What Does California AB5 Mean for Business Owners?

Let me just start this by saying, I’m not your lawyer. If you have an attorney and are concerned the below information may impact your business, please contact your lawyer and discuss how you can address. If you don’t have a lawyer and have concerns, now would be a good time to start interviewing. But nothing below is going to give you the exact solution for YOUR particular business and is general information. That being said, here’s what I think after following this for a while:

         Ever since the Dynamex decision came down in 2018, the business community has been abuzz with how the test will apply to them. Will their industries be affected? Were there any possible exemptions?

         ICYMI, the Dynamex decision completely upended the entire way independent contractors were handled; effectively reclassifying all workers to employees, unless they could meet a certain test that was wildly different from the test previously used to determine classification of workers. That test is known as the ABC Test. Effectively, it states that all workers are considered employees by default, unless the hiring company can meet a three-part test:

  1. The worker is free from the control and direction of the hirer in performance of the work (both if in writing and in practice);
  2. That the worker performs work that is outside the usual course of the hiring entities’ business; and
  3. That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

The part of this test that had companies freaked were prongs B and C of the test. Nobody was more freaked than those participating in the “gig” economy. Companies particularly like Uber and Lyft already had ongoing cases in the courts. But, they were hanging their hats on falling outside prong B and that the test didn’t apply to them.

         California has answered back with AB5 passing the Assembly, and heading to Governor Gavin Newsom’s desk for signature as early as tomorrow. AB5 aka “An act to amend Section 3351 of, and add to Section 2750.3 to the Labor Code, and amend Section 606.5 and 621of the Unemployment Insurance Code, relating to employment, and making an appropriation therefor” (that’s a mouthful), introduced by Assembly Member Lorena Gonzalez, seeks to address the rise of worker exploitation by clarifying how the Dynamex case will apply to those in the “gig” economy.

         The bill (which can be read in its entirety here), in essence says that the ABC Test will apply, unless there’s already a statutory exception from employment status, and also clearly exempts certain occupations. These exemptions are:

  • licensed insurance agents;
  • certain licensed health care professionals;
  • registered securities broker-dealers or investment advisers;
  • direct sales salespersons;
  • real estate licensees;
  • commercial fishermen;
  • workers providing licensed barber or cosmetology services; and
  • others performing work under a contract for professional services, with another business entity, or pursuant to a subcontract in the construction industry.

If your business falls outside of these exemptions, then the ABC Test will apply. However, if a court rules in an individual case that the ABC Test doesn’t apply, then the Borello standard applies. This is a much less stringent standard and is also known as the “economic realities” test.

         In arguing that the ABC Test doesn’t apply, companies like Uber and Lyft are claiming that the work performed is outside the usual course and scope of their business, as they do not provide rides, they provide technology.

         So, how does it apply to me? Will I get in trouble right away if my workers have been misclassified this whole time? Well, not necessarily. The bill has stated that it will not be applied retroactively. Unless you already have an ongoing suit prior to the enactment. So long as you aren’t already in litigation, you can clean up your business practices by January 1, 2020. Yep, it goes into effect come January 1.

         There’s more. If you took action to reclassify your workers from ICs to employees already, and you believe your workers don’t meet the ABC Test, it’s unfortunately too late for you. You can’t use AB5 as a reason to reclassify workers from employees back to ICs.

         If a business falls outside of one of the exempted professions (commercial fishermen and manicurists have exemptions, but only until 2022 and 2023), a business would be wise to evaluate all independent contractor relationships it currently has, review all of their agreements, and determine whether the work being performed meets the ABC Test. This should be done with the understanding that misclassifying workers carries with it high litigation risk and severe financial consequences if you fail in court. If, however, a court determines the ABC Test does not apply, only then will the looser Borello standard apply. For many businesses, the cost of a potential employment lawsuit far exceeds the costs of re-classifying its workers.

         The case law still remains to be fleshed out. Until then, businesses should start housekeeping in preparation of 2020.


What is the fair use defense?

Many times, I get asked by clients if they can use someone else’s intellectual property because it’s “fair use.” This term gets thrown around a lot – as if it were some kind of legal permission slip to infringe upon another’s intellectual property without repercussion. Before you can even begin to unpack whether a fair use defense is available to you, it’s important you really understand what it is.


To be clear, if the unauthorized use of another’s intellectual property is deemed “fair use,” that doesn’t mean the use is inherently allowed. Instead, fair use refers to a legal defense afforded to someone who has been sued for, most commonly, copyright infringement. Simply put, the fair use defense permits the unlicensed use of copyright-protected works, even though that use of the work might not be allowed or even, expressly prohibited, by the owner.


