The Changing Egg Market

When an average American consumer goes to the grocery store, they might be amazed at the difference from 15 years ago. Gone are the days where a consumer had limited options in the egg aisle. Now a consumer must decide between options such as conventional, cage-free, free-range, organic, vegetarian fed, and so much more. At times the amount of options and considerations can be overwhelming for consumers. Most consumers simply want to pay as little as possible for eggs, but many consumers also want to choose the healthiest eggs for their families and to purchase eggs produced from the most humane methods available. The federal government does not provide consumers with any guidance, however some states have affected the way consumers buy eggs at the store, especially concerning cage-free and conventional eggs. For example, California and Massachusetts have passed laws that require all eggs produced and sold in their states are produced using cage-free systems or enriched colony systems.

Let’s first take a look at how eggs are produced in the United States. Over the last ten years the United States egg industry has seen a drastic change in consumer preferences and state laws. For decades, the “conventional” cage system has been considered the industry norm. Conventional houses are designed with the hens located in a wire cage. The eggs have the ability to roll onto an egg belt, where they can be collected periodically during the day. Manure is collected on a manure belt to help manage and control litter. However, some companies are starting to switch to a cage free system. A cage-free house allows the hens to freely roam around the houses and allows the hens to have access to nest boxes/areas, perches, and a floor area. This gives the birds more room to exhibit natural behaviors. A combination of these two systems can be used, which is called an enriched colony. An enriched colony system puts the hens in cages, however it also allows them additional room to stand, sit, and extend their wings. Enriched colony systems also have perches and scratch pads available, but uses manure belts to control litter and egg belts to collect eggs. A great illustration of how the conventional egg system, cage-free system, and enriched colony system are set up can be found here.

In 2010, the Coalition for Sustainable Egg Supply began a project to look at the costs and benefits for each of the three different laying hen systems. In terms of animal health and well-being, there appears to be a positive impact in regards to behavior and tibia/humerus strength with both the cage-free system and the enriched colony system. This improvement in health is a result of the hen’s ability to move freely around the house. These two systems also have significantly fewer hens located within each house than a conventional system. Although cage-free systems have numerous benefits, there are also significant costs associated with a cage-free system, such as a significant increase in cannibalism, aggression, mortality, and keel damage. Indoor air quality and PM emissions appear to be worse in cage-free systems as well. There is more worker access to the hens in cage-free systems, but worker’s particulate matter and endotoxin exposure appears to be substantially worse. Enriched colony systems are similar, but also have the benefit of better controlled ammonia emissions. Overall, the biggest complaint concerning cage-free system and enriched colony system is the increase of cost in the eggs. This is due to an increase in operating cost and total capital.

The conversion to the cage-free system and enriched colony system seems to have started in 2008 with the passage of Proposition 2 in California, when it passed with 63.5% of the votes. Proposition 2 requires all egg-laying hens “be confined only in ways that allow these animals to lie down, stand up, fully extend their limbs and turn around freely.” In 2010, Governor Arnold Schwarzenegger signed AB 1437. into law. This bill, which was implemented in 2015, “prohibit[ed] the sale of a shelled egg for human consumption if it is the product of an egg-laying hen that was confined on a farm or place that is not in compliance with those animal care standards and would make violations of these provisions a crime.” This required any eggs produced or sold in California must comply with AB 1437. In addition, the Shell Egg Safety Rule provided a stocking density for number of hens per cage, which became effective in 2015. The stocking density is provided here:

No. Of Hens 1 2 3 4 5 6 7 8 ≥9
Sq. Inch / Hen 322 205 166 146 135 127 121 117 116



There is a misconception that these laws banned hens from being in battery cages, which is far from true. As seen in the Shell Egg Safety Rule, hens can be in a cage, but California has ensured that these hens have more freedom of movement. Although many companies have converted to cage-free, this has led to some companies using an enriched colony approach to their egg-laying facilities. This still places the hens in a control environment within a cage setting, however allows them to have the 116 square inches required by the Shell Egg Safety Rule.

Naturally, these laws were not met with favorable views from the agriculture industry, states, and companies. Since 2008, there have been three lawsuits that have attacked California’s laws. The first case, Cramer v. Harris et al., was brought by California egg producers in 2012. The district court dismissed the case and the egg producers appealed to the 9th Circuit. They argued that Proposition 2 was unconstitutionally vague. The Court affirmed, finding that a “person of reasonable intelligence can determine the dimensions of an appropriate confinement that will comply with Proposition 2.” Also in 2012, the Association of California Egg Farms filed suit against California. The ACEF also argued “language of Proposition 2 is unconstitutionally vague according to California law.” The Superior Court rejected this argument, but granted leave to amend. It held that the statute’s definition of confinement in terms of animal behavior instead of square inches “does not render the statute facially ambiguous.” The ACEF never amended their complaint and the suit was dropped.

