Advocacy & Government Affairs

Government Affairs

NAW Government Relations Updates

NBMDA is pleased to present its members with timely and relevant updates from the National Association of Wholesaler-Distributors (NAW) Government Relations team featuring important government decisions, guidance and resources for business executives. Topics covered in the following briefs include updates on federal budgets, relief bills, tax changes, unemployment benefits, labor issues and proposed legislation impacting wholesale distributors.

This page will be regularly updated. We encourage members to bookmark this page in your website browser to easily access new updates as soon as they become available.

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May 25, 2023

Update on Debt Limit

Congress and the White House continue negotiating over a deal to raise the debt ceiling ahead of the June 1 deadline.

The situation is extremely fluid and changes daily, sometimes hourly. This is not unusual for debt ceiling negotiations – they are inherently chaotic with both sides posturing and taking shots at each other through the media before eventually coming to an agreement late in the process.

Speaker Kevin McCarthy (R-CA) and President Joe Biden are meeting regularly, while their designees – Representatives Patrick McHenry (R-NC) and Garret Graves (R-LA) and Counselor to the President Steve Richetti and Budget Director Shalanda Young – are also meeting daily to negotiate. While progress is being made, a deal remains far away.

At this stage, Republican are pushing for a spending cut next year, long-term spending reduction, work requirements, and permitting reform.

In recent days, Democrats appear to have moved off their position of demanding a “clean” debt ceiling extension with no additional provisions and are believed to have floated some spending reductions; however, they remain far apart from Republican proposals. The White House appears open to freezing – but not reducing – spending next year, and they have proposed modest, not substantial long-term spending reduction. Their progressive base opposes work requirements or permitting reform and it is unclear whether either proposal will make it into a final agreement.

The Administration also floated some progressive proposals including tax hikes and drug pricing reform, but these were immediately rejected.

While June 1 is the current deadline, there is significant uncertainty over the exact date that the debt ceiling will be breached. Treasury Secretary Janet Yellen recently stated it is “highly likely” that the debt ceiling will be breached “as soon as June 1,” leaving some uncertainty in her prediction.

Others disagree with that date. For instance, Goldman Sachs’ chief political economist predicted the debt ceiling would be hit on June 8, while some have noted that quarterly tax payments are due June 15, which would give the federal government significant resources to make it through July and part of August.

The uncertainty exists in part because the statutory borrowing cap was hit in January and the Treasury Department has been using “extraordinary measures” to temporarily delay the deadline and continue making payments on debt and other outlays.

In the months following, Congressional Republicans and the White House met just once and instead took shots at each other through the media. The dynamic only changed after House Republicans, somewhat unexpectedly, united to pass a bill last month to raise the debt ceiling and reduce government spending.

This legislation raised the debt ceiling through either March 31, 2024, or the accumulation of $1.5 trillion in new debt, whichever comes first. In exchange, the bill establishes a cap on discretionary spending at Fiscal Year 2022 levels and limits spending growth to 1 percent per year through Fiscal Year 2033.

The proposal also contains a number of Republican priorities including rescinding unobligated COVID-19 federal spending; blocking President Biden’s proposal to forgive up to $20,000 in student loan debt; repealing green energy tax credits and $80 billion in IRS funding passed by Democrats last year; reforming welfare programs like SNAP and TANF; reforming the permitting process; and increasing domestic energy production.

It appears Democrats believed that Republicans would not be able to unite behind one proposal and were caught flat footed. To date, the Senate has not proposed any debt ceiling agreement and the White House has not publicly released any proposal to raise the debt ceiling besides calling for a “clean” extension, so the House Republican legislation remains the only debt ceiling proposal that has been released.

Progressive lawmakers have warned that Biden could see a backlash from his left wing base if he agrees to Republican demands while more centrist Democrats have complained that the White House has not seriously pushed a deal of revenue raisers in exchange for spending reductions in negotiations.

Progressives have called on President Biden to invoke the 14th Amendment to declare the debt limit unconstitutional, however this is highly unlikely to happen. It has never been done before and Secretary Yellen declared it “legally questionable” and said that it could create a Constitutional crisis.

While both sides remain far apart, it is possible a deal could come together quickly ahead of the June 1 deadline.

The House has been in session this week and is out next week, while the Senate has been out of session this week and is scheduled to be back in session next week. However, lawmakers in both chambers have been given notice that they may have to come back to vote at any time including weekends with 24 hours’ notice.

House Republicans intend to adhere to their rule requiring a bill to be out for 72 hours before they hold a vote so they could come back earlier than 24 hours before a vote.

While we do not know the final product, it is most likely that the pathway toward an eventual deal being passed by Congress is through support from more moderate or mainstream members of both parties and opposition from conservatives and progressives.

Update on Labor Issues

Nomination of Julie Su to be Secretary of Labor: The nomination of current Deputy Secretary of Labor (DOL) Julie Su to serve as Secretary of Labor has stalled in the U.S. Senate, with a party-line vote advancing her out of the Health, Education, Labor, and Pensions (HELP) Committee last month doing little to give her nomination momentum.

