ISSA Legislative & Regulatory Update October/November 2016
Update on Federal Overtime Rule
The Fate of the ACA under a Trump Administration
ISSA Opposes Proposed IRS Regulations
Federal Strategic Sourcing Initiative: Building Maintenance and Operations
Solvent Degreaser Known Human Carcinogen, Federal Report Says
Two Proposed Test Methods and Guidance for Antimicrobial Efficacy Testing
Safety and Health Corner
OSHA Releases Updated Guidelines for Workplace Safety and Health Programs
The Labor Department’s new overtime rule is scheduled to take effect in just a matter of days on December 1, 2016. Thanks to the active involvement of the business community, including ISSA and many of its members, the final rule was somewhat improved from what they first proposed: the minimum salary threshold was lowered from $50,400 to $47,476; the automatic increase in the salary was changed from annual to every three years, for the first time they are allowing commissions to satisfy at least a small part of the minimum salary, and the effective date was pushed back to December from July.
Despite these improvements, the final rule continues to present an unreasonable burden on the broad business community, and ISSA along with other trade associations continue our efforts to improve or repeal it.
In the Courts. Over 50 industry groups filed a complaint in U.S. District Court for the Eastern District of Texas challenging the overtime rule. The complaint attacks the new salary threshold, and criticizes the Department of Labor (DOL) for fundamentally departing from Congressional intent in enacting the Fair Labor Standards Act (FLSA) and from decades of regulatory policy in setting the new minimum salary level for exemption.
Additionally, the complaint challenges the validity of the automatic escalator, alleging that because it “departs from the terms of the FLSA” it “exceeds any authority granted to the Department by Congress, which has never authorized automatic escalation of salary thresholds related to overtime under the FLSA.”
The complaint asks the Court to vacate and set aside the new overtime rule and to postpone its effective date (thus maintaining the status quo) pending the Court’s review and action in this case.
To read the complaint, go to:
In a separate development, 21 states filed a lawsuit in the Eastern District of Texas that asks the court to issue an injunction preventing the new overtime rule from taking effect. Like our complaint, the states’ lawsuit also challenges DOL’s authority to automatically index the salary threshold. Co-plaintiffs in the states’ lawsuit are Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, Ohio, Oklahoma, South Caroline, Texas, Utah and Wisconsin.
On Capitol Hill. Meanwhile, ISSA and our allies in the Partnership to Protect Workplace Opportunity are continuing our legislative attack on the new overtime rule with vigorous advocacy of H.R. 5813, Overtime Reform and Enhancement Act, bipartisan reform legislation that would phase in the increase in the salary threshold and repeal the automatic escalator. H.R. 4773/S. 2707, Protecting Workplace Advancement and Opportunity Act are more sweeping bills that have attracted the support of several GOP Senators and House Members. And, finally, introduced just last week, H.R. 6094 would delay for six months the effective date of the new rule.
While we remain a long way from actually getting legislation passed by both houses of Congress, the bipartisan nature of this effort is encouraging.
ISSA will of course keep you apprised of developments in both the litigation and legislation efforts.
It is well known that President-elect Trump campaigned on the promise to repeal and replace the Patient Protection and Affordable Care Act (ACA), President Obama’s signature health care reform law. And now many are speculating about the fate of the ACA as we await Jan. 20, 2017, the date when Donald J. Trump will be sworn in as President.
Moreover, the Republican Party will retain its majority in both the House and Senate, leading many to opine that the time is right to mount a successful effort to repeal the ACA. However, any effort to repeal Obamacare will have to navigate a political mine field fraught with significant challenges along the way.
Trump’s Plan. In a position paper, Trump laid out his plan for health care, which will include:
- complete repeal of the ACA;
- permitting the sale of health insurance across state lines;
- allowing individuals to fully deduct health insurance premium payments from tax returns;
- enabling all Americans to make tax-free contributions to health savings accounts (HSAs);
- requiring price transparency from all health care providers;
- changing the Medicaid structure from a federal-state partnership to a block-grant system;
- removing barriers to free-market entry for drug providers; and
- reforming mental health programs and institutions.
Trump’s plan also calls for obtaining health care savings by enforcing immigration laws and increasing the employment rate to decrease enrollment in the Children’s Health Insurance Program (CHIP). Most of these proposals are similar to House Speaker Paul Ryan’s (R-WI) plan for replacing the ACA (see Ryan proposes ‘A Better Way’ to repeal Obamacare, June 29, 2016).