The final case filed was State of Missouri v. Harris. Six states (Missouri, Nebraska, Alabama, Kentucky, Iowa, and Oklahoma), argued that AB 1437 violated the Commerce and Supremacy Clauses of the United States Constitution. The states argued that producers in their states could either “incur massive capital improvement costs to build larger habitats for some or all of their egg-laying hens, or they can walk away from the largest egg market in the country.” The Court dismissed this case for a lack of standing, which was then appealed to the Ninth Circuit Court of Appeals. On November 17, 2016, the Court of Appeals affirmed the dismissal of the case. The Court found the states did not establish standing because there were “no specific allegations about the statewide magnitude of these difficulties or the extent to which they affect more than just an identifiable group of individual egg farmers.” The Court also concluded there was no discrimination because “California egg farmers are subject to the same rules as egg farmers from all other states, including California itself.” It is not known what the states next action will be in this matter.

After the 2015 implementation of California’s laws, 77% of Massachusetts’s citizens decided to pass a similar bill in November 2016. Question 3 prohibits a “farm owner or operator from knowingly confining . . . egg-laying hen in a way that prevents the animal from lying down, standing up, fully extending its limbs, or turning around freely.” Question 3 further prohibits a business owner selling “whole eggs intended for human consumption . . . if the business owner or operator knows or should know that the hen . . . produced these products was confined in a manner prohibited by the proposed law.” This, like California, will prohibit the sales of eggs outside of the state that are produced in conventional cages. So far it is still too early to know what effects this law will have on the egg industry, Question 3 won’t be implemented until January 1, 2022, but will likely have additional effect on companies producing eggs outside of the state.

Despite these new laws, market changes have potentially been the biggest change to the egg industry. In the past few years, many stores and restaurants started requiring their supplier to provide cage-free eggs. Wal-Mart, the world’s largest retailer, announced in 2016 it would switch to cage-free eggs by 2025. This makes Wal-Mart join other companies like McDonald’s and Burger King, which have set a 2025 and 2017 deadline respectively. This has caused companies like Rose Acre, the second largest egg producer, to pledge “every facility it builds or refurbishes will lack cages.” Michael Foods and Cal-Maine are also is investing in cage-free systems.

No one knows what will happen over the next few years, but it does appear that the egg industry will drastically change. We could see more state laws passed, maybe a future federal standard, or more changes with consumer preference and the market. One thing is for certain though; this is not an issue that will go away any time soon.

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Starting a New Business in Arkansas

Starting a business is sort of like having a child. You’re there when it enters the world, you watch it grow through the years, and taking care of it is hard work. The first years are often difficult and may be full of sleepless nights, but the experience can be extremely rewarding. And there are more surprising similarities between the two. Sometimes children and businesses are created accidentally (it’s true ).

But of course, children are not businesses and businesses are not children (though, yes, businesses sometimes are considered legal “persons” under the law). While children are always blessings, a prospective business owner really shouldn’t create a new business without planning or consulting with specialists. Business formation requires that a prospective organizer carefully think about unique legal, economic, personal, and business considerations, such as the pros and cons of forming a business and of different types of businesses.

In this article, we will provide descriptions of the types of businesses you can form in Arkansas and a general overview of the legal considerations you should keep in mind in starting a new business in Arkansas. And though this article provides general tax considerations for each business type, we do not specialize in tax law and recommend that potential organizers direct their questions about tax matters to an accountant.

Types of Businesses

Sole Proprietorship

A sole proprietorship can have only one owner—yourself. When you do business as a sole proprietor, there is no separate business entity; all business is conducted in your name. However, you can file a form with the Secretary of State allowing you to use a name for the proprietorship other than your own name. Because only you can be the owner or member of your sole proprietorship, this also means you are personally responsible for all debts of the sole proprietorship.

Considerations:
• Very simple structure and easy to form.
• Owner is personally liable for all business debts.
• Do not need to file any forms to create a sole proprietorship.
• Though accounts don’t usually recommend it, can intermingle personal and business funds.
• Only have to pay personal income tax and can usually deduct business losses.
• Recordkeeping and tax preparation is usually inexpensive.
• Only have equity contributions of a single owner.
• Can lead to tricky estate issues (e.g., if the owner passes away, may be hard to agree on the fair value of the business).

