National Retail Federation

May 2007

Senate Passes Landmark Immigration Reform Bill

The Senate on May 25 th passed S. 2611, the Comprehensive Immigration Reform Act of 2006, by a vote of 62-36. Twenty-three Republicans and thirty-nine Democrats supported the bill, while thirty-two Republicans and four Democrats voted against it.

Senate passage capped nearly two weeks of floor debate, during which numerous amendments to the measure were debated and voted on. The Senate picked up debate where they left off in mid-April, when they adjourned for the two-week Spring Recess. A tentative bipartisan, compromise bill had been formed just prior to the Spring Recess, but disagreements between the parties regarding the number of amendments that would be allowed to be debated prevented passage of the bill at that time. It was unclear, at that time, whether Senate leaders would be able to overcome these disagreements when they returned from Recess in late April. Chief among Democrats' concerns was the fear that any Senate-passed bill would be severely cut back in conference committee negotiations with the House of Representatives. The House passed a very narrow, enforcement-only immigration bill last December, and House leaders in April and May were highly critical of the Senate bill, which takes a broader, comprehensive approach.

Fortunately, after several weeks of negotiations, Senate Majority Leader Bill Frist (R-TN) and Minority Leader Harry Reid (D-NV) were able to overcome these hurdles and floor debate on amendments to the bill was commenced the week of May 15 th .

The compromise bill going into debate consisted of three main components: (1) provisions to increase security at U.S. borders; (2) a temporary worker program, called “H-2C,” for foreign workers to enter the U.S. and fill vacant jobs; and (3) an earned legalization process for undocumented persons already in the U.S. NCCR supported the legislation early on because it included these three components, which we have been advocating for several years, and we urged Senators to support the bill and to oppose any amendments intended to scale back or weaken the bill. Several such amendments were offered, including an amendment to strip the temporary worker program, and an amendment to strike the earned legalization component. Both amendments were defeated. However, Sen. Jeff Bingaman (D-NV) sponsored an amendment that severely restricts the temporary worker program, reducing the number of yearly participants from 325,000 in the original bill, to 200,000. In addition, the Bingaman amendment eliminates a key feature of the temporary worker program – the market-based escalator that increases or decreases annual numerical limits on the program based on prior years' use. Despite strong opposition from NCCR and other groups in the business community, the Bingaman amendment did pass. In our view, the amended bill's 200,000 annual cap on participants is far too low to meet employers' projected demand for foreign workers, and we are working to restore at least some of the lost numbers in conference committee.

Although his amendment to strike the earned legalization component of the bill failed, Sen. David Vitter (R-LA) was successful in attaching an amendment that would make it harder for an illegal worker attempting to prove that he or she has been working in the U.S. for the minimum specified years required under the legislation. The bill's earned legalization component divides the current undocumented population into three categories. Those who entered the U.S. after January 7, 2004 would have to leave the country, but would have the option to apply for the new H-2C temporary worker program. Those who entered before January 7, 2004, but have been here for less than 5 years, could remain in the U.S. and work for up to 3 years, but would eventually need to depart and reenter through a specified border port of entry if he or she wished to earn a green card. Those who have been in the U.S. since April 5, 2001, more than 5 years, would be provided a pathway to apply for a green card without having to first leave the country. This group of individuals would be required to provide documentation proving they were working in the U.S. at least 5 years. The original bill language would have permitted such individuals to submit, in the absence of Social Security records, pay stubs, union or other government records, sworn affidavits attesting to this fact. The Vitter amendment, which passed, prohibits such self-attestations, and requires a showing of the aforementioned documentation, or, in the alternative, a sworn affidavit from a non-relative.

In all, about 20 amendments were offered and received a vote during the Senate debate. One that establishes English as the national language passed, while another that would have denied Social Security credit to immigrants for work performed during years while they were in the U.S. illegally, failed.

Of particular note to employers is an amendment offered by Senator Chuck Grassley (R-IA) to replace the current I-9 employment verification system with a new electronically based system. The amendment passed 58-40, and it requires that all employers participate in the new system within 18 months after the government allocates $400 million to create the system. The Grassley amendment is different from the employment verification provisions included in the House bill, which simply expanded the existing, flawed Basic Pilot Program without first addressing that program's many pitfalls.

Under the Grassley provisions, an employer would need to use an electronic platform, which the bill instructs the Department of Homeland Security (DHS) to create, to verify within three days of hiring each new employee's identity and eligibility to work in the U.S. DHS must respond to the employer's inquiry within 10 days. If DHS cannot confirm an individual's identity and work authorization, the individual would have 10 days to contest the DHS and provide additional documentation, during which time the employee could not be fired. If the worker fails to contest within 10 days, he becomes automatically non-confirmed and must be fired. If the worker contests the tentative non-confirmation within the 10 day contest period, DHS has 30 days during which to make a final decision on whether the worker is legal. During the initial implementation of the system, if DHS cannot confirm or non-confirm a worker within 30 days of contest, the worker will automatically receive a default confirmation. The default confirmation process remains in place until DHS can certify that accurate final determinations are made within 30 days 99% of the time. Once the system achieves that level of accuracy, the system will issue a default non-confirmation after 30 days of manual verification, although DHS will have authority to issue a confirmation in limited circumstances.

