(See Nutriate Research Questions for legal questions.)
Legalize Your Food Biz
Education session 2015/03/24 hosted by Food Craft Institute at 65 Webster Street in Jack London Square.
Instructors
Michele Simon
Michele Simon, Michele@foodlawfirm.com, 510-465-0322, has 18 years of experience in food and beverage law and policy. After years of researching and writing about what’s wrong with the food system, Michele decided to offer her services to food and beverage companies trying to do the right thing. She offers legal advice on federal regulatory compliance for labeling and marketing, among other services. Michele is based in Oakland, California, and offers legal guidance to companies nationally, working of counsel with Foscolo and Handel, PLLC, the Food Law Firm.
Steven M. Sherman
Steven M. Sherman is the founder of Sherman Business Law, a law firm dedicated to the representation of consumers, entrepreneurs and small businesses—including a variety of food-related entities—in transactional and litigated matters. Some recent projects include: reviewing contracts presented by Safeway to a gourmet jam manufacturer; advising on choice of entity for a food start-up; advising on management and control issues for a social media company dedicated to culinary travel adventures; and advising a restaurant about issues relating to trade name infringement.
Christina Oatfield
Christina Oatfield is the policy director at the Sustainable Economies Law Center, which provides legal research, education, advice, and advocacy to promote more localized and just economies. Christina develops policy proposals and advocates for laws such as the California Homemade Food Act and laws that legalize urban agriculture. She is also pursuing an attorney license as part of the Law Office Study Program of the State Bar of California, which is an alternative to law school for aspiring attorneys seeking experiential learning and expertise in topics not often taught in accredited law schools.
Notes on Oatfield’s Presentation
California Health and Safety Code
CDPH = California Department of Public Health; CDFA = California Department of Food and Agriculture
CDPH requires wholesale (and Internet etail) businesses to get a Class B license.
Local Environmental Health organizations govern retail.
California Homemade Food Act covers shelf-stable food.
In some cases CDPH is less strict than the county and/or cit health organizations.
A county permit is more focused on retail sales within the county. Online sales to out-of-state comes under FDA regulations. Unprocessed, fresh foods are regulated by the CDFA Small Farms Food Safety Guidelines. “Community food producer”.
As a retailer, your food sources have to come under applicable laws – if those don’t exist then follow industry best practices. For example, insect-based products and aquaponics come under best practices. Food distribution and retail are covered by Local Environmental Health and the CDPH; prepared meals (not shelf-stable) are in an in-between area. Private dining clubs are a grey area. See shareable.net article on private (food) clubs. Public take-out comes under restaurant regulations.
Review the article in the online magazine Shareable about the food movement and private dining clubs.
Notes on Sherman’s Presentation
Liability is a big risk – especially when you’re in a grey area. Don’t need insurance for directors – unless you’re raising a lot of external money. Cyber insurance covered by a specific rider to an insurance policy or by a policy separate from your liability insurance policy.
C-corp ownership = shareholders, LLC ownership = members, Partnership ownership = partners. ‘cooperative corporation’ – control based on one member = one vote; profit distribution may vary. Examples: Cheese Board Collective in Berkeley and Rainbow Grocery in SF.
See the Nolo Press book Hiring Your First Employee. See slides for the nuances between an independent contractor and an employee – the biggest difference is the worker’s degree of control over their work effort. Have employment expectations in writing including trade secrets, performance criteria, and social media guidelines.
Sign contracts as the entity.
Notes on Simon’s Presentation
Ad laws apply to all types of food companies. Health claims are governed by the FTC. Refer to the Food and Drug Branch of the CDPH. “California Food Labels” includes cottage food laws. Competitors (especially big companies) can take you to court over spurious marketing claims.
The Nutrition Facts panel is undergoing changes – probably out in March 2016 with two years to comply. Interstate commerce and/or online ordering (and delivery) requires a Nutrition Facts panel. $50K or $500K revenue per year is the clip level. If you make a health claim then you have to include the panel.
Voluntary labeling includes USDA Organic. ‘Labeling’ includes Web sites and social media. The FDA has been disallowing ‘healthy’ claim for products high in saturated fat… they haven’t yet gotten to understanding healthy fats. The FTC sets a higher standard for claims that the FDA. Private litigators step in when the FTC / FDA haven’t taken action.
Avoid using the term ‘natural’. The ‘Non-GMO Project’ label doesn’t really mean anything legally (there’s no US Federal rule; 3rd-party certifiers). ‘USDA Organic’ requires at least 95% organic content (US Federal rule; US Federal certfier); have to identify your certifier. ‘Made with Certfied Organic’ requires at least 70% organic content; have to identify your certifier. Can also list your organic ingredients. FDA defines gluten-free; 3rd-party certifier.
Standard of Identity: Field Roast makes ‘Chao slices’ because they can’t call the product ‘cheese’.
IP and ingredient listings… you can protect your recipes but you aren’t protected from reverse engineering beyond not having to list quantities of ingredients and not having to specifically name small amounts (less than 2% by weight) of non-allergenic ingredients. (For example, you can simply list ‘spices’ in the ingredient list for spices under %2 by weight to make reverse engineering more difficult.) The FDA only requires listing of the top 8 allergens… but you may want to specifically list other ingredients in order to protect against liabilities.
Have a lab do analysis for packaging and Nutrition Facts panel. Have a lawyer assess your claims and liabilities.
The FDA will pre-approve labels – but that’s not their standard practice so you may need to nudge them into it.
Under the California Homemade Food Act you don’t need the Nutrition Facts panel but you do need to list allergens. Local regulators will want to see your label as part of their approval process. If you’re just doing (in-person) retail then the local regulators won’t do an on-premise inspection of your production facilities (unless there’s a complaint). CDPH says that Internet sales are not covered by the California Homemade Food Act. (Online marketing and sales transactions are covered so long as the product sold is then delivered in-person.)
If you’re within regular food laws, then get (free) help from the various regulators – it’s what we pay taxes for.
Lawyers in the Library
Meeting with Steve in West End 2015/03/16
Refer to the USDA site for labeling requirements.
We should get liability insurance (even when we’re just grouping other people’s products; i.e. we’re not producing our own food products). The big brokers are: AON, Marsh, and Gallagher; refer to their Web sites for their food services offerings. Also look for a broker who only focuses on food businesses. If we can afford it, more coverage is better than less.
Misc
LLC vs. Cooperative Corporation article.