Business Essays - Fine Foods Company

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Fine Foods Company

Kudler’s Fine Foods has decided to close three departments (deli, confectionary, and onsite prepared meals) in order to refurbish for its new venture in the catering service. The management team now has to make sure the company has all legal rights to layoff their employees. The team will also need to develop a criteria matrix for the layoff to insure all federal and local employment laws are adhered too.

Kudler’s will need to ask some questions on whom, what, when and how these departments will be closed. Once this is information is narrowed down, the team will fine-tune the legal constraints. This paper will address the legal obligation that Kudler’s has to their employees in reference to the layoff, contracts with the local organic growers, product liability and regulatory implications and employment laws for new hires.

Department layoff/shutdown

A company has the legal right to shutdown a department or layoff their employees. The question that needs further clarification is – what are the legal obligations the company has to their employees when this situation happens? Eight factors that are important in the decision making process of the layoff:

1. Job security

2. Employee privacy

3. Age Discrimination

4. Title VII – gender, religion, race, national origin

5. Wages, benefits and pension laws

6. Employee safety, health and well-being laws

7. Equal opportunity laws

8. ADA – American with Disabilities Act

Title VII states the employee’s rights are protected through race, religion and national origin and gender. Kudler’s understands these protections keep their employees happy and motivated, and at the same time protects the employer from any violations. Kudler’s has policies and procedures in place that are detailed and specific to protect employees from these violations in their daily operations.

The American Disabilities Act (ADA) protects disabled employees from discrimination in employment practice such as hiring, firing, training, job application procedures, layoff, fringe benefits and leave, just to name a few, (Job Accommodation Network, 2008).

Just for clarification, ADA considers a disabled employee as someone with AIDS, visual impairment, mental retardation, paralysis, HIV infection, epilepsy or a learning disability that is specific (Job Accommodation Network, 2008). Kudler’s will venture to make sure all policy and procedures are in place to protect these individuals from violations of the ADA laws.

The Equal Employment Opportunity Commission (EEOC) was established to protect employees or potential employees from discrimination and their civil liberties (U.S. Equal Employment Opportunity Commission, 2008). This law is in effect to guard against undesirable treatment from the employer based upon age, sex, color, race, religion, national origin, mental/physical handicap, sexual orientation (U.S. Equal Employment Opportunity Commission, 2008).

The EEOC has helped prevent the discrimination of these people. With this law, Kudler’s employees will have job security, employment at will and common law. Kudler’s has a strong policy and procedure manual, employee handbook and human resource department that abide by these laws, which ensure their employees, are protected from discrimination. If needed, they also have action steps outlined in the event this does take place.

The Age and Discrimination in Employment Act (ADEA) protects job applicants and employees of discrimination whom are 40 years of age or older (Facts about Age Discrimination, 2008). This protects the person from discrimination of promotion, layoff, firing, hiring, job assignments, training and compensation. All employers who have 20 or more employees must adhere to this law (Facts about Age Discrimination, 2008).

Kudler’s once again will ensure all ADEA laws are not broken in reference to the age discrimination and job layoffs. The Equal Pay Act of 1963 goes along with the three laws listed above and is enforced by the EEOC (Equal Pay and Compensation Discrimination, 2008). The Equal Pay Act protects employees from discrimination of equal work for equal pay.

Five factors that go into consideration when trying to prove the Equal Pay Act was violated: skill, effort, responsibility, working conditions and establishment (Equal Pay and Compensation Discrimination, 2008). Kudler’s has strong criteria set in place on their job descriptions and classifications that will be in compliance with this law for job security and equal pay.

The job description of the Kudler’s Director of Administration and Human Resource is specific on the individual’s essential duties, required qualifications and experience. The Director must be knowledgeable in federal, state and employment laws and must also have human resource experience.

These qualifications will assist the Director in consulting with Kudler’s legal counsel about any federal and state laws issues that may arise. They must also insure all policies are in compliance with these laws (University of Phoenix, 2008). Kudler’s takes these federal, state and local laws very seriously and have taken steps to ensure all these laws will be adhered to within their company.

