “of value” to a retailer. In theory, such laws minimize the potential for unfair business practices in the industry. In reality, however, they just cause headaches for people in the industry trying to figure out if something is “of value.”
The TTB recently issued a ruling that attempted to clear up one gray area in the “of value” debate—shelf plans and schematics provided by distributors to retailers. Apparently, some distributors had been providing these schematics to retailers in an attempt to get better shelf-position for their products (and therefore, worse shelf-position for their competitor’s products). One distributor even went so far as to provide the schematic to a retailer, and then also provide the labor to implement said schematic.
TTB Ruling 2016–1 clarifies what is allowed and what is prohibited. While a distributor may provide a shelf plan or schematic to a retailer, it is not allowed to do anything further. Prohibited activities include (but are not limited to):
– Providing labor to perform merchandising (other than general stocking and rotation)
– Furnishing a retailer market data from third-party vendors
– Receiving or analyzing (on behalf of the retailer) any confidential and/or proprietary competitor information
– Assuming a retailer’s purchasing or pricing decisions
For the complete ruling, visit https://www.ttb.gov/rulings/2016-1.pdf.
Is your winery online? If you have an internet or social media presence, it’s important to know what kind of information you’re allowed to post, and what is prohibited. Any social media platform is considered, as a whole, an advertisement. What this means is that your entire Facebook page, website, Twitter page, YouTube channel, etc. is considered, for the TTB’s and ABC’s purposes, one advertisement. Each page on your website is not considered a separate advertisement. There is required information necessary for all advertisement of wine, and that information must appear on the social media somewhere, but does not have to appear on each and every Facebook or Twitter post, (plus it would be tough to fit into 160 characters!). In order to stay in compliance, your winery should include all required information on the “About Us” (or similar) section of the social media:
- Always include your winery name, city and state
- Avoiding use of certain prohibited content, including false or misleading statements, disparaging statements about a competitor, “obscene or indecent” statements, or any statements about the intoxicating nature or any health benefits of wine.
For more specific dos and don’ts, see the TTB’s 2013 Industry Circular You should also remember that you, as the winery owner, are ultimately responsible for the social media statements made by your employees.
There are many hurdles an online retailer must overcome in order to be able to direct mail wine to your home. The Liquor Law Repeal and Enforcement Act, also referred to as the Webb-Kenyon Act, prohibits shipments of alcoholic beverages from one State into another State in violation of any law of the receiving State. Currently eight states absolutely prohibit shipping alcohol. They are Alabama, Delaware, Kentucky, Mississippi, Oklahoma, Pennsylvania, South Dakota, and Utah. The remaining states allow direct shipment of wine, although some impose limitations. Hawaii for instance limits the shipment of wine to six cases per family per year. Idaho limits direct shipment of wine to 24 cases per year.
If the receiving state allows shipment of wine there are additional individual state permit requirements that must be met. Each state has its own system for issuing permits for on-site and off-site wine shipments[i]. For example, Arizona does not require a permit for on-site shipments, but does require a permit for off-site shipments. Ohio requires a permit for both, but only wineries producing less than 250,000 gallons annually are allowed to ship to consumers.
The lack of uniformity in state law as well as the differing permit requirements make direct shipping of wine by a large online retailer quite complicated, so it may be a while before you can have a drone deliver you wine.
[i] On-site shipments are made on behalf of a customer who places the order while visiting the winery. Off-site shipments are made on behalf of a customer who places the order via phone, internet or fax.
February 16, 2016 | Leave a Comment
Predictably, if you own a beauty salon or a barber shop and want to serve alcohol then you currently need to apply for a license from the Department of Alcoholic Beverage Control (“ABC”). Assembly Bill 1322 is meant to change that. AB-1322 is a groundbreaking new law rolling through the state legislature this year that will have a major impact on alcohol distribution in the state of California.
Existing law makes it unlawful for any person other than an ABC licensee to sell, manufacture, or import alcoholic beverages in California. Interestingly, however, Section 23399.5 of the Business and Professions Code allows the serving of alcohol without a license in a limousine or as part of a hot air balloon ride service, provided there is no extra charge or fee for the alcoholic beverages.
AB-1322 would amend Section 23399.5 to allow the serving of beer or wine without a license as part of a beauty salon or barber shop service if the following requirements are met:
(1) There is no extra charge or fee for the beer or wine. For purposes of this paragraph, there is no extra charge or fee for the beer or wine if the fee charged for the beauty salon service or barber shop service is the same regardless of whether beer or wine is served.
(2) The license of the establishment providing the beauty salon service or barber shop service is in good standing with the State Board of Barbering and Cosmetology.
(3) No more than 12 ounces of beer or six ounces of wine by the glass is offered to a client.
(4) The beer or wine is provided only during business hours and in no case later than 10 p.m.
To date, AB-1322 passed unanimously in the House and is working its way through the Senate this year.
The intent behind AB-1322 is to legalize and regulate an already common business practice. According to David Miller, a spokesman for Assemblyman Tom Daly (D-Anaheim), who authored the bill, the service of alcohol at beauty salons and barber shops is “one of those areas of law which needs to be updated to reflect modern realities.”
