Blog

Drug Administration

FDA and FTC collaborate on CBD warning letters

Earlier this month, outgoing Food and Drug Administration (FDA) commissioner Scott Gottlieb made a number of statements relating to the FDA’s position on cannabidiol (CBD) used in consumer products, including the announcement of a working group and public hearing on the topic to be held on May 31.

Specifically, Commissioner Gottlieb’s statements referenced three warning letters [Advanced Spine and Pain LLC (d/b/a Relievus), Nutra Pure LLC and PotNetwork Holdings Inc.] that the FDA issued to CBD companies in conjunction with the Federal Trade Commission (FTC). The letters allege that the companies used their online platforms to make unfounded, egregious claims about their products’ ability to limit, treat or cure cancer, neurodegenerative conditions, autoimmune diseases, opioid use disorder and other serious diseases, without sufficient evidence and the legally required FDA approval.

Drug Administration

Some examples of conditional, yet unsubstantiated claims that the FDA focused on as deceptive or misleading include:

  • “CBD also decreased human glioma cell growth and invasion, thus suggesting a possible role of CBD as an antitumor agent.”
  • “For Alzheimer’s patients, CBD is one treatment option that is slowing the progression of that disease.”
  • “Cannabidiol May be Effective for Treating Substance Use Disorders.”
  • “CBD reduced the rewarding effects of morphine and reduced drug seeking of heroin.”
  • “CBD may be used to avoid or reduce withdrawal symptoms.”

We believe the first time in history that the FDA and the FTC have collaborated to issue warning letters, perhaps to underline the agencies’ intention to take action against CBD companies making unsubstantiated health-related claims in an effort to sell products that have not been previously approved by the FDA, even ahead of formal guidance on the topic being issued by the FDA.

More to read: Has the Supreme Court Opened a Door for New Challenges to State Corporate Practice of Medicine Laws?

paying tipped employees

The complete guide to paying tipped employees in Tennessee

If your restaurant, bar, club or hotel employs tipped staff, this post is for you. Guest blogger and employment law guru Casey Duhart gives the lowdown on avoiding seriously expensive lawsuits for wage and hour violations.

Casey asks: “Why are tipped employees bringing so many wage and hour lawsuits these days?” Casey’s answer is simple: “Too many employers are not using the tip credit correctly.”

Read Casey’s advice for avoiding tip credit pitfalls.

What is a Tipped Employee?

A tipped employee is an employee who customarily and regularly receives more than $30 per month in tips. An employee does not meet the “customarily and regularly” requirement if the employee only receives $30 or more monthly during the holidays or special events.

See Also: Your Comprehensive Guide to Property Transfers

What is the Fair Labor Standards Act?

Wage-related rules for tipped employees who receive money from customers are governed by the Fair Labor Standards Act (“FLSA”).

What is the Tip Credit?

Under the FLSA, employers can claim a tip credit toward the federal minimum wage. This credit means that an employer can pay tipped employees a lower wage than the federal minimum wage.

The current federal minimum wage – and the minimum wage in all of Tennessee – is $7.25 per hour.

An employer can claim a maximum tip credit of $5.12 per hour and pay tipped employees $2.13 per hour.

paying tipped employees

Notice Requirement

Before you can claim a tip credit, you must provide the following information to each tipped employee:

  • the amount of cash wages the employer is paying a tipped employee. The minimum wage for tipped employees is $2.13 per hour;
  • the additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required cash wage of $2.13 and the current minimum wage of $7.25);
  • that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
  • that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and
  • that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

If you fail to provide this information to a tipped employee, you will be required to pay the tipped employee at least $7.25 per hour in wages and allow the tipped employee to keep all the tips.

Here is a simple rule: provide this information in writing to all employees, when they are hired.

Overtime Compensation

If you claim a tip credit, overtime is calculated on the full minimum wage of $7.25; not the lower direct (or cash) wage payment of $2.13.

Example: A tipped employee works 60 hours in a workweek.

            Step 1: Use the minimum wage to calculate the overtime rate.

$7.25 x 1.5 = $10.88

            Step 2: Subtract the tip credit from the overtime rate to achieve the adjusted rate and multiply by overtime hours worked that week.

            $10.88 – $5.12 = $5.76

            $5.76 x 20 overtime hours = $115.20

            Step 3: Add the employee’s straight pay plus the overtime pay to calculate the pay for that week.

            40 hours x $2.13 = $85.20 straight time

            $85.20 + $115.20 = $200.40

Uniforms

You cannot require a tipped employee to pay for their uniform out-of-pocket if the cost would reduce the tipped employee’s wages below the minimum wage of $7.25 per hour.

