The Consumer Product Safety Commission (CPSC) voted to promulgate a Direct Final Rule clarifying deadlines for the new nationwide standard for upholstered furniture flammability. The new rule codifies the effective dates for compliance with the new national flammability standard (which incorporated California’s flammability testing standard already in effect) and allows for affected parties to comment if they are significantly adversely affected by the new rule.
On March 25th, the Federal Trade Commission (FTC) announced that the agency is creating a new and dedicated “rulemaking group” within the FTC’s Office of the General Counsel. Currently, rulemaking within the FTC is decentralized and individual bureaus are responsible for promulgating particular rules. With this new group in place, Acting Chairwoman Rebecca Slaughter explained, the FTC can take a harmonized approach to rulemaking across its different authorities in order to prohibit unfair and deceptive trade practices and unfair methods of competition. This move is significant because, although the FTC has declined to engage in rulemaking for many years, it has signaled its desire for stricter enforcement for some time. Just last year, the FTC promulgated a new “Made in USA” labeling rule in order to make the standards clear and to enable the Commission to seek civil penalties for any violations.
Continue Reading Harmonized Approach to Rulemaking: FTC Announces New Rulemaking Group
The Federal Trade Commission (“FTC”) is distributing more than $6 million to Fashion Nova customers after the popular retailer did not “properly notify [them] or give them the chance to cancel their orders when [it did not] ship merchandise in a timely manner.” On the heels of a settlement entered into between the FTC and the Southern California-based fast fashion company almost a year ago, the government agency revealed that it “is sending refunds to more than 500,000 people,” noting that in addition to failing to ship products within the “fast shipping” time frame it promised, Fashion Nova further ran afoul of federal law when it “did not offer customers the option to cancel [the delayed] orders, and opted to issue gift cards to compensate customers for unshipped merchandise instead of providing refunds.”
In a statement on Thursday, the FTC asserted that it is “providing more than $6.5 million in payments to 518,552 consumers, including more than 40,000 consumers who live outside the United States in 169 different countries.” The distribution of the refunds – which amount to $12.60 per individual consumer – follows from an agreement between Fashion Nova and the FTC that settled charges lodged against Fashion Nova. Continue Reading The FTC is Paying Out $6.5 Million to Consumers in Connection with Fashion Nova Settlement
Recalls in Review: A monthly spotlight on trending regulatory enforcement issues at the CPSC.
The demand for consumer exercise equipment soared over the past year as Americans sought out ways to stay in shape while spending more time at home. As more Americans create their own “home gyms” and purchase exercise equipment such as stationary bikes, treadmills, weights, and resistance bands, we will likely see an increase in the number of injuries typically associated with such products. According to CPSC Spokeswoman Patty Davis, treadmill injuries were already common before the start of the coronavirus pandemic: an estimated 22,500 treadmill-related injuries were treated at emergency rooms in the U.S. in 2019 alone.[1]
Like many other consumer products, the CPSC has regulated exercise equipment at a fairly consistent rate since the 1990s. At least 82 recalls of exercise equipment have been conducted since 2000, with only one slight enforcement “spike” occurring in 2006. Unlike the enforcement spikes we have observed for other products—such as hoverboards in 2016 and essential oils in 2020—the Commission’s recall efforts in 2006 targeted a wide variety of exercise equipment rather than a single product.
Just last month, the CPSC issued a civil penalty of $7.95 Million against Cybex International—which is the largest civil penalty related to exercise equipment to date. According to the settlement agreement, Cybex failed to timely report known defects or risks for two different products after receiving numerous consumer complaints. The CPSC has issued eleven total civil penalties related to exercise equipment. All of the penalties were issued due to the firms’ failure to timely report a known defect or risk to the CPSC. The fines for the remaining ten civil penalties involving exercise equipment are somewhat dated and ranged from $100,000 to $3,000,000.