However, there are critics that oppose the law. According to alcohol industry watch groups, the state’s ability to enforce AB-1322’s requirements at over 45,000 new venues serving alcohol (a 41% increase) remains unclear. And because these businesses are not required to register with the ABC, identifying non-compliant businesses will be far from easy.
In any event, AB-1322 is a bill to keep an eye on in 2016.
August 6, 2015 | Leave a Comment
California wineries can breath a sigh of relief after the California Legislature addressed some of the critical shortcomings in California’s Paid Sick Leave Law only a few weeks before it was to go into effect.
The original Paid Sick Leave Law (codified in Labor Code Section 246) provided that employees shall accrue paid sick leave at a rate not less than one hour for every thirty hours worked. To determine the amount of pay, employers were required to divide the total pay within the last 90 days by the total hours worked.
One of the critical flaws of the original Paid Sick Leave Law – readily apparent to anyone in the hospitality business – is that many employees have fluctuating pay rates. For example, a server paid mostly from tips or a sales employee paid based on a draw and commission structure wouldn’t fit the rigid 90 day calculation.
Fortunately, Assembly Bill 304, recently signed by Governor Brown, amended the Paid Sick Leave Law to provide greater flexibility for employers.
First, the amended law permits employers to offer one hour of paid sick leave for every thirty hours worked or offer three paid sick leave days per year up front.
Second, and perhaps most crucial to the hospitality and wine industries, the amended law provides greater flexibility in calculating pay rates for paid sick leave. Specifically, Labor Code Section 246(k) was amended to provide that the amount of pay can be the same regular rate used for overtime pay or the same rate used for other forms of paid leave, such as vacation. As a result, employers have greater flexibility in calculating pay rates for paid sick leave for employees with fluctuating pay rates, such as servers and sales employees.
As tax day approaches for individuals in the U.S., it is always fun to think about the integral part that tax has played in forming our nation’s identity and its laws, particularly where alcohol has been involved.
The first source of income tax for our new Republic was an excise tax on distilled spirits levied in 1791. These taxes under the Washington presidency, as called for by Alexander Hamilton, paid off our nation’s debt in the Revolutionary War. However, the tax caused some uproar (I’m looking at you, Pennsylvania) and the Treasury Department found itself in the middle of the Whiskey Rebellion, an event that would come to stand as the first true test of our Federal government’s legitimacy. During the events of the Whiskey Rebellion, Washington sent militia troops into Pennsylvania with instructions to protect the judicial courts, assist the civil magistrates in executing the laws, and aid them in suppressing the disturbers of peace. These instructions would later be cited as one piece of historical evidence behind the Supreme Court’s ruling that military tribunals could not sentence civilians to prison in Hawaii in 1945. See Duncan v. Kahanamoku, 327 U.S. 304, 321 (1946). The events of the Whiskey Rebellion also contributed to the formation of political parties in the United States, a process already underway. The whiskey tax was repealed after Thomas Jefferson’s Republican Party, which opposed Hamilton’s Federalist Party, came to power in 1801.
Later, the U.S. Treasury collected taxes and issued stamps for alcohol and tobacco products in order to finance the Civil War. And during the early part of the twentieth century, the Treasury Department used agents like Eliot Ness to enforce the Eighteenth Amendment (while certain moon shiners who escaped the law began stock car racing). The Alcohol and Tobacco Tax and Trade Bureau (or “TTB”) is the bureau that collects excise taxes on alcohol, tobacco, firearms, and ammunition today. TTB was created in January of 2003, when the Bureau of Alcohol, Tobacco and Firearms was reorganized under the provisions of the Homeland Security Act of 2002. Although the levying and filing of taxes can seem mundane, like most things, when alcohol is mixed in, the results have been tumultuous in U.S. history.
Duncan v. Kahanamoku, 327 U.S. 304, 321 (1946).
February 12, 2015 | Leave a Comment
In evaluating a new name or label for your wine, it is important to keep in mind that in the USPTO’s opinion, all alcoholic beverages are related. One of the main purposes of the Lanham Act (the U.S. Trademark Laws), is to protect a brand’s distinctiveness by prohibiting the use of other marks that are so similar they are likely to cause confusion among customers. In deciding whether there is a strong likelihood of confusion (which could lead to the refusal to register a proposed trademark or worse, liability for trademark infringement), one of the key factors that is considered is the relatedness of the products offered under the similar marks. Last month, the Trademark Trials and Appeals Board (“TTAB”) refused registration of the mark “Masquerade” for sparkling wine, finding that it was confusingly similar to the registered mark “Mascarade” for “mixed beverage containing alcohol and fruit juice.” (See In re 8 Vini, Inc., Serial No. 85857391 (January 16, 2015).) The TTAB has recently issued similar holdings in cases concerning proposed trademarks for beer that were similar to existing registered marks for wine as well. (See, e.g., The Bruery, LLC, Serial No. 85656671 (September 24, 2014).) In the latter, the TTAB noted that it believed it was not uncommon for craft/microbreweries to also produce wine in issuing its decision.
As these recent cases make clear, it is not enough that the marks are not identical (or that you are using a correct, as opposed to misspelled, word) if you want to avoid an adverse ruling from the TTAB. A trademark attorney can assist you in evaluating the likelihood that your proposed new name or label will face challenges, and in filing the appropriate disclaimers to avoid refusal, while still assuring protection of your brand.