Section 107 of the Copyright Act provides the framework for determining whether an unauthorized use would be classified as fair use by identifying types of uses: criticism, comment, news reporting, teaching, scholarship, and research. These are examples of activities that may qualify as fair use, depending upon further examination and evaluation. Typically, it is a judge who will make the final determination as to whether certain uses qualify as fair use. This defense creates a limitation to copyright protection that is intended to balance the interests of copyright holders and the ability to use creative works. Without this defense, any use of copyrighted material without permission or license by the owner could be deemed actionable infringement.


So, what does that mean to someone who doesn’t speak lawyer? Let’s use an example. Say you’re a teacher. You decide to show a movie in class today. You want to keep it somewhat educational, so you show the BBC program, Blue Planet. You grab the DVD (or I suppose it’s more likely to be through the Netflix app these days), pop it in, and play the film. The students are happy, and you are happy because you are able to catch up on grading some papers and get home at a reasonable hour. If you’re a teacher, I bet you can probably relate to this and are nodding your head. But, I bet not a lot of teachers would question the legality of doing what they did. Technically speaking, you violated someone’s copyright by playing the film. “What the heck? How did I do that?” you ask. Well, copyright is a very broad term that covers a lot of stuff. It’s more like a bundle of rights that protects everything from artwork to software. One of those rights is being able to make money off the stuff you create. In this example, the stuff created was the video you just showed to your class, and the one who created it is the BBC. Copyright lets them, and only them, use their movie in the ways they see fit.  If someone uses it without their permission, they can sue them for copyright infringement.


Why aren’t more teachers freaking out about showing movies in their classrooms? Because of the fair use defense. One of the uses covered as a “permissible use” of someone else’s material is for teaching. In this case, the teacher showed it for an educational purpose and wasn’t making any money off it. And BBC knows this kind of use is going to happen. Hence why it’s not going to go around suing people for doing this. They know if they do, the teacher is going to say it’s fair use and a judge will agree. This example is just one of many types of fair use that fall under the defense.


I know what you’re thinking. You’re thinking, “That’s great! So, I’m a teacher, and because of that, I can always show movies to students without worrying about a lawsuit.” And you’d be wrong. The reason fair use is so tricky, is because of the facts surrounding how the copyrighted material is used, matter. One little change in facts can take use from being squarely within the fair use defense to being infringement. And copyright infringement suits have big consequences. Most copyright infringement lawsuits provide statutory damages to the winner. This means that there is an amount of money literally written into the law that requires you pay a certain amount of money for every time you infringe. This can often be in the tens of thousands of dollars.


That’s why it’s so important to not take chances when it comes to using someone else’s intellectual property, especially if you are in the business of content creation/reproduction. People using social media apps like Instagram and Facebook to generate income and run businesses are becoming savvier when it comes to the laws on reposting/publishing original content. Earlier established accounts like @Fuckjerry and @thefatjew who made millions of dollars off using unlicensed copyrighted material to re-posting then sell may have been able to get away with that behavior when social media etiquette hadn’t been established. But, as for the legality, that behavior has never been legal. And you better believe businesses are now willing to sue to protect the content. That’s why simple attribution isn’t always enough. The context in which you use someone else’s content matters and the ramifications of unauthorized use can be huge. A seasoned intellectual property attorney can be helpful in helping you decide whether your intended use of someone else’s material is worth the risk.

(fair use image by: Electronic Frontier Foundation)


Listen here for a recent interview with Kristen Roberts on Harder to Kill Radio


“I don’t want to be pigeon-holed. A lot of law firms, when you work at a firm, there’s this goal. The goal is to always become a partner, become a part owner. Well, how do you become a partner? Traditionally speaking, you bring in business and you build up a good business. That’s what makes you valuable to a company. I looked at that and I went, if I’m going to do that anyway, why don’t I just do it for myself? Then at least I get to call the shots and make the rules.”

Thanks to a New Supreme Court Ruling, California Employers May Want to Think Twice Before Hiring Independent Contractors

Companies are always looking for ways to lower their bottom lines, particularly when it comes to their staffing. Similarly, more and more workers are looking for flexibility to pursue personal business ventures and alternative work avenues outside of the traditional nine-to-five. Freelancing, or working as an independent contractor, is an attractive option for both California employers and workers.

But for California employers, a recent Supreme Court of California decision has severely limited employers’ abilities to classify workers as independent contractors. Because of this recent decision, employers may now be unwittingly walking into a trap when hiring someone as an independent contractor.

Dynamex Operations West, Inc. v. Superior Court was based on a class-action lawsuit waged against Dynamex Operations West Inc, a document and package company with big-name clients such as Amazon. The suit alleged that Dynamex sought to misclassify its delivery drivers and label them as independent contractors instead of employees.

