Regulatory Wrap-Up: Health care, taxes, security and more
Wages
Delaware: The expected vote to increase the minimum wage to $10.25/hr by 2020, up from $8.25/hr, was delayed in the Senate. The House has already approved the legislation. If it eventually passes the Senate, the governor has indicated he will sign it.
Illinois: The legislature recently passed a bill to raise the state minimum wage to $15/hr by 2022, up from the current $8.25. Many expect Republican Governor Rauner to veto the measure although publically he’s remained noncommittal. Rauner has 60 days to sign or veto the bill. Last year, he vetoed legislation establishing a $15/hr minimum wage targeted solely at caregivers for those with developmental disabilities.
Minnesota: Governor Dayton vetoed a labor preemption measure that would have nullified paid leave ordinances in Minneapolis and St. Paul and prevented municipalities from enacting minimum wage or benefit requirements above the state standard.
Missouri: In the final hours of session, the state legislature approved a much-anticipated labor preemption law. However, because some House members left the Chamber before the final vote was taken, the legislation lacked the supermajority necessary to take immediate effect. The law will instead go into effect Aug. 28, 2017. Therefore, operators in St. Louis must comply with the city’s higher $10/hr requirement until that date.
Ohio: A Franklin County (Columbus) judge ruled against a statewide labor preemption law enacted last December, which prevents localities from enacting ordinances on wage, benefits and scheduling higher than the state standard. The judge did not rule on the merits of the preemption but rather on a potentially correctable legal technicality. While the judge's ruling currently only applies to Franklin County, it has statewide ramifications. In cities like Cleveland, the ruling may encourage activists to restart local efforts around scheduling or minimum wage. Potential remedies may be found in the court or the legislature - the Attorney General is likely to appeal the court decision and the legislature is still in session.
Rhode Island: House lawmakers reached a budget deal that includes a moderate minimum wage increase. The minimum wage would increase by $.50/hr Jan. 1, 2018 and another $.40/hr Jan. 1, 2019, rising to a new minimum wage rate of $10.50/hr. The legislature is expected to approve the budget package next week, and the governor is expected to sign it into law.
Minneapolis, MN: The City Council directed staff to draft an ordinance that would raise the minimum wage in the city to $15/hr. They plan to hold a public hearing on June 22 and likely vote on the ordinance before the end of the month.
Paid Leave
Federal Paid Leave: The White House released President Trump’s budget recently which, as expected, includes a plan to provide six weeks of paid leave to new mothers, fathers and adoptive parents. Under the plan, states would be required to provide leave payments through existing unemployment insurance programs and would have to identify cuts or tax hikes, as needed, to cover the costs. The proposal drew criticism from both Republicans and Democrats.
AEI/Brookings Institution: A bipartisan coalition, the American Enterprise Institute–Brookings Paid Family Leave Working Group, released a report calling for a national paid family leave policy. AEI is a conservative think tank and has joined the growing list of right-of-center players - most notably President Trump - advocating for a policy. This dynamic, along with polling indicating that 73 percent of Republicans and 81 percent of Democrats favor a national family leave law, are leaving many Republicans both in Congress and at the state level in an increasingly perilous position when opposing paid leave.
Massachusetts: Legislators continue to debate a paid family and medical leave program. Labor interests have threatened a ballot initiative on both paid leave and minimum wage if the legislature does not act during this session. There is significant support in both chambers for a bill, and the debate could continue for the duration of the year-long session.
Scheduling
Oregon: With just over four weeks left in the legislative session, negotiations related to a statewide scheduling mandate are ongoing. With a statewide preemption sunsetting in August, employers are incentivized to compromise on some issues. Discussions with union leaders around carve outs for collective bargaining agreements and the length of advance notice requirements for employers are the outstanding issues for the yet-to-be-introduced package.
Emeryville, CA: The City Council is in the process of developing rules for implementing the scheduling ordinance, passed October 2016. The rules are expected to be made public June 26 and are scheduled to take effect July 1, following a brief, open comment period. Staff has proposed a “roll-out” enforcement period from July 1 to Sept. 30 with “regular enforcement” beginning on Oct. 1, meaning fines for violations will not occur until October. Retailers will initially be notified of violations but not fined.
Labor Policy
Persuader Rule: The U.S. Labor Department is proposing to rescind the persuader rule, which increased disclosure requirements for consultants and attorneys that assist companies with union campaigns. It never took effect because a court issued a permanent injunction against it in November. The proposal will be published in the Federal Register June 12 and will be open to public comment for 60 days.
NLRB: President Trump’s nominations for the National Labor Relations Board (NLRB) are expected any day. Marvin Kaplan and William Emanuel are the presumptive nominees and are both management-side attorneys. Once they are seated, Republicans will hold a majority on the board for the first time in almost a decade.
New York: Labor union dues will be fully deductible from New York State income tax under legislation signed late last week by Governor Cuomo. Cuomo outlined his intent at a news conference stating, “We’re going to make it easier to join labor unions.”
