There’s much disagreement over what we know about COVID-19, but one thing we can agree upon is that it has left an impact on the food supply chain. For some food producers, that impact is creating opportunity. Many growers see the potential of filling the gaps created by closed processing facilities, thin grocery shelves, and unwillingness to shop inside stores. If you’re one of those growers who sees an opportunity to sell food, we have a few thoughts on legal issues to consider before moving into the direct food sales arena. Doing so will reduce your risks and the potential of legal liability.
1. Follow COVID-19-related guidelines
Perhaps this goes without saying, but businesses should take COVID-19 guidelines seriously. Doing so will hopefully reduce the potential of a COVID-19 transmission in the operation while also minimizing the risk of an enforcement action and potential legal liability for failing to protect employees and customers. Follow the Ohio Department of Health Responsible RestartOhio Guidelines that are now in effect. Engaging directly with customers places a grower in the “Consumer, Retail and Services” sector guidelines, which are here. Mandatory requirements include protecting the health and safety of employees, customers and guests by establishing six-foot distances or barriers, wearing face masks, handwashing and sanitizing, checking for symptoms daily, posting signs, deep cleaning, and dealing with suspected and confirmed cases of COVID-19. The FDA has also issued “Best Practices for Retail Food Stores, Restaurants and Food Pick-Up and Delivery Services” here, and OSU’s direct marketing team has many helpful resources for implementing the practices here. Develop protocols based upon the guidelines, carefully train employees on protocols, and document your compliance.
2. Determine what food safety regulations apply to you
For food safety purposes, the Ohio Department of Agriculture and local county health department require licensing or inspection of certain types of food sale activities. The regulations are a bit messy, and it’s challenging to know when an operator is affected by these regulatory requirements. We’ve explained licensing laws pertaining to sales directly at the farm in this law bulletin, “Selling Foods at the Farm: When Do You Need a License?” There are more stringent requirements for those who sell meat, process food, or sell higher risk foods or several different types of foods. We’ve provided a few simple guidelines in the chart at the end of this post, but please refer to the above law bulletin for further details. Additionally, produce growers need to comply with Good Agricultural Practice (GAPs) and Food Safety Modernization Act (FSMA) rules. Learn more about those on our Fruit and Vegetable Safety Program website here.
3. Check your zoning
If you’re within a municipality, you may have zoning regulations that apply to your production and sales activities. Check your local zoning regulation to ensure that those activities are “permitted uses” within your designated zoning district. If not, you may need to seek a “conditional use” permit. Also be aware that some municipal zoning regulations regulate “home businesses,” and a home bakery or cottage food operation that has customers coming to the home to purchase the goods might fall into that category.
If you’re outside a municipality, Ohio’s agricultural exemption from county and township zoning applies to your production and sales activities. Local zoning can’t prohibit your activities regardless of your zoning district, with limited exceptions if you’re in a “platted subdivision” situation (on a lot under 5 acres in a platted area of at least 15 other contiguous lots). Note, however, that county and township zoning can regulate a “farm market” that receives more than 50% of its gross income from goods that weren’t raised on the owner’s farm. You might need to comply with a few zoning regulations that pertain to the size and setback lines for your structure, the parking area, and ingress and egress points for customers.
4. You may have to collect sales taxes on some items
Most takeaway food items to be consumed off-site, such as meat and produce, aren’t subject to Ohio’s sales tax. But if you sell items that are not exempt from sales tax, you’ll need to collect sales taxes on the items. If you’re planning to sell ready-to-eat items on site, beverages, flowers, or container plants, you must charge and collect sales taxes and obtain a vendor’s license in order to submit the taxes to the state. Find more details in our law bulletin on vendor’s licenses and sales taxes here.