Su, whose background as Secretary for the California Labor and Workforce Development Agency helped earn her nomination to the #2 post at DOL in 2021, has seen her nomination wither under further scrutiny of that same record. Business groups, including NAW, have broadly opposed her ascension to the top spot for reasons including her mismanagement of California unemployment claims; her support of the radically unpopular AB5; and the massive regulatory burdens faced by her state’s job creators during her time as labor commissioner. You can learn more about NAW’s opposition by clicking here.

NAW has continued working with likeminded business groups to oppose this nomination, and it appears opposition from the business community has had some impact, as Senate Majority Leader Chuck Schumer, a month after her committee passage, has yet to schedule a vote on Su’s nomination. At this time, there is thought that in-cycle Senators Joe Manchin (D-WV), Kyrsten Sinema (I-AZ), and Jon Tester (D-MT) could vote against the nomination on the floor. Even with President Biden’s White House doubling down on the nomination, Su’s path remains rocky.

FTC Non-competes Update: Citing unnamed sources, a recent Bloomberg Law article stated that the Federal Trade Commission will likely not vote on a final version of its proposal to ban non-competes until next year. As the article notes, the FTC is expected to follow the normal process for rulemaking and will consider what, if any, changes to make to the final rule after reviewing the 27,000 comments filed on the draft rule.

As a reminder, the FTC issued a notice of proposed rulemaking (NPRM) to ban non-compete clauses in January, opening a time window for public comments. The comment period for the NPRM ended in April and NAW submitted comments on the rule which can be found here. NAW also signed onto a coalition comment letter led by the Chamber of Commerce on the NPRM.

We will continue updating you as the issue develops.

Update on “White Collar Exemption” Overtime Rule: A new rule from the Wage and Hour Division (WHD) changing the “white collar exemption” from the payment of overtime has been anticipated since the beginning of the Biden Administration. We most recently heard that a new rule might be released this month, but that is increasingly unlikely. NAW and allied organizations have urged DOL to abandon this rulemaking, including organizing broad participation in a WHD “listening session” more than a year ago in which NAW and a significant number of our member associations participated.

It is possible that the rule has been delayed because DOL does not have a Senate-confirmed WHD Administrator. President Biden’s first nominee, David Weil, was the architect of the Obama-era overtime rule which was successfully challenged in court in a case in which NAW was a plaintiff; because of that record business opposition to his nomination was broad and deep. The nomination languished in the Senate for almost a year until three moderate Democrat Senators joined Republicans in opposing Weil and the nomination was withdrawn. The President subsequently nominated WHD Principal Deputy Administrator Jessica Looman to the post, but her confirmation has not yet been confirmed by the Senate

We are informed that WHD still intends to promulgate a new rule, despite the intense business opposition. The opposition will be reinforced this week in a letter to the Department, signed by numerous trade associations, which NAW helped organize. We will keep you updated on any new information as it becomes available.

Legislation Addressing Truck Driver Shortage Introduced: Last week, Representatives Rick Crawford (R-AR) and Henry Cuellar (D-TX) introduced H.R. 3408, the DRIVE Safe Integrity Act. This legislation looks to provide safe avenues for 18- through 20-year-olds to begin careers in interstate trucking. Currently, these young career starters are permitted in 49 states to use commercial trucking licenses but are blocked by federal rules from participating in interstate commerce, meaning a 20-year-old can drive a commercial truck from El Paso, TX to Texarkana, TX (818 miles), but not from Texarkana, TX to Texarkana, AR (across State Line Avenue).

Disappointingly, a pilot program passed as part of the 2021 bipartisan Infrastructure Investment and Jobs Act has been bogged down by thorny rules from the Biden Department of Transportation (DOT), meaning a 3,000-person pilot program has seen fewer than a dozen enrollees thus far. The DRIVE Safe Integrity Act will help ensure the DOT administers the pilot program in the spirit of the law, making it easier for young Americans looking to choose a vocation to choose trucking careers that involve interstate commerce.

The DRIVE Safe Coalition, of which NAW is a member, has sent a letter to the House Committee on Transportation & Infrastructure in support of this legislation. To learn more about the bill and to read the letter, you may click here.

Tax Update

Senator Steve Daines (R-MT) last week re-introduced his Main Street Tax Certainty Act, which would make the 199A 20 percent passthrough deduction permanent. The 199A deduction, which provides important tax relief to S-corporations, partnerships, sole-proprietorships, and LLCs, is scheduled to sunset at the end of 2025.

NAW sent a letter, led by our coalition partners at the Main Street Employers and S-Corp Association, signed by more than 140 other trade associations. The legislation was reintroduced with 14 Republican cosponsors, indicating strong support from Senators. Moving forward, NAW and other allies in Congress will work to increase the number of cosponsors. Sen. Daines’ legislation is unlikely to be passed into law this Congress but is an important marker to show support for making the 199A deduction permanent.

A House companion for this legislation has not yet been introduced. Last Congress, the bill was led by Representative Jason Smith (R-MO) who is now chairman of the Ways & Means Committee. Committee chairmen often hand off their signature bills to other members of the committee; however, it is not yet known whether Chairman Smith will hand off the bill or seek to reintroduce it himself.

The Ways & Means Committee is also reportedly developing an economic package that they hope to consider sometime over the summer. The timeline on this package being introduced or voted on is uncertain given the looming debt ceiling deadline. Originally, it was expected they would introduce legislation in late May; however, this has reportedly been pushed back to June or July.