Exercise equipment recalls have targeted a wide variety of equipment over the years. The most frequently recalled type of equipment is weights-based strength training equipment—ranging from large exercise towers to weightlifting bars to dumbbells. Other frequently recalled types of exercise equipment include mini- and full-sized trampolines, treadmills, elliptical and glider machines, resistance bands and tubes, and exercise or weight benches.
According to information provided by the CPSC recall announcements, approximately forty-one percent of exercise equipment recalls address a fall risk. And this makes sense—many exercise machines and towers are quite large and need to be able to support a user’s body weight without breaking, collapsing, or falling over. Similarly, approximately thirty-five percent of recalls address unspecified injury risks.
A smaller number of the recalls address a risk of laceration (10%), fire (6%), impact injuries (4%), and crushing or amputation (3%). The recalls addressing a risk of fire all involve electrically-powered cardio machines, such as treadmills, ellipticals, and a step climber. Only one recall of exercise equipment conducted since 2000 has addressed a violation of the lead paint standard.
Consumers who keep exercise equipment in their home—or who use such equipment in a gym setting—should stay up to date on product recalls and follow any applicable recall instructions to avoid potential injury. The most common remedy offered by recalling firms is a free replacement product (or relevant product component).
Unlike many other consumer products, exercise equipment can be particularly bulky and difficult to transport in the event of a recall. Accordingly, recalling firms frequently elect to send consumers a repair kit to fix their equipment at home, provide free “on site” repair of the equipment, or simply provide consumers with new instructions and warnings regarding how the product should be operated. Less often, the remedy may be limited to refund or store credit.
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About Recalls in Review: As with all things, but particularly in retail, it is important to keep your finger on the pulse of what’s trending with consumers. Regulatory enforcement is no different – it can also be subject to pop culture trends and social media fervor. And this makes sense, as sales increase for a “trending” product, the likelihood of discovering a product defect or common customer misuse also increases. Regulators focus on popular products when monitoring the marketplace for safety issues.
As product safety lawyers, we follow the products that are likely targets for regulatory attention. We share our observations with you though Recalls in Review.
[1] Melissa Repko, Peleton CEO says child died in treadmill accident, federal consumer watchdog starts probe, CNBC.com (Mar. 19, 2021, 9:49 AM ET), https://www.cnbc.com/2021/03/19/peloton-ceo-says-child-died-in-treadmill-accident-federal-consumer-watchdog-starts-probe.html.
California Governor Newsom signed into law a new bill, SB 95, that provides for up to 80 new hours of COVID-19 supplemental paid sick leave to covered employees. The law applies to all businesses with more than 25 employees, and goes into effect on March 29 through September 30, 2021. SB 95 retroactively applies to qualifying leave taken on or after January 1, 2021. Employers are not required to review sick leaves granted since January 1 to determine whether they qualify for retroactive supplemental leave payment, and instead can assess requests for such retroactive payment as employees make them.
Importantly, the new law explicitly extends paid sick leave benefits to employees who are unable to work or telework because they are either attending an appointment to receive a COVID-19 vaccine or experiencing symptoms related to a COVID-19 vaccine. Other qualifying circumstances include quarantine or isolation periods related to COVID-19, experiencing symptoms of COVID-19 and seeking a medical diagnosis, caring for a family member who has been advised to isolate or self-quarantine, and caring for a child whose school or place of care is closed or otherwise unavailable for reasons related to COVID-19.
Full-time employees and employees who worked or were scheduled to work at least 40 hours on average during the two weeks prior to the leave are entitled to up to 80 hours of COVID-19 supplemental paid sick leave. Part-time employees are entitled to up to the number of hours the employee regularly works over two weeks.
SB 95 caps COVID-19 supplemental paid leave wages at $511 per day and $5,110 in the aggregate for each covered employee. Within that limit, nonexempt employees must be paid for each hour of supplemental leave at the highest of the following four rates of pay: (1) the employee’s regular rate of pay for the workweek in which leave was taken, regardless of whether the employee worked overtime in that workweek; (2) the covered employee’s total wages, not including overtime premium pay, divided by the employee’s total hours worked in the full pay periods of the prior 90 days of employment; (3) the California minimum wage; or (4) the local minimum wage. Paid leave for exempt covered employees must be calculated in the same manner as the employer calculates wages for other forms of paid leave time.
