A recent study by legal research organization Acritas found that U.S. companies spend, for every dollar of revenue, nearly triple the amount on legal services than their counterparts around the globe. Unfortunately, doing business in the U.S. comes with increased risk and exposure to unanticipated litigation, which raises the underlying “cost” of doing business.
Here, we highlight several litigation and enforcement trends that are currently plaguing this sector with an aim of providing retail brands with the foresight needed to attempt to avoid certain issues.
ADA Web Site Accessibility
With e-commerce and mobile platforms at the forefront of the retail world, companies should ensure that their web sites and digital properties are accessible to everyone. Since the scope of the Americans with Disabilities Act application to places of public accommodation is being interpreted very broadly, certain courts found that it extends to websites as “places of public accommodation,” putting unaccommodating sites danger of violating the statute.
This past June, the first post-trial verdict in an ADA web site accessibility case was rendered in Gil v. Winn-Dixie Stores Inc. Although the Federal District Court did not opine as to whether a web site constitutes a public place in and of itself, it followed a line of established case law that renders the ADA applicable websites heavily integrated with the operators physical store locations.
Based on the foregoing, the court determined that the ADA applied to the Winn-Dixie web site and ordered the Winn-Dixie comply with the Web Content Accessibility Guidelines 2.0. This is the first time a court has ordered a defendant to conform to a particular accessibility standard in an ADA claim surrounding a website. While the Winn-Dixie decision is not binding nationwide, it might be seen as a harbinger of things to come and a guide to escaping ADA-associated risks.
The Department of Justice, which is likely to publish regulations related to website accessibility under the ADA, has delayed its decision to take action until 2018.
New Jersey’s Truth in Consumer Contract, Warranty and Notice Act
Class-action suits accusing retailers of misrepresenting the original or regular price of goods in order to make the sale price appear to be a greater discount have been on the rise. Examples of recent defendants include Burberry, Coach and Michael Kors.
Although the Federal Trade Commission does not have specific rules on reference price advertising, it does publish guidelines on deceptive pricing, stating that a product can be advertised as being sold at a reduced price if the former price was “a bona fide price at which the article was offered to the public on a regular basis for a reasonably substantial period of time.” The FTC does not define “a reasonably substantial period of time.”
As the guidelines are merely recommendations, enforcement is left to the states and nearly all states have statutes relating to deceptive pricing, many with language mimicking the FTC guidelines. Though some states have enacted more rigorous rules and, therefore, retailers should remain up to date on state regulations and make necessary changes to comply.
“Predictive Scheduling” Legislation
New York is the most recent city to pass “predictive scheduling” legislation following San Francisco’s and Seattle’s lead. The bill (Local Law §20-1251), effective Nov. 26, 2017, prohibits any retail business with 20 or more employees, selling consumer goods at a store located within New York, from partaking in, among other things, “on call” scheduling (the practice of requiring employees be available to work during an unscheduled time upon short notice).
Additionally, the bill prohibits employers from canceling an employee’s shift or requiring an employee to work during an unscheduled time with less than 72 hours’ notice. One of the more burdensome requirements is that the retailer must provide, upon employee’s request, a written copy of that employee’s work schedule for any week the employee worked during the prior three years.
Similar legislation is pending in a number of other states. Retailers with stores in states or cities that have adopted such legislation should pay close attention to their employment practices and implement procedures, such as record keeping, to comply, as these laws generally create a private right of action for employees.
Former Legal Trends that Remain Relevant
As we see new trends develop, there are a few past trends that remain relevant to retailers.
Since the upsurge of claims in 2011, California retailers should be mindful of California’s Song Beverly Credit Card Act, which regulates credit card transactions that take place in California. Under the Act, a retailer cannot, among other things, request a customer’s personal identification information, such as a zip code or e-mail address, as a requirement to a credit card transaction and then record that information.
Second, many retailers that sell gift cards and consumer credits continue to find themselves with costly penalties, due to noncompliance with unclaimed property laws that require companies to turn over any unused gift cards and consumer credits to the state. As these regulations are frequently changing, retailers need to remain up to date on current guidelines.
Why a Compliance Program Is Crucial for Retailers
Due to the increased potential for litigation, compliance programs are becoming increasingly important. As we have seen over the past year, high-profile luxury brands are often a preferred target in litigation. Name recognition inevitably amplifies press coverage. In this present environment, brands must be proactive rather than reactive in dealing with compliance with regulatory requirements. Companies are now engaging full-time chief compliance officers to increase protection and provide peace of mind. In addition, full-time chief compliance officers help send a strong message that the brand is committed to excellence and compliance with all laws.
Taking action upfront with compliance programs and chief compliance officers will lead to reduced legal costs in the future and help businesses focus their time and costs on brand development and growth.
Giuliano Iannaccone is a partner at Tarter Krinsky & Drogin LLP in the Corporate and Securities and Italy Practice Groups, and chairs the International and Retail Practice Groups. He is also a member of the firm’s executive committee. Gina Piazza is a partner at Tarter Krinsky & Drogin LLP in the International, Retail, Corporate and Securities and Real Estate practices, and she is co-chair of the firm’s Italy Practice.
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