One question that needs to be asked by Kudler’s is can they legally shut down these departments? Since Kudler’s does not meet the statutory requirement of the number of employees to enact the Worker Adjustment and Retraining Notice (WARN) this law does not apply. WARN is a legal requirement for employers who have 100 or more employees (U.S. Department of Labor, 2008). Doing business in California is an employment at will state which is supported in the Kudler’s Personnel Polices (University of Phoenix, 2008).

Kudler’s can shut down any department and could have a reduction in force. They will need to follow the Kudler Personnel Policies for pay out of vacation balances and if possible offer a severance package. Any moral obligation Kudler may consider is to have the state employment office available for those workers dislocated. The employees remaining will need to have the skills and abilities to perform the current or newly created positions.

Contract with Organic Produce Growers

The local organic produce growers would like to enter an agreement to supply Kudlers with their produce requirements. Prior to Kudlers agreement to a contract, several questions should be contemplated and answered.

  • What amount of product will the growers require Kudler to purchase? If Kudlers does not have the demand for what the growers produce, will minimum purchased amounts be established? (Brooke, A. F., 1992).
  • Will Kudler be given special pricing terms if they agree to an exclusive agreement? Special cost and margin considerations should be given to Kudlers for an exclusive agreement according to (Srivastava, Chakravarti, & Rapport, 2000).
  • What consideration in addition to pricing would be given to Kudler for an exclusive agreement? An exclusive agreement should be accompanied by special compensation (Srivastava, Chakravarti, & Rapport, 2000).
  • Will the growers produce an exclusive private label for Kudler? Private label provides higher margin and helps with brand identity (Crainer, 2008).
  • What remedy will Kudler have if the growers fail to perform to the agreement? Damages should be sought by Kudler in the event of non-performance to the agreement for cost incurred (Pearce, D. & Halson, R. 2008).
  • What penalty will be levied against Kudler if they fail to honor any part or parts of the agreement? Growers should be entitled to seek cost related damages if Kudlers fails to honor the agreed upon contract (Pearce, D. & Halson, R. 2008).
  • What product quality guarantee will the growers provide to Kudler? Kudlers should request an express warranty to ensure the goods are what the growers claim (Mallor, Barnes, Bowers, & Langvardt, 2003).
  • Who will inspect for organic growing and handling guidelines? Kudlers should request frequent inspection by the government organic guidelines enforcement body (United States Department of Agriculture, 2008)
  • What payment terms will the growers agree to with Kudlers? Payment terms of 15 days or more would benefit Kudlers cash flow. They would sell the product before making payment to the suppliers.
  • What will the delivery frequency be, and how will the growers react to increased or decreased demand? Kudlers should request and arrangement for just in time inventory replenishment directly to the stores because of the perishable nature of produce.
  • Will product liability be entirely assumed by the growers, and will the growers agree to hold Kudlers harmless for product liability? Kudlers should request to limit their liability through some type of hold harmless product liability agreement with the growers (Parry, 1990).
  • What insurance provisions have the growers made for product liability and other liability concerns? Kudlers should request proof of liability insurance from all growers to limit their liability (Mallor, Barnes, Bowers, & Langvardt, 2003).
  • Will Kudlers be allowed to tour the growing and processing facilities if requested? Kudlers should request in their agreement periodic visits to inspect growing and packaging facilities.
  • What contingency will the growers provide in case of a labor shortage or strike? Kudlers should request a planned contingency for potential labor problems (United States Department of Labor, 2008).

Many concerns exist for Kudlers when considering a contract agreement with growers. If Kudlers has a good agreement signed with growers, they will be able to control their product quality. Kudlers can also limit their liability by sharing or shifting to the growers. Kudlers can increase their cash position with an exclusive contract through favorable payment terms with growers.

Food Regulations and Product Liability

Kudler Fine Foods, owner Kathy Kudler has recently expanded her business to include a catering service, but she needs to be aware of basic food regulations, product liabilities, and good workplace practices to meet all requirements set by food and safety regulations.

In today’s society many consumers such as very young children, the elderly and pregnant women with very sensitive immune systems that is more at risk for food borne illnesses. “According to the Center for Disease Control and Prevention (CDC) there are five factors that contribute to the unsafe food preparation techniques in food establishments that is considered food borne illnesses by the FDA” (U.S. Department of Health and Human Services, 2006, P.3).

