SEPTEMBER WASHINGTON REPORT

September 15, 2021

  • Join Us for IBA's Fall Meeting @ PACK EXPO

  • GFF Submits New Checkoff Proposal to USDA

  • Sen. Braun Receives IBA Legislative Service Award

  • Biden's Sweeping Vaccine Mandate

  • Breakdown of Dem's Social Spending Package

  • CA Judge Strikes Down Independent Contractor Exemption

  • FDA Hosts New Era of Smarter Food Safety Summit on E-Commerce

  • Upcoming Events & Contact Information

Washington's in a frenzy with questions mounting over President Biden's vaccine mandate and negotiations hastening over Democrats' $3.5 trillion social spending package while a fiscal cliff looms over the Capitol. Unfortunately, IBA members concerned about what these discussions will ultimately mean for their businesses now face added uncertainty with the U.S. Department of Agriculture now considering a revised grain foods checkoff proposal. In this month's Washington Report, IBA breaks down the key elements of these developments, discusses the situation on the ground, and identifies how members can best prepare. 


JOIN US FOR IBA’S FALL MEETING @ PACK EXPO

IBA members and PACK EXPO attendees are invited to meet from 7:00 to 9:00 am in the Las Vegas Convention Center in room N212 on Tuesday, September 28. The meeting will begin with a networking breakfast provided by our generous sponsors. Please register in advance! 


GFF SUBMITS NEW CHECKOFF PROPOSAL TO USDA

IBA President Nick Pyle learns from the U.S. Department of Agriculture's (USDA) Agriculture Marketing Service (AMS) that it recently received a draft "revised" grain foods checkoff proposal. USDA says it may include the proposal in its published fall regulatory agenda or push it to its spring agenda. The proposal is presently subject to an internal review and will be published on the agency's proposed promotion website. USDA could not comment on the contents of the proposal, so it is not known who will be subject to it and how a referendum will be conducted. However, it did say that the proposal called for an upfront referendum. 

Once the grain foods checkoff proposal makes it into USDA's agenda, it will publish a draft proposed rule in the Federal Register for industry comments. USDA will review comments and possibly move forward by issuing two draft rules for comment: one on the grain foods checkoff order and one on the industry referendum. USDA will again review comments and determine if the order should move forward. If it does, a referendum will then occur. The referendum could be based on a weighted average of all producers subject to assessment or based on one producer, one vote. 

USDA advised that of the 13 commodities under its purview, most upfront referendums are based on one producer, one vote. While statute allows for a checkoff program to move forward with 50% majority of industry vote, USDA told Mr. Pyle that it "would like to see" at least 70% approval and at least 60%. IBA is monitoring USDA's agenda and will keep members update. Please email nick@dcpyle.com with any questions, comments, or concerns.


SENATOR BRAUN RECEIVES IBA LEGISLATIVE SERVICE AWARD 

  
IBA member John F. Popp, President of Aunt Millie's, presented Senator Mike Braun (R-IN) with the Independent Bakers Association 2021 Horst G. Denk Legislative Service Award at an event in Fort Wayne, Indiana. 

IBA awards this year's Legislative Service Award to Sen. Braun for his outstanding service and leadership. Senator Braun is a conservative who works to create jobs, build a strong national defense, and reduce the debt and deficit. 

Before he was elected to the Senate, Mike Braun was the founder and CEO of Meyer Distributing, a company he built in his hometown of Jasper to be a nationwide contender in the third-party logistics business. He understands the needs of small businesses, and works on behalf of them every day in Congress. 

With this award, IBA expresses its profound appreciation for Senator Braun's leadership on issues affecting small businesses. Thank you, Senator Braun!
 

BIDEN’S SWEEPING VACCINE MANDATE 

 
President Biden unveils a sweeping plan that would eventually require all federal employees and contractors to get the Covid-19 vaccine, along with a vaccinate-or-test mandate for private-sector workers at companies of 100 employees or more. Those who do not comply with the OSHA standard could face fines up to $14,000 per violation, a senior White House official said.
 
Federal government: As part of a six-part plan, Biden plans to sign an executive order requiring that all federal workers get vaccinated against Covid-19 -- with no option for being regularly tested as an alternative. That’s an escalation from earlier, when he encouraged employees and contractors to seek the shot. Any federal employee or contractor who refuses to get vaccinated will be terminated. Federal workers will have 75 days to comply with the mandate, unless they qualify for limited exemptions.
 
