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Regulatory Wrap-Up: Weekly recap of retail-related legislative, judicial developments – Oct. 8

BY CSA Staff

Wages

Alameda, CA – The city council voted to raise the local minimum wage to $13.50/hr effective July 2019 and to $15/hr by July 2020 over the objections of the mayor and some small businesses. The California statewide rate is set to reach $15/hr by 2022.

Washington D.C. – The city council repealed an initiative to eliminate the city’s tip credit. Voters approved the initiative with a 56 percent majority vote in June. The council voted 8-5 to overturn the law that would have gradually eliminated the tipped wage by raising it to the city-wide minimum wage level of $15/hr by 2026. Procedurally, the council needs to vote again at their next meeting but no votes are expected to change. The council also voted to delay enforcement until the second (and final) vote.

Amazon – The online retail giant announced they would increase their company-wide minimum wage to $15/hr impacting roughly 350,000 U.S. workers. The announcement won immediate praise from Sen. Bernie Sanders and others. Subsequently, the company experienced some backlash after reports indicated workers were frustrated about the simultaneous elimination of bonuses and stock grants.

Paid Leave

IRS – The Internal Revenue Service issued an updated guidance notice for employers regarding the paid family and medical leave tax credits that passed in the 2017 tax reform law.

Westchester County, NY – The county approved a paid sick leave mandate modeled off of New York City’s law.  The measure requires companies with five or more employees to grant 40 hours of annual leave, accruing at a rate of one hour per 30 hours worked with carryover allowed. The law takes effect 90 days after adoption.

Labor Policy

Supreme Court – The high court heard oral arguments on Oct. 3 in the case New Prime Inc. v. Oliveira. The case will determine whether independent contractors are exempt from arbitration requirements under the Federal Arbitration Act. The decision could have a wide-ranging impact on the trucking industry in particular, which relies on independent contractor status for the majority of its workforce. A shift in that model would impact costs up and down the national supply chain.

California – The governor signed into law a bill requiring employers with five or more employees to provide at least two hours of sexual harassment training to all supervisors and one hour of similar training to all nonsupervisory employees.

California – The governor vetoed a bill that would have required large employers to keep records of sexual harassment incidents for five years.

Joint Employer

Labor Department – Mixed signals came out of the Labor Department this week regarding rulemaking on the joint employer issue. An internal memo leaked indicating the agency would issue guidance documents (a less stringent approach) rather than go through the rulemaking process. Secretary Acosta had previously stated in public forums that the agency will engage in rulemaking and distanced himself from the memo.

NLRB – The NLRB recently ruled on a case involving picketing and secondary boycotts that could have far-reaching impacts. In that case, a subcontractor’s janitorial workers protested the prime contractor, a building management company, in an attempt to put pressure on their employer. In response, the janitorial subcontractor fired the workers. The Board found the firings justifiable, ruling that secondary boycotts or picketing are unlawful and not protected activities. The Board found that only activity related to the worker’s primary employer, in this case the janitorial subcontractor, was protected.

Activism

Burgerville – Burgerville workers have gone on strike and are calling for a boycott of all locations due to a corporate policy barring employees from wearing political buttons on their work uniforms. Complicating matters is the fact that the chain and union officials are in the midst of contract negotiations for the recently-unionized locations.

Fight for $15 – Fight for $15 held protests in markets across the country this week. While protests were not widespread, activists in a number of locations engaged in acts of civil disobedience, resulting in arrests and in some instances the temporary closure of restaurant locations.

Whole Foods – Whole Foods employees are continuing to advocate for union representation, despite the announcement from parent company Amazon that the entry-level wage would increase to $15/hr. Some detractors have argued that when factoring in recent cuts to bonuses and other benefits, Amazon employees will actually receive less total compensation even with the new commitment to a $15/hr entry wage.

Data Security

California – The governor signed a law that mandates manufacturers of internet-connected devices, such as thermostats and refrigerators, must equip such devices with unique passwords or require the user to set their own. The original draft of the law put the onus on the retailer to ensure the security of the devices and similar legislation has been introduced in other states. The shift to manufacturer responsibility as the preferred model for “internet of things” security is notable for sellers.

Key Takeaways

  • Amazon’s announcement increasing the company-wide starting salary to $15/hr will impact the distribution center labor market heading into the holiday season. While the company may notch a political win in neutralizing some of the recent rhetoric against their labor policies, the decision comes as Amazon and other retailers compete for labor in an extremely tight market.
  • Two weeks ago, a new law was signed in California that holds retailers jointly responsible for labor violations by port trucking companies is a notable inflection point on the issue. For decades the short-haul trucking industry was accused of rampant labor violations and wage theft by independent truckers. A major three-part expose by the USA Today exposed many of the abuses. Now the state has effectively made consumer-facing retailers the “enforcer of record” which could become a model for other supply chain-related issues where criminal activity can occur.

Legislature Status for Week of 10/8/18

  • The United States Senate is in session this week
  • The United States House is in session this week

Podcast

Check out our Working Lunch podcast each week that includes further analysis into these legislative issues, policy, politics and much more. You can find Working Lunch on the Nation’s Restaurant News website, or by clicking here, and when you download the podcast and subscribe on iTunes here.