It is expected that the package will include extensions of a number of expired tax provisions such as bonus depreciation, deductibility of business interest and R&D expensing. It is also possible that the proposal will include individual tax relief and repeal parts of the Democrat’s reconciliation bill passed last year including green energy credits.

Some lawmakers have suggested extending parts of the 2017 tax bill that are set to expire in 2025 including 199A, however we currently believe this is unlikely given this deadline is several years away.

April 26, 2023

Debt Ceiling Update

The past few months have seen House Republicans and President Joe Biden exchange political broadsides over the debt ceiling with virtually no real negotiation taking place. Republicans have called for raising the debt ceiling in combination with spending cuts and regulatory reform while the President has insisted on a clean debt ceiling increase free of cost-cutting policies. Both sides have accused the other of being irresponsible and threatening to default on the debt, yet both sides have not met in person in months.

In an attempt to put pressure on Biden to negotiate, House Republicans last week released their first legislative proposal to raise the debt ceiling and reduce government spending.

The legislation raises the debt ceiling through either March 31, 2024, or the accumulation of $1.5 trillion in new debt, whichever comes first. In exchange, the bill establishes a cap on discretionary spending at Fiscal Year 2022 levels and limits spending growth to 1 percent per year through Fiscal Year 2033.

The proposal also contains a number of Republican priorities including rescinding unobligated COVID-19 federal spending; blocking President Biden’s proposal to forgive up to $20,000 in student loan debt; repealing green energy tax credits and $80 billion in IRS funding passed by Democrats last year; reforming welfare programs like SNAP and TANF; reforming the permitting process; and increasing domestic energy production.

Even after the introduction of the GOP proposal, President Biden continues to refuse to meet in-person with Speaker Kevin McCarthy.

House Republican leadership intends to hold a vote on the bill today or tomorrow before leaving town for a one-week recess. At this time, it is not clear if they have the 218 votes needed for passage.

As of Tuesday, Republican leadership insisted the bill could not be changed; however, as many as 10 Midwest lawmakers opposed repeal of ethanol tax credits in the bill – more than enough to sink the legislation given every Democrat is expected to vote no. Several conservative members also wanted to see the bill strengthened in some ways such as adding stronger work requirements to the welfare reform section of the bill. Others did not want to vote for a debt ceiling increase at all.

On Wednesday morning, Republican leadership announced an amendment that removed repeal of the ethanol credits and strengthened work requirements in an attempt to win over skeptical lawmakers. While this has reportedly won over many holdouts, it has angered some moderates who were told the bill was not open for amendment.

Republicans hold a narrow majority and can only afford to have four members vote against the legislation, meaning changes or delays to the bill remain possible.

Even if the bill passes the House, it is dead on arrival in the Democrat-controlled Senate, and President Biden has already criticized the bill.

Nonetheless, there is some evidence that Speaker McCarthy’s release of the bill is putting pressure on vulnerable Democrats. In the last week, several Democrats in the House and Senate have called on the President to reverse his position – that he would not negotiate a debt limit with spending restraints – and begin negotiating with Republicans over adding other items to a debt ceiling package. Senate Republicans have so far echoed the calls of their House counterparts in urging Biden to negotiate.

One complication to the debt ceiling fight is that it remains unclear when the deadline will be hit.

The statutory borrowing cap was officially hit in January and the Treasury department has been using “extraordinary measures” to temporarily delay the deadline and continue making payments on debt and other outlays.

While initial estimates forecast the debt ceiling would be hit in August or September, more recent estimates from financial institutions have warned the date could be June or July due to lower than expected tax receipts and a slowing economy.

Non-compete Ban / Federal Trade Commission Update

In January, the Federal Trade Commission (FTC) issued a notice of proposed rulemaking (NPRM) to ban non-compete clauses, opening a time window for public comments. The comment period for the NPRM ended last week and NAW submitted comments on the rule which can be found here. NAW also signed onto a coalition comment letter led by the Chamber of Commerce on the NPRM.

As a reminder, the proposal would impose a blanket ban on all non-compete clauses and would apply that ban retroactively to all existing agreements. The proposed rule could also extend to other covenants like non-disclosures and non-solicitations if they are deemed to be overly broad in scope. The FTC also asked for input on alternative proposals that would impose a more limited ban on non-competes such as a ban limited to an income threshold or a category of workers. More information on the NPRM can be found here and here.

Moving forward, the FTC will consider input provided on the NPRM and will almost certainly move forward with a final rule in the months ahead. There has been some conjecture that the FTC will move quickly to release a final rule that will be narrowed in some ways, possibly exempting highly-compensated employees from the ban.

We will continue updating you as the issue develops.

On a related note, the House Energy and Commerce Innovation, Data, and Commerce Subcommittee held a hearing last Tuesday examining the Federal Trade Commission’s Fiscal Year 2024 Budget. FTC Chair Lina Khan and Democrat Commissioners Rebecca Slaughter and Alvaro Bedoya testified before the Subcommittee. There are currently no Republican Commissioners following the resignation of Christine Wilson in protest of Chair Khan’s running of the FTC.

