food law

The world loves a good baker.  If you’re one of those good bakers and you want to sell your baked goods, do you need a license?  Maybe. Our newly revised law bulletin, “The Home Bakery Registration Law in Ohio,” explains when a license or “registration” is necessary for selling home baked goods in Ohio.

Whether you need to register for a Home Bakery license depends on the type of baked good you’ll produce. Certain foods are at lower risk of a food safety concern when produced at home, which we refer to as “non-potentially hazardous” foods.  Those foods might fall under the Ohio Cottage Food Law, which does not require a license or registration for those who want to produce and sell foods that are on the cottage foods list. When a home baked good does pose higher food safety risks, however, the home bakery law applies to that food and additional practices are necessary to reduce food safety.  The producer who wants to sell that type of home baked good must register as a “Home Bakery" with the Ohio Department of Agriculture to help ensure that food safety practices are in place.

Which home-baked foods fall into which category?  This chart illustrates the differences between non-potentially hazardous “cottage" foods and potentially hazardous “home bakery” foods. If a food falls into the “potentially hazardous” category, the producer needs to apply for a Home Bakery license. 

What’s required for the Home Bakery registration?  Our law bulletin explains the registration and inspection process and labeling requirements.  Read more about those parts of the Home Bakery Registration Law in our bulletin, available on the Farm Office Food Law Library at https://farmoffice.osu.edu/our-library/food-law.

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. 

By Ellen Essman, Sr. Research Associate

On September 25, 2018, USDA found a Cleveland, Ohio company to be in violation of the Perishable Agricultural Commodities Act, or PACA.  USDA initiated the complaint against Forest City Weingart Produce (Forest City) in November 2017.  Forest City’s failure to pay $716,689, collectively, to numerous produce sellers is considered “unfair conduct” under PACA.  The complaint was determined to be valid, and consequently, Forest City is not permitted to “operate in the produce industry” for a time.  Because USDA found Forest City’s violations to be “repeated and flagrant,” under PACA, the Secretary of Agriculture had the authority to revoke the company’s license.  According to USDA’s press release, Forest City will be able to reapply for a PACA license on September 21, 2020.  The principal officers of the company are also banned from being “employed by or affiliated with any PACA licensee” through September 21, 2019.  Since Forest City has been found to have violated PACA by participating in unfair conduct, the law states that the company is liable to those they took advantage of “for the full amount of damages,” which in this case, would be the aforementioned $716,689. 

What is PACA?

PACA was passed in 1930.  The Act’s purpose is to promote “fair business practices” when buying and selling “perishable agricultural commodit[ies].”  A perishable agricultural commodity is defined in the law as “fresh fruits and fresh vegetables of every kind and character,” which can also be “frozen or packed in ice,” including “cherries in brine.” 

PACA contains a list of what the law considers to be “unfair conduct.”  Such unfair conduct is unlawful for commission merchants, dealers, or brokers, who are essentially the middle-men of the perishable agricultural commodities industry, to engage in.  The following actions are deemed to be “unfair” under the law, and therefore illegal when the transaction is in interstate or foreign commerce:

• Using any unfair, unreasonable, discriminatory, or deceptive practice when weighing, counting, or determining the quantity of a perishable agricultural commodity;
• Rejecting or failing to deliver perishable agricultural commodities under the terms of the contract, if there is no reasonable cause for the failure;
• Discarding, dumping, or destroying any perishable agricultural commodity received without reasonable cause;
• Making a false or misleading statement, for a fraudulent purpose, in connection with any transaction involving a perishable agricultural commodity; failing or refusing to make full, prompt, payment in such a transaction; or failing to perform any specification or duty in such a transaction without reasonable cause;
• Misrepresenting by word, act, mark, stencil, label, statement, or deed, the character, kind, grade, quality, quantity, size, pack, weight, condition, degree of maturity, or State, country, or region of origin of any perishable agricultural commodity;
• Removing, altering, or tampering with any card, stencil, stamp, tag, or other notice upon any container or railroad car containing any perishable agricultural commodity, if such notice contains a certificate or statement under the authority or law or regulation of the federal or state government concerning the grade, quality, or origin of the commodity;
• Making any change by way of substitution or otherwise in the contents of a load or lot of any perishable agricultural commodity after it has been officially inspected for grading and certification. 