The Regulatory Wrap-Up is presented by Align Public Strategies. Click here to learn how Align can provide your brand with the counsel and insight you need to navigate the policy and political issues impacting retail.

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Target takes on dollar, deep-discount rivals with new launch

BY Marianne Wilson

Target Corp. is entering new territory price-wise with the debut of its newest private brand.

The retailer is introducing Smartly, a line of essentials and personal care products, aimed at budget-conscious shoppers. The new brand includes more than 70 everyday items, from body lotions to paper plates to razor blades, with most items priced less than $2. (The full range is $0.59 to $11.99.) The line will arrive in Target stores and online starting Oct. 14, with new products rolling out through early 2019.

Target has launched more than 20 owned and exclusive brands during the past couple of years. Smartly stands out for its aggressive pricing, with products costing approximately 70% less than similar products from national brands, according to Target. The pricing undercuts rivals and also Target’s previously launched store brands.

“The introduction of Smartly is another example of how we are listening to consumers and bringing them solutions to make their lives easier,” said Mark Tritton, executive VP and chief merchandising officer, Target. “Smartly offers incredible value, looks great and most importantly, gets the job done. It broadens our assortment to give guests even more options to find the product that’s right for them, regardless of their budget.”

Target is positioning the brand not only at price-conscious shoppers, but also at those who live in small spaces without ample storage for the type of bulk merchandise that warehouse clubs sell. Products are available as single items and also offered in small multi-packs.

“Smartly offers the affordability of bulk shopping without buying in bulk,” Tritton noted in a blog post on the company’s website.

Target said its product design and development team “doubled down” on design and key attributes for the brand. For example, liquid hand soaps will be found in fragrances such as Rain Shower and Lavender, and all-purpose cleaners will be available in scents like Ocean and Citrus Grove.

Smartly’s packaging is modern and fun, featuring irreverent expressions such as “smells like well, nothing” on a bar of unscented soap and “no dishes tonight” for disposable plates, and “does the dirty work” on dishwasher powder.

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Survey: Kwik Trip, Wawa and Quik Trip tops with consumers

BY Marianne Wilson

Convenience trumps price and quality when it comes to shopping for food in the convenience, dollar and drug store channels. And shoppers favor regional retailers over larger ones.

That’s according to a new study by dunnhumby, which found that Kwik Trip, Wawa and Quik Trip are the top three retailers for food in the $291 billion U.S. convenience, dollar and drug channels. The report studied what drives retailer preference among shoppers of smaller format grocery channels and analyzed consumer emotional sentiment and preference for 37 of the largest retailers in the three channels.

The 10 retailers with the highest consumer preference index scores are: 1) Kwik Trip, 2) Wawa, 3) Quik Trip, 4) Speedway, 5) CVS, 6) Sheetz, 7) Cumberland Farms, 8) Walgreens, 9) Dollar Tree, 10) Turkey Hill.

“Consumers today are starved for time and as a result are making more quick food shopping trips to convenience, dollar and drug stores,” said Jose Gomes, president of North America for dunnhumby. “The goal of our study is to understand macro trends in the convenience space, and to provide retailers with a benchmark for how they are performing on the different drivers of consumer preference.”

Key findings from Dunnhumby’s “Retailer Preference Index” study include:

• Convenience plays a much bigger role in customer preference than price and quality. Convenient locations, hours of operation and speed play a big role in store preference.
• Quality-focused regional retailers such as Kwik Trip, Wawa and Quik Trip have stronger connections and customer preference compared to the larger retailers with higher store counts.
• Retailers ranked higher in the RPI tend to have a lower proportion of franchisees/licensees than retailers ranked lower. On average, retailers in the top half of the ranking are 7% franchised. By contrast, retailers in the bottom half are 48% franchised.
• Convenience stores stand out from the drug and dollar channels in their strength in meal destination and their weakness in price.
• Drug stores are stronger in quality, rewards, and digital compared to convenience stores and dollar stores.
• Dollar stores are strongest in price but are weaker than convenience stores and drug stores in quality and convenience.
• Six in 10 convenience store customers shop dollar stores and drug stores at least three times a month.
• Fifty percent of dollar store customers shop the other two channels regularly.
• Fifty percent of drug store customers cross-shop the other two channels.

The study found that there are six drivers of customer preference:

• Convenience – Customers are interested in convenient locations and hours. They want to be able to get in and out quickly and they want fast and easy checkouts. Customers also want the right variety of food and beverage products.
• Price – Customers want lower prices than other stores and their preferred brands to be in stock.
• Quality – Customers want quality products, clean stores and bathrooms, and a safe location.
• Meal Destinations – Customers want appetizing, ready-to-eat food, fresh produce and healthy food options.
• Discounts and Rewards – Customers want relevant, easy to use discounts and coupons that reward them for shopping.
• Digital – Customers want easy ways to shop online, and want stores to have an mobile app that makes shopping easier and provides useful information.

“By building loyalty and preference with customers, convenience retailers can improve the performance of existing stores rather than having to continually build top line sales through acquisition, which could be more challenging moving forward because of higher interest rates and the rise of digital and alternative food channels,” Gomes said.

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