Affirming the Court of Appeals’ prior judgment, the California Supreme Court clarified the definition of  “independent contractor,” providing lower courts with more specific guidelines to follow when determining whether a worker is an  “employee” versus an “independent contractor.”

The Dynamex Three Part “ABC” Test:

Previously, classifying a worker as an independent contractor was set forth in a multi-factor “totality of the circumstances” test set forth in the case S.G. Borello & Sons, Inc. v. Department of Industrial Relations.

Although the determination regarding independent contractor vs. employee in Borello examined a multitude of factors, the most important factor was the level and degree of control the employer had over the worker.

Generally speaking, the more control the employer had over how, when, and where the work was performed, the more likely the worker was an employee. Thanks to the Dynamex decision, the California Supreme Court has substantially narrowed employers’ ability to deem a worker an independent contractor.

Under the Dynamex three part test, the business has the burden of proving that the worker meets all three of the factors in order to be considered an independent contractor:

  1. They must show the worker is independent from any control of the employer;
  2. The worker performs in a capacity that is outside the core business of the company; and
  3. The employee has an established trade, business, or occupation outside of their employment

Under the Dynamex test, it is difficult to see how any worker could ever be classified as an independent contractor. Consider the following example: A successful blogger enters into an independent contractor agreement with another blogger to write articles for his/her website from her home.

Under the new test, it is very likely the employer will fail at least parts A and B of the test. To some degree, the blogger will need to control when the articles are finished and how they are written. Not to mention, the services are most certainly a core part of the blogger’s business (article writing).

Implications and Penalties for California Employers:

It is clear that those hit hardest by the ruling will undoubtedly be California employers using independent contractors. Fines for misclassification of an independent contractor can be levied against the company both from the state as well as from the IRS.

These fines can range from $5,000-$15,000 per violation for state labor code violations to a minimum of 1.5% of the wages paid levied by the federal government. And there’s even more bad news for employers: some of the labor code violations are enforceable through the California Private Attorney General Act, meaning attorneys’ fees and costs are recoverable by the misclassified worker, thereby further exposing California employers.

Hiring an independent contractor is an attractive option to most employers, especially small businesses. It gives a company the opportunity to have someone work fewer hours without the heavy burden of paying employment taxes or any state/federal withholdings. It also alleviates the employer from being required to make certain retirement contributions it offers to employees.

Not only does hiring an independent contractor appeal to businesses, it also appeals to workers. Many people are bootstrapping their own businesses and do not want to be beholden to a company where they are required to work particular hours. Others want the flexibility of indicating whether they will accept certain work and/or projects from their employer.

However, with the imposition of the Dynamex ruling, it is difficult to see how the incredibly successful “gig” economy can survive.  

This ruling has many business owners concerned about the consequences of mislabeling someone as an independent contractor and being challenged. As a result, we may expect to see a slowdown in the hiring and creation of jobs, particularly in the small-business sector.

If you are an employer in the state of California and have independent contractors working for you, it is vital that you understand how misclassifying someone as an independent contractor versus as an employee can affect your bottom line. Contact Trestle Law today to discuss your businesses’ employment needs and how you can protect yourself.


Top 5 Legal Mistakes New Business Owners Make

Getting the courage to take a leap into entrepreneurship is tough on its own. Believe me, as a former law firm employee turned law firm owner, I know the challenges new business owners face. But, it’s time for me to put on my lawyer hat, and give you a rundown of the top 5 legal mistakes new business owners make time and time again.  Hopefully, this list will help you avoid these pitfalls and get you moving in the right direction!

Failing to Budget for Professional Services

For many individuals, a business starts with a unique idea. Those marvelous ideas are honed, tinkered-with, and developed over late nights, early mornings, and lost weekends. For the majority of entrepreneurs, the leap from full-time job to business owner is not one taken lightly. The majority of entrepreneurs that I have worked with spend considerable time, energy, and funds before they fully commit to leaving their full-time jobs. They set aside capital for operating expenses, government fees, and office equipment.

The amount of energy and focus people are willing to dedicate to starting a legitimate business venture begs the question: why are so many entrepreneurs hesitant, or even downright against, setting aside startup capital to pay for professional fees?

Everyone knows lawyers and accountants can be expensive. But it can be even more expensive if you are stuck with fines and penalties for doing something incorrectly. One of the best pieces of advice I’ve received from a business owner friend of mine was, “work on your business, don’t work in your business.” It’s important to remember what your strengths are. Nobody is an expert at everything. It is better to hire out, contract out, or delegate out the work you know isn’t in your wheelhouse, and spend your time on your strengths.

Now, I know there are those do-it-yourself companies out there that can get your basic business structure set up, but those companies typically use boilerplate documents that don’t always contain the right provisions for your business. A well-crafted shareholder agreement or operating agreement is going to be essential down the road when you’re looking to sell your business, or solicit potential venture capital. No investor wants to give their money to a business with messy books.