Warning and safe labeling on food is to help keep consumers abreast of food borne illness and how to prepare food the proper way. These warning labels help many consumers change the way they handle food preparation at home to prevent making themselves ill.

Five food borne illnesses are:

  • Unsafe food sources
  • Insufficient cooking times
  • Inaccurate temperatures for holding food.
  • Unclean equipment
  • Staffs personal cleanliness

Kathy Kudler and her operations management team will need to decide on a food management safety system that will help them manage their food related risk. One-way Kudler can began to implement a safe food managing plan is to take a general assessment of food regulations set by the Hazard Analysis and Critical Control Point (HACCP) system. “Hazard Analysis and Critical Control Point (HACCP) system determines where contamination can happen during food production” (U.S. Department of Health and Human Services, 2006, P.11).

Section 205.308 of the National Organic Program (Agricultural Marketing Service – National Organic Program, 2008), requires that organic food be produced, processed, certified, and labeled to meet national organic standards.

Here are four approved organic labeling methods:

  • 100% organic
  • 95% organic or more
  • 75% to 95% organic
  • 70% or less organic

Kathy Kudler and her operation management team must monitor the workforce to assure they do not become careless with labeling food products incorrectly. Mislabeling a food product could lead to serious criminal and civil liabilities for Kudler Fine Foods. “Product liability is when a consumer is injured by a defective product and can be legally compensated from the retailer” (Einstein Law, 2004, P.1).

In product liability cases negligence and strict liability plays an extreme part in determining the outcome of a case. Strict liability makes a business responsible for all injuries sustained by consumer who purchased a defective product; on the hand negligence makes a business legally responsible for getting medical care to a consumer who was injured by a defective products when the business refuses to provide it.

Kathy Kudler must surround herself and her business with good legal advisors who are knowledgeable about food product liability laws and regulations. Food product liability insurance can protect a retailer in the event a consumer is injured by a food product. Suggested coverage that a retailer should carry is in the range of $1 million to $2 million dollars. Good business practices is to ask suppliers for certificates of insurance in order to operate as a real company and to protect assets.

Kathy has been very fortunate to have her sister-in-law Anne Shousha as her legal counsel, this has help Kathy keeps her legal fees to a minimum. Even though Kudler Fine Foods is a fairly new establishment the business has already had several customer accidents that have ended in litigation and out of court settlements.

Kathy Kudler must also implement safety regulations for food preparation for her workforce to be trained in. These safety standards should consist of sanitation of hands during and after food preparation, the correct ways to handle ready to eat foods, the correct way to label organic and non-organic foods, the correct temperatures to set for hot and cold foods, and how to keep good food records for traceability.

Good record keeping allows Kudler to keep accurate dates of purchase, product sources, food quantities and certifying agents for organic products. These records should be kept and maintained for at least 3 years. Food service operators have a responsibility to maintain a safe food managing plan. Kudler Fine Foods can avoid any future litigation by making sure staff and managers are accurately trained in food preparations and handling, record keeping and correct labeling of foods to help consumers stay aware of potential dangers of not preparing foods correctly.

Employment Law

In obtaining new employees as Kudler Foods expands, the company will be faced with specific legal requirements to ensure that the workers hired, are protected from discrimination, unfair practices and a safe environment. In order for employment law to be effective, the consideration of the powers of government over business and commerce within the states must be defined.

The powers of government would be the legal body to establish the laws that become enforceable to violators of the laws, which embody employment. The consequences of actions that violate employment law can be argued as the deterrent against violating the laws and regulations.

One specific component faced by business and industry, is the human component, which deals with the relationship variable in a business. This is the foundation of discrimination that can occur in the workplace. Kudler Foods would need to understand this component as the locality of each satellite store and areas of potential growth, represent various ethnic groups, some of which are a majority. As Kudler Foods is determined to obtain local products and use local vendors, problems such as territorial disputes could arise, causing friction even in the workplace.

The first legal foundation in understanding employment law is, who governs or regulates employment law? The Federal and State Governments both have regulatory power, but both face a situation in which they are geared towards the governing body each represents. Where State laws place powers of regulation within a state under their jurisdiction, while the laws regulated in Commerce within the United States falls under the jurisdiction of Congress.