General Partnership

General partnerships are dangerously easy to form; all it takes is two or more people carrying on a business and sharing profits for a general partnership to be created. You do not have to file a specific form to create a general partnership. Though sole proprietorships also do not require that a form be filed, one must be more cautious about accidentally forming a general partnership because general partnerships are subject to more laws and rules than sole proprietorships.

Considerations:
• Easy to form, do not need to file forms to create.
• All general partners are personally liable for business debts.
• Partners only have to pay personal income tax and can usually deduct business losses.
• Recordkeeping and tax preparation is generally inexpensive.
• Cannot have passive investors.
• May be difficult for the partnership to continue or transition when a general partner quits.
• Partners must pay taxes on all money earned in any given year even if the money was not distributed to them that year.
• Each partner’s income is subject to employment taxes.

Limited Liability Partnership (LLP)

Not to be confused with LPs or LLLPs (see below), an LLP is basically the same as a general partnership. The major difference is that LLP general partners are not subject to personal liability for the debts of the partnership. This makes the LLP an attractive, informal type of business.

Considerations:
• Same considerations as for general partnerships, except that general partners generally are not personally liable for the LLP’s debts.

Limited Partnership (LP)

Unlike general partnerships and LLPs, limited partnerships (or LPs) have two types of partners: 1) general partners and 2) limited partners. General partners usually control management of the LP while limited partners generally act as passive investors in the partnership. Considerations:
• Partners only have to pay personal income tax and can usually deduct business losses (though deducting losses may be more difficult for limited partners).
• At least one partner (a general partner) must be personally liable for partnership debts.
• Taxes can sometimes be structured to avoid employment taxes.
• Can have passive investors.
• The partnership can smoothly transition when a limited partner quits, but may not transition as easily if a general partner quits.

Limited Liability Limited Partnership (LLLP)

Just as an LLP is a slightly modified general partnership, an LLLP is also a slightly modified LP that makes all general and limited partners safe from personal liability for the partnership’s debts. The LLLP is one of the newest business forms nationwide, which means that many states do not recognize the LLLP as a legal business entity.

Considerations:
• Same considerations as for LPs, except that both general and limited partners generally are not personally liable for the LLLP’s debts.
• Also, out-of-state courts may not recognize LLLPs conducting business in their state and may find that the LLLP is an LP or some other form of partnership instead.

Limited Liability Company (LLC)

LLCs used to be the newest form of business but are now commonplace nationwide. The LLC business form was designed as a flexible hybrid form that mixes the strengths of both partnerships and corporations. It is therefore a very popular business form.

Considerations:
• Informal.
• Can be more expensive and time-consuming to form.
• Generally, neither members/owners nor managers are personally liable for the LLC’s debts.
• Members/owners only have to pay personal income tax and can usually deduct business losses (unless there are more than 500 members).
• Usually taxed as a partnership but can elect to be taxed as a corporation.
• Flexible management structure that can be made to resemble corporate or partnership structures.
• Members must pay taxes on all money earned in any given year even if the money was not distributed to them that year.
• Members’ income may be subject to employment taxes.
• Accounting can be more expensive than for any other business type.
• Arkansas LLC law is somewhat muddled and unclear.

Corporation

The corporation is one of the oldest business forms and is, without a doubt, the best type of business for those seeking public investors. However, corporations are arguably the most formal type of business and require extensive recordkeeping, an organized structure, and regular meetings, which some may find not to their taste.

Considerations:
• Formal and inflexible.
• Unlike with LLCs, corporate law is well understood and very clear.
• Passive investors (shareholders) have well-defined rights.
• Shareholders, managers, and directors are generally not subject to personal liability for the debts of the corporation.
• Preferred business type for pulling in outside investment.
• Though small private corporations can be great for some, the corporation is not always a good business type for small and start-up enterprises.
• Corporate income is generally taxed twice, first as corporate income and then as personal income distributed to shareholders. However, smaller corporations can sometimes elect to avoid corporate taxation.

For most of these business types, there are lots of formal rules for proper formation, and, as with any area of law, there are exceptions to many of the rules. Therefore, as mentioned earlier, it is a good idea to consult with a lawyer, an accountant, and other specialists before forming a business. Let us worry about the technicalities while you enjoy watching your business sprout and grow!

