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Report: Companies to watch in wake of CVS, Aetna deal

BY CSA STAFF

CVS Health’s decision to purchase insurance Aetna will transform both the pharmacy and health-care businesses. And it will also impact a potentially vulnerable small pool of retail chains.

Walgreens has the most to lose from the deal as it is the most similar to CVS in business model and the most reliant on drug sales to drive traffic into its stores, reported CNBC.

Other vulnerable retailers include Walmart, Kroger Co., and Rite Aid.

The report noted that Walgreens blocked acqusition of Rite Aid makes the chain particularly sensitive to regulatory risks posed by further deals that could come in reaction to CVS/Aetna.

For more, click here.

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Regulatory Wrap-Up: Spotlight on immigration raids, wages and paid leave

BY CSA STAFF

Wages

Massachusetts: Ahead of the deadline for the first round of signatures, Raise Up Massachusetts announced that they have secured the required number to place an initiative on the 2018 ballot. The initiative would raise the state minimum wage to $15/hr by 2022. The signatures must now be validated by state election officials. Activists will have additional time to gather signatures (should they need it) by June 19, 2018 if the legislature fails to act on the issue.

Missouri: According to recent filings, advocates pushing for a $12/hr minimum wage increase on the 2018 ballot have received more than $500,000 in funding from unions and other labor-backed groups. The proponents have until May to turn in enough signatures (a relatively low threshold) to qualify for the Nov. ballot.

New Jersey: At Governor-elect Murphy’s first press conference with legislative leaders, he stated that a $15/hr statewide minimum wage will be one of his first priorities when he is sworn in on Jan. 16.

Vermont: Anticipating the recommendation of a special legislative committee to increase the state’s minimum wage to $15/hr, the Senate President Pro Tem stated that the increase is one of his top priorities for the 2018 legislative session. The committee plan calls for an increase to $15/hr but does not specify the length of time over which the increase would phase in.

Paid Leave

Maryland: Governor Hogan announced plans to introduce a compromise paid leave bill in the 2018 session. The governor vetoed a bill earlier this year that may have enough support in the Democrat-controlled legislature for a veto override. The governor’s proposal seeks to allow smaller businesses a longer implementation timeline and includes state preemption. The proposal was met with opposition from Democratic leadership in both chambers.

Massachusetts: Ahead of the deadline for the first round of signatures, Raise Up Massachusetts announced that they have secured the required number to place a paid family leave initiative on the ballot in addition to a $15/hr minimum wage mandate. The signatures must now be validated by state election officials. The proposal seeks to provide a maximum of 16 weeks of paid leave at up to 90% of average weekly wages with a maximum of $1,000/wk. It would also create a trust fund into which employers would pay 0.63% of each employee’s annual wages. Activists will have additional time to gather signatures (should they need it) by June 19, 2018 if the legislature fails to act on the issue.

New Hampshire: With bipartisan support, a bill to establish a paid leave program financed by a 0.5% payroll tax on employees recently passed out of a house committee and will move to the floor for consideration next session. It would provide up to twelve weeks of paid leave, parental or sick time per year at 60% of the employee’s current salary.

Wage Theft

San Diego: Several local restaurants are being sued for adding surcharges to customers’ bills to offset added costs associated with the recent escalation in the city’s minimum wage. The pending lawsuits allege deceptive advertising, claiming customers were not made aware of the surcharge until after the meal.

Santa Monica, CA: The city attorney’s office announced its first successful prosecution of a business owner for failing to pay the city’s minimum wage and retaliating against an employee for asserting her wage rights. The retail shop owner must pay employee back wages, fines and complete community service hours.

Scheduling

New York: New statewide regulations were officially published Nov. 22 and are subject to a 45-day comment period before taking effect. The new rules are applicable to employers as defined under the state’s Miscellaneous Industries and Occupations wage law, which only applies to traditional retailers. Restaurants are covered under a separate statute, the Hospitality Industry wage law. The new “call-in” pay regulations will only impact retailers, while restaurant employers remain subject to the existing state regulations governing “call-in” pay.

Los Angeles: An opinion piece in the Los Angeles Times suggests that L.A. city or county government may take up restrictive scheduling in the near future. There have been rumors over the past year of potential legislative activity in L.A., following the path of San Francisco and Seattle. Similar legislation at the state level has failed to move, which may add additional motivation for local policymakers to take action.

New York City: The city’s “fair workweek” laws went into effect Nov. 26. The city ordinances mandate that fast food employers provide 14 days advance notice of work schedules, offer new hours to existing employees prior to bringing on new workers, allow employees voluntary paycheck deductions to non-profits of their choice and prevent employers from scheduling employees for multiple shifts with less than 11 hours between shifts. The city law also calls for specific record keeping requirements for retailers as well as fast food employers.

Soda Taxes

Multnomah County, Ore.: Advocates announced that they have collected enough signatures to place a 1.5 cent per ounce tax on sugary drinks on the May 2018 ballot, but they made the strategic decision to wait for the November 2018 ballot, determining they have a better chance at passage with higher turnout in Portland and other areas of the county in November.

Tax Reform

U.S. Senate: The U.S. Senate’s tax reform legislation passed 51-49, as a result of last minute negotiations with key Republican Senators. The language that passed the Senate differs from what previously passed the U.S. House. The most likely path forward is that the bill will go to a conference committee and be voted on again in both chambers before it is advanced to the President’s desk.