Plan to set aside about $2,000-3,000 for professional services. I know that sounds expensive, but let’s be serious. A well-crafted website can set you back at least $2,000, so investing in something as crucial as your legal and financial stability will be well worth the money spent. Start vetting accountants and attorneys early on – preferably before you launch your business. Many attorneys offer consultations at no charge to you, so you can at least understand what kind of person you want to work with.

Finalizing your Brand without Knowing the Competition

I can’t stress this one enough. Your business is your brand. Consumers find you, identify you, and relate to you by the brand you choose. However, developing a brand that infringes on another already-existing brand’s rights can prove disastrous for a new business. You can be faced with litigation, damages, and ultimately have to change your business name. Imagine investing time, money, and energy in a business name and logo, only to get a cease and desist letter from an attorney saying you are infringing on their client’s trademark. Believe me, it happens more often than you think. I once helped an established local restaurant stop a fledgling restaurant in another county from using the same restaurant name.

Ultimately, the defendant restaurant wound up having to change its name. Hiring an attorney to perform a clearance search can really save your business dollars in the long run. Remember, trademark rights in the United States are not based on the first to register, but the first to use a particular mark in commerce. So, you can still infringe on another’s mark even if they do not have a federal trademark registration. An experienced trademark attorney can perform a clearance search and evaluate potential likelihood of confusion with other existing trademarks and common law marks that are in use.

Hiring without Developing HR Guidelines

Human Resource (or HR) guidelines provide a framework for how employees are expected to behave. They describe the company’s standards, objectives, and goals for all areas of employment. This includes termination, recruitment, benefits, compensation, and employee relations. HR Guidelines provide instructions on how staff should be performing their jobs and behaving. These are the policies that keep everyone on the same track, as moving parts of a machine designed to achieve a specific goal.

Without them, the parts cannot work in tandem, and you will end up with a fragmented, and ultimately broken workforce. This may seem like a dramatic way to look at things, but believe me, I’ve seen first-hand just how important proper guidelines can be in the workplace. People like to be aware of exactly what is expected of them. HR Guidelines make workers feel more confident and capable of working as part of a team. No business can survive without them.

Failing to Incorporate

The word ‘corporation’, stems from the Latin term, ‘corpus’ which means ‘body’. When a company incorporates, it evolves into a legal person in the eyes of the law. As such, it can be sued, sell and buy property, be taxed, establish contracts, and even commit crimes. Perhaps the most important aspect of a legal corporation, is that it provides protection for its owners regarding personal liability. A corporation becomes a legal entity, separate from those who created it.

Most often, I hear business owners state that they are not “quite there yet” with their business to warrant incorporating. That’s an understandable viewpoint, considering a corporation or LLC require certain annual/biannual filings, governmental fees, and added tax concerns. However, there’s that saying that goes, “dress for the job you want, not the job you have,” and I think the sentiments of that adage can apply to a business owner’s decision to incorporate. If you are running your business, and suddenly, you are “big enough” to incorporate, not only are you going to have to deal with the hassle of setting up your legal entity while also running your business, but you will need to change your bank accounts, and you will have to talk to your accountant about how transforming into a legal entity will affect your taxes for the year. Often times, while you may be worried about the cost of setting up the entity, you will benefit from its structure in the long run.

No Shareholder Agreements

Even though you’re not legally required to have a shareholder’s agreement, I can’t recommend it enough. And I’m not just talking an agreement that outlines how the profits will be shared. I believe that the most important part of a shareholder agreement is your exit strategy. Sadly, most US marriages end in divorce. A business relationship is very similar to a marriage in terms of tying yourself financially to another person. When the relationship ultimately breaks down, emotions run hot, making any kind of decision regarding the business much more difficult. In addition to an exit strategy, shareholder agreements ensure that everything remains fair and straightforward within a company. They ensure that responsibilities for shareholders and the running of the company have been properly planned. Without formal shareholder agreements, you increase the potential for conflicts arising between shareholders, leading to a disrupted and ineffectively run business.

I once witnessed the dissolution of a company where shareholder agreements weren’t implemented, due to the personal circumstances of one individual. Because there was no formal paperwork, each shareholder’s financial interest in the company was broken down and destroyed. Remember, a shareholders agreement can assist in raising finance from creditors and banks. It demonstrates the stability of a business, and shows that you are a sensible, forward-thinking business.