Obstacles to ACA Repeal. While the Republicans have retained control of the Senate, they failed to achieve a supermajority (i.e., more than 60 members). And without a supermajority in the Senate, the Trump Administration could potentially face a filibuster on its health care plans, a tactic commonly used in the Senate to block legislation. The obstacle created by the lack of a Republican supermajority, however, may be overcome by use of the reconciliation process. Earlier this year, H.R. 3762—a bill repealing the ACA’s coverage subsidies, tax credits, Medicaid expansion provisions, individual and employer mandate penalties, and the medical device and health insurance taxes—made it to Obama’s desk before being vetoed. In effect, the reconciliation process could be used to “defang” the ACA.
Moreover, any effort to repeal the ACA is likely to be met with social and political backlash because of the potential impact it would have on the nation’s uninsurance rate.
Under the ACA, the uninsurance rate in the U.S. has dropped to 8.6 percent, the lowest level on record. On the other hand, the Congressional Budget Office (CBO) estimated that 22 million people would lose health insurance if H.R. 3762 became law. In a different report, the CBO found that repealing the ACA would first increase the federal deficit, but later begin to reduce the deficit while leaving individuals with higher premium costs. Similarly, Ryan’s “A Better Way” plan is estimated to reduce overall insurance coverage from ACA projections. The nonpartisan Committee for a Responsible Federal Budget analyzed Trump’s plan and determined that if it were implemented, the uninsurance rate would double.
ISSA will continue to monitor and report on efforts to repeal or otherwise modify the ACA in the coming weeks and months.
In a letter to the Jacob J. Lew, Secretary of the U.S. Department of the Treasury, ISSA expressed its strong opposition to the Department’s proposed changes to Section 2704 on estate and gift tax valuation discounts because of the adverse economic impact it would have on family owned businesses, which comprise a significant portion of ISSA’s membership.
In expressing its opposition, ISSA observed that the proposed rules would significantly change family businesses’ succession plans of many ISSA member companies, and make it harder for family owned businesses to transition to the next generation. In particular, the changes proposed to Section 2704 would remove legitimate valuation discounts for estate, gift, and generation skipping taxes which businesses have used for the past two decades in order to prevent the IRS from overvaluing their businesses at death.
Under the proposed regulations issued by IRS, the tax bill for estate and gift taxes might rise by up to 50 percent due. In effect, the proposed regulations issued in early August will radically alter how valuations of fractional interests in family-owned entities are valued. The bottom line is these regulations appear to cause a large increase in the valuation of family partnerships and family businesses. Consequently, the proposed regulations could be devastating for the hundreds of ISSA members that operate family owned businesses.
Background. For years, the IRS has sought to control estate planning, which incorporates the use of valuation discounts. The term “discount” means the interest is valued at an amount less than that interests’ proportional share of the entity as a whole. These discounts exist because, unless an individual owner has control of the entity, that owner’s interest, if sold to a third party, would bring far less than its proportional share of the entity as a whole. The reasons for this are that such a minority interest has no control over the entity’s operations and there is a very limited, if any, market for selling such an interest.
Proposed Regulations. The proposed regulations would affect how taxpayers estimate the fair market value of assets for estate and gift tax purposes. The IRS is bringing back an often discredited notion called “family attribution.” This means if you are part of the family and the family controls the entity, your value is based upon what the control value of the business is. Family attribution implies that all family members get along, act in concert and never dispute how money is managed or allocated. However, this scenario is more the exception than the rule.
The concept of “family attribution” is a discredited notion because the U.S. Supreme Court repudiated this concept in the case of Estate of Bright v. United States. In addition, there have been a myriad of U.S. tax court cases that have all opined that valuation discounts are valid. Somewhere along the way, the IRS decided to try to reinstitute family attribution. They have sought help from Congress to bring it back but have been rebuffed.
Repeal of Estate Tax. In addition, ISSA and other industry groups called for the full and permanent repeal of the estate tax for the following reasons because of the unreasonable adverse economic impact it has on family owned businesses and the nation’s economy generally.
In fact, many studies have quantified the jobs that would be gained from estate tax repeal. A recent Tax Foundation study found that the US could create over 150,000 jobs by repealing the estate tax. A 2012 study by the House Joint Economic Committee found that the estate tax has destroyed over $1.1 trillion of capital in the US economy – loss of small business capital means fewer jobs and lower wages.
Lawrence Summers, former Secretary of the Treasury under President Clinton; Alicia Munell, member of President Clinton’s Council of Economic Advisors; Joseph Stiglitz, a Nobel laureate for economics; and Douglas Holtz-Eakin, former CBO Director have all published work on the estate tax’s stifling effect on job growth and the economy as a whole.