The authors Jentz, Miller and Cross point out that article VI of the US Constitution, commonly known as the “Supremacy Clause,” determines the relationship between federal and state laws when conflict exists, rendering state law invalid. (2002, p. 70). This act reduces the State to function solely in the policing of business and industry, but in order to accomplish this; the State must enact laws that are similar to what the Federal Government establishes. The authors Jentz, Miller and Cross, point out in article I, Section 8, otherwise known as the “Commerce Clause” gives Congress the power to regulate commerce within the United States. (2002, p.69).

Kudler Foods faces expansion into the local markets through vendors and local products. To accomplish this, Kudler will come into contract with the vendors that supply and transport the products. Once the contracts have been established, these third parties are now considered agents of Kudler Foods and would fall under some aspects of the same employment law umbrella that is given to direct employees.

The specific components of which these agents are entitled are based on the discrimination, and health and safety protections. This only occurs when functioning on behalf of Kudler Foods. The authors Jentz, Miller and Cross explain that under 42 USC, Section 1981 of the Civil Rights Act of 1866, prevents discrimination between employers and independent contractors. (2002, p. 565).

Unfortunately, as business turns to independent contractors for outsourcing certain aspects of the operations of a company, an attorney would need to prove the employment relationship between the company and the contractor, which leads to case law citing the employment law protections for contracted parties in relation to the company.

Kudler Foods has satellite stores in areas of Southern California, which have a mix in ethnic and cultural groups, and socioeconomic statuses. The company itself points out, it intends on pursuing the market in San Francisco, where the Asian population is predominant. In opening local stores within these markets, Kudler Foods primary legal focus is to ensure equality amongst all prospective employees.

Several laws, which focus strictly on the equality of employees protect the various groups that would be represented in each store falls under Title VII. Barnes, Bowers and Langvardt point out that Title VII of the 1964 Civil Rights Act covers the discrimination of employees, based on behavior, whereas the Equal Pay Act covers discrimination based on pay, which focuses on sexual discrimination and will determine the fairness of the pay rates even in areas which represent both ends of the socio-economic spectrum. (2003, p. 1172).

In conjunction with these laws, the American Disabilities Act adds another level of protection for both employees and potential candidates. This act falls under the jurisdiction of Title VII, while maintaining a distinct status under its own act, allowing for protection beyond contracted employees.

Kudler Foods is owned by Kathy Kudler. Case history shows that the majority of sexual discrimination cases stem from male owned or operated businesses. I believe, in this case, the idea of the proverbial “Glass Ceiling” is not as apparent. However, a potential for sexual discrimination may exist.

Each employee falls under the protections of the Fair Labor Standards Act of 1938. This law establishes a federal minimum wage. The federal minimum wage is determined by Congress but is only specific to covered industries. As authors Jentz, Miller and Cross-point out, the overtime protections do not extend to exempt employees.

The categories for exempt employees are executive, administrative, professional and outside employees (2002, p. 749). The act also protects against child labor. As the stores are local to specific communities, Kudler Foods can opt to employ under age workers, given the various restrictions, but would aid in promoting a family oriented business.

Employees also face legal protections under health and safety. These protections are only enacted when conducting business on behalf of Kudler Foods. If Kathy or any staff member meets a vendor or is searching for local produce, those protections are extended to each worker, even if she is in a traffic accident between meetings. Jentz, Miller and Cross-illustrate the abstractness of coverage to an employee by providing an appellate decision, which drew a line in where employee coverage extends.

The authors cite that in one Missouri Appeals Court decision, Rogers v. Pacesetter Corp, Rogers left a bar on his way home and was involved in an accident. The appeals court determined that Rogers’ home was an integral part of his job and therefore coverage of employment benefits extends into the household also. (2002, p. 754).

Other various laws extending into employment law exist, which have not been discussed. Entire courses in law schools across the country have been dedicated to employment law. Case law changes the face of these laws, in interpreting the language. As the federal laws override state laws in cases of disputed claims, several organizations are used to aid in the interpretation of these laws.

One such example is the EEOC (Equal Employment Opportunity Commission) and the States’ Labor and Industries boards. Kudler Foods’ biggest focus should be on the human factors within each area, such as sexual and racial discrimination. In understanding these laws, Kudler will be protected as an organization. Kudler Foods could use this same information in promoting its business in each locale.


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