As we enter the fifth month of the COVID-19 crisis in the United States, the global pandemic continues to have a significant impact on the food industry.  Many of the changes that are anticipated are the result of increases in the cost of doing business and COVID related pronouncements. Together, this ‘double whammy’ will create a wide range of challenges for the food sector. 

Based on a recent report issued by the New Jersey Food Council, there are several key areas to watch. Here is an Executive Summary of the most important obstacles that are likely to occur:  

  • Changes that will increase the cost of doing business

Rising minimum wage will cause additional costs in every situation from retail stores to food manufacturers:

The minimum wage will increase from $11.00 per hour to $12.00 on January 1, 2021 and is subsequently scheduled to increase by $1.00 every year until it reaches $15.00 in 2024. 

Likewise, the expanded paid family leave requirement went into effect on July 1, 2020, increasing employee benefits and costs for employers:

This law doubles the length of time an employee can utilize paid family leave from six to twelve weeks within a twelve month period, and increases the amount of intermittent leave allowed to be used from 42 to 56 days. This law also increases the amount of the weekly benefit from two-thirds of an employee’s wage to 85 percent of the wage, and expands the definition of family member. 

Rising transportation costs will need to be absorbed or passed on to customers:  

On September 13, 2020, the tolls on the Turnpike will increase 36%, the tolls on the Parkway will increase 27% and the tolls on the AC Expressway will increase 37%. 

Given how much fuel consumption has decreased during COVID, there is a strong likelihood that the gas tax will be increased on October 1, 2020, in order to support the 2016 statute which calls for the combined Petroleum Products Gross Receipt tax and motor fuels excise tax to be set to generate roughly $2 billion per year to support the Transportation Trust Fund (unless the statute is changed). 

  • New industry mandates will add new procedures

New food waste recycling mandate will impose new costs and procedures in the industry by requiring that food waste be sent to a recycling facility unless the cost is at least 10% more than the cost of transporting food waste for disposal as solid waste. 

  • COVID-19 Related “Emergency” Changes  

The WARN Act

The effective date of the expanded WARN Act was extended to 90 days following the termination of the State of Emergency. 

This law also provides that the definition of a mass layoff, which triggers the notification and severance requirements under the WARN Act, does not apply to a mass layoff resulting from a fire, flood, natural disaster, national emergency, act of war or similar factors. 

The Product Return Law

This law remains in effect, limiting the return of groceries and other foodstuffs purchased by customers during a declared State of Emergency pertaining to COVID-19, and for 30 days following the end of the State of Emergency. As such, a retailer is not permitted to accept the return of these products during this time period, except a retailer may, in its sole discretion, accept the return of goods due to a manufacturing error or defect, in which case the products may not be offered for resale. 

Food Assistance

The NJ Department of Human Services announced that special food assistance benefits will be delivered starting next week to children who normally would have received free or reduced-price school meals if not for COVID-19 school closures. 

New Jersey Pandemic-EBT (P-EBT) benefits will be provided to both SNAP recipients and non-SNAP households with children who normally receive free or reduced-price school meals. 

The USDA Food and Nutrition Service has approved an extension of all currently active State WIC waivers from June 30 to September 30, 2020. 

Governor Murphy has issued an Executive Order which extends certain statutory deadlines, including those governing food items such as milk plant and bulk milk hauler permits by 90 days.

In addition, insurance carriers or self-insured employers responsible for the payment of workers' compensation death benefits to a dependent are required to notify the Division of Workers' Compensation of the need to have the Second Injury Fund make supplemental benefit payments to the dependent not later than 60 days after the date on which it is determined that payment of supplemental benefits is required has been extended to 60 days after the last day of the public health emergency. 

Potential Changes to the State Budget 

In response to the pandemic, the Legislature and Governor agreed to extend the State fiscal year  by three months, so that the current fiscal year ends on September 30, 2020. 

The Governor will release his proposed revised Budget for the 2021 Fiscal Year the end of August which will likely include tax increases to be proposed and to be part of the negotiations between the Governor and the Legislature.

If you have any questions about these upcoming, or anticipated, changes and the impact on your company’s situation, please do not hesitate to contact us.