Private sector: The same blueprint includes the requirement of staff vaccinations at all health facilities receiving government funding -- as well as the development of regulations that will require employers with more than 100 workers to institute requirements that employees get vaccinated or submit to regular testing. Those employers will also be required to give workers paid time off to get vaccinated. The requirement is expected to affect over 80 million workers, the White House said.
 
Company executives are waiting for clarification on whether remote employees would need to show proof of vaccination or weekly proof of negative Covid-19 tests.
 
Challenges: Republican governors across the country assailed President Biden’s aggressive moves to require vaccinations as an unconstitutional attack on personal freedoms and vowed to sue the administration to block the requirements. Governors Kristi Noem of South Dakota, Mark Gordon of Wyoming, Greg Abbott of Texas, and Doug Ducey of Arizona are among those arguing that Mr. Biden’s plan is a big-government attack on states’ rights, private business and personal choice, and promising swift legal action to challenge it, setting up a high-stake constitutional showdown over the president’s powers to curb the pandemic.
 
Legal experts say that broad provisions given to the federal government and the public health emergency could ultimately protect against legal challenges. The Department of Labor's (DOL) Occupational Safety and Health Administration (OSHA) oversees workplace safety, which the agency is likely to contend extends to vaccine mandates. The agency has issues other guidelines for pandemic precautions, such as a rule in June requiring health care employers to provide protective equipment, provide adequate ventilation and ensure social distancing, among other measures.
 
The Equal Employment Opportunity Commission has already clarified that employer can require their staffs to get vaccinated, so long as they provide accommodations for workers who say they can’t get the shot because of their religious beliefs or a disability. Businesses can tell workers to stay home if they can’t be vaccinated for one of those reasons, and workers could be fired if their employer is unable to accommodate remote work. There’s also some related Supreme Court precedent on vaccine requirements – the high court upheld a 1905 vaccine mandate in Cambridge, Massachusetts. 
 
What’s next: DOL and OSHA are expected to issue a rule "in the coming weeks" that will lay out the exact timeframe for the new requirements. Standards issued by federal agencies typically take several weeks to write and go through executive branch review. DOL has been working on the standard for at least a week, according to two people familiar with the matter. 


Other parts of Biden's plan

  • Easing access to booster shots: the administration has bought the booster shots necessary to give Americans a third shot, which Biden says the federal government is ready to administer them as soon as they are authorized. However, top federal health officials told the White House last week to scale back a plan to offer coronavirus booster shots this month to the general public, saying that their agencies needed more time to collect and review all the necessary data.

  • Keeping schools free of the virus: Biden urged that parents ensure children ages 12 or older are vaccinated. While no vaccine has been approved for children under the age of 12, the president said he continued to support the Food and Drug Administration as it worked to approve one “as safely and as quickly as possible.” For states, he urged mandating school staff and teachers to be inoculated. Biden also said that nearly 300,000 educators who work in federal run school programs would be required to be vaccinated. The President slammed efforts by elected officials like Governor Ron DeSantis of Florida who are dismantling local mask mandates, many of which apply to schools. Mr. Biden said the Education Department was moving to take legal action against those efforts and promised that the federal government would compensate any educator whose pay is withheld “for doing the right thing.”

  • Increasing testing and masking: As part of a broader effort to bolster the affordability and availability of testing, the president said that his administration has teamed up with retailers, including Amazon and Walmart, to lower the cost of at-home Covid-19 rapid test. That proposal includes dedicating nearly $2 billion to buy about 300 million rapid tests for community health centers, food banks, and schools, “so that every American, no matter their income, can access free and convenient test.” He also said that the Transportation Security Administration would double fines on travelers who refused to wear masks.

  • Aiding the economic recovery: The president said that he would expand the loan programs run by the Small Business Administration that allow small-business owners to borrow money at low interest rates in order to hire and retain workers, buy inventory or even pay down debt as the coronavirus continues to cripple business. 

  • Improving response and treatment to the virus: The president also outlined measures to address the increasing number of infections and hospitalizations, like bolstering support for overburdened hospitals and speeding new methods of treatment. Mr. Biden said he would deploy “response teams” that would include experts from a number of government agencies “to stem the spread of Covid-19,” adding to the health care teams that already been deployed by the federal government. The president also vowed to increase the availability of therapeutics that have been tested and recommended by doctors, including by increasing shipments of monoclonal antibodies.


IBA is monitoring this issue closing and will keep members updated.

