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Federal Policy Update Sept. 8th

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TAX

Tax Reform Details To Be Released Soon:  The Trump administration and Republican leaders in Congress reached some final decisions on a tax reform framework at a meeting this week.  Bloomberg BNA reports that a White House official, who spoke on the condition of anonymity, said a markup of a tax bill could happen in late September or early October.  “The so-called Big Six—Ryan, Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, House Ways and Means Committee Chairman Kevin Brady (R-Texas), Senate Majority Leader Mitch McConnell (R-Ky.), and Senate Finance Committee Chairman Orrin G. Hatch (R-Utah)—have been meeting regularly to finalize tax overhaul details. They have hinted for weeks about releasing details, which could be imminent because some conservatives say they need to know more about the plan before backing the budget resolution that would set it in motion.”

Ryan on a Corporate Rate of 22.5%:  In an interview with New York Times, Speaker of the House Paul Ryan stated that Republicans hope to be “at or below” a 22.5 percent corporate rate.  “Mr. Ryan also said Mr. Trump’s call for a 15 percent corporate tax rate was unrealistic and suggested that the president’s math did not add up. He said that getting the corporate tax rate to the mid to low 20 percent range was more likely and would make American businesses more competitive.”  When asked about the timing of a release, Ryan said "I'll leave it up to the tax writers as to when they'll release their template."

House Freedom Caucus Demands Details on Tax Reform:  While Speaker Ryan spoke on Thursday that the tax reform is a number one priority this fall and the tax writing committees are in the midst of working on the details of tax reform, the House Freedom Caucus’s leadership speaks about their frustrations on movement and transparency.  Bloomberg Government reports, Caucus Chairman Mark Meadows stated, “At some point you’re going to have to call the play. You’re going to have to get specific. We can’t answer it if we don’t know what the details are. It’s time to make some decisions and get on with it.”  Meadows then cautioned, “there’s going to be rebellion against everybody” -- including House leadership -- if Republicans finish the year without delivering on any of their major campaign promises. “If we get to December and we’ve not repealed and replaced Obamacare, we’ve not built the wall, we’ve not done tax reform, let me just tell you it’s not going to be pretty some 8 or 9 months after that in terms of reelection,” he said.

House Freedom Caucus to Release Own Tax Reform Proposal:  Axios reports, “The House Freedom Caucus — a group of around 35 ultra-conservative House Republicans who can block their party's leadership on key legislation — is in the final stages of drafting its own tax plan, according to sources familiar with the process. Freedom Caucus chairman Mark Meadows is expected to unveil his group's tax reform plan in the near future. But sources familiar with the arrangements have leaked key details in the current draft of the Freedom Caucus plan. (These details haven't yet been formally discussed within the group and therefore aren't set in stone):  slashes the corporate tax rate from 35% to 16%; doubles the standard deduction for individuals; and abandons "revenue neutrality," the dogma that tax reform mustn't worsen currently projected deficits. Instead of raising new sources of money to ensure their tax cuts don't add to deficits, the Freedom Caucus is planning to embrace a non-traditional idea to extend the budget window.  The idea, pushed by some conservatives, including Sen. Pat Toomey, is to change budget rules so that tax cuts that add to the deficit can last for 20 years or longer, rather than expiring after 10 years.”  The Caucus is also expected to push for  some form of welfare reform. 

Mnuchin on Tax Reform in 2017Reuters reports that in an interview with Fox Business Network, Treasury Secretary Steve Mnuchin said that “it’s still very viable to get [tax reform] done this year.  We have a path to get this done this year, and we’re still very hopeful that we can get it done.” He further said that President Trump’s deal with the Democrats on Wednesday on the debt limit “cleared the decks 90 days to have more room to focus on taxes. I think that was a big win” and Mnuchin expects some Democrats to back the final plan.  In response to questions about the House Freedom Caucus’s demands and concerns, Mnuchin stated ““I‘m not worried about any GOP revolt at all,” adding that lawmakers could push their ideas with leadership as part of a regular legislative process.”

LABOR

Wages:

Overtime Rule Struck Down:  The Hill reports, “A federal judge in Texas has struck down a rule from the Department of Labor that would have extended overtime pay to more than 4 million workers, effectively erasing one of former President Obama's biggest regulatory initiatives.”  “The judge's ruling was celebrated by industry groups, including the Restaurant Law Center, which represents the restaurant industry. In a statement to The Hill, the group said the Obama administration "overstepped its authority…The Department of Labor under the previous administration overstepped its authority in making changes to the federal overtime rule. Today’s decision to invalidate the rule demonstrates the negative impacts these regulations would have had on businesses and their workers. We will continue to work with [the Department of Labor] on behalf of the restaurant industry to ensure workable changes to the overtime rule are enacted.”  The Obama-era overtime rule would have raised the overtime threshold to $47,476/yr. The same judge issued a stay of the rule last December. The final decision was based on the argument that job responsibilities, and not just salary levels alone, should have been considered in setting the threshold.

Justice Department to Drop Pending Overtime Appeal:  Bloomberg BNA reports that on September 5, “The Justice Department asked a federal appeals court to dismiss the DOJ's appeal in the ongoing battle over a stalled Obama overtime rule that was expected to make some 4 million workers newly eligible for time-and-a-half pay…The Justice Department asked the U.S. Court of Appeals for the Fifth Circuit to dismiss the DOJ's pending appeal of an earlier Mazzant ruling that temporarily blocked the rule before it took effect late last year. The DOJ wanted the Fifth Circuit to affirm the Labor Department's general authority to take salary into account for overtime purposes. It told the court in the latest filing that Mazzant's new decision made the appeal moot (Nevada v. DOL, 5th Cir., No. 16-41606, motion to dismiss file 9/5/2017). The Labor Department is already reconsidering the rule, and has asked for public comment. Labor Secretary Alexander Acosta has signaled that the DOL may issue a new rule with a more moderate salary threshold bump, potentially in the low $30,000 range.”

