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BPAA Biweekly Federal Policy Updates - September 6, 2019

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LABOR AND MINIMUM WAGE

  • The Wall Street Journal reports: Trump Administration Close to Expanding Overtime Pay: The Trump administration is moving to expand the number of Americans eligible for overtime pay under a rule the Labor Department is set to complete in the coming weeks. The rule, which could be completed as early as next month, would increase the annual salary threshold that generally determines who qualifies for time-and-a-half overtime pay, people familiar with the matter said. Workers and employers in numerous industries—including retail, fast food, higher education and nonprofits—would be affected. The federal overtime rule would raise the salary threshold to around $36,000, these people said, higher than the current $23,660 figure, which hasn’t been changed since 2004. The details could still change as the administration works to finish the rule.
    • The rule would boost the salary threshold to nearly $700 per week, which would affect workers in industries such as retail and fast food. In June, clothing retail employees made an average $488 per week and fast-food workers earned $385 per week, on average. The threshold could also affect home health-care workers, who had average weekly earnings of $576 in June. A Labor Department spokesman declined to comment.
    • Businesses and labor groups are following developments on the rule because, depending the details, it could make millions more Americans eligible for extra pay. “Updating the overtime threshold was long overdue, so staking out a middle ground between the previous administration’s excessive number and the outdated current level is a reasonable landing spot,” said Matthew Haller, the International Franchise Association’s senior vice president of government relations and public affairs.
    • The department hasn’t released specifics on its proposal, which is pending review by the White House’s Office of Management and Budget. The final version of the rule comes as the White House has pressed the department to complete unfinished regulatory overhauls amid a leadership shuffle following the recent departure of Alexander Acosta as labor secretary.
    • The White House formally signaled this week that it plans to nominate corporate attorney Eugene Scalia to succeed Mr. Acosta.
    • While the Senate prepares to consider Mr. Scalia’s nomination, the department is moving quickly to finish high-profile rules, under the direction of acting secretary Patrick Pizzella. “We are going to accomplish all that we can as we prepare for a new secretary,” Mr. Pizzella said on Thursday, speaking after a ceremony marking the 125th anniversary of the Labor Day holiday.
    • In another high-profile regulation, the department is gearing up to clarify when a worker could be jointly employed by two companies, which could help reduce liability for franchises and companies that use contractors. The administration is expected to set a high bar for when an employee could have claims against multiple businesses.

 

  • Employers Should Plan Now for New Federal Overtime Rule: The U.S. Department of Labor (DOL) is expected to set a new salary threshold soon for the white-collar exemptions to overtime pay under the Fair Labor Standards Act (FLSA)—but employers should start planning for changes now. The DOL might not give employers more than three or four months between the announcement of the final rule and its effective date to comply, noted Tammy McCutchen, an attorney with Littler in Washington, D.C. But she said employers shouldn't fret about the short compliance window. "We've been through this before," she said, referring to the steps employers took to prepare for the 2016 Obama-era rule that was blocked shortly before its effective date. The 2016 rule would have raised the salary threshold for white-collar exemptions to overtime pay from the current $23,660 to about $47,500—whereas the new proposal, if finalized, would set a $35,308 cutoff. President Donald Trump's administration wants to get a new rule in place as soon as possible in case there's a political shift after the 2020 presidential election, McCutchen noted. If Democrats take control of the White House before the new rate is effective and safe from challenge under the Congressional Review Act, they would likely propose a cutoff similar to the Obama administration's higher threshold. Read more at SHRM.