BREAKDOWN OF DEM'S SOCIAL SPENDING PACKAGE 

Democrats are in the thick of assembling President Joe Biden’s $3.5 trillion social spending plan, hastening to resolve their differences on key tenets like expanding health care, curbing carbon emissions and investing in child care. Majority party leaders want to wrap up the breakneck reconciliation action by September 27 when House leaders have also pledged to pass the Senate’s bipartisan infrastructure package. But many lawmakers are worried committees won’t finish their portions of the social spending bill by today’s deadline. But the majority party’s aspirations of finalizing that sweeping package in the coming weeks could quickly take a back seat to a crush of more pressing concerns, like funding the government before the end of the month and tackling a cap on how much money the nation can borrow.
 
Democrats must also contend with concerns from moderates like Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), who have said they won’t support a final product that costs $3.5 trillion — the spending floor for progressives. While entire policies in the Democratic bill may not get nixed, the complicated caucus dynamics could also lead to changes in funding levels or duration of programs. 
 
Additionally, the Senate parliamentarian can make or break key priorities. While the budget reconciliation process only requires a majority support in both the House and Senate, and cannot be stopped by the filibuster in the Senate, its provisions must clear the upper chamber's rules referee, the Senate Parliamentarian. Democrats are largely viewing the budget reconciliation package as their best — and perhaps last — chance at clearing major party priorities before the midterm elections next year. The Senate parliamentarian will have major sway over which policies can ride to passage and which must get tossed aside, including language that would provide a pathway to citizenship for certain undocumented immigrants. 
 
The upper chamber’s rules referee will also consider whether Democrats can include elements of the so-called PRO Act, which would make it easier for workers to join unions, a big priority for the party. While Democrats could overrule any decision the parliamentarian makes, it's highly unlikely. Here's what we know so far:

Pro-Union Language 

In an effort to ensure that certain key aspects of the PRO Act become law, the House Education and Labor Committee released language that its members hope to become part of the budget through reconciliation. If passed, these amendments will take effect on January 1, 2022 .
 
The Committee’s portion would bar class action waivers, bar captive audience meetings, prohibit and create fines for misclassifying workers as independent contractors, and limit employers from permanently replacing striking workers or locking out workers in certain situations, among other things. It would also create new liability for employers found to have committed unfair labor practices, resulting in civil monetary penalties rather than a requirement for a person or company to cease and desist from the prohibited behavior.

Tax Increases

The House Ways and Means Committee has proposed $2.9 trillion in tax increases. They include $1 trillion in tax increases on individuals, $900 billion on corporations, $700 billion from drug-pricing policy changes, and $120 billion from tougher tax enforcement. The most important aspects of the 40-plus tax increases are:

  • A lift to the top income tax rate to 39.6% from 37%

  • An increase in the corporate rate to 26.5% from 21%

  • A hike in the top capital gains rate to 28.8% from 23.8%

  • A newly proposed 3% surtax on people making more than $5 million

  • A reduction in the estate tax exemption rate by almost half, to $6 million for couples

  • A restriction of tax breaks that come with so-called carried interest


These mean that businesses organized as pass-throughs and family businesses would face a range of tax increases, leading to a significantly higher tax burden. For pass-throughs, their top rate would increase by 2.6 percentage points, while their 20% pass-through deduction would be virtually eliminated and their owners (with an income greater than $5 million) would be subject to the new 3% surtax on individuals. For family businesses, they would also be impacted by the increase in the top capital gains tax rate, as well as the reduction of the estate tax exemption. 


Small Business Aid

The House Small Business Committee approved $25 billion for small businesses and announced that it plans to give further aid through a separate bill. Its plan would pour funding into several Small Business Administration (SBA) initiatives, would create a new $4.4 billion program in which the agency would lend directly to small businesses. Today the SBA largely relies on bank partners to extend government-backed credit to entrepreneurs, with the big exception being the agency’s disaster loan program that was expanded during the pandemic.

The new direct lending initiative would offer loans up to $150,000 for most businesses while allowing loans up to $1 million for small manufacturers and government contractors. 

House and Senate Democrats said they planned to assemble a separate small business relief bill to support employers struggling in the Covid-19 economy. Separately, the Biden administration is expected to unveil an expansion of SBA’s Economic Injury Disaster Loan program as part of a broader White House effort to combat the Delta variant. 


CA JUDGE STRIKES DOWN INDEPENDENT CONTRACTOR EXEMPTION 

 
A California judge strikes down Proposition 22, a 2020 tech industry ballot initiative exempting companies from treating app-dispatched workers as employees. The ruling is a major loss for Uber, Lyft, and other tech companies who are trying to exempt their fleet of independent contractors from state employment laws, although the legal issue in California centered on the measure's limits on the state legislature, not worker status.