5. Review contracting situations
You’ll likely be presented with a contract or agreement in many situations, such as a farmers’ market contract or an agreement for selling on an online sales platform. Or you may need to generate your own contract for selling whole animals or establishing a “community supported agriculture” operation. In either instance, read your contracts carefully. Be sure to include and review important terms such as price, quality delivery dates, payment processes, late fees, data use, and other provisions related to your type of sale. Don’t hesitate to involve an agricultural attorney to be sure that you’ve minimized your legal risk.
6. Talk to your insurance provider
Direct food sales might not be adequately covered by your insurance policy. You’ll need to know whether you have sufficient premises liability coverage if a customer is harmed on your farm, coverage for transporting foods or for selling at a farmers’ market (typically required by the market) and product liability coverage in case someone claims illness or other injury from consuming your food. You may need to increase coverage or purchase additional riders to the policy, depending on your risk level. Reviewing your policy with your provider and aligning coverage with your food sales activities is imperative to reducing your liability risk.
7. Do you need a separate business entity?
Consider whether your food sales activities put other assets at risk, and whether your insurance is sufficient to address that risk. If not, you should consider forming a separate business entity for your direct marketing business. Forming a Limited Liability Company for your direct food sales activities can help shield your other assets from the liability of the food sales. Talk with an agricultural attorney to assess your needs and determine what type of entity is best for your situation.
8. Keep great records
This one applies to everything above. Maintain records of what you do in regards to COVID-19 precautions, employee training, food safety compliance, and financial records of your expenditures and sales. If a liability incident arises, document it carefully. Keep the records for the required amount of time, which is typically three years for receipts for purchases and sales, ten years for insurance and employee records, and permanently for other records.
9. Don’t stop here
This list is a starting point for legal considerations for direct food sales, but it shouldn’t be the end. There may be other legal issues that affect your particularly situation. To learn more and fully consider all risks of direct marketing, talk with others who’ve directly sold food, visit with your accountant, lawyer and insurance provider, and learn the best practices for growing and marketing your food products.
Do you need a license for your direct-to-customer food sales?
Peggy Kirk Hall, OSU Agricultural & Resource Law Program
Emily Marrison, OSU Extension Coshocton County
We offer this chart as guidance and not as legal advice. Please confirm your specific situation and needs with the Ohio Department of Agriculture and your local county health department.
Selling meat for custom operator processing. You don’t need a license to sell an animal to a customer who will have it processed by a custom operator. But you can’t bring custom operator processed meat back to the farm and sell it to customers in individual portions; that type of sale requires processing by a federally approved processor.
Selling meat in individual portions. You may sell cuts of beef, pork and other livestock if the meat is processed and labeled by a processor that meets federal regulations and is deemed “fully inspected” by ODA (see a list of such facilities here).
Selling chickens processed at the farm. Growers may be surprised to learn that no license is required to process and sell up to 1,000 birds per year at the farm where the birds are raised. But if a grower sells the birds along with other food items such as produce, then the grower must register as a Farm Market and be inspected by ODA. The Farm Market registration form is here.
Selling eggs. A grower does not need a license to sell eggs produced at the farm where sold, as long as the grower has 500 or fewer birds. But if a grower wants to sell eggs through a farmer’s market or sells other low risk foods along with eggs, either a Farm Market registration and inspection from ODA (here) or a Retail Food Establishment license from the county health department is necessary.
Selling produce. Selling only fresh, unprocessed produce does not require any licensing. However, if selling other low risk foods along with produce, a grower must either register as a farm market through ODA or obtain a Retail Food Establishment license from the county health department.
Selling multiple food items. Regulation increases when a grower offers multiple types of food items for sale. If those items are “low risk,” the grower must register as a Farm Market with ODA, which involves a site inspection. If higher risk foods are involved, such as meat, eggs from offsite or from more than 500 birds, dressed poultry from offsite or from more than 1,000 birds, the grower must obtain a Retail Food Establishment license from the county health department.
Selling cottage foods and home bakery goods. Many home-prepared foods such as cookies, breads, jams, granola, snack mixes and more fall under Ohio’s cottage food law and require no licensing, but there are labeling requirements. See our law bulletin on Ohio’s Cottage Food Law here.