Example: If a tipped employee is paid $2.13 per hour and worked 40 hours in a workweek and received $205 in tips (total compensation of $290.20) charging the employee $15 for a uniform shirt would cause the employee’s wages to fall below the minimum wage for that week.

Keep in mind that “street wear” such as ordinary shirts and/or pants of a standard style is not considered a uniform. As a rule of thumb, the more specific your requirements for employee clothing, the more likely it is that it will be considered a uniform.

You may be financially responsible for the cost of cleaning the uniform if the uniform requires daily washing, special commercial laundering, ironing or other special treatment (such as dry cleaning).

Tip Pooling

The FLSA requires that tipped employees keep their tips. However, you can require tipped employees to share their tips with other employees who customarily and regularly receive tips. People who don’t normally receive tips, such as cooks, dishwashers, janitors, and chefs, cannot be included in the tip pool.

Have a clear tip pooling policy. Although not required by law, you should ask all tipped employees participating in the tip pool to sign a tip pooling agreement.

Service Charges

A charge for service, for example, 20 percent of a bill, is not a tip! A compulsory service charge is part of the employer’s gross receipts, which means that the employer may choose to retain the gain or distribute all or part of it to employees. Therefore, service charges are not counted as tips. Unlike tips, you must collect and pay sales tax on service charges.

paying tipped employees

Credit Card Fees

Customers who pay by credit card usually write in their tip. However, with each credit card transaction, you are charged a transaction fee by the credit card company. You are allowed to pay the employee the tip, less that transaction fee. For example, where a credit card company charges an employer 3 percent on all sales charged to its credit service, the employer may pay the tipped employee 97 percent of the tips without violating the FLSA. However, the charge on the tip may not reduce the employee’s wage below the required minimum wage.

Walkouts

Deducting a tipped employee’s pay for walk-outs or cash register shortages is illegal if the deduction reduces the employee’s wages below the minimum wage.

Not Making up the Difference

An employer must make up the difference if a tipped employee’s wages does not reach the minimum wage when you add their tips to their cash wages. Double and triple check that tipped employees make at least minimum wage.

Example: If a tipped employee is paid $2.13 per hour and worked 40 hours in a workweek and received $75 in tips (total compensation of $160.20) the employee’s compensation is below the minimum wage ($7.25 x 40 hrs = $290) and the employer must make up the difference of $129.80.

Record and Pay for all Time Worked

Be sure that you have a timekeeping and payroll system that captures all time worked by tipped employees and all tips received. Even a simple sign-in sheet or iPad app is better than nothing.

Be Diligent

Restaurants and hospitality employers are easy targets for wage and hour lawsuits and audits. Because the tip credit laws can be tricky, make sure you are diligent about compliance and accurate record keeping.  If in doubt, contact an attorney that practices employment law to help evaluate your tip credit policies and procedures.

blockchain 'smart' contracts

Tennessee becomes one of first states to approve blockchain smart contracts

Tennessee has become one of the first states in the country to approve the use of “smart contracts,” which are made through the use of blockchain technology.

In essence, the law gives blockchain contracts and electronic signatures submitted through blockchain as having equal standing to more traditional forms of contracts.

The Chamberlains officially defines “blockchain technology” as “distributed ledger technology that uses a distributed, decentralized, shared, and replicated ledger” to record transactions.

By design, blockchain permanently records all transactions and is unalterable. Blockchain transactions replicate across millions of computers, making it virtually impossible to alter the transaction. In these deals, both parties have the assurance that the transaction has been permanently recorded without the need for a traditional intermediary, such as a bank or other institution.

blockchain 'smart' contracts

While blockchain is currently the method for verifying transactions using the popular cryptocurrency Bitcoin, the technology has the capabilities to be used in an endless variety of transactions across a multitude of industries.

The law, which was submitted as Senate Bill 1662, was unanimously passed in the state House and Senate and was signed by Gov. Bill Haslam in late March. The bill officially amended the Tennessee Code Annotated, Title 47, Chapter 10.

Tennessee joins a handful of other states, including Wyoming, Nebraska, Florida, New York and Colorado, that have officially recognized blockchain technology as a means of verifying contracts.

While noteworthy, it just one step for a technology that remains in its infancy.

The state should next turn its attention to the Uniform Regulation of Virtual-Currency Businesses Act, which was recently proposed by the Uniform Law Commission.

Waller’s Charles A. Trost, who has previously served as commissioner of the Tennessee Department of Revenue, is a member of the 19-person committee that created the draft legislation.