PACA also makes it mandatory for commission merchants, dealers, and brokers to be licensed.  In order to obtain a license, both an application and fee are required.  If all the requirements are met, the Secretary of Agriculture may issue the license.  Licenses can be annual or cover multiple years, depending on the type of entity licensed.  The Secretary may also suspend or revoke a license. 

Violations, Complaints, and Liability

PACA specifically states that when any commission merchant, dealer, or broker is found to have participated in unfair conduct (discussed above), they are “liable” to those injured by their conduct “for the full amount of the damages sustained in consequence of such violation.”  Liability can be enforced through the complaint process or through the courts.  Complaints of unfair conduct can be sent to the Secretary of Agriculture up to nine months after the unfair conduct occurs.  Notifications of violations by merchants, dealers, or brokers can also be sent to the Secretary by officers of state agencies.  The Secretary is then able to investigate complaints and notifications.  If the investigation shows violations occurred, then the Secretary can “have the complaint served” on the violator.   If the alleged damages are more than $30,000, the Secretary must provide the violator with the opportunity for a hearing.  After a hearing, the Secretary can “determine whether or not the commission merchant, dealer, or broker has violated” any part of the law regarding “unfair conduct.”

Those interested in background information on PACA, fees, licensing, etc. can find it at the USDA’s website, here.  The federal regulations that accompany PACA are here. 

It's Farm Science Review week!  Be sure to visit us in the Firebaugh Building to get your questions answered and pick up copies of our Law Bulletins and a helping of candy corn.  We'll be speaking on "Pond Liability" at the Gwynne Conservation Area on Wednesday and on "Estate Planning:  Mistakes to Avoid" in the Ask the Experts session everyday.

Here's our gathering of ag law news you may want to know:

Movement on Ohio “Watersheds in Distress” rules.  As we have reported on several times this summer, Governor John Kasich signed an executive order on July 11, 2018 directing ODA to “consider whether it is appropriate to seek the consent of the Ohio Soil and Water Commission (OSWC) to designate” certain watersheds “as watersheds in distress due to increased nutrient levels resulting from phosphorous attached to soil sediment.”  Since that time, ODA has submitted a proposed rule dealing with Watersheds in Distress.  Amendments were made to the proposed rule after evaluating the first set of public comments, and ODA is now resubmitting the rules package.  ODA reopened the proposed rule for public comments, but it closed the comment period on September 7, 2018.  Information about the proposed rules, as well as how and where to comment, can be found here (click on the “Stakeholder Review” tab and then the “Soil and Water Conservation – Watersheds in Distress OAC 901:13-1” drop down option).  A draft of the newly amended proposed rules is available here. 

WOTUS woes continue.  The Obama administration’s hotly contested “Waters of the United States” Rule is back in the news, and this time, where it applies is dependent on where you live.  A background on the rule can be found in our previous blog post.  The rule basically expanded which bodies of water qualify as “waters of the United States,” which in turn protected more waters under the Clean Water Act.  The rule became effective in 2015.  Since that time, U.S. District Courts in North Dakota and Georgia have issued preliminary injunctions against Obama’s WOTUS Rule, which means it cannot be carried out in twenty-four states.  Additionally,  last summer, the EPA and Army Corps of Engineers, under the direction of President Trump, announced their plan to repeal Obama’s WOTUS Rule and replace it with the definition of WOTUS “that existed prior to 2015” until a new definition could be developed. Trump’s  rule was published on February 6, 2018, giving the administration until 2020 to come up with a new definition.   However, in a ruling on August 16, 2018, in a U.S. District Court in South Carolina, Judge David Norton determined that the Trump administration “failed to comply with” requirements of the Administrative Procedure Act when it enacted its rule.  This means that the Trump rule repealing and replacing the definition of WOTUS is invalidated.  As a result of Judge Norton’s decision, in the remaining twenty-six states without an injunction, the Obama administration’s version of the rule has been reinstated.  Ohio is one of the twenty-six states where the Obama rule currently applies.  Will the Trump administration and the EPA respond to Norton’s decision by announcing yet another new WOTUS rule?  Follow the Ag Law Blog for any updates.  In the meantime, the country remains nearly split in half by which version of the WOTUS rule is carried out. 

