Some unintended consequences began to take shape in late June 2011, when the Federal Reserve (Fed) issued its final rule implementing the law. While its initial proposals suggested that fees between 7 and 12 cents seemed “reasonable and proportional” to the costs incurred, the Fed’s final rule concluded that all future swipe fees would be capped at 21 cents plus .05 percent of the transaction amount to account for fraud losses. This was below the past average debit fee of 44 cents per transaction. However, swipe reform supporters were disappointed at the significant concessions the Fed made to big banks and credit card companies, especially since 44 cents was only an average. They felt there were many other transactions, such as small ticket purchases, that fell well below the average rates.

While the 21-cent-cap decision was higher than expected, many agreed that overall swipe fees would decrease. What no one expected, however, was that the credit card and banking industries would find a way to generate MORE revenue–not less–from imposing swipe fees. Worse, the businesses in which franchisees sold lower-ticket items were the ones that were about to be hit the hardest.

How did MasterCard and Visa manage to profit from regulations intended to lower swipe fees? Prior to oversight by the Fed, the credit card giants were imposing differing fee schedules based on multiple factors like industry segment, size of the transaction and volume processed. As a result, fees on small-ticket transactions were 4 cents plus 1.55 percent. After the Federal Reserve issued the final rule, however, MasterCard and Visa set new rates that treated the 21-cent cap as a floor for debit card fees. That meant that almost ALL transactions, regardless of cost or size, would be subject to a 21-cent fee. Therefore, franchisees selling lower-ticket items would now be paying a much higher percentage of the cost to the credit card companies. The result: every transaction made below $15 on a non-exempt card now has a higher network-imposed interchange fee than it did prior to the law’s enactment. Further, interchange swipe fees on purchases under $2.50 have now tripled in price because of the decisions by participating networks to raise all rates to the cap.

How did this happen? According to the organization primarily responsible for advocating the law’s passage, the Merchants Payments Coalition (MPC), two parties are to blame for this result: the Fed and the credit card companies.

According to MPC, the Fed did not set a truly reasonable and proportional standard and therefore is now allowing banks to collect almost six times the transaction cost in debit swipe fee revenue. Also, because the Fed did not require merchant routing choices on every transaction (i.e., a signature or PIN number), they limited the competition between Visa, MasterCard and the other debit networks. As for the credit card companies, MPC points out that while the 21-cent rates are not required by law, Visa and MasterCard still raised the debit swipe fee to the 21-cent cap, which now serves as more of a floor in the eyes of the networks.

In late November 2011, retailers began fighting back. The National Retail Federation, the Food Marketing Institute, the National Association of Convenience Stores and other organizations filed a suit against the Fed for setting too high of a cap on interchange fees; buckling to pressure from the banking industry; and considering outside expenses, such as fraud, when determining swipe fees. The suit maintains that the Fed’s cap is an “unreasonable interpretation” that exceeds its authority under the law. In addition, the suit contends that the Fed wrongly interpreted another provision in the law—one that requires merchants have a choice of which network handles their transaction.

In the long term, hopefully the networks will begin to face some competitive pressures and swipe fees will decrease. Until that happens, however, franchisees need to write to their members of Congress and relay their personal stories of how the new swipe fee law is hurting–rather than helping–their business.

Members voted 263-159 in favor of the bill; more than two dozen Democrats voted for it.

The bill, H.R. 527, would also require a review of past rules, and give small companies more authority to fight rules they say are too burdensome.

The legislation is the latest of several proposals that Republicans have advanced in the name of trying to create a more hospitable environment for job creation. House Small Business Committee Chairman Sam Graves (R-Mo.) said the bill would remove several loopholes that federal agencies have used to avoid complying with the Regulatory Flexibility Act (RFA), which was meant to ensure federal rules are mindful of small companies.

Democrats argued that Republicans are effectively trying to regulate the regulators to the point that they would not be able to work.

“What it does is require agencies to engage in so much analysis and so much new procedures that it basically befuddles the agencies to bring forth any rules in the future,” said Rep. Steve Cohen (D-Tenn.). “It is elimination by burdensome regulation, and while it doesn’t say they’re eliminating rules, that’s the effect of it.