Moreover, the estate tax contributes a very small portion of federal revenues. It is estimated that the estate tax currently accounts for less than one percent of federal revenue. There is a good argument that not collecting the estate tax would create more economic growth and lead to an increase in federal revenue from other taxes. In addition, the estate tax forces family businesses to waste money on expensive insurance policies and estate planning. These burdensome compliance costs make it even harder for business owners to expand their businesses and create more jobs.
ISSA is a member of an industry coalition that opposes on unfair taxes on the business community, and will continue to monitor and report on this and other related issues.
On October 7, 2016 GSA released two Request for Proposals (RFP) for the Phase II Building Maintenance and Operations (BMO) strategic sourcing solution. These RFPs will result in two multiple-award, government-wide contract vehicles (BMO Unrestricted and BMO Small Business) supporting the federal strategic sourcing initiative (FSSI). FSSI is being implemented across federal agencies for the purpose of reducing procurement costs, and driving efficiencies in purchasing.
The BMO strategic sourcing solution is a comprehensive and flexible solution covering all high-demand BMO services that are consumed by federal agencies in support of their operations. The scope of the BMO strategic sourcing solution includes the following services:
- HVAC maintenance
- Pest control
- Building management services
- Waste management
The BMO Phase II will add five additional zones to the solution. The zonal approach creates reasonably sized regions in which small businesses can realistically compete and operate. The five new Phase II zones are outlined below:
- Zone 2 – Maine, Massachusetts, New Hampshire, Vermont, Connecticut, Rhode Island
- Zone 3 – Florida, Georgia, North Carolina, South Carolina
- Zone 4 – Texas, Oklahoma
- Zone 5 – California, Nevada
- Zone 6 – Kansas, Nebraska, Missouri, Iowa, Illinois
GSA has implemented Phase I of its BMO strategic sourcing solution in the summer of 2016 when it awarded BMO contracts to 31 companies in Zone 1 which covers Delaware, Maryland, New Jersey, New York, Pennsylvania, Virginia, West Virginia and the District of Columbia.
Trichloroethylene, formerly a widely used solvent, is listed as a “known human carcinogen” in a federal Report on Carcinogens published Nov. 3. The Department of Health and Human Services, which issued the report, upgraded trichloroethylene (TCE) from a “reasonably anticipated to be” to a “known human carcinogen,” HHS’s National Toxicology Program said in the Federal Register notice Nov. 3.
The HHS classification is consistent with the conclusion the Environmental Protection Agency reached in 2011, when it deemed the solvent to be “carcinogenic to humans” by all routes of exposure.
The Dow Chemical Co., PPG Industries Inc. and GreenChem Industries LLC are among the U.S. companies that made or imported 225 million pounds of TCE in 2011, the most recent year for which data is available. Trichloroethylene also is made in or imported into the European Economic Area. European registrants include Arkema France, Banner Chemicals Ltd. and Dow subsidiary Blue Cube Spinco Inc., which say their combined production ranges between 10,000 and 100,000 metric tons (11,023-110,231 U.S. tons) annually.
Trichloroethylene has been found on at least 1,045 of the 1,699 current or former Superfund sites, according to the Agency for Toxic Substances and Disease Registry. The solvent has two major uses, that agency says. First it is used to make other chemicals, especially the refrigerant, HFC-134a and, as a solvent, it removes grease from metal parts. Minor uses include as a spotting agency in dry cleaners, the toxic substances agency said.
Two proposed rules developed by the Environmental Protection Agency that would restrict certain uses of trichloroethylene are under review at the White House Office of Management and Budget.
EPA’s first rule would restrict, ban or otherwise address health risks the agency identified with commercial vapor degreasing operations that use the solvent. The second rule would address health risks EPA identified when trichloroethylene is used as a spotting agent in dry cleaning and in commercial and consumer aerosol spray degreasers.
The health concerns the EPA seeks to mitigate include the solvent’s potential to cause cancer and its and a wide range of other harms including immunotoxicity, neurotoxicity, reproductive toxicity and developmental toxicity such as potential fetal cardiac defects.
EPA is announcing the availability for public comment of two proposed test methods and associated testing guidance for evaluating antimicrobial pesticides against two biofilm bacteria, Pseudomonas aeruginosa and Staphylococcus aureus.
