Retailers and legal experts converge in California — the nation’s legal trendsetter

“As goes California, so goes the nation.” Whether this maxim rings true throughout the U.S. legal landscape is debatable. It is clear, however, that retailers are facing new and unique legal requirements in California. From shifting wage and hour laws to more stringent labeling and pricing regulations, regulatory compliance gets very complicated for many companies in California.

To help retailers navigate the complexities and nuances of California laws, NRF and the California Retailers Association recently hosted the annual inaugural CA Retail Law Summit in Irvine. Some of California’s top legal experts facilitated discussions on litigation threats, privacy laws, and labor and employment regulations that will impact retail businesses in 2024 and beyond.

Innovation drives new regulation

As new technologies emerge, California is introducing new privacy legislation and regulation including the California Age-Appropriate Design Code Act and SB 362, known as the Delete Act. At the CA Retail Law Summit, David Keating of Alston & Bird was joined by Yum! Brands Global Privacy Counsel Nicholas Godlove, Macy’s Inc. Vice President of Legal Business Operations Wendy Schmidt Beadles and NRF Vice President and Senior Policy Council Paul Martino to share insights into these new laws, their potential impact on retailers, and specific considerations for retailers to understand.

The Delete Act would require the California Privacy Protection Agency — the state’s new privacy office — to establish a website where consumers can verify their identity and make a single request to order a blanket deletion of personal data, including information on shopping preferences.

If utilized on a large scale, Keating said the Delete Act could impact the ability to reach consumers with relevant information to personalize their shopping experience. However, Martino said, customers generally value personalization and relevant advertising. Moreover, the Delete Act could accelerate the need for all types of companies, including retailers, to have the capability to delete specific data relating to individuals.

Keating and the panel of privacy experts also discussed new developments regarding the California Age-Appropriate Design Code Act, set to take effect on July 1, 2024. Last month, a federal court judge granted a preliminary injunction blocking enforcement of the CAADCA on grounds that many of the provisions were both overbroad and underinclusive, and could lead to the collection of more information about young people, contrary to the CAADCA’s purpose of limiting personal information collected about minors.

Notwithstanding the current injunction, which is likely to be appealed, the panel discussed the law’s data privacy impact assessment requirements and actionable steps for retailers to prepare for compliance.

California’s wage and hours laws are on the rise

Andy Medlin, vice president and deputy general counsel for Hot Topic, was joined by California labor and employment legal expert Julie Dunn and other leaders from DLA Piper for a deep dive into California’s unique labor rules regarding scheduling, vacation pay, paid sick leave and timekeeping. Wage and hour laws continue to shift for businesses located in California or with employees who work in California, presenting fresh challenges and additional considerations for retailers.

One such challenge is the City of Los Angeles’ Fair Work Week Ordinance, requiring large retail employers in Los Angeles to provide employees with a “good faith estimate” of their future work schedules, at least 10 hours of rest between shifts and at least 14 days’ advance notice of their work schedules.

Since the regulation’s 180-day grace period expired and enforcement began September 28, 2023, Dunn urged retailers to be aware that each day a violation exists constitutes a separate violation and administrative fees increase by 50% if another offense occurs within three years.

Moving from scheduling rules to vacation pay rules, Dunn said employers are currently required to provide at least 24 hours (three days) of paid sick leave each year to most workers, including full-time, part-time and temporary workers who meet certain qualifications.

Dunn and her DLA Piper colleagues facilitated discussions on what’s ahead in this space, noting that the California legislature recently passed a bill to expand paid sick leave to 40 hours (five days) per year. If signed by Governor Newsom, the law will become effective January 1, 2024.

Pricing litigation and environmental regulation

Well over half of pricing class action lawsuits have been in California, according to Stephanie Sheridan and Meegan Brooks, retail litigation counsel from Benesch’s retail and ecommerce group. Brooks said 262 pricing lawsuits have been filed since 2014, with 170 of those in California.

Brooks and Sheridan alerted retailers to recent pricing targets including smaller companies, startups, companies that sell high-value goods (e.g., furniture, flooring and computers), and companies that have been sued previously.

When it comes to environmental regulation, “the main greenwashing lawsuits have been related to PFAS, a so-called forever chemical that pops up everywhere, from rain jackets to hamburger wrappers,” Brooks said. She discussed California bans on PFAS in textiles, cosmetics and juvenile products, in addition to a California bill in the pipeline that would restrict the use of PFAS in cleaning products and artificial turf.

Sheridan walked attendees through PFAS class actions, mostly against fast-food, apparel and cosmetic companies, and advised retailers to work closely with vendors to ensure PFAS and California Proposition 65 certifications are obtained and updated.

As the two discussed how unique California pricing and environmental laws are compared with most other states, attendees engaged in robust discussions around balancing cost of compliance against litigation risks when California has more stringent laws than other states.

“Do we have to do this across the country, or can we just do it in California?” was the refrain in the room. The response from Sheridan and Brooks: “Generally, no … but the answer to whether you actually want to carve out California depends on the law.”

Want to stay ahead of the curve on the latest trends and pressing issues in retail law? Register now for the NRF Retail Law Summit, March 5-7, 2024 — a free virtual event for retail in-house attorneys risk and compliance officers, HR and other provisions who counsel their organizations on law-related matters.