References

• Professor Carol Goforth, University of Arkansas School of Law, Business Planning: Introduction (2017) (previously referenced material from Business Lawyering Skills class).
Secretary of State Website
Arkansas Small Business Center and Technology Development Center


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Georgia Court Limits OSHA Inspection Power in Response to Expanded Inspection at Poultry Facility

The Occupational Safety and Health Administration (OSHA) recently expanded its inspection powers, but was rebuked by the Northern District of Georgia in a November 2, 2016 order in the case of United States v. Mar-Jac Poultry, Inc. Mar-Jac centered on OSHA’s behavior in expanding an authorized, limited inspection of Mar-Jac Poultry’s processing facilities under the authority of an OSHA-issued Regional Emphasis Program for Southeastern states, including Georgia (OSHA Region 4). The Court’s decision is a sigh of relief for poultry producers and similarly situated employers not only in Georgia, but also in Arkansas, Missouri, Oklahoma, and surrounding states as Arkansas and Oklahoma (Region 6), and Missouri (Region 7) are in regions with almost identical REPs for poultry producers.

History of OSHA

OSHA is a federal regulatory agency that most businesses are familiar with. However, OSHA has not always been around in the form it is in today.

OSHA’s predecessor was not an agency but a law named the Walsh-Healey Act of 1936. Congress passed the Act during FDR’s presidency and, for almost 30 years, the Act solely governed federal health and safety standards for businesses that contracted with the federal government. During this period, these standards gradually expanded and focused particularly on workplace safety standards for war production facilities during World War II.

On December 29, 1970, OSHA became the all-encompassing and authoritative agency that it is today when President Nixon signed into law the Occupational Safety and Health Act, which expanded federal oversight of workplace safety to virtually all employers in the United States. Most private employers and some state and local agencies would now have to follow standards created by and allow inspections conducted by the newly created OSHA regulatory body. Employers would also be subject to fines and, in severe situations, criminal penalties for violations of OSHA standards.

Regional Emphasis Programs


In 2015, OSHA launched a Regional Emphasis Program (REP) for poultry processing facilities in Southeastern states, including Georgia. Besides poultry, OSHA has REPs for a variety of industries and issues, including the retail industry, construction industry, and noise in the workplace. The purpose of the REPs is to (1) “address hazards or industries that pose a particular risk to workers in the office's jurisdiction” and (2) educate employers about the programs and work hazards. OSHA accomplishes these goals through outreach and enforcement activities, including inspections. REPs usually last for one-year intervals and may be renewed year-to-year. OSHA initiated the Southeastern poultry REP in late 2015 after noting in a press release that “poultry workers are twice as likely to suffer serious injuries and six times more likely to get sick on the job than other private sector workers.” The program began with a three-month training and education initiative and then moved into the targeted enforcement phase in 2016, which ended on October 25, 2016.

The Mar-Jac Inspection



Normally, an OSHA inspection is a fairly routine and limited process. OSHA inspectors are only allowed to inspect facilities, areas, and documents covered by the inspection warrant authorizing the inspection. If the inspector finds a violation, OSHA has the authority to issue fines or penalties against the employer.

However, OSHA recently expanded its normal inspection power through use of the REPs. The 2015 Southeastern poultry processing facilities REP broadly stated:

Area offices will normally conduct inspections for all complaints, formal or non-formal, which contain allegations of potential worker exposure to poultry processing hazards unless there are significant resource implications. In addition and where applicable, all unprogrammed inspections will be expanded to include all areas required by this emphasis program.

The REP essentially gave all discretion of whether and when to expand an inspection from one part of a facility to other parts or the whole facility to the OSHA Area Director for the region.

In Mar-Jac, the Northern District of Georgia found that this language was too expansive and violated administrative process rules (which are governed by the Fourth Amendment). The Court stated that expansion of an inspection requires a showing of reasonable suspicion that a violation has occurred or is occurring and will likely be found by OSHA through further inspection. The Court then held that it is okay to expand inspection of a facility if an inspector finds specific evidence of certain hazards or violations, but that it is not okay to expand inspections based on evidence of “possible” violations.

Furthermore, the Court found problems with the way the Area Director chose to expand the inspection at Mar-Jac Poultry’s facilities. Because OSHA has limited financial resources, the Area Director was only realistically able to choose to expand one inspection per year. The Area Director would therefore choose only one out of many facilities eligible for an expanded inspection. The Court found that the choice of whether to expand an inspection must be based on neutral, objective factors and cannot be decided based on one (or maybe even more than one) person’s discretion and whim.

As stated before, the Mar-Jac decision is great news for Arkansas, Missouri, and Oklahoma employers and especially for poultry producers in the area. The language from the Region 4 REP (quoted above) giving authority to the Area Director to expand inspections “where applicable” is in the Region 6 (Arkansas & Oklahoma) REP. Furthermore, all of the language quoted above is almost exactly the same in the Region 7 (Missouri) REP. These three poultry processing REPs (in Regions 4, 6, and 7) are the only three REPs for the poultry processing industry and affect 16 states overall. Though the Northern District of Georgia’s opinion is not binding outside of Georgia, Mar-Jac has set an important precedent upholding constitutional protection of facilities from arbitrary expansion of searches when there is no direct evidence of further violations.