The hearing was an opportunity for lawmakers to discuss policies being pushed by the agency. Republican lawmakers criticized the agency for its overreach, partisanship, and lack of transparency, and noted the historically low levels of staff morale and high turnover under this administration. Democrats defended the agency and pointed to the work the agency had done to protect consumers. Topics discussed included data privacy, protecting children from big tech, ensuring the FTC had the proper tools to win monetary compensation for consumers, stopping junk fees and preventing monopolies in areas such as healthcare and agriculture.

There was virtually no discussion of the FTC’s non-compete proposal; however, this could be because the proposal is still in the early stages of the regulatory process.

There was also no mention of the FTC’s plans on another NAW priority – holding Amazon accountable for its anticompetitive behavior toward third party sellers.

While recent news reports have suggested the FTC could move forward on a lawsuit against Amazon for its anti-competitive behavior, it remains unclear when or if a suit will be initiated. Obstacles remain to progress on holding Amazon accountable.

First, the FTC has been launching lawsuits and investigations across a wide range of industries and issues so their bandwidth to focus on any single suit is limited – especially one against a large company like Amazon that would require significant resources.

Second, the FTC is extremely unpopular with Republicans due to their belief that the agency is unaccountable and overly partisan. While these same lawmakers typically believe big tech should be reined in, their opposition to the Biden FTC precludes them from supporting any action taken by the agency.

Congressional Update

After a slow first couple of months, Congress has begun to pick up the pace with a flurry of Committee activity in recent weeks. In fact, at the end of March, House Republicans held 42 committee hearings in a single day, the most in a single day in history.

These hearings are part of House Republican efforts to establish a body of work that highlights their policies to their conservative base and builds a case to push messaging bills later in the year that contrast with the policies of Democrats and President Biden. For instance, Republicans on the House Ways and Means Committee have held several hearings outside of DC on the state of the economy to build consensus on their tax and economic growth policies.

Many of these hearings are also taking place due to the House Republican rules requiring any bill to receive a legislative markup before it can be considered on the House floor.

However, while this activity is keeping lawmakers and staff busy, the number of hearings occurring simultaneously means that very few are receiving significant media attention or getting the attention of voters.

House Republicans have also introduced a border security package which they hope to bring to the House floor in the coming months. While this was a key issue that many conservative lawmakers campaigned on in 2022, it is unclear whether it has the votes to pass because of the concerns of many moderate Republicans. The bill is purely a messaging exercise – it contains no reforms to encourage more legal immigration or address the workforce shortage and is dead on arrival in the Senate.

More broadly, the Senate’s tight, 51-49 majority means that Democratic Leader Schumer must have all Democrats in attendance in order to get anything done. Senator John Fetterman (D-PA) recently returned to the Senate following a two-month absence for clinical depression, and Dianne Feinstein (D-CA) has been absent from the Senate since the beginning of March. Of note: Senator Feinstein serves on the Judiciary Committee, and her extended absence has made it impossible for the Committee to report out the President’s judicial nominations, leaving vacancies unfilled on the US courts.

Labor Update

As we have reported before, the resignation of Secretary of Labor Marty Walsh earlier this year resulted in the automatic elevation of Deputy Secretary Julie Su to Acting Secretary, and President Biden formally nominated her to be Secretary shortly thereafter.

The business community had a generally cordial relationship with Secretary Walsh, who was a union organizer but with a track record of competency rather than confrontation. As one of his labor-union critics described his tenure as DoL Secretary: “While the National Labor Relations Board has become very proactive in handing down pro-worker judgments and slapping violators with fines and unfavorable rulings, the DOL has been quieter under Walsh’s leadership.” That was clearly preferable for business.

Secretary nominee Su’s track record puts her much closer to the pro-union, anti-business activism of the NLRB, and her nomination has drawn significant and growing opposition from the business community. Su’s mismanagement as Labor Secretary for the State of California of the state’s COVID unemployment benefit program resulted in payments of more than $30 billion in fraudulent claims, and she was an active advocate of the controversial California AB5, which would have virtually eliminated the ability of a worker to be an independent contractor and crippled California’s vibrant gig economy. In addition, the ongoing west coast port labor negotiations have raised serious concerns about Su’s lack of experience and lack of Marty Walsh’s recognized skill at handling tough labor negotiations.

While only a few business groups initially opposed her nomination, the opposition has strengthened as more becomes known about her record. NAW sent a letter to the Senate opposing the Su nomination, and joined more than 30 business organization in signing an additional letter. An additional letter will be sent in a few days with even more groups signing on to join the opposition.

The Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing on the Su nomination last week, leaving her critics unconvinced that she could capably run the department and convinced of her pro-union and anti-business bias.

Su’s nomination was confirmed this morning by a party-line vote of 11-10, but her confirmation by the full Senate remains uncertain.

Healthcare Update

The House is holding a number of hearings on healthcare issues this week.

The Education and Workforce Subcommittee on Health, Employment Labor, and Pensions is holding a hearing entitled “Reducing Health Care Costs for Working Americans and Their Families.” The Partnership for Employer-Sponsored Coverage (P4ESC), a coalition of business groups which includes NAW submitted a statement for the record.