 

  • Don’t Worry About the Job Market—Yet The job market is cooling, and that is probably no cause for alarm. Probably, but not definitely. The economy added 130,000 jobs last month—fewer than the 150,000 economists expected. What is more, that payroll figure was inflated by more government hiring of workers for the 2020 census than most economists expected. The private sector added 96,000 jobs in August, versus 131,000 in July. So far this year, private-sector job gains have averaged 145,000 jobs a month, which compares to 215,000 last year and marks the slowest pace of hiring since 2010. With an unemployment rate of just 3.7%, that isn’t so surprising—filling jobs isn’t as easy as it was when there were more workers available. Moreover, even at its current rate, job growth is outstripping population growth and would over time bring the unemployment rate even lower. But at a time of rising trade tensions, slowing global growth and shrinking profit margins, there is a possibility that the decline in jobs growth is about to become more precipitous, putting the economy at risk. Indeed, the manufacturing sector, which is more exposed to trade and global growth risks than other parts of the economy, is one of the areas where the hiring slowdown has been most pronounced. Factory jobs represent only a small segment of the labor force, but their sensitivity to shifts in the economy shouldn’t be discounted. Read more at The Wall Street Journal

 

TAX UPDATE

  • Trump Again Flirts With Easing Capital Gains Taxes President Donald Trump on Friday again flirted with the idea of easing capital gains taxes, after swearing off the idea last week because it could be seen as "elitist." Trump retweeted an article co-authored by Sen. Ted Cruz (R-Texas) and conservative anti-tax crusader Grover Norquist calling for the capital gains tax to be indexed to inflation, a move that would effectively cut taxes on the sale of assets like stocks. He also shared a tweet from Club for Growth, another conservative group focused on slashing taxes, asking him to index capital gains to inflation. Read More at Politico

 

  • White House still considering tax cut bypassing Congress that Trump seemed to rule out last week The White House is still considering a plan to bypass Congress to enact a tax cut on capital gains, according to a senior administration official, although President Trump appeared to rule out the idea last week and expressed concern that it could be perceived as “elitist.” On Friday, Trump tweeted about the proposal to unilaterally index capital gains to inflation, responding to an op-ed backing the idea with the comment. He asked: “An idea liked by many?” A White House spokesman declined a request for clarification on the meaning of the president’s tweet. Trump also retweeted an op-ed, written by Sen. Ted Cruz (R-Tex.) and anti-tax advocate Grover Norquist, pushing the administration to back the plan to index capital gains to inflation. Read more at the Washington Post

 

  • Trump Says He’s Exploring ‘Various Tax Reductions,’ and the Economic Data He Loves Shows Why Last fall, administration officials displayed a series of charts that showed how President Trump’s economy was outperforming President Barack Obama’s. But many of the indicators officials used to showcase a Trump-fueled economic “boom” have fizzled on the back of the president’s escalating trade fights. On Tuesday, Mr. Trump confirmed that he was considering “various tax reductions,” including a payroll tax cut, to stimulate an economy that is beginning to slow.
    • Companies that Mr. Trump has pointed to as signs of economic strength are now warning of weakness. United States Steel, an early champion of Mr. Trump’s metal tariffs and a frequent mention in the president’s Twitter feed, is idling workers and slowing production at a plant in Michigan. Home Depot on Tuesday lowered its sales outlook for the year as it braces for consumer spending to take a hit from Mr. Trump’s Chinese tariffs. Consumer and small-business optimism have fallen, and two in five economists surveyed by the National Association of Business Economists now expect the economy to slip into a recession this year or next. Blue-collar job growth has fallen to its lowest level since Mr. Trump took office, and key surveys of manufacturing activity are near recession levels. Economic growth, which Mr. Trump once promised would soar as high as 5 or 6 percent annually, is now running at about a 2 percent annualized pace. Mr. Trump, speaking to reporters at the White House, continued to portray the economy as “incredible” and played down any chance that the United States could enter into a recession. Any tax cut, he said, would not be done as a defensive move. “I’ve been thinking about payroll taxes for a long time,” he said. “Whether or not we do it now, it’s not being done because of recession.”
    • In addition to potentially cutting payroll taxes, which would benefit workers by putting more money in their paychecks, Mr. Trump told reporters that he was thinking about unilaterally reducing capital gains taxes. Such a move would largely benefit wealthy investors by reducing the amount of taxes owed on profitable sales of stocks, bonds and other investments. The economy is still growing and unemployment remains at a 50-year low. But several of the administration’s favorite economic data points now show unmistakable signs of a slowdown. Business investment has stalled and it slipped backward in the spring. Read more at The New York Times
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