Labor Policy

NLRB: Management-side attorney John Ring is going through a final White House background check to fill an upcoming Republican vacancy on the National Labor Relations Board. Ring would fill the seat of Phil Miscimarra, whose term expires Dec. 16.

OSHA: For the second time, the Occupational Safety and Health Administration extended the deadline for employers to file illness and injury reports. Originally the deadline was July 1, 2017 and was extended to Dec. 1, 2017. The new deadline is Dec. 15, 2017.

Missouri: The secretary of state certified that the right to work law passed earlier this year will be placed on the 2018 ballot for voter approval. Missouri allows residents to call for a ballot measure on new legislation by collecting signatures from at least 5 percent of voters (over 100,000) from six of the state’s eight congressional districts.

New York City: The National Restaurant Association’s legal center initiated a lawsuit seeking to block a component of the city’s ordinances dealing with restaurant scheduling and payroll policies. Specifically, the group is seeking to bar the law that allows for voluntary employee paycheck deductions to nonprofits of their choice. The ordinance, supported by labor leaders, was intended to provide a funding mechanism for local labor organizations.

CEO Pay Survey: A survey released by Korn Ferry highlights the concern that many entry-level employers have with the upcoming mandated disclosures of CEO pay compared to median worker pay. The reporting, due for the first time by publicly traded companies in their 2018 earnings reports, could show ratios up to 1100% when comparing the chief executive against the median compensation level of all other employees. This level of disparity will certainly gain national attention and cause reputational issue for many brands and industries.

Health Care

U.S. Senate: The tax reform bill that passed the U.S. Senate contains a repeal of the individual mandate which is a central piece of the ACA. President Trump has said he would support two separate proposals intended to stabilize insurance markets in exchange for support of the tax reform bill. One proposal would fund ACA insurer payments, and another would fund states’ reinsurance programs for high-cost patients. Some centrist Republicans believe both provisions would help stabilize the insurance markets following the repeal of the mandate; however, some conservatives have raised concerns regarding the costs, putting the deal in jeopardy. As the bill is likely headed to a House/Senate conference committee, it’s unclear how this issue will be addressed in the final legislation.

Trade

ITC: The U.S. International Trade Commission officially recommended that the U.S. impose tariffs on large residential washer imports. The administration is expected to issue a final ruling early next year. While the proposed tariff would affect only those foreign manufacturers in countries without U.S. trade agreements, South Korean manufacturers such as LG and Samsung would be impacted given their sourcing practices. The proposed tariff could impact ongoing discussions over the KORUS trade agreement between the United States and South Korea.
Immigration

ICE: According to a U.S. Immigration and Customs Enforcement internal memo, the agency is planning a major worksite enforcement operation at an unnamed national food service chain. The intent of the operation is to identify criminal activity and enforce immigration and wage laws where applicable.

Key Takeaways

• As we’ve witnessed under previous administrations, ICE raids are likely to draw national headlines. Recent reports indicating that raids will occur in the coming weeks at food service chains should be a cause for concern for retailers. Some operators may find their supply chains under scrutiny in addition to their workplaces. Given the President’s tough talk on immigration, many expect this round of raids while be much more highly publicized compared to previous actions.

• The conversation around paid leave benefits continues to evolve. A recent New York Times article highlights the growing prioritization, by millennials in particular, of expanded leave policies in determining where they live and work. Recent studies have found that millennials now feel policies such as paternity leave should be part of normal leave packages from employers, moving the goalposts in the employee marketplace yet again.

 

Legislature Status for Week of 12/4/17

  • The United States Senate is in session this week
  • The United States House is in session this week
  • The following state legislatures are in session year round
    • IL, MA, MI, NJ, NY, OH, PA, WI
    • MA, MI, NJ, OH and PA are all meeting actively this week.

Podcast

We’ve recently launched a podcast that focuses on politics and policy for the restaurant industry. You can listen to the “Working Lunch” podcast by clicking here, or 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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7-Eleven makes an unusual move with new beauty line

BY Marianne Wilson

7-Eleven is looking to grab market share in a lucrative category that most convenience stores largely ignore.

The convenience store giant has launched its own line of makeup, called Simply Me Beauty. Available exclusively at 7-Eleven stores, the brand was created to appeal to millennial women, the company said.

The new line is made up of 40 items of cosmetics and cosmetic accessories for the face, eyes and lips. All items are priced between $3 and $5.

“The beauty industry has seen dramatic growth of cost-conscious cosmetics in the marketplace because millennial women are looking for a variety of colors at affordable prices,” said Lindsay Robertson, 7-Eleven product development category manager. “Our goal when developing the Simply Me Beauty line was to create a line of makeup that had a quality look and feel without a high price barrier.”

Beauty products is a $46 billion industry that is expected to increase by 12% by 2020, and makeup accounts for 17% of the cosmetic market, another number that is expected to continue to grow. Drug stores and supermarkets have 30% of the market, and 7-Eleven hopes to gain market share in a big way with its new introduction.

“Convenience isn’t always just about a quick stop for something to eat and drink,” said Jack Stout, 7-Eleven senior VP of merchandising. “7-Eleven tries to offer our customers solutions for lots of different needs. We believe that for many, this top quality line of cosmetics and cosmetic accessories can become regular purchases in addition to fill-in stops.”

7-Eleven is supporting the launch with a social media program during the holiday shopping season.

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