This statement outlines many of the priorities of the coalition including preserving and strengthening employer-sponsored coverage, providing employers with relief from burdensome healthcare regulations, addressing high medical costs, and promoting innovation and diversity in the design of employer health plans.

P4ESC also submitted a statement for the record for an Energy and Commerce Subcommittee on Health hearing entitled “Lowering Unaffordable Costs: Legislative solutions to increase transparency and competition in healthcare.” The comments noted that rising healthcare costs are a significant challenge for employer-sponsored health coverage and urged lawmakers to take steps to make the healthcare system more transparent.

On the Senate side, lawmakers are in talks to bring up a healthcare bill that would include price transparency measures, reforms to the practices of Pharmacy Benefit Managers, and a price cap on insulin.

The Senate HELP Committee is expected to consider multiple bills dealing with PBMs and increasing access to generic medications next Tuesday, May 2nd and will hold a hearing on the high costs of Insulin on May 10. Given this timeline, it is possible that the full Senate could consider legislation in late May or in June.

March 14, 2023

Tax Update

The White House released President Joe Biden’s Fiscal Year 2024 Budget proposal last week.

While there are a number of concerning tax increases that would impact the wholesale distribution industry, the budget is dead on arrival in the Republican controlled House of Representatives and the one-vote Senate Democrat majority. Instead, like all Presidential budgets, it is largely an aspirational messaging document that provides information on the White House’s policy priorities, provides clues on what Biden and other Democrats will campaign on in 2024, and serves as a basis for legislative proposals that will be pushed the next time Democrats control the White House and both chambers of Congress.

In total, the budget called for $4.7 trillion in higher taxes over the ten-year budget window and almost $2 trillion in new spending. As a result, the budget reduces the deficit by almost $3 trillion relative to the existing federal baseline.

Tax increases included in the budget relevant to wholesaler-distributors include:

  • Increasing the 3.8 percent Net Investment Income Tax (NIIT) to 5 percent and applying it to all S-Corporation and partnership income above $400,000.
  • Increasing the top individual tax rate from 37 percent to 39.6 percent including on main street businesses organized as S-corporations and partnerships.
  • Raising the corporate tax rate from 21 to 28 percent.
  • Additional limitations on the ability of passthrough businesses to deduct business losses.
  • Doubling the top capital gains tax rate from 20 percent to 39.6 percent.
  • Raising taxes on family-owned businesses by narrowing existing grantor trust rules.
  • Imposing a new, 25 percent minimum tax on large S-Corp and passthrough businesses with assets greater than $100 million.

Although none of these tax increases stand a chance of passing this Congress, it is still important to educate lawmakers on the damage these proposals could do to wholesaler-distributors. As such, NAW released a press release criticizing the proposed tax increases in the Budget on Thursday. You can find the NAW statement here. NAW also signed onto a letter led by the S-Corporation Association and signed by 85 trade associations in opposition to these tax increases which can be found here. NAW will continue to educate and update lawmakers on these harmful proposals.

On a related note, several House Democrats released legislation to repeal roughly a dozen tax credits and deductions utilized by the oil and gas industry. One of the proposals would repeal the last-in, first out (LIFO) deduction for large oil and gas companies.

While this legislation would not directly impact wholesaler-distributors that utilize LIFO and is purely a Democrat messaging bill with little chance of passing Congress, NAW takes seriously any threat to the LIFO inventory accounting method, even if the threat is not aimed at wholesaler-distributors. NAW will be reaching out to lawmakers through the LIFO Coalition to explain the importance of the provision and to highlight the significant opposition efforts to repeal the deduction in full or in part.

Amazon Update

Senator Amy Klobuchar (D-MN) held a hearing last week on the need to rein in Big Tech including Amazon. The hearing was titled “Reining in Dominant Digital Platforms: Restoring Competition to Our Digital Markets” and was held in the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights. Witness testimony and a video of the hearing can be found here. The hearing focused on Senator Klobuchar’s American Innovation and Choice Online Act (AICOA), legislation supported by NAW that would prevent Amazon’s unfair treatment of third-party sellers. The hearing also focused on Open Market App Act, legislation that also reins in Big Tech but is unrelated to NAW’s Amazon issue. This was the first action taken by the new Congress to push AICOA and It is expected that Sen. Klobuchar will soon formally reintroduce the bill and bring it for consideration before the Senate Judiciary Committee. One new challenge in passing the legislation is the increasing unpopularity of the FTC and Chair Lina Khan among Republicans and business groups. These critics argue the FTC is out of control and is pushing sweeping regulations on businesses and the U.S. economy including their proposal to ban noncompete clauses. Given this viewpoint, many Republicans are hesitant to cosponsor legislation that would give the Biden FTC more authority. A Bloomberg article that can be found here provides more information.

On the hearing itself, it was encouraging that no Senator or witness defended Big Tech. Even critics acknowledged the need to act to rein in Big Tech although viewpoints on what should be done varied greatly.

Sen. Klobuchar noted that Big Tech spent at least $200 million running ads against her bill and $90 million on lobbying. Despite this, there is bipartisan support for the legislation. She bemoaned the fact that the rest of the world, including the EU, is ahead of the US in reining in Big Tech. She also referenced how Amazon bullies third party sellers.