The law prohibits employers from requiring employees to use any other paid or unpaid leave, paid time off, or vacation time before using COVID-19 supplemental paid sick leave. Employers can, however, require an employee to exhaust leave under this new law before the employer pays exclusion pay under the California Division of Occupational Safety and Health COVID-19 Emergency Temporary Standards.
For any qualifying leave taken since January 1, 2021, if a covered employee was not paid an amount greater than or equal to the amount required under this new law, a covered employer must pay the employee a retroactive payment providing the required compensation upon oral or written request by the employee. This retroactive payment must be paid on or before the payday for the next full pay period after the employee requests it.
Covered employers are required to post a notice communicating the requirements of the new law in a conspicuous place in the workplace. The law requires that the Labor Commissioner make a model notice publicly available within seven days of the law’s enactment, which will be on March 26, 2021. If an employer’s covered employees do not frequent a workplace, the employer can satisfy the notice requirement by disseminating notice through electronic means, such as email.
California’s extension of paid sick leave time to employees for time taken away from work to receive vaccinations and due to symptoms suffered after receiving a vaccination is in keeping with the Centers for Disease Control and Prevention’s “Workplace Vaccination Program,” which provides recommended best practices to employers concerning COVID-19 vaccines. The guidance specifically recommends that employers “[o]ffer flexible, non-punitive sick leave options (e.g., paid sick leave) for employees with signs and symptoms after vaccination.” The guidance also recommends that employers provide “paid leave and transportation support” for off-site vaccination programs. In enacting SB 95, California has converted this best practice into a legal requirement for many employers.
In anticipation of March 29 when the law goes into effect, employers should train human resources and payroll employees about the requirements of the law and keep a lookout for the publication of the model notice by the Labor Commissioner to allow for efficient dissemination once it issues.
On Tuesday, March 30th Crowell & Moring’s Cheryl Falvey and Matthew Cohen will lead a webinar titled, “The Consumer Product Safety Commission – An Agency in Transition.”
The U.S. Consumer Product Safety Commission (“CPSC”) is in a state of transition. The Democrats will soon have a majority of commissioners. Acting Chairman Bob Adler has announced that he will not seek re-nomination when his current term ends later this year. The Division of Compliance and Field Operations has reorganized, and we have already seen two civil penalty matters announced in 2021, which is two more than the total number of civil penalties announced over the past two years.
In this webinar, we will offer thoughts and predictions about what to expect in the coming years as the Biden Administration takes hold and continued change at the agency takes place.
Click here to register for the event.
The New York State legislature recently passed a bill (S2588A/A3354B), signed into law by Governor Cuomo on March 12, 2021, which amends the New York Labor Law and Civil Service Law to grant private and public employees paid leave time for the COVID-19 vaccination. The law is effective March 12, 2021 and will expire on December 31, 2022. Under the new law, employers are required to provide employees with paid leave of absence for COVID-19 vaccinations for a sufficient period of time, not to exceed four hours per COVID-19 vaccine injection. The four-hour maximum per vaccination does not apply to employees subject to a collective bargaining agreement (CBA) providing a greater number of hours, or as otherwise authorized by the employer, to be vaccinated for COVID-19. Where a CBA explicitly references the law, however, its leave provisions may be waived in their entirety.
Currently, the FDA has authorized the use of three vaccines: the Pfizer Inc. and Moderna Inc. vaccines, which each require two doses, and the Johnson & Johnson vaccine, which requires only one dose. Therefore, employees will generally be entitled to up to eight hours of paid leave, depending on the vaccine. This time must be paid at the employee’s regular rate of pay for the entire leave period. The law also provides that the paid vaccination leave may not be charged against any other leave to which the employee is entitled, such as any paid sick leave or leave pursuant to a CBA. Discrimination and retaliation against employees for exercising their rights under the law are prohibited.