“The cumulative effect of this and other changes in H.R. 527 will be to undermine the ability of agencies to effectively regulate consumer health and product safety, environmental protection, workplace safety, and financial services industry’s misconduct, among other critical concerns,” Cohen added.

But Republicans rejected this, and said the bill would only require agencies to do more to ensure small companies can comply with their rules.

“Opponents will argue that the bill stops agencies from issuing regulations,” Graves said. “However, the reality is that H.R. 527 will force agencies to consider how their actions affect small businesses and other small entities.

“More importantly, if the effects are significant, agencies, not small entities, will have to develop less burdensome and costly alternatives,” he added.

With House passage, the bill goes to the Senate, which is not expected to consider the legislation.

NEW YORK

Employers argue that paid sick leave would increase operating expenses and  further hamstring businesses already struggling in the down economy, leading to  reduced economic and job growth.

If the measure passes, New York would become the third city behind San  Francisco and Washington, D.C., to require businesses to offer paid sick leave  to employees. Similar measures have been introduced in 15 states, including  Connecticut, New Jersey, Maine and Ohio, although none have passed into law. At  the federal level, the Healthy Families Act, which would provide up to seven  days of paid sick leave, was introduced earlier this year in the House and  Senate, and has garnered support from President Obama.

Read more: http://nrn.com/article/paid-sick-leave-takes-center-stage-nyc#ixzz1dkmQYr26

Denver voters reject sick leave bill

Denver voters on Tuesday shot down a proposal to require employers to offer  paid sick leave after weeks of divisive debate that pitted business owners  against their workers.

Known as Initiative 300, the paid sick leave mandate was on a ballot  initiative on which 104,217 people voted. Of those, 36 percent, or 37,498 voters  said yes, while 64 percent, or 66,719, rejected the measure.

Read more: Nation’s Restaurant News

Related Story: Paid sick leave takes center stage in NYC

The bills, which will be the subject of legislative hearings today, have implications for the state’s nearly 14,000 franchise businesses and the 150,000 people who work at them. A franchise is an independently owned business that has been granted a license to market a company’s goods or services.

One bill would clarify the employment status of franchise owners and protect parent corporations from having to pay them overtime and the costs of certain benefits. The legislation follows recent rulings by the Massachusetts Supreme Judicial Court, which found that cleaning franchise owners were essentially working as employees of the corporate parent, Coverall North America Inc., and entitled to overtime pay, worker’s compensation insurance, and unemployment insurance.

The other bill would give local franchise owners greater legal protections in their dealings with parent companies. It would require parent firms to prove there is a legitimate business reason for terminating or failing to renew a contract. It would ensure that franchise owners are paid for the value of businesses upon termination; grant them monetary damages if a new outlet opened nearby hurts sales; and give them the right to take corporate parents to court, instead of arbitration, to which many contracts limit them.

In Massachusetts, a local owner could lose all the investment in the store if a franchise company ended the contract, said Robert Zarco, a Miami lawyer who represents franchise owners around the country. “These franchise agreements are extremely one-sided,’’ said Zarco. “You are left on the street with nothing.’’

That’s what former Dunkin’ Donuts franchisee Irwin Barkan said happened to him. In 2005 Dunkin’ Donuts gave him seven days to repay his $1.8 million debt to the company. When he couldn’t, he said, Dunkin’ terminated the contract for his Rhode Island stores and refused to compensate him for the $3 million he had invested.

Barkan filed a lawsuit against Dunkin’ Donuts, which was thrown out by a federal judge last year. At the time, Dunkin’ officials praised the decision, saying there was no breach of contract and that Barkan’s franchises flourished under new management. Rhode Island subsequently passed a law similar to the one under consideration in Massachusetts, which includes a requirement that franchise owners get 90 days’ notice before an agreement is terminated.

Read more at: Boston Globe

 The Senate left in place pending federal rules that will cap the fees charged by banks each time a consumer swipes a debit card, ending for now a fight that rekindled populist fervor against Wall Street.

But the attempt Wednesday to roll back the regulations and preserve the higher fees came within six votes of passage, ensuring that the long-running battle will continue.