Ranking Member Mike Lee (R-UT) acknowledged the size and power of Big Tech and stated that he agreed that Congress should act to rein them in but worried that solutions being proposed could harm the economy. He talked about the need for crafted, targeted solutions rather than empowering unelected, unaccountable bureaucrats and said he does not want to give more power to the Biden FTC.

Six other Senators spoke at the hearing – Chuck Grassley (R-IA), Sheldon Whitehouse (D-RI), Dick Durbin (D-IL), Richard Blumenthal (D-CT), Mazie Hirono (D-HI), and Alex Padilla (D-CA).

Sen. Padilla was the only one that was critical of the legislation and specifically mentioned his concern that the restrictions on Big Tech preferencing could have unintended consequences that harm consumers and businesses.

The other five Senators all supported AICOA and discussed the need to act now, the challenges with adequately regulating Big Tech, the fact the EU has already taken action to rein in Big Tech, and how the bill is targeted to addressing specific issues like self-preferencing and data collection.

Five witnesses appeared before the Committee including three that supported the legislation and two that had concerns with the bill.

The supporters of the legislation discussed the need to update antitrust law to properly regulate Big Tech, with some calling for the creation of a new federal agency to specifically regulate Tech. They believed AICOA is a targeted, narrowly crafted approach, with some arguing that Congress should go even further.

The witnesses speaking in opposition to AICOA argued the bill was poorly crafted and that it contained vague, confusing, or overly broad definitions. They also argued the bill would have unintended consequences that could harm consumers and businesses. While they both criticized the bill, they did not defend Big Tech and acknowledged the need for reforms and legislation.

Federal Trade Commission Non-compete Clause update

As we previously noted, the FTC released a notice of proposed rulemaking (NPRM) to ban non-compete clauses. Last week, the FTC announced it would extend the comment period for 30 days from March 20 to April 19. This extension is welcome news given that over 100 trade associations including NAW had requested the FTC to extend the comment period shortly after the rule was first published.

As a reminder, the proposal would impose a blanket ban on all non-compete clauses. The proposed rule could also extend to other restrictive covenants like non-disclosures and non-solicitations if they are deemed to be broad in scope. Certain businesses like banks and nonprofits that are outside of the FTC’s jurisdiction would be exempt and there would be a narrow sale of business exemption allowing non-competes for an individual who owns at least 25 percent of the business. More information on the NPRM can be found here and here.

Congressional Update

The House is out of session this week and will return next week for a two-week session before taking another two-week recess. The Senate is in session and will be in for the next three weeks. They continue to focus on confirming executive and judicial nominations and holding Committee hearings.

Last week, House Republicans announced that H.R. 1, would be the Lower Energy Costs Act, legislation to lower energy costs, increase energy independence, and enact permitting reform. H.R. 1 is designated each Congress to the Majority party’s top legislative priority. Specific legislative text has not yet been released; however, the bill will be voted on in the last week of March and will contain proposals from three House Committees – the Energy & Commerce, Natural Resources, and Transportation & Infrastructure.

Labor Update

As we mentioned in our last Update, controversy continues to surround the nomination of current Deputy Secretary of Labor Julie Su to succeed outgoing Secretary Marty Walsh in the top post. After reviewing Ms. Su’s record going back to her time as Secretary of the California Labor & Workforce Development Agency, NAW has announced opposition to the nomination, and sent a letter today to members of the Senate Health, Education, Labor and Pensions (HELP) Committee urging the senators to vote against the nominee.

In the labor space, NAW has concerns about the President’s proposed budget. Although budgets submitted by the sitting President never become law, and in fact almost never are even considered by Congress, a President’s budget is usually seen as aspirational, and often provides insight into the chief executive’s legislative and policy priorities. While the most notable proposals in President Biden’s budget are the more-than-four-trillion dollars in tax increases, his proposed increased in budgets for the Department of Labor and the National Labor Relations Board send a clear signal that NAW will have to maintain our focus on those agencies in the months to come:

Biden Budget Request: On March 9, the Biden administration released its FY24 budget request. It includes a $1.5 billion increase for DOL, an approximately 11% increase from FY23, and a 25% increase in funding for the NLRB. The budget request also includes calls for up to 12 weeks of paid family and medical leave and urges Congress to require employers offer a minimum of 7 paid sick days to employees

March 10, 2022

1. Latest on the Government Omnibus Spending Bill and Russian Oil Import Ban

Last night, the House passed a $1.5 trillion federal omnibus spending bill ahead of Friday’s deadline. The House has also approved a short-term funding bill that gives the Senate until March 15th to complete work on the omnibus. The bill included $13.6 billion in military and humanitarian aid to Ukraine. Democrats had discussed including tax provisions in the funding legislation, but they were ultimately excluded. That decision came despite the pleas of lawmakers and business groups to include temporary provisions known as “extenders” and an intense effort to revive the now-expired employee retention tax credit.

However, the spending bill did ensure that the bi-partisan infrastructure law passed last year would now be fully funded. Lawmakers and transportation officials have been warning for months that full implementation of the infrastructure law isn’t possible because government funding is constrained at last year’s levels.