A review of policies and practices applicable to workforces in New York State concerning paid leave should be conducted in order to identify any revisions necessary to comply with this new law. The impact on this new requirement on various wage and hour issues, such as spread of hours/split shifts and amounts to pay tipped employees where applicable, should be considered as well. The new law is silent on what, if any, documentation an employer can request from its employees to verify such paid leave. The Equal Employment Opportunity Commission has, however, previously concluded that employers can request proof of receipt of a COVID-19 vaccination, but should consider informing employees not to provide any related medical information. While this New York State statute does not set forth a notice provision, employers should consider ways to advise employees that they are eligible for paid leave under these circumstances.
On March 4, 2021, the Federal Circuit spoke pointedly on its view of contract interpretation and contract obligations in the context of trademark licensing agreements between private and government actors. In Authentic Apparel Group, LLC v. United States, No. 2020-1412 (Fed. Cir. Mar. 4, 2021), the court upheld the Court of Federal Claims’ decision, on summary judgment, that the Army did not violate its obligations under a trademark licensing agreement with Authentic Apparel Group, LLC (“Authentic”). Authentic, the licensee, claimed that the Army violated the terms of the licensing agreement by refusing to approve certain products and marketing materials bearing Army trademarks. These included a proposed shoe line and an advertisement featuring Dwayne “The Rock” Johnson. The Federal Circuit disagreed.
The Federal Circuit emphasized the plain language of the trademark licensing agreement, which granted the Army “sole and absolute discretion” to approve or deny Authentic’s proposed uses of the Army’s marks. Additionally, an exculpatory clause provided that Authentic would have no cause of action based on the Army’s exercise of this discretion in failing or refusing to grant approval. “Contracting parties,” the court noted, “including parties who contract with the government, are generally held to the terms for which they bargained.” This precept does not change merely because the subject matter of the contract is a trademark. Continue Reading Deep Sixed: Federal Circuit Boots Trademark Licensee for Meritless Claims Against U.S. Army
On March 10, Crowell & Moring’s ITC Section 337 practice co-lead, Josh Pond, and counsel, Preetha Chakrabarti, will lead a discussion titled, “2021: Year of the Knockoff – Counterstrategies at the U.S. ITC & Beyond.”
The COVID-19 pandemic has led to an exponential rise in e-commerce, as well as counterfeiting. With it harder than ever to touch and experience products before purchase during the pandemic, 2021 is poised to be the “Year of the Knockoff.”
Whether your focus is legal or business, intellectual property or corporate, join Crowell & Moring LLP for an analysis of recent trends in counterfeit products and strategies for countering them at the uniquely-potent U.S. International Trade Commission and beyond.
Click here to register for the event. Click here to read their related article in Law360, “How Cos. Can Combat Knockoffs At And Beyond ITC This Year.”
There have been recent calls for Congress to re-visit H.R. 2211, the “Stop Tip-overs of Un-stable, Risky Dressers on Youth Act” also known as the “STURDY Act.” Sponsored by Janice Schakowsky (Dem-IL 9th District), the bill was introduced in Congress last session and passed by the House on September 17, 2019 but never passed by the Senate. It would require the U.S. Consumer Product Safety Commission (“CPSC”) to promulgate a consumer product safety rule for free-standing clothing storage units to protect children from tip-over related death or injury.
As we indicated in our May 2020 analysis of dresser tip-overs, tip-overs have been a main focus for the CPSC and consumer advocacy groups in recent years. A CPSC report indicates that 571 people died from furniture tip-overs between 2000 and 2019, and 82% of those were children (ages ranged from 1 month to 14 years). A survey conducted by the CPSC showed that 41% of respondents did not anchor furniture in their homes.
Currently, there is no mandatory standard requiring manufacturers to test furniture to specific stability and safety standards. The current voluntary standard, ASTM F2057 – 19, is recognized by industry and the CPSC as required best practice in order to prevent tip-overs from dressers and other clothing storage units. Continue Reading New Proposed Legislation to Prevent Furniture Tip-Over