Last week, the U.S. House of Representatives passed the Small Business Paperwork Mandate Elimination Act (“Act”) by a vote of 314-112. As you may recall, Section 9006 of the health care law created new 1099 reporting requirements for business transactions exceeding $600. According to the new law, businesses must now file an IRS Form 1099 for all payments of more than $600 a year paid to providers—including corporations—that supply tangible property and services. If not revoked, the law will into effect on Jan. 1, 2012.
 
The Act, which repeals Section 9006 in its entirety, passed on a bipartisan vote, with 76 democrats voting for repeal. The Senate already passed its own 1099 repeal measure as an amendment to Federal Aviation Administration reauthorization legislation. Yet despite a bipartisan effort and support from the White House, 1099 repeal is still a contentious issue. Both the parties and the chambers continue to fight over how to offset the estimated $19 billion in lost revenue that proponents of the measure claim would have been generated.
 
Interchange Fees

Despite passage of interchange fee reform last year, the debate over interchange fees has reached new heights. On Feb. 17, members of the House Financial Institutions and Consumer Credit subcommittee heard from merchants, banks and card companies about the Federal Reserve’s (“Fed”) proposed rules on debit-card swipe fees. Under the CFA-supported Durbin Amendment passed last summer, the Fed has until April 21 to publish final rules to make merchant debit card swipe fees more reasonable. Rules are required to take effect by July 21.
 
Card companies and banks said at the hearing that the rules the Fed proposed in December are rushed; that the Fed’s proposed swipe fee limits of $.07-$.12 per transaction—down from the average $.44 per transaction that merchants pay today—constitute federal “price fixing”; that the rule will hurt small banks and credit unions; and that reduced swipe fees are a $12 billion giveaway to merchants and won’t be passed along to consumers.
 
The Merchants Payments Coalition, of which the CFA is a member, argued that the Fed’s rules need to be implemented on time and as written. Sen. Durbin, sponsor of the interchange reform language, wrote to Federal Reserve Chairman Ben Bernanke that “The U.S. banking industry is a $13 trillion dollar industry… [and] has always fiercely opposed any reform to the current interchange fee system… I urge you and the Federal Reserve to recognize these tactics for what they are, and to carry out the implementation of interchange reform as Congress intended—on the basis of facts and not the financial industry’s fictions.”
 
Washington insiders believe that a bill will be introduced, possibly by Rep. Shelly Moore Capito (R-W.Va.), to give the Federal Reserve more time to issue the rules. Capito chairs the subcommittee that held the hearing discussed above. Click here to write to your members of Congress and tell them to oppose any delay to the interchange rules!
 
Labor Regulations

As was previously reported, on Dec. 22, the National Labor Relations Board (NLRB) issued a proposal which would require employers to post an 11″ x 17″ poster in the workplace which informs employees about their union-organizing rights under the National Labor Relations Act. The comment period for this proposal ended on Feb. 22. Under the NLRB proposal, businesses who fail to post notices could be charged with an unfair labor practice. The CFA is a member of the Coalition for a Democratic Workplace (CDW), which filed comments in opposition to the proposed regulations.
 
Comments were due last week for the Department of Labor’s (DOL) preliminary guidance on accommodations for nursing mothers. Since March 23, 2010, and as part of the new health care law, employers are required to provide nursing mothers with reasonable break time and “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public” for expressing breast milk while at work. DOL’s guidance for employers covers topics such as the length of break times, acceptable private spaces in a workplace and hardship exemptions for certain small businesses. The department noted that it does not plan to issue regulations implementing this provision at the present time.

The Republicans promised to eliminate it in their Pledge to America, and President Obama did the same in his State of the Union address. So nearly one year after its passage, why isn’t the law dead yet?

0Email Print Money. Congress can’t undo the looming 1099 tax mess without finding $2 billion a year to offset the government revenue the wildly unpopular provision is expected to generate.

Starting in 2012, the new regulations require any taxpayer with business income to issue 1099 forms to all vendors from whom they purchased more than $600 of goods and services in one tax year. That’s a massive expansion in the role of the 1099 tax form, which is currently used only to document non-wage income for individual workers. The IRS’ National Taxpayer Advocate estimates that this change will affect 40 million taxpayers, creating a compliance burden that could be “disproportionate as compared with any resulting improvement in tax compliance.”