On Tuesday, President Biden announced an import ban on Russian oil, natural gas and coal. President Biden had come under growing bipartisan pressure from Congress to sanction Russia's energy industry, but hesitated due to concerns about rising energy prices and opposition by U.S. allies. To read Executive Order 14024, click HERE.

The House also overwhelmingly passed a bill last night banning U.S. imports of Russian oil. Speaker Pelosi characterized the legislation as a compliment to the executive actions of President Biden. It’s still not clear whether the bill will be considered in the Senate. Majority Leader Schumer praised Biden’s decision to ban Russian energy imports but so far has made no commitment to having his chamber take up separate House legislation.

2. Latest From Department of Labor (Dol) & National Labor Relations Board (NLRB)

Both DoL and the NLRB are pursuing aggressive policy and rulemaking agendas that could seriously impact NAW members. We can’t cover all of them in one update, but the following are the immediate initiatives most likely to effect wholesaler-distributors:

Wage and Hour Division (WHD) rulemaking on the Fair Labor Standards Act (FLSA) “white collar exemption” to the overtime rule.

As you may recall, in 2015 the Obama Administration proposed a rule on the overtime exemptions which, among many other things, would have increased the threshold salary for exemptions from $23,660 to more than $47,000. NAW filed comments with DoL on the rule and arranged a meeting in 2016 with DoL and White House officials at which three NAW member company CEOs discussed the impact of the proposed rule on their companies.

NAW then joined other associations as a plaintiff in a lawsuit challenging the rule, which was eventually invalidated by the court. Subsequently the DoL in the Trump Administration promulgated a new rule, raising the salary threshold to $35,568.

The Biden DoL has announced that they plan to promulgate a new rule, even though the current rule has been in effect for less than three years. While they have not released any details on their proposal, a few members of Congress have sent a letter to WHD recommending a threshold salary of at least $82,732 by 2026, indexed to inflation. DoL has made no comment on that recommendation.

NAW and 109 other trade associations (including about twenty NAW member associations) sent a letter to WHD in late January requesting stakeholder meetings as they develop the rule. A month later WHD responded, offering one 90-minute meeting for the entire group of 110 associations. We rejected that offer, since it would have allowed less than one minute of input from each group, and insisted on industry-specific meetings, and many more of them.

As of today, WHD has agreed to a number of industry stakeholder meetings through the end of April, with a “manufacturing and wholesale” listening session for one hour in late April. There were 38 manufacturing and distribution associations on the letter to DoL requesting industry meetings, so again they offered a completely inadequate amount of time for serious input if all 38 groups were invited to participate.

Speaking with DoL officials yesterday, we asked that they separate manufacturing and distribution into separate meetings (retail has a separate meeting), but so far, they remain committed to combining both industries into a single 60-minute session. They did, however, however, set up a much smaller meeting so that participants will have the opportunity to provide substantive input.

As we did in the previous rulemakings on the OT rules, NAW will be asking for member input on how changes to the regulations would impact you. We rely on the information from our members to inform our meetings with DoL/WHD, and our comments during the regulatory process, so please take a few minutes to respond to our survey(s) when we send them out.

NAW had a virtual meeting with the Acting Administrator of the Wage and Hour Division last week to discuss their "Warehouse and Logistics Worker initiative (see below), and during that call we asked her why the Department was pursuing a new overtime rule when the existing regulations were promulgated not-yet three years ago. She made it very clear in her response that WHD was determined to proceed with this new initiative.

Finally, Bloomberg ran a story this week on the business community interactions with DoL on the overtime issue in which NAW is referenced.

WHD’s New “Warehouse and Logistics Worker Initiative”

As you may already know, last month the Department of Labor announced a “worker initiative” to ensure that worker rights are protected in the warehouse, logistics and distribution industries. While the press release announcing this initiative does not mention the wholesale distribution industry specifically, the "Fact Sheet" on the initiative does.

Fact Sheet #10: Wholesale and Warehouse Industries Under the Fair Labor Standards Act (FLSA):

There are some problems and misconceptions which Wage and Hour investigations commonly disclose in the wholesale and warehouse industry. These include:

  • The misapplication of the executive or administrative exemptions to non-exempt persons, such as clerical workers, working foremen, dispatchers, and inside salespersons.
  • Employment underage minors, especially in the operation of forklifts and paper balers.
  • The misconception that salaried employees need not be paid overtime.
  • Failure to pay employees for all hours suffered or permitted to work, including time spent taking inventory, completing paperwork, etc. beyond the normal schedule.
  • Failure to maintain time records on salaried or piece rate employees.
  • Giving compensatory time off in lieu of overtime pay.
  • Considering certain employees to be "contract labor" and thus, not covered by the Act's provisions.
  • Deductions made for reasons other than board, lodging, etc., in overtime work weeks.

At this point there is no specific action to which to respond, and no indication that DoL will promulgate a rule or seek public or stakeholder input. While they do not describe in any detail what this initiative will do, they include “vigorous enforcement to increase compliance” as one course of action.

NAW and the International Warehouse Logistics Association, along with a number of NAW member associations, sent a letter to Jessica Looman, the WHD Acting Administrator, asking for a meeting to discuss this initiative. They have agreed to meet with us, and we are waiting for a meeting to be scheduled.