Seattle, WA: The courts dismissed a hotel industry-backed lawsuit challenging the voter-approved Initiative 124. While this issue only impacts hoteliers, it is notable because unions in other industries may be emboldened to replicate the hotel union’s (UNITE HERE) strategy. The union-drafted measure included a number of items typically found in a collective bargaining agreement including, but not limited to, a mandate that limits housekeepers to cleaning 5,000 square feet in a normal workday, protections against exposure to chemicals and other workplace hazards, assistance with health insurance for some workers and a requirement to retain workers in the event that a hotel is sold.
Activism
National Low Income Housing Coalition: Affordable housing advocates released an annual report this week detailing the minimum hourly wage a worker must earn to afford a two-bedroom rental, based on 30 percent of income. The study found, in order for the rental to be affordable, workers must earn between $13.72/hr-$35/hr, depending on where they live in the country.
OUR Walmart: Labor activists released a report claiming Walmart routinely refuses to accept doctors’ notes, penalizes workers who need to take care of a sick family member and otherwise punishes employees for lawful absences. Activists claim Walmart’s employment practices violate both the Family and Medical Leave Act and Americans with Disabilities Act, among other worker protections. Case studies primarily centered on stories of pregnant workers. Other brands may see similar criticisms and attacks.
Pay Equity
EEOC: Republican members of the U.S. Senate HELP Committee called upon the White House Office of Management and Budget to rescind the new EEO-1 form. The Obama-appointed Equal Employment Opportunity Commission (EEOC) updated the form to require that businesses with 100 or more employees provide pay data to the agency by race, ethnicity and gender. The update to the form was intended to help the EEOC and federal regulators better target employers who discriminate against workers. The revisions are set to take effect in 2018. Many business associations continue to lobby against the new form.
New Jersey: Negotiations on a potential compromise equal pay bill are ongoing. Term-limited Governor Christie has vetoed several previous iterations of equal pay bills. With Democrats likely to regain the governor’s mansion next year, Republicans’ best chance for a moderate bill may be this legislative session.
Oregon: The governor signed a pay equity law that prohibits pay discrimination on the basis of protected class - defined as race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age. Employees can be paid different rates for comparable work as long as there is another basis for the differential including merit, seniority or experience.
Healthcare
AHCA: U.S. Senate Republicans continue to negotiate an Obamacare replacement following the U.S. House passage of a federal health care bill (AHCA) in early May. Some moderate Republicans have floated a gradual seven-year phase out of federal funding for the Medicaid expansion that occurred under Obamacare, which is one of the more politically contentious issues. Senate Republicans can only afford to lose two votes when they bring the legislation to the floor and Majority Leader McConnell (R-KY) has stated he wants the Senate to vote on the bill prior to the July 4th recess.
California: A bill that creates a single payer health care system passed out of the state Senate. It was criticized by both Democrats and Republicans for its unfunded $400 billion price tag. The bill faces a steep climb to become law - it would need to pass the Assembly and be signed by a skeptical governor. Additionally, it would require voter approval to exempt it from spending limits and budget formulas in the state constitution. As a result of those long odds, it has been viewed by many as a purely political response to health care activity on Capitol Hill.
Taxes
Border Adjustment Tax: Last week, U.S. House Ways and Means Committee Chairman Kevin Brady (R-TX) suggested a five-year implementation delay to the Border Adjustment Tax (BAT) in an effort to make the provision more palatable to fellow Republicans and the general public. During a committee hearing last month, the BAT provision (which would put levies up to 20 percent on thousands of imported consumer items as a way to pay for overall tax reform) did not receive a positive reception. The platform offered a notable opportunity for some Republicans to join Democrats in voicing their concerns. Treasury Secretary Mnuchin has repeatedly stated the administration’s opposition to the BAT.
No Regulation Bill: Some online retailers publicly supported U.S. Congressman James Sensenbrenner’s (R-WI) recently introduced federal legislation to codify the existing physical nexus standard for sales tax obligation purposes. Proposed language defines physical presence (or nexus) in a way that would allow many online retailers to avoid sales tax obligations. The bill also applies to income and other business taxes and prevents states from imposing product-specific regulations on out-of-state sellers. Many state government groups oppose the bill because of its direct threat to state sovereignty on a variety of issues. The bill is not likely to gain enough support for passage but further complicates the sales tax issue at the federal level.
Massachusetts: The state Department of Revenue recently issued a new directive for out-of-state, online retailers to begin collecting a 6.25 percent state sales tax July 1. As a trigger, the state is adopting a unique definition of physical presence — one that relies on any downloaded apps as well as "cookies" (data that websites store on users' computers or phones to track visits). Massachusetts now considers those as physical, in-state operations for a company, triggering a sales tax collection and remittance obligation. A group of online and catalogue sellers have filed suit to stop the state from requiring collection.
