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Legislative/Regulatory Outlook for 2019

As with all new years, 2019 will come with a new set of issues and challenges for retailers in both Washington, D.C., and across the country. But the election results from November will shape the tone and tenor of the issue landscape more than any other single factor.

The impact of a U.S. House of Representatives controlled by Democrats is obvious. But the real story may be at the state level. With seven new Democratic governors, seven new state chambers under Democratic control and four new Democratic attorneys general, the state playing field looks very different in 2019. In states like Colorado, Illinois, Maine, New Mexico and Nevada, where Democrats now control all levers of state government, we can expect significant legislation on wages, leave and benefits.

Additionally, now having a majority of state attorneys general, look for some Democratic AGs, particularly those in Minnesota, New York, Illinois, Michigan and Washington to aggressively engage corporate brands over wage and hour enforcement, sexual harassment policies, pay equity, and a host of other issues.

Here are some of the key issues to pay attention to in 2019:

Data Privacy: Over the past several years, the major concern has been the legislative and regulatory reaction to data breaches. Facebook has changed that dynamic significantly and the buying and selling of data and the manipulation of that data is now first and foremost in policymaker’s minds.

Washington State is contemplating legislation similar to California’s new law, which should impel retailers to push harder for a federal solution. The conversation has caused other industries to be more focused on a federal solution as well, which could provide more momentum. Smart retailers will continue to advocate for secure consumer data, uniform data breach notification laws and responsible enforcement.

Trade: The trade situation with China will likely not level out anytime soon. The perceived “win” by Trump on NAFTA will further embolden him as it relates to China. But China will continue their traditional game of slow playing the issue and pushing off major policy changes as long as possible.

It is important for retail operators to understand that the President’s trade policies have nothing to do with economics or global commerce. They are purely political and designed to appeal to a subset of his base. When and if the economic consequences of the trade uncertainty are ultimately felt by Middle Americans, only at that point is there any chance for stability in this space.

E-Fairness: Following the landmark Supreme Court decision in South Dakota v. Wayfair that did away with the physical presence standard for state sales tax collection authority, almost every state with a sales tax is expected to have taken action by the conclusion of the 2019 session. The long-sought-after ‘missing’ revenue from a tax that has been on the books for decades will be the chief motivator for legislatures across the country.

Traditional retailers will be working in lock step to ensure that most, if not all, sales are finally treated equally. The good news is, this time the Overstocks and Amazons of the world are finally on the right side of the argument and promoting reasonable policy solutions. We shall see if this newfound partnership extends to other more traditional retail issues.

Paid Leave: The environment around paid leave has shifted quickly over the last two years. With many Republicans now embracing some form of the issue as a response to their poor showing with women voters and companies themselves instituting leave policies in order to recruit and retain the best employees, the train has left the station on this issue.

Look for increased pressure in Washington from the new Democratic House as well as states with new democratic majorities and pay particular attention to the Washington state model effective in January. The program is an important test of paid leave as a government-sponsored program or “insurance” fund. The monies — paid in part by employers and deducted from employees’ paychecks — are deposited into the state fund to be distributed to employees when they become eligible. If the mechanics of the program work, expect other states to adopt the model. And, perhaps more importantly, a functional program lays the groundwork for a future portable benefits program.

Minimum Wage: The new Democratic House will begin the push for a national $15/hr wage immediately in January. While that legislation is likely dead on arrival in the Senate, many in the business community may be of a mind to compromise for a lower wage level coupled with possible concessions on joint employer, tips or other labor issues - potentially creating a situation where Democrats oppose a final package. At the state level look for strong pushes for a $15 wage in New Jersey, Connecticut, Illinois and other states that are now Democratic trifectas as a result of the November elections.

Restrictive Scheduling: While no federal action is likely in the capital, look for states and localities to continue pursuing restrictive scheduling legislation across the country. Pay particularly close attention to Illinois, Maine, Chicago, Los Angeles and Washington, D.C., as proposals are either pending or very likely. Many of these bills call for two to three weeks advance posting of schedules, penalty pay when an employer changes a schedule, restrictions on hours between shifts and some call for the offering of additional hours to existing workers before additional workers can be hired.

Overtime: It is likely that the Labor Department will begin the process for a new overtime standard in the spring. Secretary Acosta has publicly stated that a new, higher standard is necessary but likely much lower than the Obama Administration’s proposal. If and while that process proceeds, look for blue states to follow California and New York and begin the process of setting their own standards. A potential patchwork of different state requirements could result in retailers and other employers calling for federal action.

California: While California has always been politically difficult to navigate, it will likely get much more precarious. Outgoing Gov. Brown, while a strong liberal, was much more pragmatic in his approach to business issues and had a strong understanding of the retail business model. In fact, Brown recently vetoed a bill forcing companies to report pay data based on race and gender. His successor, Gavin Newsom, is much more aligned with the labor and activist community and meaningful conversations on core business issues are about to get significantly tougher.

Additionally, Democrats in the legislature now have a veto-proof supermajority so it will certainly be an interesting year — both in California and the rest of the country.

Joe Kefauver is managing partner of Align Public Strategies, a full-service public affairs and creative firm that helps corporate brands, governments and nonprofits navigate the outside world and inform their internal decision-making.
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