Although many of us are quarantined at home these days, the gears of the legal world are still turning. Here’s our gathering of recent notable news and legal developments:
Our Farm Office is open Monday night! Join us for the Farm Office’s live online office hours this Monday night from 8—9:30 p.m. Our team of experts will provide updates on the Paycheck Protection Program and the dairy economy and discuss COVID-19 macro-economic and export impacts, BWC dividends, property tax concerns, potential legal issues arising from COVID-19, and other issues you want to discuss. Register at https://go.osu.edu/farmofficelive.
What’s the deal with dicamba? Our partner, the National Agricultural Law Center, is hosting a free webinar on dicamba litigation on Wednesday, April 15 at noon EST. "The Deal with Dicamba: An Overview of Dicamba Related Litigation," will feature attorney Brigit Rollins, who will review each of the dicamba lawsuits, the claims made by the plaintiffs, and what the outcome of each suit could mean for dicamba use in the United States. Go here to learn more.
Walmart sued for employee’s COVID-19 death. We’ve been wondering when we’d start seeing COVID-19 lawsuits, and the answer is now. On Monday, the estate of a Walmart employee in Illinois who died from COVID-19 sued the company for negligence and wrongful death. The complaint alleges that Walmart failed to properly clean the store or provide employees with masks, gloves, antibacterial wipes and other protective equipment, knew that employees were exhibiting COVID-19 signs and symptoms, and did not screen new employees for COVID-19. A second employee at the same store has also died of the virus. Read the complaint here.
Shell eggs go to market. The FDA issued guidance that eases up packaging and labeling requirements during the COVID-19 pandemic for shell eggs sold directly to consumers in retail food establishments. The agency explained that it made the change because plenty of shell eggs are available to meet increased consumer demands, but properly labeled retail packaging for the eggs is not. See the guidance here.
EPA’s glyphosate approval is challenged. Glyphosate, used in the weed killer Roundup, is in the news again. This time, the controversy surrounds the EPA’s decision in January 2020 to allow glyphosate to continue being used in the interim while the agency conducts its mandatory 15-year re-approval review. Although EPA has yet to make its re-approval decision, two groups of plaintiffs have petitioned the Ninth Circuit Court of Appeals for an invalidation of the EPA’s decision allowing continued use in the interim. Plaintiffs argue that the decision violates both the Federal Insecticide, Fungicide, and Rodenticide Act and the Endangered Species Act because the EPA has not gathered enough information to prove that glyphosate is safe for humans, the environment, and endangered species. You can read the petitions here and here, and EPA’s interim decision here.
No rehearing for RFS litigation. We reported previously that the Tenth Circuit Court of Appeals held the EPA in violation of the Renewable Fuel Standard (RFS) when it granted RFS blending waivers to three small refineries. While the Trump administration did not appeal the court’s decision, two of the oil refiners requested a rehearing before the full panel of Tenth Circuit judges. This week, those requests were rejected by the Tenth Circuit, starting a 90-day period during which the refiners may petition for a hearing before the U.S. Supreme Court.
ODNR suspends hunting and fishing license sales for non-residents. The Ohio Department of Natural Resources announced this week that it is “temporarily suspending the sale of non-resident hunting and fishing licenses until further notice” to further discourage travel into the state. ODNR has no set date to lift the suspension; it will be in place as long as state COVID-19 orders dictate. Read ODNR’s press release here.
BWC gives dividends and deferrals. The Ohio Bureau of Workers’ Compensation board decided yesterday to pay dividends to employers for BWC premiums to the tune of up to $1.6 billion. Checks will go out to employers later in April, and will equal approximately 100% of the BWC premiums paid in their 2018 policy years. The agency is also allowing employers to delay unpaid premium installments due for March through May until June 1, 2020 and will not lapse coverage or assess penalties for amounts not paid due to the COVID-19 pandemic. See this FAQ for details.