Regulatory Wrap-Up: Minimum wage, paid leave in Massachusetts
Wages
Massachusetts — The legislature passed a sweeping bill this week designed to keep an array of issues, notably paid leave and minimum wage mandates, from appearing on the November ballot. The so-called grand bargain is intended to satisfy labor activists and it appears to have been effective as it relates to paid leave. However, Raise Up Massachusetts has not yet agreed to withdraw its $15/hr minimum wage increase from the ballot. The compromise included a slightly watered down $15/hr mandate that would phase in the increase over five years instead of four; it would raise the tipped wage to $9/hr instead of $6.75/hr; it would also not index future wage increases to inflation. The governor is expected to sign the legislation but will likely wait until July 1 which is the deadline for Raise Up Massachusetts to officially withdraw its measures.
Anaheim, Calif. — By a 4-3 vote, the council advanced an $18/hr minimum wage initiative to appear on the Nov. ballot. As previously reported, the measure was crafted to narrowly apply to hotels on or near Disney property that are targets of an ongoing union campaign. The measure applies to businesses that have received city subsidies.
Washington, D.C. — Initiative 77, which gradually eliminates the city’s tipped wage, was approved by voters by a 55% to 45% margin. Currently, the tipped wage is $3.33/hr and the new law would increase it to $15/hr by 2026. The majority of city council members expressed their opposition to the increase and the city has the ability to adjust or rescind the ballot initiative through legislation. The law is also subject to a 30-day congressional review. It remains to be seen if or when the council may act.
Paid Leave
Massachusetts — As reported above, the grand bargain legislation establishes a family and medical paid leave program that would require businesses with 25 or more employees to provide up to 12 weeks of family leave and 20 weeks of medical leave with a maximum of 26 weeks total per year. Workers would be paid 80% of their salary up to a certain limit (around $670/wk), then 50% after that, to a maximum of $850/wk. The medical leave provision is funded by a 0.63% payroll tax split between employers and employees. Businesses with fewer than 25 employees do not have to pay into the fund. The family leave program is employee-financed. The governor is expected to sign the legislation but will likely wait until July 1 which is the deadline for Raise Up Massachusetts to officially withdraw its measures.
Wage Theft
New York City — The city council set aside $2.5 million to support local legal aid groups representing workers who claim they are victims of wage theft. Expect the city to become increasingly active on the issue.
Joint Employer
Massachusetts — The senate approved a wage theft bill this week that would hold contractors, both the lead contractor and subcontractor, liable for wages, penalties or fines. The senate approved a similar measure in 2016 but at that time, the house did not take up the legislation.
Labor Policy
Federal Agency Reorganization — The Trump Administration released a plan to merge the Education and Labor Departments into a new agency called the Department of Education and the Workforce. Proponents assert the united agency would be able to seamlessly manage education programs, vocational training and apprenticeships. The proposal is unlikely to be acted on in the foreseeable future and is part of a larger plan to streamline the federal government.
Association Health Plans — The Labor Department released its long-awaited rule on association health plans. The rule is designed to expand options for smaller employers by allowing them to band together and form insurance pools. The New York and Massachusetts attorneys general are planning a lawsuit to stop the new rule, arguing that the new plans will not meet requirements set forth under the Affordable Care Act.
Activism
Immigration Protests — Immigration activists, in reaction to family separation at the border, have organized 130 rallies in 48 states to occur on June 30. While there is no indication that hospitality or retail locations will be targeted, some employers may experience call outs or work disruptions.
Taxes
U.S. Supreme Court — The court ruled in favor of South Dakota in a landmark case this week, overturning a long-standing precedent that states could only collect sales taxes from merchants with a physical location within their borders. In a 5-4 decision, the justices overturned the precedent set forth in the 1992 Quill v. North Dakota decision which established a physical nexus standard for sales tax collection obligations. In the majority opinion, Justice Kennedy cited the changing nature of commerce as the primary reason for the court to reconsider the Quill standard. Expect states to move quickly to require that online marketplaces collect and remit taxes on items shipped to customers residing in-state.
Massachusetts — The state supreme court ruled this week that the millionaire’s tax ballot initiative is unconstitutional. It would have added a surtax to income over $1 million. That decision eliminated a big piece of revenue the state needed to cover costs related to other ballot initiatives - a reduced sales tax rate, a paid leave program and a minimum wage increase. The decision spurred discussions and created the dynamics that allowed for the so-called grand bargain which includes an annual sales tax holiday in August rather than an overall reduced state rate. The compromise bill has passed the legislature and is currently on the governor’s desk. He is expected to sign it.
New Jersey — A bill was introduced last week that is modeled after the South Dakota economic nexus law which was recently upheld by the U.S. Supreme Court. The bill requires remote sellers with annual retail sales exceeding $100,000 into the state, or at least 200 in-state transactions, to collect and remit sales tax on their sales. The bill is expected to be amended to include language that would force online platforms to either collect on behalf of their third-party sellers or ensure that they are doing so on their own.