Additionally, the amendment provides a safe harbor for employers. If an employer uses the system and complies with its requirements, the employer is shielded from liability for hiring an employee who is later determined to be illegal. The provision also makes it unlawful to hire or continue to employ an illegal worker. Employers who violate this provision would be subject to fines of $500 to $4,000 for a first offense, with a maximum fine of $10,000 for a second violation within a year and as high as $20,000 for a third offense within two years.

Although we continue have concerns with certain provisions of the bill, overall S. 2611 is a net gain for the chain restaurant industry. Moreover, the Senate version of the bill is a significant improvement over the legislation passed last year by the House. NCCR praised the Senate for working diligently in recent months to craft a bipartisan compromise that addresses the needs of the employer community while enhancing border security. In a press release following passage of the bill, NCCR Vice President of Government Relations Scott Vinson said, “Although this legislation is not perfect, it is a dramatic improvement which will enable chain restaurants and other businesses to hire the employees they desperately need to effectively run their companies and serve their customers."

Getting the Senate on record in support of comprehensive immigration reform was a significant victory for the restaurant industry, but the next step in the legislative process – conference committee with the House -- will present enormous challenges. Several Republican leaders in the House of Representatives have already criticized the Senate bill, with House Judiciary Committee Chairman Sensenbrenner (R-WI) calling the bill a “non-starter.” We will need to intensify our efforts even further as this legislation moves to conference. At this stage we expect conference negotiations to consume most of the summer, and we are hopeful that an agreement between the two chambers is reached before Congress leaves Washington for the month of August recess.

For more information, contact NCCR Vice President for Government Relations Scott Vinson at (202) 626-8183.
NCCR Hosts Human Resources Executives at Two Day Confab

NCCR and NRF hosted human resources executives from the chain restaurant and retail industries at a two day meeting at our office headquarters in Washington , DC in early May. Meeting participants took advantage of the opportunity to discuss best practices, share ideas on current issues in human resources, and strategize on ways to retain employees. Attendees also heard from two prominent speakers in the areas of immigration reform and the wage and hour arena. Laura Reiff, shareholder at the law firm of Greenberg Traurig LLC and co-chair of the Essential Worker Immigration Coalition, gave a comprehensive presentation on the current state of play in the immigration reform debate in Congress. Tammy McCutchen, former administrator at the Department of Labor's Wage and Hour Division and currently partner at the law firm of Dickstein Shapiro, briefed participants on up-to-the-minute issues facing retail and restaurant companies in the wage and hour area.

The joint NCCR/NRF Human Resources Executives Council (HREC) provides chain restaurant HR professionals an opportunity to network and share ideas with our HR colleagues in the retail industry. This spring was the first time NCCR and NRF held this meeting jointly, and we are looking forward to our second meeting together at the annual HREC Summit in late October. All NCCR member companies are invited to participate. Please contact NRF Vice President for Retail Operations Dan Butler at (202) 626-8143, or NCCR Vice President for Government Relations Scott Vinson at (202) 626-8183 for more information.

Small Business Health Plan Vote Falls Short in Senate

In a major setback for small businesses seeking affordable health insurance for their employees, opponents of Small Business Health Plan (SBHP) legislation defeated a key procedural vote in the Senate this week. The action is expected to put the bill on hold for the remainder of the year as premiums continue to escalate.

The Senate voted 55-43 in favor of S. 1955, the Health Insurance Marketplace Modernization and Affordability Act, sponsored by Health, Education, Labor and Pensions Committee Chairman Michael Enzi (R-WY). But the procedural "cloture" vote to cut off debate required 60 votes to pass, leaving the measure five votes short.

The balloting was overwhelmingly along party lines: Senator Ben Nelson of Nebraska , a co-sponsor of the bill, and Senator Mary Landrieu of Louisiana were the only Democrats to vote in its favor. Senator Lincoln Chafee of Rhode Island was the only Republican to vote against it. (Click here for vote.)

The legislation was seen as Congress' best opportunity to pass major health insurance reform this year, and the defeat was disappointing to supporters who saw opponents as setting political considerations ahead of the need to address soaring health insurance costs and lack of access to health care for millions of working families. NCCR supported the legislation as a way to address soaring costs for chain restaurant franchisees.

The Enzi bill would allow businesses and trade associations to pool their members in Small Business Health Plans in order to purchase insurance coverage at rates available to large groups. Similar Association Health Plan bills have repeatedly passed the House only to stall in the Senate. The Enzi bill differs by maintaining state regulatory oversight and not allowing the plans to self-insure. It would also establish a federal commission to streamline various state regulations and reduce administrative costs.

Enactment of SBHPs would save small businesses about 13 percent on average and up to 25 percent in some cases -- a savings ranging between $450 and $1,250 annually per covered employee. One recent report showed that as many as 8.5 million previously uninsured workers would receive coverage if the legislation is enacted.

For more information, contact NRF Vice President and Employee Benefits Policy Counsel Neil Trautwein at (202) 626-8170.