Swipe Fees
CHOICE Act: The U.S House passed the Financial CHOICE Act along a mostly party-line vote of 233-186. The Act, which would repeal and replace key parts of the landmark 2010 Dodd-Frank law, faces an uphill climb in the Senate despite the priority the GOP places on the revamp. In a major win for merchants across the country, House Leadership opted to remove language prior to the floor vote that sought to repeal debit swipe fee reform after lawmakers realized merchant opposition to the issue was large enough to kill the entire legislation.
New York: The U.S. Supreme Court issued an 8-0 ruling earlier this year that said a New York law prohibiting merchants from telling consumers they are imposing a ‘surcharge’ on credit card purchases is a speech regulation that could be unconstitutional. The case is now remanded back to the 2nd Circuit which previously ruled to uphold the NY law without considering the free speech issue. Currently, ten states prohibit merchants from imposing surcharges on credit card purchases.
International Trade
NAFTA: On May 18, U.S. Trade Representative Robert Lighthizer notified Congress of the administration’s intent to begin negotiations with Mexico and Canada in an effort to modernize the NAFTA agreement. This notice triggered a 90-day period during which USTR will consult with Congress in developing its specific negotiating objectives. The administration is required to publicly outline its objectives and how those objectives benefit the U.S. 30 days prior to initiating negotiations. In its notification, USTR highlighted its interest in modernizing NAFTA in specific areas: intellectual property rights, regulatory practices, state-owned enterprises (SOEs), services, customs procedures, sanitary and phytosanitary (SPS) measures, labor, environment, as well as effects on small and medium enterprises. USTR also announced an open comment period which ended June 12 and a public hearing which is scheduled for June 27.
Data Privacy
Nevada: Governor Sandoval signed into law a bill that requires internet operators to disclose what types of personal information they collect from users. The law defines internet operators as anyone who “owns or operates an internet website or online service for commercial purposes” and collects personal information from a resident of Nevada. Personal information is defined as: first and last name, home or other physical address, email, telephone number, social security number or any other identifier that allows a specific person to be contacted either physically or online. The law also requires internet operators to disclose information on any third party contractors who may be collecting the covered information.
Transportation & Logistics
Trucking: A front page USA Today news story from last week, entitled “Rigged,” details the financial challenges faced by short-haul truckers moving cargo in and out of the Los Angeles/Long Beach port. Long a flashpoint of labor interests, the port takes in the vast majority of total U.S. goods. In 2008, the state of California required fleets of trucks that move in and out of the ports comply with new clean energy standards. The article argues that the cost of the fleet upgrade was primarily born by individual truck operators who took on the debt to upgrade their truck(s). Short-haul truckers that signed lease-to-own agreements complain that they may be fired without cause or compensation after having to make costly upgrades. Several prevalent retail brands, many of whom contract with the shipping logistics companies in question, were mentioned in the article.
Politics
Georgia: The ongoing special election for the state’s 6th Congressional District (June 20) made national news recently when Republican candidate Karen Handel stated in a debate that she opposes a “livable wage.” Her misstep highlights the sensitivity around many business model issues important to the industry.
Virginia: The state held primary elections for the November gubernatorial election last week. Unusually high turnout on the Democratic side bodes well for the current Lt. Gov. Ralph Northam (D). Notably, while serving as lieutenant governor and president of the state Senate, Northam cast the tie-breaking vote in 2014 to raise the state minimum wage from $7.25/hr to $9.25/hr.
Other
Texas: Governor Abbott has called the legislature into special session to reconsider a number of issues that stalled during the regular session. One of the top priorities of the lieutenant governor, who also serves as president of the Senate, is passage of the controversial “bathroom bill” which is opposed by many brands similar to what occurred in North Carolina.
Key Takeaways
● The off-year Virginia governor's primary election highlighted a possible reemergence of the “Obama coalition,” and potential problems for Republicans. Democrats enjoyed a significantly higher than normal turnout (170% compared to the last competitive primary). If Democrats overperform in the upcoming Georgia 6th Congressional contest (June 20), you may begin to see Republicans distance themselves from the President as they look toward midterm elections. This dynamic could have an immediate impact on our policy agenda and important issues like tax reform and healthcare.
● A recently released national affordable housing study - which shows that minimum wage workers cannot afford a two-bedroom rental in most of the country - provides a powerful talking point for the labor community, enriching their narrative around “low wage jobs” and a systemic income inequality gulf.
● In Birmingham, AL the Southern Poverty Law Center and the NAACP Defense and Educational Fund joined an ongoing lawsuit challenging minimum wage preemption. Regardless of the outcome, linking the wage conversation with racial inequality puts brands in a potentially precarious position with both consumers and their employees.
● The USA Today cover story positioning short-haul truckers as indentured servants instead of independent contractors presents a challenge for retailers who contract with some of the logistic providers named in the article. Retailers should highlight their individual efforts over the last decade to work in partnership with government and civic leaders to promote solutions to environmental and labor challenges at our nation’s ports.
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