California Gives the Finger to AB 1252


On June 28, 2014, California Governor Jerry Brown signed Assembly Bill No. 2130 into law. This Bill served to repeal and add Section 113961 to the Health and Safety Code. For those of you unfamiliar with Health and Safety Code 113961, also known as AB 1252, I’m referring to that pesky law that went into effect January 1, 2014 which required food employees to wear gloves whenever touching ready-to-eat foods. That’s right folks. The infamous “rubber glove” law has been repealed. 

This law had the food and beverage industries up in arms over the requirement that latex gloves be worn whenever handling ready-to-eat food. Generally speaking, this required that any person working in food service, from bartenders to sushi chefs, were required to wear gloves when handling food that did not need to be cooked. I’m talking about everything from rice in your California Roll to mint in your mojito. And foodservice folks were not happy about it. As soon as the law went into effect, the California legislature announced it would be extending a six month grace period before handing out citations for violations of the law. During that time, various petitions were launched to repeal AB 1252, including a change.org petition to exempt bartenders from the law.  

One of the biggest complaints regarding AB 1252, was that there was really no hard evidence to support that wearing gloves helped prevent foodborne illness in restaurant/bar patrons. In fact, wearing gloves may actually contribute to foodborne illness, since gloves are not always changed frequently enough, and the moist environment is a perfect breeding ground for bacteria to flourish. Moreover, business owners were concerned about the potential costs and environmental impact of the new single-use rubber glove requirement. In one article, San Diego owner of Polite Provisions, Eric Castro, called the law “an environmental nightmare.”

In response to the public outcry, California Assembly Members Pan and Gatto introduced Assembly Bill 2130. It was a race against the clock to get the bill passed, since the six month grace period only extended until June 30, 2014. After that, California businesses would be stuck with the glove law. Luckily, AB 2130 passed in the Assembly on May 8, 2014, and approved by the Governor on June 28, 2014. Due to the urgency of the nature of the bill, the statute went into effect immediately upon signing.

Now, rather than requiring food industry workers to wear gloves when handling ready-to-eat foods, or assembling foods, the newly enacted Health and Safety Code Section 113961 requires the worker “minimize bare hand and arm contact with nonprepackaged food that is in a ready to eat form.” While the law does require that food workers, “use utensils, including scoops, forks, tongs, paper wrappers, gloves, or other implements to assemble ready-to-eat food or to place ready-to-eat food on tableware or in other containers,” they are allowed to assemble or place ready-to-eat food on tableware or in other containers without utensils or implements, so long as they wash their hands in accordance with Health and Safety Code Section 113953.3.

Although, there is some ambiguity in the new Section as written relating to what constitutes “minimized” contact, this law is much more preferential than the previous law that required all workers wear gloves when handling ready-to-eat foods. If the California Legislature is really worried about foodborne illness in bars and restaurants, they should be focusing their efforts on proper food handling training and certifications, rather than slapping rubber gloves on everyone. At least our bartenders and sushi chefs can rest easier knowing they won’t be dusting our drinks and rolls with latex glove powder.

Missouri AG isn’t Playing ‘Chicken’ with California

I don’t know about you, but I LOVE eggs. I eat eggs almost every day for breakfast. Eggs are delicious and incredibly healthy. Don’t believe me, go read CaveGirl Eats’ book, “EAT THE YOLKS.” So, naturally, when I see news about eggs, I’m immediately interested.

For those of you who do not follow the goings on in the agricultural industry, you probably completely missed that little lawsuit filed by Missouri’s Attorney General Chris Koster in the beginning of February. In case you had your head up a chicken’s bum during that time and are wondering what got Koster’s feathers ruffled to begin with, let me illuminate.

Very simply, Koster filed a Federal suit against California over chicken coops. I know, you must think I’m joking, but I assure you, I am not. In 2008, California voters approved Proposition 2; a ballot initiative that required all California farmers to provide larger enclosures to egg laying hens. California farmers became concerned that the new regulations would increase their costs, and put them at a competitive disadvantage with other egg farms across the country, as those farmers were not beholden to California’s more strict caging requirements. in 2010, as a result of the growing concern, the state legislature passed a measure requiring out of state producers to comply with California’s rules.

Are you following this so far? California gets pressure from various animal rights groups (most notably the Humane Society) to treat egg laying hens (and other farm animals) more ethically. California enacts law to require bigger cages. Farmers worry, because bigger cages means larger operating costs for farmers. That cost necessarily gets passed on to consumers when they buy their eggs. Those more expensive eggs get sold at the store next to cheap eggs from a different state where the California regulations do not exist. You (consumer) look at a dozen eggs for $6 or a dozen for $4, and more often than not, you will buy the cheaper eggs. So, to keep the playing field “fair,” (and of COURSE to promote public health and safety) California says anyone selling eggs in our state has to comply with our regulations. The caging requirements go into affect in 2015 for California farmers, with all out of state farmers to follow suit by the end of that year.