WOTC/WWTC Left Out of Compromise Tax Bill

Congressional leaders in May reached agreement on a $70 billion tax cut bill stalled since February, finally settling on a compromise between conflicting House and Senate versions of the measure. But lawmakers removed key items important to chain restaurants, leaving us to seek another vehicle for extension of the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work Tax Credit (WWTC).

The agreement centers on extension of 2003 tax cuts that reduced the rate for dividend income to 15 percent from as high as 38.6 percent and the rate on capital gains from 20 percent to the same 15 percent. The cuts were scheduled to expire at the end of 2008 but would now run through the end of 2010, the same as the rest of President Bush's $1.7 trillion package of tax relief adopted in 2001 and 2003.

The bill would also extend individual Alternative Minimum Tax relief through the end of 2006. The plan includes $90 billion in tax cuts over 10 years, offset by $20 billion in revenue raisers to provide a net tax cut of $70 billion. Among other provisions, corporate estimated tax payments due in July through September would be accelerated, increasing to 105 percent in 2006, 106.25 percent in 2012 and 100.75 percent in 2013.

As expected for some time now, the compromise, which the President signed into law this month, leaves out previously included language that would have extended the Welfare to Work Tax Credit, the Work Opportunity Tax Credit, the research and development tax credit and a 15-year depreciation period for improvements to leased stores for as long as two years. All expired at the end of 2005 and will remain in limbo unless reauthorized by Congress.

The House bill passed last November and a Senate version passed in December would have extended the provisions for one year, while a later Senate version passed this February would have extended them for two years.

WWTC and WOTC offer businesses a tax credit equal to 40 percent of the individual's first-year wages up to $6,000 (for a maximum of $2,400 per employee) to hire welfare recipients and other disadvantaged individuals, and have been widely used by retailers to help those individuals move into the workforce.

For more information, contact NRF Vice President and Tax Counsel Rachelle Bernstein at (202) 626-8168 or NCCR Vice President for Government Relations Scott Vinson at (202) 626-8183.

NRF Hosts Update on State Health Care Legislation

NRF this month continued its series of conference calls on health care measures pending in the state legislatures, bringing members of the NRF/NCCR Tax on Jobs Coalition up to date on recent action in two states where intense battles are being waged over bills that would mandate retailers' level of spending on employee health insurance.

More than 30 retailers, chain restaurant representatives, state retail association executives and representatives of other trade associations participated in the call, which featured presentations by New Jersey Retail Merchants Association President John Holub and Rhode Island Retail Federation Executive Director Paul DeRoche.

The New Jersey Senate Labor Committee recently approved legislation that would require companies with 1,000 or more workers to provide at least $1.65 in health benefits per hour worked by most employees. The amount would be increased to $3.30 over a three-year period and indexed after that. Companies that spend less would have to contribute the difference to a state insurance fund. The measure has now moved to the Senate Budget and Appropriations Committee.

In Rhode Island , the House Finance Committee in May held a hearing on legislation that would require companies with 10,000 or more workers to spend at least 8 percent of payroll on health care. The measure is one of the top issues for the Rhode Island legislature, along with casino gambling legislation.

I n both states, health care is beginning to be overshadowed by budget considerations as lawmakers move into the annual appropriations process. The New Jersey legislature meets year-round but Rhode Island faces a June 30 adjournment date.

The state-by-state fight over employer health care mandates began in January, when Maryland enacted legislation requiring companies with 10,000 or more workers to spend at least 8 percent of payroll on health care -- the model for the bill now pending in Rhode Island . The AFL-CIO then launched a campaign to pass similar legislation in as many as 30 states. Many of the bills, like the Maryland measure, have been crafted to specifically target major big-box retailers.

About a dozen states still have pending either spending mandates or bills to require that the number of employees accepting public assistance for health care be reported, but most bills are not expected to see action before legislative sessions come to an end. In other states, most bills introduced missed procedural deadlines or saw sessions expire before action could take place. In Massachusetts, legislation was enacted requiring all state residents to purchase health insurance, while in Vermont, legislation was signed requiring companies with eight or more workers to spend at least $365 a year on health care. A bill requiring reporting of workers on public health care was signed into law in Washington state, while it is uncertain whether a reporting bill passed in Colorado will be signed.

NRF and NCCR do not lobby at the state level, but formed the Tax on Jobs Coalition earlier this year to coordinate efforts by state retail associations and individual retail and restaurant companies to fight the mandate legislation.

NRF has argued that the mandates drive up already-skyrocketing costs for employers while doing nothing to address issues contributing to high insurance costs. NRF has supported a variety of federal initiatives to make health care more affordable and accessible, including Small Business Health Plans, expanded Health Savings Accounts and medical malpractice reform.

For more information, contact NRF Vice President and Government and Industry Relations Counsel Maureen Riehl or Director of Government Relations Alison O'Donnell at (202) 626-8134.

MARK YOUR CALENDARS!

NCCR Fall Membership Meeting
October 16-18, 2006, McDonald's Corporation, OakBrook, IL

For information or copies of materials regarding any of the above issues call NCCR at (202) 626-8183.