This set of rules creates a “statutory framework for regulating companies engaged in virtual-currency business activity.”

blockchain 'smart' contracts

The uniform legislation was drafted by a coalition of leaders in virtual currency, banking, business, government officials, according to the ULC. Thus far, state legislatures in Connecticut, Hawaii, and Nebraska have introduced the legislation.

According to the ULC, there are four benefits for the proposed legislation:

— it specifically regulates companies that assume “control” of a client’s virtual currency.

— It creates an “on-ramp” for some smaller companies to operate without a license, which allows for room for innovation and experimentation, the ULC contends.

— It assures consumers of the safety and security of virtual currency. It would require all virtual-currency businesses to create specific policies and compliance programs to guard against fraud, cyber threats, and terrorist activity.

— It allows for reciprocal licensing, which creates better coordination among states, while also reducing hassles for member companies.

More to read: The Power of Crafting Wills Online

Medicine Laws

Has the Supreme Court Opened a Door for New Challenges to State Corporate Practice of Medicine Laws?

It’s not surprising that Supreme Court watchers in the healthcare industry have focused primarily on King v. Burwell and its potential impact on the Affordable Care Act. However, the Court’s recent 6-3 decision in North Carolina Board of Dental Examiners v. Federal Trade Commission is also noteworthy for its possible effects on the way state boards or agencies license and regulate dental and medical practitioners.

The North Carolina case centers on teeth-whitening services being offered in the state by non-dentists. In response to complaints by licensed dentists, the Board of Dental Examiners issued cease-and-desist letters alleging that teeth whitening constituted the unlicensed practice of dentistry. Then, the Federal Trade Commission got involved. The FTC took the position that the Board’s actions violated federal antitrust laws and a lower court agreed. The Board appealed the ruling on the grounds of state-action immunity meaning that the Board was insulated from antitrust lawsuits by virtue of being a state agency. The Supreme Court affirmed the lower court ruling.

See Also: The complete guide to paying tipped employees in Tennessee

Medicine Laws

Writing for the majority, Justice Kennedy concluded that “[t] he Sherman Act protects competition while also respecting federalism. It does not authorize the States to abandon markets to the unsupervised control of active market participants, whether trade associations or hybrid agencies. If a State wants to rely on active market participants as regulators, it must provide active supervision if state-action immunity … is to be invoked.”

Unlike most states (in which dental board members are appointed by the state’s Governor, North Carolina’s dental board is popularly elected by the dentists in the state.  As the American Dental Association noted after the decision, the case focused largely “on the fact that the dentist members of the North Carolina board are elected by other dentists — in accordance with state statute.” Considered “active market participants” by the Court, these dentists require active supervision by the states in which they operate. The result, according to the ADA’s general counsel J. Craig Busey, is that professional boards across the country are now left in a quandary, “with no explanation as to what level of active supervision is necessary to invoke immunity for each board.” Busey added that “boards are likely to be extremely reluctant to take actions that may subject them to legal exposure, and individual members may be justifiably concerned about possible liability.”

Medicine Laws

What will be the impact of this case on the regulation of dental and medical practice management companies by state dental and medical boards?  We’ll leave it to others to analyze the antitrust aspects of the decision. Our focus is on what the decision might mean for dental and medical groups moving forward and, in particular, Dental Support Organizations (DSOs) and Management Services Organizations (MSOs).

  • The ruling might inhibit the North Carolina Dental Board’s efforts to  further regulate dental support organizations in the state. Back in 2012, legislation was proposed in the North Carolina House of Representatives that would have given the Dental Board significant new regulatory and oversight authority over DSOs operating in the state. Commenting on the proposed legislation, the FTC expressed concerns that the bill might “deny consumers of dental services the benefits of competition spurred by the efficiencies that DSOs can offer, including the potential for lower prices, improved access to care, and greater choice.” After the Supreme Court’s recent ruling, the North Carolina Dental Board might be reluctant to initiate a third confrontation with the FTC.
  • Other states could take the Supreme Court decision as a warning with respect to new DSO and MSO regulations. North Carolina isn’t the only state that tried to increase its regulation of DSOs. In 2014, the Texas State Dental Board’s attempt to impose new fees and regulations on DSOs was met with strong resistance and was ultimately defeated. The Supreme Court’s North Carolina decision represents another weapon that DSOs and MSOs can use to defend their business models, particularly as dental boards in New Jersey, Indiana, Washington and other states consider new regulations.
  • There may be new opportunities for companies to offer teeth whitening services without state board restrictions. The North Carolina decision would seem to create new opportunities for companies other than dental practices to offer teeth whitening services, but this will vary on a state-by-state basis. A number of states have begun specifically regulating teeth whitening, and companies could face similar – and costly – court battles in those states.

More to read: Tennessee becomes one of first states to approve blockchain smart contracts