In addition, we had a separate virtual meeting with Jessica Looman last Friday, at which we provided wholesale distribution industry data – average non-non-supervisory wage, percentage of employees with access to benefits, etc. – and explained that given the current worker shortage, employers who underpay or mistreat their employees don’t have those employees for long. Her response was to describe “other employers” who deliberately exploit and underpay the most vulnerable workers.

Of note: this initiative will not be limited to responding to complaints received by the department but will include “direct” investigations initiated by DoL. The agency may, but is not required to, notify an employer in advance if they have been targeted for an audit.

We will of course keep you posted on developments with both this new initiative and the FLSA overtime rulemaking. And again, our ability to respond effectively to these initiatives depends on our having accurate information from our members, so please respond to the surveys we will be sending out in the next weeks.

NLRB cases:

As a reminder: The National Labor Relations Act covers virtually all employers, whether or not any employees in the company are unionized. According to the NLRB website: “As a practical matter, the Board’s jurisdiction is very broad and covers the great majority of non-government employers with a workplace in the United States, including non-profits, employee-owned businesses, labor organizations, non-union businesses, and businesses in states with `Right to Work’ laws.”

NAW has signed onto several amicus briefs recently opposing decisions and actions of the NLRB and expect to participate in additional cases as Board actions warrant. Among the issues on which we’ve recently signed onto amicus briefs:

Specialty Health Care: In this original case, the Obama Board changed the standard for what constitutes an “appropriate collective bargaining unit,” allowing unions to organize “micro bargaining units” of a small number of employees within a larger workforce. For example, the Board deemed appropriate a bargaining unit consisting of just the employees in the cosmetics and fragrance department in a Macy’s store. The Trump Board reversed the Obama Board, restoring the previous standard. The Biden Board is now considering a case, American Steel, proposing to again change the standard to allow micro bargaining units. NAW has joined this amicus brief

Handbook Rules: The Obama NLRB invalidated dozens of typical employee handbook rules that were “facially-neutral” but which employees could “reasonably construe” as interfering with their protected rights to organize. Among the invalidated rules were those dealing with confidentiality of internal investigations, prohibitions on video or audio taping on the business property, use of profanity or sexually explicit language in the workplace, criticism of the employer on social media, employee contact with the media on employer-related matters, etc. The Trump Board reversed the Obama Board, restoring a more balanced approach that could consider an employer’s “legitimate justifications associated with the rule.” The Biden Board has invited interested parties to submit briefs in the Stericycle, Inc. case on “whether the Board should adopt a new legal standard to apply in cases where an employer’s maintenance of a facially-neutral work rule is alleged to violated Section 8(a)(1) of the National Labor Relations Act.” The Board is expected to revert to the Obama Board’s standard. NAW has signed onto an amicus brief in this case.

Independent contractors: Both the Board and DoL are aggressively challenging the right of employers to hire individuals as independent contractors (IC) rather than employees. The agencies are specifically accusing employers of misclassifying workers as ICs to avoid having to pay benefits, despite consistent polls showing that an overwhelming majority of ICs choose to work independently. In one initiative, WHD and the NLRB are “collaborating to strengthen the agencies’ partnership through greater coordination in information sharing, joint investigations and enforcement activity, training, education, and outreach” on a variety of issues, including ICs. NAW has joined an amicus brief in the Atlantic Opera case, opposing the Board’s efforts to rewrite the standard for determining whether a worker is an IC or an employee.

Labor Legislation: While it seems clear that the radical pro-union PRO Act will not pass this year, unions and their allies persist in finding other ways to advance their agenda in Congress. The House recently passed the America COMPETES Act, intended to increase US competitiveness with China. But at the last minute, an unrelated labor amendment was added to the House bill. The amendment applies labor provisions to entities receiving certain funding under the bill. The provisions would require funding recipients and their contractors and subcontractors to 1) agree to recognize any union base on card check (i.e., without a secret ballot election) and 2) agree to let an arbitration panel set the terms of collective bargaining agreements if parties do not come to an agreement within 120 days. Both provisions were part of the Employee Free Choice Act, which Congress rejected years ago. Senate allies are fully aware of these provisions, and we are working with them to ensure that the labor language is dropped from the “conference report” on the legislation.

3. Employer Resources

As businesses and the economy continue to emerge from the Coronavirus Pandemic, it can be hard to decipher how new regulations and laws may impact your business. To help you manage these issues NAW is providing information about reports, webinars, and seminars that you may find useful:

Webinar from Covington Law Firm: Infrastructure Act Domestic Preference Requirements

Wednesday, March 23, 2022 | 11 a.m. - 12 p.m. EDT

Members of Covington’s Government Contracts practice will host a webinar to address the Buy America and Buy American provisions in the new Infrastructure Investment & Jobs Act (IIJA). To register, click HERE.

Topics in discussion will include:

  • An overview of the new domestic preference provisions included in the IIJA’s “Build America, Buy America Act,” including requirements for federal grants and procurements
  • Key takeaways on how these requirements modify existing Buy America/Buy American requirements, including the March 2022 Buy American Final FAR Rule
  • Best practices for sourcing and supply chain management given evolving domestic preference requirements
  • Open questions and key developments to watch in the coming months