Naturally, this really boiled Missouri’s egg. While Missouri doesn’t even rank in the top 10 egg producing states in the country, it does send approximately 540 million of its 1.7 billion eggs to the California market. However, this situation does beg the question as to why Missouri, is stepping up to the plate to bring this lawsuit against California?

AG Koster stated that it is his job to fight against out of state “legislation that imposes new requirements or limits on  Missouri businesses.” He goes on to state that requiring egg farmers to comply with California larger coop requirements is a violation of the Constitution’s Commerce Clause, which prohibits any state from enacting legislation that regulates  conduct wholly outside its borders, protects its own citizens from out-of-state  competition, or places undue burdens on interstate commerce. Not to mention, it will cause Missouri farmers to suffer increased costs just to do business with California.

Is this really about the constitutionality of California’s regulation, or is there perhaps something else going on? At the end of the day, egg farmers are running businesses. And nobody understands the agricultural business better than BigAgra (think companies like Monsanto).

Previously included in the recently passed Farm Bill (you know, the one that slashed SNAP benefits by billions of dollars), was an amendment backed by BigAgra interests known as the King Amendment (named after and authored by noted racist Iowa Republican, Steve King). The King Amendment purported to  “prohibit states from enacting laws that place conditions on the means of production for agricultural goods that are sold within its own borders, but are produced in other states.” Uh, I don’t know about you, but that looks quite obviously aimed at a particular California law. Thankfully, the King Amendment was dropped from the Farm Bill, but it begs the question: Why didn’t Iowa bring the suit against California? After all, Iowa is the largest producer of eggs in the country, and appears to have a much larger vested interest in seeing the California legislation defeated.

This takes me back to BigAgra and Big Agribusiness. Clearly, BigAgra and Big Agribusiness have a HUGE interest in keeping costs low and regulation at a minimum. This leads me to believe that the lawsuit filed by Missouri may be an attempt to get into the good graces of these giant conglomerates. Hello! Monsanto’s headquarters are in Missouri. Obviously, the companies that make up BigAgra do not want to change their business practices, if it ultimately means a loss in profits. Forget that the chickens cannot even stand up and turn around! Profits, people! It will be interesting to see how this lawsuit turns out. I imagine it could eventually be a measuring stick for future lawsuits to come regarding state attempts at exercising food safety and agricultural regulations across the country.


Small Brew knocks out Big Brew with KO Trademark Punch

Big Sky Brewing Drops Suit Photo Credit: KURT WILSON/ Missoulian

To view the whole article, click HERE.

As of January 23, 2014, Missoula, Montana based brewery Big Sky Brewing agreed to drop the lawsuit it filed against  Anheuser Busch for trademark infringement in exchange for Busch removing a YouTube commercial from its channel which featured the saying, “hold my beer and watch this.”

Big Sky Brewing had been using the phrase since 2004 and had the phrase registered as a federal trademark in 2009. While the advertisements were never featured on television, Big Sky nonetheless requested that Busch cease its use of the phrase in its YouTube commercials. Based on comments by Busch’s communication director, there was no financial component to the agreement. It appears Busch simply agreed to pull the YouTube videos in exchange for Big Sky’s voluntarily dismissal.

After reading this article, I was struck by Busch’s acquiescence to simply remove the videos from YouTube in exchange for dismissal of Big Sky’s complaint. I mean, according to that very same article I mentioned above, Big Sky had sold approximately 50,000 barrels of its product in the year 2013. This is a paltry number compared to Busch who sells hundreds of millions of barrels of its product per year. For those who are  unfamiliar with “barrels,” a barrel of beer is typically around 31 gallons. This obviously depends on where you are in the world (the US measures barrels differently than the UK).

What really astounded me was Big Sky’s ability to get a company like Busch to take down a highly-visible ad, when Busch is clearly the majority owner in the market share. Normally, we’re used to seeing large corporations like Busch “muscle” their way out of a lawsuit such as this. And by “muscle,” I mean Busch using its vast wealth to pile paperwork, discovery, and motions onto Big Sky, thereby forcing Big Sky into a settlement. But in this instance, Busch appears to have simply removed the YouTube ads. In reality, the amount Busch spent on the YouTube ads was likely less than the amount it would cost to litigate the matter, so they simply took them down. However, I do believe another factor in Busch removing the YouTube ads was the fact that Big Sky just so happened to have federally registered their slogan, “hold my beer and watch this” as a trademark. In registering their trademark, it gave them a stronger foothold upon which they could bring their suit against Busch for trademark infringement. By having their slogan registered as a trademark, Big Sky was able to bring a lawsuit against Busch for federal trademark infringement and more specifically false designation of origin by way of the Lanham Act.