Also of note is the fact that while none of the REPs for other industries and issues seem to contain the exact language of the poultry processing REPs, several contain similar language, so Mar-Jac may further set the standard for other industries affected by this sort of expanded OSHA inspection.

References

• Regional Emphasis Plans for the poultry industry and poultry processing facilities:
Region 4
Region 6
Region 7
• OSHA press release:OSHA’s Regional Emphasis Program Focuses on Reducing Illness and Injury at Southeastern Chicken Processing Facilities
• United States v. Mar-Jac November 2, 2016 Order (Case No. 2:16-CV-192-WCO-JCF)
OSHA Fact Sheet: OSHA Inspections


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Sometimes Kids Need Lawyers, Too
“One thing remains constant: children, most of all, need access to competent counsel when they come before the power of the state. Regardless of rehabilitative intentions, the truth remains that when a child’s liberty and freedom are at risk, meaningful access to legal advice and counsel is essential.”
-National Juvenile Defense Standards

Sometimes kids need lawyers, too. On June 8th, Mrs. Cook’s phone rings. The voice on the other end is saying nasty things. She hangs up, disgusted, and immediately makes a complaint to the police. Later the same day, 15-year old Gerald “Jerry” Gault is arrested along with his friend for the crime of lewd phone calls. Jerry is sent to a juvenile detention facility. No attempt was made by police to notify Jerry’s parents as to his whereabouts.

Meanwhile, Jerry’s parents have been at work all day and are confused when they cannot find Jerry once they get home. After sending Jerry’s brother out to look for him, the Gaults discover, by way of another parent, their son has been arrested. Mrs. Gault drives to the detention facility where she is told there will be a hearing on her son’s case the following day.

Jerry spends three nights at the detention facility before he is released to his parents. At a second, very informal, hearing on June 15th, Jerry is sentenced to six years in detention, until he turns 21 years old. If Jerry had been an adult when he was convicted of lewd phone calls, the maximum sentence would have been two months in jail and a $50 fine. From the day Mrs. Cook’s phone rang to the day Jerry was sentenced was seven DAYS. That was in 1964.

In the resulting case, In re Gault, the United States Supreme Court established that children have a right to counsel in delinquency proceedings. In re Gault also demonstrates exactly how fast things move in juvenile court. Juvenile defense work requires a breadth of knowledge one can only acquire through special training and time working in the system.

While juvenile law has developed and expanded dramatically since Jerry Gault was arrested in 1964, “one thing remains constant: children, most of all, need access to competent counsel when they come before the power of the state. Regardless of rehabilitative intentions, the truth remains that when a child’s liberty and freedom are at risk, meaningful access to legal advice and counsel is essential.” National Juvenile Defense Standards, Forward.

Juvenile defense is a specialized practice anchored in juvenile-specific training and practice.

Involvement with juvenile court can be confusing and scary for the entire family. This video from The Center for Court Innovation documents the feelings of anxiety and stress families go through once they are “in the system." While the video is geared specifically to New York, it applies equally to Arkansas and provides a good overview of what to expect when you are in juvenile court.

If your child needs an attorney, consider the 10 following “Guiding Principles” found in the National Juvenile Defense Standards when making your decision:

1. Juvenile defenders play a critical role in the fair administration of justice for children;
2. Juvenile defense is a specialized practice anchored in juvenile-specific training and practice skills;
3. Juvenile defense requires zealous advocacy;
4. Juvenile defense requires competence and proficiency in court rules and the law;
5. Juvenile defense requires legal representation that is individualized;
6. Juvenile defense requires representation that is developmentally appropriate;
7. Juvenile defense is based on the clients’ expressed interests;
8. Juvenile defense requires that clients be meaningful participants in their defense;
9. Juvenile defense includes counseling clients through the legal and extralegal processes;
10. Juvenile defense includes ensuring that clients and their



As a prosecutor in juvenile court for five years, Law Group attorney, Heather Campbell, was responsible for approximately 15,000 delinquency cases. These matters ranged from minor violations, such as vandalism and shoplifting, to much more serious crimes, including gang-related shootings prosecuted in adult court. The process and outcome of a delinquency proceeding can drastically impact the rest of a child’s life. As a juvenile defense attorney, Ms. Campbell provides her clients and their families with up-to-date knowledge of the criminal and juvenile legal systems as well as the diligent and individualized defense that every child deserves.

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