In a lawsuit brought by the Service Employees International Union and several drivers, Alameda County Superior Court Judge Frank Roesch ruled that Prop. 22 is unconstitutional and unenforceable. That's in part because the law, Roesch wrote, infringes on the legislature's power explicitly granted by the state constitution to regulate compensation for workers' injuries. Also by including language aimed at preventing drivers from unionizing, the ballot measure violates a constitutional provision that requires laws and initiatives to be limited to a single subject. Since a ballot initiative cannot be amended after it is passed by voters, any unconstitutional provision renders it unenforceable. 

The app-based rideshare and delivery companies say they plan to appeal the decision and Prop. 22 will stay in place as the case continues. After consideration by the state court of appeals, it will eventually be decided by the California Supreme Court, a process that could take a year. The California Supreme Court previously declined to hear a constitutional challenge to Prop. 22 in February, ordering the plaintiffs to first file the suit in a lower court. 

Tech companies like Uber and DoorDash spent $200 million to pass Prop. 22 after California's state government enacted a law called AB5, which requires California employers to treat more workers as "employees" who are covered by state laws mandating protections like overtime pay and worker compensation. California voters passed Prop. 22 last fall, exempting certain independent contractors from AB5 and instead guaranteeing them a minimum wage based on driving time, a health insurance stipend, and some compensation for on-the-job injuries. 

The ruling striking down Prop. 22 comes as those companies are working to replicate Prop. 22 in other states. Earlier this month, the company-based Massachusetts Coalition for Independent Work filed a measure for consideration on next year's Massachusetts ballot that would define their workers as independent contractors and create a similar model to Prop. 22 in that state. The tech companies have also lobbied the state legislature in New York to provide gig workers with some benefits, but not the full protections that come along with being an "employee."

In D.C., President Joe Biden and other Democrats are calling for greater protections for independent contractors, including adopting the test set out in California's AB5 so that more workers are consider "employees" who are protected under federal laws. While Democrats are unable to enact that change via legislation with a razor-thin majority in the Senate, Biden's appointees across federal agencies have started unraveling the Trump administration's attempts to shield companies that rely on independent contractors from liabilities under federal law.

The Labor Department in May rescinded a Trump-era rule that made it easier for businesses to classify their workers as independent contractors under federal minimum wage and overtime law. Furthermore, Biden's nominee for the Department's Wage and Hour Division chief, David Weil, said that "most" workers should be considered employees under federal minimum wage law when he served in the Obama administration. The National Labor Relations Board's new general counsel, Jennifer Abruzzo, also recently said that she wanted to address the issue of employee status and whether independent contractors should be covered by federal labor law and able to unionize. 

The Independent Bakers Association believes that Congress should reject any effort to classify more workers as "employees" protected under federal law, including passing the Protecting the Right to Organize (PRO) Act. The PRO Act relies on the same test used in California's AB5 to determine employee status for the National Labor Relations Act, the "ABC" test. The "ABC" test for determining worker status is explicitly designed to deny independent-contractor status to a subset of common-law independent contractors.

The situation in California demonstrates the problem with adopting an "ABC" test at the federal level. After California adopted this test, there was severe backlash from independent contractors being denied the right to work independently. Instead of repealing the "ABC" test, the California legislature drafted Prop. 22, which carved out nearly 100 specific groups from the test. With Prop. 22 now struck down, California businesses face uncertainty over whether they will be hit with misclassification enforcement actions or litigation. Congress should not repeat this failure at the federal level. 


FDA HOSTS NEW ERA OF SMARTER FOOD SAFETY SUMMIT ON E-COMMERCE  

The Food and Drug Administration's New Era of Smarter Food Safety Summit on E-Commerce: Ensuring the Safety of Foods Ordered Online and Delivered Directly to Consumers will take place virtually October 19-21, 2021. The summit is designed to help the agency improve its understanding of how human and animal foods are sold through Business to Consumer (or B2C for short) e-commerce models across the U.S. and globally. Registration is free, but required for attendance. 

UPCOMING EVENTS


2021 Prop 65 Virtual Conference
Monday, September 27, 2021
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PACK EXPO
September 27-29, 2021
Las Vegas Convention Center
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IBA Fall Meeting
Tuesday, September 28, 2021
7:00-9:00 AM
At the 2021 PACK EXPO
Las Vegas Convention Center
Register here

FDA New Era of Smarter Food Safety Summit on E-Commerce
Tuesday-Thursday, October 19-21, 2021
Virtual
Register here