Regulatory Environment

Regulatory Environment

As a result of Kudler Fine Foods' (KFF) decisions to implement a catering service and contract for organic produce with local growers, KFF will close multiple departments at three stores simultaneously and layoff several workers. The potential outcomes of the company's proposed actions are analyzed in this paper with attention to employment law, supply contracting, regulatory issues and product liability.

Temporary Departmental Closings

KFF has decided to implement a catering service prompting the closing of the deli, confectionary and on-site prepared meal departments for three months at 3 different store locations simultaneously. The following questions are relevant to the scenario:

Can Kudler legally shut down these departments? Employment-at-will is defined in the KFF employee handbook as the employer or employee having the right to terminate the employment relationship at any time for any reason. According to the employee handbook, "you or KFF [may] terminate your employment at any time for any reason" (University of Phoenix [UOP], 2006). Therefore, KFF does indeed have the legal right to move forward with their plan.

What obligations does Kudler have to its employees? If KFF moves forward with laying off employees, "word of cutbacks should come directly from an affected employee's manager and not from a mass e-mailing or companywide announcement...[m]ore lawsuits are initiated and contemplated--and more emotional damage is done--during that short moment when a manager lets [an employee] go." (Hicks, 2001).

What alternatives to layoffs could KFF consider and why? Alternatives to consider include retraining, reassignment, using banked leave time, early retirement, voluntary furloughs and reduced workweeks (Smith & Murphy, 2001). The ethical dilemma at play is KFF's need for cutting costs coupled with the need to increase profits with the catering business line.

Contracting with Local Growers

A contract is a legally binding and enforceable voluntary agreement.

Should Kudler enter into contracts with local growers? Contracting with small local growers will be a win-win for both parties given the following information from CNN:

Supplying large grocery store chains is often too big a job for small organic farms, and many of the small, local grocery stores have been eaten up by larger ones, creating a problem for many organic farms, said Bob Scowcroft, executive director of the Organic Farming Research Foundation. "While there's an element of truth around bigger growers impacting smaller growers, it's not really either of their fault," Scowcroft said. "The ability to sell into the stream of commerce has been dramatically diminished" (CNN, 2003).

How will a contract benefit Kudler and the local grower? A contract is a tool used to protect the interests of all involved parties. Kudler is interested in a reliable supply of high quality produce and organic farming methods. The supply cost should be low enough for KFF to make a profit. The grower is interested in selling his crops to make more money than what he spent to grow them. Again, this is a win-win opportunity for both parties to get what each wants.

What happens if something goes wrong such as a crop failure? Regarding failure of a farmer to deliver, different positions may be taken by KFF in the contract. If KFF insists the produce comes from specific acreage, there should be a clause for crop failure. If KFF specifies bushels, the farmer may purchase the required deliverables from another grower (US Department of Agriculture, n.d.). Farmers should carry crop insurance regardless of the type of contract they have with another party.

Product Liability of Organic Produce

How can KFF determine that an organic farming operation complies with the standards and regulations of an organic operation? KFF should work closely with the California Certified Organic Farmers, LLC Certification Services (CCOF CS) to find certified local organic growers. "CCOF CS certification programs operate in compliance to various local, state, federal and international organic regulations and standards. These ongoing recognitions allow CCOF CS to offer its clients a broad access to organic markets" (California Certified Organic Farmers, LLC Certification Service [CCOFLLCCS], 2007, p. 3).

What regulatory implications does this have for Kudler? Strict USDA guidelines for organic growers and sellers are available through CCOF CS' website in a standards manual at: http://www.ccof.org/pdf/US%20National%20Organic%20Standards.pdf. This manual is comprehensive and includes information on growing, product composition, handling, labels, labeling and market information.

A certifying agent must conduct an initial on-site inspection of each production unit, facility, and site that produces or handles organic products and that is included in an operation for which certification is requested. An on-site inspection shall be conducted annually thereafter for each certified operation that produces or handles organic products for the purpose of determining whether to approve the request for certification or whether the certification of the operation should continue (California Certified Organic Farmers [CCOF], 2006, p. 15).

What product liability implications does this have for Kudler? If KFF places their own label on the organic produce, they will be liable via implied warranty of merchantability in the event of a contamination based on the author's research of the latest E. coli outbreak. It would be wise for Kudler to have the local grower place his own label on the produce, which shifts the product liability back to the farmer. Dole will probably be found liable for the latest E. coli illnesses and not the grocery stores supplying the spinach:

Marler of Seattle-based Marler Clark is representing 85 people so far who allege they were victims of the spinach E. coli outbreak. He said he expects the cases to be strictly about products liability and proving that his clients became ill because of a pathogen in the spinach. As in the past lettuce cases, Marler will assert negligence, though he doesn't need to prove that to prevail on the liability issue (Marek, 2006).

Hiring New Employees

Regarding employment law and hiring new employees after the expansion into catering, the following questions are relevant:

Would KFF benefit from a "no layoffs policy?" KFF could easily close one store's departments

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