REMINDER - DOL’s Call for Public Comment on the Overtime Rule:  The Department of Labor released a Request for Information (RFI) on July 26, proposing questions for public comment on revising the Obama administration’s rule to expand overtime eligibility.  The public until September 25 to submit their suggestions on the rule.  To note, the overtime rule has never taken effect because of litigation and, pending on the outcome of Fifth Circuit’s decision, the Trump administration is beginning to deliver on its promise to revisit the rule through this RFI.  The RFI is considered a first step to gather advice on an eventual proposal that would set a new salary threshold higher than the current $24,000 level but lower than the $47,000 figure set under the Obama administration.  During Secretary Acosta’s confirmation hearing, he said that he might be comfortable with a salary threshold in the low $30,000 range to account for inflation in recent years.  The scope of the RFI includes questions and issues beyond the salary threshold as well.  Some of the questions include:  Should the 2004 salary test be updated based on inflation? If so, which measure of inflation?  Would duties test changes be necessary if the increase was based on inflation? Would a duties-only test be preferable to the current model?  Were there specific industries/positions impacted? Which ones?

Tip Regulation:

Court Ruling on DOL’s Interpretation of Tip Related Regulation:  Bloomberg BNA reports, “Fourteen former bartenders and servers claimed in consolidated cases that their employers—including restaurant chains International House of Pancakes, Denny's, and P.F. Chang's China Bistro—improperly took a tip credit for all the time they worked.  The workers said they spent time on duties that didn't directly generate tips and that took up more than 20 percent of their working hours. They relied on the DOL's interpretation of the regulation in focusing on these details of their work in their allegations.”  On September 6, the Ninth Circuit Court of Appeals found the DOL’s interpretation was inconsistent with the regulation and effectively creates an “alternative regulatory approach with new substantive rules.” “We hold only that, at present, no provision with the force of law permits the DOL to require employers to engage in time tracking and accounting for minutes spent in diverse tasks before claiming a tip credit,” the Ninth Circuit said. It split from the Eighth Circuit, which found in a 2011 decision that the DOL's interpretation of the regulation warranted deference.”  Former Administrator of DOL’s Wage and Hour Division Paul DeCamp said, “The decision also suggests that the DOL's approach to determining when an employer can take a tip credit isn't necessarily the “last word” on the subject and that employers might want to turn to other guidance documents such as opinion letters and court rulings.”

Joint Employer Rule:

Joint Employer Legislation Moving through Congress:  The Chambers of Commerce is a major force behind legislation that would limit labor and employment liability for affiliated businesses.  Bloomberg BNA reports, “The measure would limit the circumstances under which businesses in staffing, franchise, and other contract relationships can be required to bargain with affiliated workers or be held responsible for wage-and-hour violations as joint employers. It's a response to recent decisions by a federal appeals court and the National Labor Relations Board finding that a business that exerts indirect control over affiliated workers may be tagged as a joint employer.”  While it likely has the necessary Republican and a few Democrat votes in the House, the challenge will be getting at least eight Democrat votes the Senate.  If the bill does not pass Congress, then the courts may be left to resolve the issue.  “An appeals court in Washington may soon weigh in on a lawsuit challenging the NLRB's decision in Browning-Ferris Industries of California Inc. The board in that case said BFI should be on the hook for labor violations alleged by sorters, screen cleaners, and housekeepers provided by Leadpoint Business Services to work at a BFI recycling plant in Northern California.  The U.S. Supreme Court could decide as soon as September whether to take up a case in which the U.S. Court of Appeals for the Fourth Circuit said DirecTV is liable as a joint employer of technicians who were hired by an intermediary and claim they weren't paid overtime.”

BEVERAGE AND FOOD

Menu Labeling

Consumer Groups Lead Study on FDA Menu Labeling:  A recent independent economic analysis funded by the Consumer Federation of America (CFA) and the Center for Science in the Public Interest (CSPI) found the FDA’s delay of its menu labeling rule could cost consumers $15 for every dollar the industry saves.  The FDA delayed the rule in May with a new deadline of May 2018.  NIAC points out that this study’s finding is “in stark contrast with the FDA’s benefit-cost analysis, which already conceded the cost to consumers was greater than any savings to industry by 2-to-1 ($2 cost to consumers for every $1 saved by food establishments that have not yet added nutrition data to their menus).”  ““This economic analysis once again proves the importance of menu labeling, which the public has been waiting for over seven years since the law passed in 2010,” said Colin Schwartz, Senior Nutrition Policy Associate of CSPI. “The FDA’s delay of the law comes with a steep price tag for consumers.” The study finds that changing the requirements could cost food service establishments additional hundreds of millions of dollars. Further, the vast majority of food service establishments have already incurred the initial costs of compliance. As a result, delaying the law is unlikely to result in any cost savings for them. “Because of the last-minute delay of the rule and the uncertainty introduced by the Trump Administration, many food service establishments, including the nation’s top 50 restaurant chains, have already made large investments to abide by the law and give their customers what they want,” said Schwartz. “Now they are faced with uncertainty at the prospect of changes that would cost them additional hundreds of millions of dollars to redo their menus, retrain staff and conduct legal reviews.”

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