Regulators, meet “meat.”  Under a new Missouri law, it is a criminal offense to misrepresent a product as “meat” if there is, in fact, no meat.  Missouri’s revision of its meat advertising laws took effect on August 28th, and has been dubbed by many as the first attempt by a state to regulate what qualifies as meat.  Defining meat as “any edible portion of livestock, poultry, or captive cervid carcass,” the law prohibits “misrepresenting a product as meat that is not derived from harvested production livestock or poultry.”  Violations are treated as a misdemeanor, with a fine up to $1,000 and possible jail time.  The Missouri Department of Agriculture has said that it intends to enforce the law, but that it plans to give affected companies until the start of next year to bring their labels into compliance.  Supporters of the law, like the Missouri Cattlemen’s Association, argue that it will provide consumers with accurate information about their food, and also protect meat producers from unfair labeling of plant-based or lab-grown meat alternatives.  Opponents have already filed a lawsuit to prevent enforcement, arguing that the law restricts free speech and improperly discriminates against out-of-state producers of meat alternatives.  The named plaintiff on the lawsuit is Turtle Island Foods, an Oregon company that does business under the names Tofurky and The Good Foods Institute.  The company makes plant-based food products, and is joined in its opposition by the American Civil Liberties Union of Missouri and the Animal Legal Defense Fund.  Beyond Missouri, the National Cattlemen’s Beef Association has listed the issue as a top policy priority for this year, and the U.S. Cattlemen’s Association has petitioned the USDA to adopt stricter labeling requirements.  As this issue develops, the Ag Law Blog will keep you updated.

USDA taps Commodity Credit Corporation to aid farmers.  Readers are no doubt aware of global trade disputes in which other countries have increased tariffs on American agricultural exports.  Given the extensive news coverage, the Harvest will not attempt to cover the dispute in depth; however, one point that has been less covered is the tool that the USDA has selected to provide relief to impacted farmers: the Commodity Credit Corporation.  What is it?  The Commodity Credit Corporation (CCC) is a federal government entity created during the Great Depression in 1933 to “stabilize, support, and protect farm income and prices.”  Since 1939, it has been under the control of the Secretary of Agriculture, although it is managed by a seven member Board of Directors.  CCC is technically authorized to borrow up to $30 billion from the U.S. Treasury at any one time, but due to trade agreements, that number is, in reality, much smaller.  This gives USDA access to billions of dollars in funding without having to go to Congress first.  The money can be used to provide loans or payments to agricultural producers, purchase agricultural products to sell or donate, develop domestic and foreign markets, promote conservation, and more.  CCC has no staff, but is instead administered through other USDA agencies, largely the Farm Service Agency and Agricultural Marketing Service.  On August 27th, Secretary of Agriculture Sonny Perdue announced that USDA plans to tap the Commodity Credit Corporation for up to $12 billion worth of aid to farmers affected by recent tariffs.  The Market Facilitation Program will provide direct payments to eligible corn, cotton, dairy, hog, sorghum, soybean, and wheat producers, and the Food Purchase and Distribution Program will purchase up to $1.2 billion in select commodities.  For more about the Commodity Credit Corporation, check out its website.

Bayer reports increasing number of lawsuits against newly acquired Monsanto.  Bayer, the German pharmaceutical and life sciences company that acquired Monsanto early this summer, has indicated that there are an increasing number of lawsuits in the United States alleging that its weed killers cause cancer.  According to the Wall Street Journal, there were roughly 8,700 plaintiffs seeking monetary damages from Bayer as of late August, a sharp increase from the 5,200 plaintiffs just months earlier.  Many of these lawsuits involve cancer patients who claim that Monsanto’s glyphosate-containing herbicides like Roundup caused their cancer.  As we reported in a previous edition of the Harvest, one person’s successful lawsuit against Monsanto resulted in a San Francisco jury award of $289.2 million for failing to warn consumers of the risks posed by its weed killers.  Monsanto is expected to file motions for a new trial and for the judge to set aside the verdict, and may ultimately appeal the decision.  These cancer-related claims come at a time when another Monsanto product, Dicamba, is causing great controversy.  Stay tuned to the Ag Law Blog as these lawsuits continue to develop.