Bacterial biofilms excrete a slimy, glue-like substance (extracellular polymeric substances, called the biofilm matrix) that facilitates attachment to many hard surfaces such as glass, metals, and plastics, including those in health-care settings. The biofilm matrix provides embedded bacteria with protection from dehydration and other environmental stresses, and interferes with the action of chemical disinfectants.
Under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), the registrant of an antimicrobial product with a public health claim is required to submit efficacy data to EPA in support of the product’s registration.
EPA is soliciting comments on the clarity of the standard operating procedures and the regulatory guidance. Comments will be collected for 60 days (until December 5, 2016), at which point EPA will finalize the procedures and provide the revised methods for use. The methods, guidance and additional background documents are available in dockets EPA-HQ-OPP-2016-0357 at www.regulations.gov.
Voters in Washington, Arizona, Colorado, and Maine all approved measures to raise their state’s minimum wage.
Workers in Maine will see the greatest pay hike, with the minimum hourly pay jumping from $7.50 to $12 by 2020, and later increasing with inflation. The minimum wage for tipped workers there will also increase to $5 an hour, with $1 increase until their earnings equal the general minimum wage by 2024. Colorado will also give workers a sizable raise, incrementally increasing the minimum wage from $8.31 to $12 by 2020.
In Washington State, not only will workers receive a pay increase — from $9.47 to $13.50 by 2020 — but employers will now be required to provide them with one hour of paid sick leave for every 40 hours worked. Along with a pay hike from $8.05 to $12 by 2020, Arizona will also provide workers with sick leave: 40 hours annually for those at large companies, 24 hours for those at smaller businesses, and guaranteeing one hour of paid sick time for every 30 hours worked.
Still, the increases aren’t as great as those seen in some major cities — like Washington, D.C., Seattle, San Francisco and New York City — which have passed ballot measures to raise the minimum wage to $15. However, in the wake of Donald Trump’s victory in the presidential election, others hoping for a raise might be in luck. The president-elect has gone on record as being in favor of “doing something” about the minimum wage.
Maryland has enacted a new law that prohibits an employer taking certain actions concerning discussion of wages, with limitations.
Effective October 1, Maryland employers may not prohibit an employee from: (a) inquiring about, discussing, or disclosing the wages of the employee or another employee; or (b) requesting that the employer provide a reason for why the employee’s wages are a condition of employment. In addition, employers may not require employees to sign a waiver or other document that would deny the employee the right to disclose or discuss wages. Further, employers may not take any adverse employment action against an employee: (1) for inquiring about another employee’s wages; (2) disclosing the employee’s own wages; (3) discussing another employee’s wages if those wages were disclosed voluntarily; (4) asking the employer to provide a reason for the employee’s wages; or (5) aiding or encouraging another employee’s exercise of his or her right to discuss or disclose wage information.
Employers may, however, provide employees with a written policy establishing reasonable workday limitations on the time, place, and manner for inquiries about or for discussing or disclosing wages. Such policy may include prohibiting an employee from discussing or disclosing another employee’s wages without that employee’s prior permission. This restriction would not apply to an employee who has access to such information as part of the employee’s essential job functions, if such discussion or disclosure is in response to an investigation or complaint.
The Commissioner of Labor and Industry, in consultation with the Maryland Commission on Civil Rights, is to develop educational materials and make training available to employers in adopting training, policies and procedures that comply with these requirements.
Safety and Health Corner
The Occupational Safety and Health Administration (OSHA) today released a set of Recommended Practices for Safety and Health Programs to help employers across the nation establish a methodical approach to improving safety and health in their workplaces.
The recommendations update OSHA’s 1989 guidelines to reflect changes in the economy, workplaces, and evolving safety and health issues. The recommendations feature a new, easier-to-use format and should be particularly helpful to small- and medium-sized businesses. Also new is a section on multi-employer workplaces and a greater emphasis on continuous improvement. Supporting tools and resources are included as well.
The programs are not prescriptive, but rather are built around a core set of business processes that can be implemented to suit a particular workplace in any industry. OSHA has seen them successfully implemented in manufacturing, construction, health care, technology, retail, services, higher education, and government.
Key principles include: leadership from the top to send a message that safety and health is critical to the business operations; worker participation in finding solutions; and a systematic approach to find and fix hazards.
The OSHA recommendations include seven core elements for a safety and health program: management leadership; worker participation; hazard identification and assessment; hazard prevention and control; education and training; program evaluation and improvement; and communication and coordination for host employers, contractors and staffing agencies. The recommendations are advisory only and do not create any new legal obligations or alter existing obligations created by OSHA standards or regulations.