Translation: This is a paperwork-intensive tax nightmare. And it might have unintended consequences. Critics of the provision are concerned that it could prompt businesses to consolidate their purchases with a few large vendors in order to cut down on their paperwork, making it harder for small businesses to compete.

Read More:  CNN Money

Employers’ payments finance the trust fund that pays unemployment benefits to the state’s jobless. The rates would have risen as much as 40 percent in March as Massachusetts takes steps to keep the fund solvent. Instead, the fund will take interest free loans from the federal government to make up shortfalls resulting from the freeze.

Patrick signed legislation approving a plan to defer the cost increases for business. In a press release, he said the move would save businesses $402 million this year, or an average of $228 per employee.This is the second year in a row Patrick has signed legislation enacting a freeze.

State’s typically exhaust unemployment trust funds during economic downturns, particulalry when they last long, as this one has. The money borrowed is repaid as the economy improves and the fund replenished as the fewer workers lose jobs and collect benefits.

The sheer cost of doing this, coupled with the cost many people would have to incur by hiring accounting help just to deal with this provision,  could have burdened small businesses to the point that up to 40% would have had to close their doors, or layoff workers.

The other good news here is that it is likely the President would sign a repeal of this provision once the House passes the bill in their chamber.  President Obama spoke about the 1099 requirement in his State of the Union address as something the Democrats would be willing to compromise on, and as you can see by the 81-19 vote in the Senate, both sides moved quickly to address it.

Democrats however, see the need elsewhere to make up for the potential $17 Billion this requirement would have brought in yearly taxes to pay for Healthcare, and already Senators like Carl Levin of Michigan are presenting amendments to place an additional tax on oil companies to make up for the potentially lost revenue.

Continue reading on Examiner.com

This bulletin is brought to you by Misty Chally , the Executive Director of the Coalition of Franchisee Associations (CFA)Please be aware of the following issues affecting franchisees across the country:

Menu Labeling

Earlier this week, the Food and Drug Administration (“FDA”) announced that it is going to abandon its original plan to issue “draft guidance” on how the calories are to be displayed on menu boards (and expect compliance by the industry) and then wait until the end of the year to do a final rulemaking. Instead, it will skip its plan to issue “draft guidance” and instead issue an advanced notice of proposed rulemaking (“ANPR”) in the next several weeks – no later than March 23d. The FDA’s original plan would have required restaurants to have to put up new menu boards twice – once based on the draft guidance and again after the final rule (assuming the likely chance that there are differences between the guidance and the final rule).

In other good news, the FDA has also agreed to call regulators in New York City, Montgomery City (MD), California, Vermont and other areas where legislators are advancing their own menu labeling laws to ask them to “stand down” on enforcing their own laws until the FDA finalizes their rule. If those the states and municipalities continue to enforce their local laws, the FDA will not intervene further; only citizens of those states/municipalities can sue, claiming the local law has been preempted by federal law. As a result, it is likely that compliance will still be required in those localities pending the final rule.

After the ANPR is issued, the public will be given a 60-day comment period to provide comments. The final rule will be issued by end of 2011 and the compliance date for the final rule will be at least 6 months later.

Health Care

Since the passage of the Patient Protections and Affordable Care Act in 2010, those that have realized the potential negative effects of this health care law have adamantly fought for its repeal. On January 19th, and as a symbolic gesture of a new regime, the U.S. House of Representatives voted in favor of repealing the entire bill by a 245-189 vote. Three Democrats – Representatives Boren (OK), McIntyre (NC) and Ross (AR) – voted for full repeal.  Thank you to those who responded to the Action appeal.

The bill now moves to the Senate where Majority Leader Reid has publicly stated that he will not schedule the bill to move forward. President Obama has also stated that if the bill were to cross his desk (which his very unlikely), he would veto it. Opponents of the law will now attempt to repeal specific provisions on an individual basis. 