For some clients I have worked with, it can be difficult for them to understand how federal trademark registration can positively impact a business. Registration does not inherently prevent infringement, so why go to all the trouble and cost to register it with the United States Patent and Trademark Office? I often hear clients tell me that because they are not “a big business,” trademark registration will not confer any real benefits to them, and that they will wait until they are “bigger” to protect their intellectual property interests. I believe this Big Sky/Busch case exemplifies how a federally registered trademark can make a big difference, even when going up against a “big player” such as Busch.

Had Big Sky used the “hold my beer and watch this” slogan without registering it with the United States Patent and Trademark Office, I do not believe Busch would have been so willing to take down their YouTube ads. Would Big Sky still have a basis to claim they had superior rights to the phrase than Busch? Sure. But would the claim be as strong? Probably not. While Big Sky could claim common law rights in the mark, it would not have been as strong as their claim for infringement of a registered trademark. Trademark registration provides certain “presumptions” to registrants. For one, registration gives the owner of the trademark the presumption that they were the first to make use of the mark. While that presumption is rebuttable, without registration, you would not be afforded that presumption and would be forced to prove you were the first to make use of the mark in commerce, as well as the owner of the mark. For marks that are not inherently distinctive (read: not unique, descriptive), this can be very difficult to prove.

So, by Big Sky obtaining federal trademark registration for its slogan, they had a stronger basis by which they could sue Busch, and also had a stronger claim they were the owners and first users of that slogan. Thus, it made it easier for Busch to make the decision to “give up” the fight and take the ads down, even though Big Sky was a much smaller company and they probably could have made Big Sky’s business suffer during the pendency of the lawsuit. So, I’ll leave all you business owners out there with this final thought: Do you still think you’re “too small” for trademark protection to be helpful?

To IC or not to IC. That is the Question.

I’ve seen a lot of articles about Kevin Ogar’s horrific injury floating around the web. For those of you that don’t know, an elite CrossFit athlete, Kevin Ogar, was competing at the OC Throwdown last week. He was attempting a heavy snatch, couldn’t complete the movement, bailed, and dropped the bar. Bailing on a lift is common in CrossFit, especially when the lift is heavy. However, when the bar dropped, it bounced against the stacked weight plates behind him, hit him in the back, and injured his spine. It is unknown whether Kevin will regain use of his legs, although reports have indicated permanent paralysis.

Without going into the amount of backlash CrossFit is likely to receive (and already receiving) regarding the dangers of the sport, I’d like to first point out that Kevin has received immediate, immense support from the CrossFit community. Kevin, like many elite CrossFit athletes, was uninsured. He suffered a devastating spinal injury, so surgery was naturally required. Almost immediately following reports of his injury, a fund was established to help pay for his surgeries, and over $100,000 has been raised already. This is a large part of what I love so much about CrossFit: the community. We support one another, we cheer each other on, and we lean on each other when things get tough.
After learning about Kevin’s tragic injury, it got me thinking about employer classification of their workers. I know it seems like that connection came completely out of left field, but hear me out. Had Kevin been a full-time employee for a business, there’s a good chance he would’ve been offered some kind of healthcare option under the new Affordable Care Act guidelines. However, Kevin was an independent contractor and part time employee. Thus, like many Americans, he was uninsured. Now, I’m not saying Kevin was improperly classified as an independent contractor. But, it definitely got me thinking about how employers decide to classify their workers as independent contractors or employees. Many business owners simply choose to classify their workers as independent contractors due to the benefits associated with doing so. However, mis-classification of an employee as an independent contractor can cause a legal nightmare for an employer.
Benefits to Employers and the Regulatory Authorities in Charge:
Many of you do not know why classifying a worker as an independent contractor is such an attractive option to employers. First off, there are a number of taxes employers can avoid paying to the government if their workers are classified as independent contractors (or “ICs” to keep it simple). Employing an IC means an employer is not responsible for paying payroll taxes, the minimum wage or overtime, complying with other wage and hour law requirements such as providing meal periods and rest breaks, or reimburse their workers for business expenses incurred in performing their jobs. Additionally, employers do not have to cover independent contractors under workers’ compensation insurance, and are not liable for payments under unemployment insurance, disability insurance, or social security. Naturally, this looks really good to a business owner who is trying their best to keep overhead low, thus maximizing as much cheddar in the business coffers at the end of the day.