Data Privacy
California — A bill was introduced last week that could offer a pathway forward on data privacy issues and potentially avoid a costly and problematic voter initiative currently proposed for the Nov. ballot. The bill, The California Data Privacy Protection Act, would guarantee consumers the right to know what personal data has been collected by any company. It would also allow them to opt-out of future collection and hold companies directly liable in the event of a data breach. In a nod to some business concerns, the bill would allow the attorney general to levy fines for data breaches, only after which consumers could sue. The ballot measure exposed companies to litigation regardless of the state attorney general’s action. Privacy advocates have said if the legislature passes the bill and the governor signs it by the end of the month then they will withdraw the more onerous ballot initiative. The demand for hurried action by legislature (this month) may cause the deal to fall through.
Trade
China — The Trump Administration, in a further escalation of the pending trade war with China, announced it would consider additional tariffs on up to $200 billion of Chinese exports. Consumer products, such as apparel, footwear, toys, and additional consumer electronics, may get swept into the expanded list of goods subject to these new import tariffs. The announcement comes after China responded last week to the final list from the United States ($34 billion worth of products) with its own retaliatory list of mainly U.S.-exported agricultural products.
European Union — Due to the U.S. decision not to grant the European trading block an exemption, the EU imposed tariffs on over $3 billion worth of U.S. exports in retaliation to the U.S. steel and aluminum tariffs. In a tweet President Trump threatened further retaliation in the form of a 20% import on automobiles imported from European countries.
Key Takeaways
Legislature Status for Week of 6/25/18
Podcast
Check out our Working Lunch podcast each week that includes further analysis into these legislative issues, policy, politics and much more. You can find Working Lunch on the Nation's Restaurant News website, or by clicking here, and when you download the podcast and subscribe on iTunes here.
Massachusetts — The legislature passed a sweeping bill this week designed to keep an array of issues, notably paid leave and minimum wage mandates, from appearing on the November ballot. The so-called grand bargain is intended to satisfy labor activists and it appears to have been effective as it relates to paid leave. However, Raise Up Massachusetts has not yet agreed to withdraw its $15/hr minimum wage increase from the ballot. The compromise included a slightly watered down $15/hr mandate that would phase in the increase over five years instead of four; it would raise the tipped wage to $9/hr instead of $6.75/hr; it would also not index future wage increases to inflation. The governor is expected to sign the legislation but will likely wait until July 1 which is the deadline for Raise Up Massachusetts to officially withdraw its measures.
Anaheim, Calif. — By a 4-3 vote, the council advanced an $18/hr minimum wage initiative to appear on the Nov. ballot. As previously reported, the measure was crafted to narrowly apply to hotels on or near Disney property that are targets of an ongoing union campaign. The measure applies to businesses that have received city subsidies.
Washington, D.C. — Initiative 77, which gradually eliminates the city’s tipped wage, was approved by voters by a 55% to 45% margin. Currently, the tipped wage is $3.33/hr and the new law would increase it to $15/hr by 2026. The majority of city council members expressed their opposition to the increase and the city has the ability to adjust or rescind the ballot initiative through legislation. The law is also subject to a 30-day congressional review. It remains to be seen if or when the council may act.
Paid Leave
Massachusetts — As reported above, the grand bargain legislation establishes a family and medical paid leave program that would require businesses with 25 or more employees to provide up to 12 weeks of family leave and 20 weeks of medical leave with a maximum of 26 weeks total per year. Workers would be paid 80% of their salary up to a certain limit (around $670/wk), then 50% after that, to a maximum of $850/wk. The medical leave provision is funded by a 0.63% payroll tax split between employers and employees. Businesses with fewer than 25 employees do not have to pay into the fund. The family leave program is employee-financed. The governor is expected to sign the legislation but will likely wait until July 1 which is the deadline for Raise Up Massachusetts to officially withdraw its measures.
Wage Theft
New York City — The city council set aside $2.5 million to support local legal aid groups representing workers who claim they are victims of wage theft. Expect the city to become increasingly active on the issue.
Joint Employer
Massachusetts — The senate approved a wage theft bill this week that would hold contractors, both the lead contractor and subcontractor, liable for wages, penalties or fines. The senate approved a similar measure in 2016 but at that time, the house did not take up the legislation.
Labor Policy
Federal Agency Reorganization — The Trump Administration released a plan to merge the Education and Labor Departments into a new agency called the Department of Education and the Workforce. Proponents assert the united agency would be able to seamlessly manage education programs, vocational training and apprenticeships. The proposal is unlikely to be acted on in the foreseeable future and is part of a larger plan to streamline the federal government.
Association Health Plans — The Labor Department released its long-awaited rule on association health plans. The rule is designed to expand options for smaller employers by allowing them to band together and form insurance pools. The New York and Massachusetts attorneys general are planning a lawsuit to stop the new rule, arguing that the new plans will not meet requirements set forth under the Affordable Care Act.
Activism
Immigration Protests — Immigration activists, in reaction to family separation at the border, have organized 130 rallies in 48 states to occur on June 30. While there is no indication that hospitality or retail locations will be targeted, some employers may experience call outs or work disruptions.