1099 Reporting

A number of bills have been introduced to repeal the 1099 reporting requirements included in the health care law. On Tuesday, Senate Finance Committee Chairman Max Baucus (D-MT) and Senate Majority Leader Harry Reid (D-NV) issued a statement saying they have introduced a bill for full repeal. Concurrently, Senators Mike Johanns (R-NE) and Joe Manchin (D-WA) introduced a bill which authorizes the Office of Management and Budget (“OMB”) to identify unobligated federal funds to cover the cost of repeal. A third bill, which revokes the section in its entirety, has been introduced by Sen. Debbie Stabenow (D-MI) is identical to an earlier bill introduced last year by Rep. Daniel Lundgren, (D-CA) which has attracted 233 Republican co-sponsors.

As you may recall, Section 9006 of the new Health Care law created new 1099 reporting requirements for business transactions exceeding $600. According to the new law, businesses must now file an IRS Form 1099 for all payments of more than $600 a year paid to providers—including corporations—that supply tangible property and services. In response to these requirements, pro-business members of congress have been working to repeal these requirements before they come into effect on January 1, 2012.

Congressional Republicans, Democrats and the White House have all called the reporting provision “burdensome.” Although a repeal of the provision has bipartisan support, lawmakers couldn’t reach an agreement as to how to repeal it prior to the end of 2010. 

Americans with Disabilities Act (“ADA”) Regulations

On July 26th, the Department of Justice (“DOJ”) issued its Advanced Notice of Proposed Rulemaking (“ANPR”) regarding proposed changes to the ADA. These changes focused on increased website accessibility and access to equipment and furniture.

Regarding websites, the proposal applies to entities already covered by Title III of the ADA (defined as private entities that own, operate or lease areas of public accommodation). Providing “website accessibility” includes adding descriptive text, visual notification for sound video, tags for forms, static copies and other options (i.e. larger text, phone options) on your website.

Regarding equipment and furniture, the ANPR is proposed extending ADA requirements to all equipment and furniture (including non-fixed and portable items), as opposed to the current law which applies to “fixed” elements. This includes POS devices and drive-thru equipment.
When asked whether the final rule would be released soon, experts said that while this is a priority for the Obama administration, they do not foresee any rule finalized earlier within the next 2 years.

Expiring Tax Cuts

Just prior to the end of the year, President Obama signed the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” into law. Some of the highlights of the new law include:

• An extension through 2012 of the Bush tax cuts (individual rates, dividends, and capital gains) for all taxpayers
• Reinstatement of the estate tax for 2011 and 2012 at a 35% rate with a $5 million exemption
• A reduction in the social security payroll tax for individuals (not the employer share) from 6.2% to 4.2% in 2011
• A provision allowing businesses to fully expense capital investments in 2011
• An extension of the alternative minimum tax (AMT) “patch” for 2010 and 2011
• An extension through 2011 funding for emergency unemployment benefits
• An extension for 2010 and 2011 of 15-year depreciation for restaurant new construction and building improvements
• An extension through 2011 of energy tax incentives including those for ethanol
• An extension through 2011 of the Work Opportunity Tax Credit (WOTC)

Card Check/Labor Issues

The National Labor Relations Board (NLRB) and Department of Labor (DOL) have been busy promoting their “card check” agenda.

First, the NLRB released a Notice of Proposed Rulemaking (NPRM), which would require employers subject to the National Labor Relations Act (NLRA) to post a notice in the workplace informing employees of their rights under the NLRA or face a number of sanctions. As you may recall, President Obama issued an Executive Order in 2009 that required government contractors display such a poster.

Additionally, the NLRB announced a new enforcement policy against employers accused of unlawful conduct during union organizing campaigns. The announcement instructs regional NLRB attorneys to seek the specific remedies in those situations – including increased union access to employees. The memo also states that in cases where an employers’ conduct had a particularly severe impact, the regional attorney may look to pursue additional remedies, including: “granting a union access to non-work areas during employees’ non-work time; giving a union notice of, and equal time and facilities for the union to respond to, any address made by the company regarding the issue of representation; and affording the union the right to deliver a speech to employees at an appropriate time prior to any Board election.”

Finally, DOL released its semi-annual regulatory agenda which includes a proposal to issue a proposed rule in June 2011 revising reporting requirements for costs related to employer communications to employees during organizing drives. Under current law, employers and consultants are not required to report activities classified as advice. DOL has said it intends to narrow the advice exemption.