Figuring out whether a worker is an IC or employee (or “EE”) is not as easy as looking to a code section or regulation for answers. There is really no one-size-fits-all approach in determining whether a worker should be classified as an IC or EE. In California, there are several state agencies involved with determining independent contractor status. The Employment Development Department (EDD) is concerned with employment-related taxes, and the Division of Labor Standards Enforcement (DLSE) focuses on compliance with wage, hour, and workers compensation insurance laws. Other agencies such as the Franchise Tax Board (FTB), Division of Workers’ Compensation (DWC), and the Contractors State Licensing Board (CSLB), also have regulations or requirements concerning independent contractors. Because there are so many entities involved, a worker could be considered an IC by one regulating agency, and an EE by another. It is therefore important to understand how most courts in California approach classifying workers.
Economic Realities Test:
In dealing with any matter where classification of a worker is at issue, the DLSE will first begin by presuming the worker is an employee per Labor Code Section 3357. This presumption is rebuttable, meaning an examination of the facts is necessary for an ultimate determination as to whether a worker is an EE or IC. The California Supreme Court established the “economic realities” test in the case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d 341. Of the factors evaluated by the Court, the most significant in applying the economic realities test is the degree of employer control over the work performed and the manner in which it is performed. Very simply put, the more control an employer has over the work itself and how work is done, the more likely the worker will be considered an employee. There are a host of other factors a court will examine when applying the economic realities test, depending on the issues involved. But I will save you all the headache of making you read them here.
You’re probably thinking, “As long as I don’t control work details, I should be fine.” And you MIGHT be right. However, in the case of Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991) 226 Cal.App.3d 1288, the Court found that an employer-employee relationship existed, even where there is an absence of control over work details, if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary.
The application of this test and evaluation of these factors are not easy, and I strongly suggest seeking legal counsel before classifying your workers as ICs willy-nilly. A good attorney can help evaluate your business and determine whether it’s acceptable to treat your workers as ICs, or if they should be classified as EEs. They can also help you draft independent contractor and employment agreements, which can be very helpful to an employer.
Just remember — because employers are able to avoid many state and federal tax payments as a result of classifying workers as ICs, the IRS and state government construe IC classification narrowly. What does that mean for you if you’ve improperly classified your EEs as ICs? Well, let’s just say the government always gets its piece, and you could be looking at some pretty hefty penalties imposed by both your state and the IRS. Let’s not forget you could also be looking at potential lawsuits brought by disgruntled workers.

Naked Settles After Getting Caught with Its Pants Down

Like most folks who choose to live a paleo, whole-food lifestyle, I typically try to select products that are “non-GMO” (that’s Genetically Modified Organism to you). Now, I’m not going to get into the morality of messing with foodstuffs to create new foodstuffs. However, I will say that in theory, from a scientific standpoint, I don’t have an issue with modifying organisms and think that in the right hands, some good can actually come of it. IN. THE. RIGHT. HANDS. I do not believe the right hands are those of Big Agra or Big Food, nor do I believe food is being genetically modified for the right reasons. The corporations that own most (if not all) of the companies you know and love and consider “healthy.” Kashi? Yeah, owned by Kellogg. Stoneyfield Farms Organic/Brown Cow? Purchased by Groupe Danone. Tom’s of Maine? Colgate-Palmolive actually got you covered.

It’s at this point, that I would like to turn your attention to the Naked Juice brand. Owned by Pepsi Co, a class action lawsuit was brought against Naked Juice for labeling its products as “All-Natural” and “Non-GMO,” when in fact, they were using synthetic substances and genetically modified ingredients. Among the causes of action in the lawsuit were violations of California’s Unfair Competition Law, False Advertising Law, and the Consumer Legal Remedies Act. The causes of action were based on the fact that consumers are generally willing to pay a premium for foods that are Non-GMO and 100% natural, and Plaintiffs were financially injured when they relied on Naked’s false and misleading labeling of its products as “Non-GMO” and “100% Juice” when the products contained many synthetic ingredients as well as genetically modified ingredients.

Aside from the fact that Naked Juice wound up settling this claim with the Plaintiffs, I am interested specifically in the fact that the FDA still remains unwilling or, according to them — too underfunded — to be able to define the term “natural” when it is applied to our food. Perhaps the FDA prefers to simply remain out of the legal fray. Whatever the reason, the FDA’s unwillingness to provide any guidelines regarding the labeling of our food as “natural,” will continue the barrage of lawsuits brought by consumers who feel they have been misled. Further, food companies will continue to play fast and loose with the labeling of their products, because they are not beholden to anyone to ensure the food they deliver is what it claims to be. Until a class or defendant refuses to settle, thereby requiring the courts to make a determination, the term “natural” will remain a gray term with no real meaning, despite consumers wanting to believe they’re buying something healthy. While I do believe legal precedent will be set regarding the labeling of our food, I do not foresee a change coming soon enough. Until then, I believe it is important that consumers recognize the term “natural” has no significant meaning of any kind. Hopefully, the more light that is shed on cases such as this will encourage more consumers to consider buying food that is labeled in a way that is regulated, with enforced standards, such as organic foods.