Taxes
U.S. Supreme Court — The court ruled in favor of South Dakota in a landmark case this week, overturning a long-standing precedent that states could only collect sales taxes from merchants with a physical location within their borders. In a 5-4 decision, the justices overturned the precedent set forth in the 1992 Quill v. North Dakota decision which established a physical nexus standard for sales tax collection obligations. In the majority opinion, Justice Kennedy cited the changing nature of commerce as the primary reason for the court to reconsider the Quill standard. Expect states to move quickly to require that online marketplaces collect and remit taxes on items shipped to customers residing in-state.
Massachusetts — The state supreme court ruled this week that the millionaire’s tax ballot initiative is unconstitutional. It would have added a surtax to income over $1 million. That decision eliminated a big piece of revenue the state needed to cover costs related to other ballot initiatives - a reduced sales tax rate, a paid leave program and a minimum wage increase. The decision spurred discussions and created the dynamics that allowed for the so-called grand bargain which includes an annual sales tax holiday in August rather than an overall reduced state rate. The compromise bill has passed the legislature and is currently on the governor’s desk. He is expected to sign it.
New Jersey — A bill was introduced last week that is modeled after the South Dakota economic nexus law which was recently upheld by the U.S. Supreme Court. The bill requires remote sellers with annual retail sales exceeding $100,000 into the state, or at least 200 in-state transactions, to collect and remit sales tax on their sales. The bill is expected to be amended to include language that would force online platforms to either collect on behalf of their third-party sellers or ensure that they are doing so on their own.
Data Privacy
California — A bill was introduced last week that could offer a pathway forward on data privacy issues and potentially avoid a costly and problematic voter initiative currently proposed for the Nov. ballot. The bill, The California Data Privacy Protection Act, would guarantee consumers the right to know what personal data has been collected by any company. It would also allow them to opt-out of future collection and hold companies directly liable in the event of a data breach. In a nod to some business concerns, the bill would allow the attorney general to levy fines for data breaches, only after which consumers could sue. The ballot measure exposed companies to litigation regardless of the state attorney general’s action. Privacy advocates have said if the legislature passes the bill and the governor signs it by the end of the month then they will withdraw the more onerous ballot initiative. The demand for hurried action by legislature (this month) may cause the deal to fall through.
Trade
China — The Trump Administration, in a further escalation of the pending trade war with China, announced it would consider additional tariffs on up to $200 billion of Chinese exports. Consumer products, such as apparel, footwear, toys, and additional consumer electronics, may get swept into the expanded list of goods subject to these new import tariffs. The announcement comes after China responded last week to the final list from the United States ($34 billion worth of products) with its own retaliatory list of mainly U.S.-exported agricultural products.
European Union — Due to the U.S. decision not to grant the European trading block an exemption, the EU imposed tariffs on over $3 billion worth of U.S. exports in retaliation to the U.S. steel and aluminum tariffs. In a tweet President Trump threatened further retaliation in the form of a 20% import on automobiles imported from European countries.
Key Takeaways
- Industries other than retailers (hotels, restaurants, c-stores, etc.) should view the U.S. Supreme Court’s South Dakota v. Wayfair decision as a victory. In its ruling, the court recognized that “old economy” employers were operating at a significant disadvantage relative to their “new economy” counterparts. While both were subject to the same tax and regulatory requirements, only the brick-and-mortar retail community was required to collect taxes. Consumers making online purchases were responsible for calculating and submitting sales tax, not the platforms, which in practice rarely happened. The ruling levels the playing field between traditional retail and e-commerce sales by now allowing states to require online marketplaces to also collect and remit taxes. Other industries can expect to face similar challenges as disruptive businesses gain market share. And, conservative justices just armed them with important talking points and legal precedent.
- It appears healthcare will once again serve as a partisan campaign issue this cycle. The Labor Department’s announcement of a final rule on association health plans was met with immediate criticism, including a lawsuit from Democratic attorneys general. Congressional Democrats have already started campaigning on the issue, blaming the Trump Administration and the Republican-controlled Congress for exacerbating problems in the healthcare marketplace, just as many rates are scheduled to spike before Election Day. The campaign season’s political conversation may bleed into workplace conversations over healthcare benefits and employers should be prepared to answer questions regarding coverage as we approach open enrollment season.
Legislature Status for Week of 6/25/18
- The United States Senate is in session this week
- The United States House is in session this week
- Eight state legislatures are meeting actively this week: California, Delaware, Massachusetts, Maine, Michigan, New Jersey, Ohio and Pennsylvania.
Podcast
Check out our Working Lunch podcast each week that includes further analysis into these legislative issues, policy, politics and much more. You can find Working Lunch on the Nation's Restaurant News website, or by clicking here, and when you download the podcast and subscribe on iTunes here.
The Regulatory Wrap-Up is presented by Align Public Strategies. Click here to learn how Align can provide your brand with the counsel and insight you need to navigate the policy and political issues impacting retail.