Washington Retail Insight - May 26, 2006

Volume 11, Number 13
May 26, 2006

In Today's Edition:

• Senate Passes Immigration Reform, Eases Employment Verification

• House Committee Approves Net Neutrality Legislation

• NRF Questions Direct Challenges of Credit Reports

• NRF Backs Bill to Expand Health Savings Accounts

• NRF Updates Retailers on State Health Care Legislation

• Retailers to Meet with Nevada Congressman

• Congress in Recess

• Congressional Outlook

• NRF Events

Senate Passes Immigration Reform, Eases Employment Verification
     Immigration reform legislation passed by the Senate this week includes a new system for verifying the legal status of employees, but the proposal appears significantly less onerous than similar language included in House legislation passed last December.
    
S. 2611, the Comprehensive Immigration Reform Act of 2006, sponsored by Senate Judiciary Committee Chairman Arlen Specter, R-Pa., was approved 62-36 on Thursday. The measure enhances border security, establishes a new temporary worker program and creates a process for undocumented immigrants to earn legal residence.
    
The legislation would create a new Electronic Employment Verification System that would require employers to check whether a new hire is a U.S. citizen or legally documented immigrant. All new employees would have to be checked through the system, but the requirement would not go into effect until a year and a half after the system has been fully funded. If an employer uses the system and is told that a worker is legal, the employer could not be found in violation of immigration laws even if the worker is later found to be illegal.
    
Employers who hire or continue employing illegal immigrants would be subject of fines of $500 to $4,000 for a first offense, with a maximum fine of $10,000 for a second violation within a year and as high as $20,000 for a third offense within two years.
    
Passage of the bill came after NRF wrote to senators on Tuesday, asking them to approve legislation "with more realistic requirements and enforcement mechanisms for employers than those included in the House-passed legislation." The "punitive provisions" of the House bill "would be a significant and undue burden for law-abiding employers," NRF Senior Vice President for Government Relations Steve Pfister wrote.
    
Rather than creating a new system, the House bill would expand the existing "Basic Pilot Program" for employment verification, making it mandatory for all U.S. employers.
    
Similar to the Electronic Employment Verification System, the Basic Pilot Program allows employers to go on-line or place a call to check immigration status. In 10 years of operation, however, only 3,600 of the nation's estimated 8.4 million employers have participated, and those that have joined have reported numerous delays, errors, inconveniences and other problems. One study found error rates as high as 51 percent.
    
While the Senate proposal would apply only to new hires, the House version would require that the employment status of all existing workers be checked after the system had been in place six years. That would require retailers alone to re-verify more than 20 million employees, most of whose employment documentation is still maintained in paper form.
    
Penalties would also be higher under the House bill, starting with a minimum fine of $5,000 for a first offense, $10,000 for a second offense and $25,000 for a third offense. Under current law, fines range from $250 to $10,000.
    
The two versions of the bill now move to a House-Senate conference committee, where negotiators from each chamber will attempt to craft a compromise on employment verification and other differences. NRF will continue to monitor the legislation closely and work to ensure that any final bill does not include provisions that would be onerous for retailers.
    
NRF praised the overall Senate bill as "a practical attempt to address one of the most emotional and challenging public policy priorities facing our nation today."
    
NRF's National Council of Chain Restaurants division, whose members rely heavily on immigrant labor, also praised the bill.
    
"The faulty immigration system currently in place prevents the chain restaurant industry from being able to access an adequate labor supply," NCCR Vice President of Government Relations Scott Vinson said. "Although this legislation is not perfect, it is a dramatic improvement which will enable chain restaurants and other businesses to hire the employees they desperately need to effectively run their companies and service their customers."
    
For more information, contact NRF Vice President for Government and Political Affairs Rob Green or NCCR Vice President for Government Relations Scott Vinson at (202) 783-7971.

House Committee Approves Net Neutrality Legislation

     The House Judiciary Committee this week approved "net neutrality" legislation that could set the stage for a fight with the House Energy and Commerce Committee.
    
H.R. 5417, the Internet Freedom and Nondiscrimination Act of 2006, sponsored by Judiciary Chairman James Sensenbrenner, R-Wisc., was approved 20-13 on Thursday. The measure would amend federal antitrust law to require that network providers interconnect with other networks on a "reasonable and nondiscriminatory basis" and give non-affiliated providers of content, services and applications an equal opportunity to reach customers. Network operators would not be allowed to interfere with users' ability to choose the lawful content, services and applications they use. The companies would still be allowed to manage their networks, offer consumers different tiers of service and earn compensation from users of the network.
    
"The lack of competition in the broadband marketplace presents a clear incentive for providers to leverage dominant market power over the broadband bottleneck to pre-select, favor or prioritize Internet content over their networks," Sensenbrenner said. "When this market power is utilized to violate the non-discriminatory features that drive Internet innovation and consumer choice, an antitrust remedy is clearly needed."
    
Passage came after NRF and other groups supporting net neutrality briefed Judiciary Committee members and other House lawmakers on the issue during a Capitol Hill meeting on Wednesday. NRF provided examples of how the lack of net neutrality could harm retailers and clarified misinformation spread by opponents that retailers and others "don't pay for the Internet."
    
With online commerce growing rapidly, net neutrality is a top issue for on-line and multi-channel retailers. Online retail sales were up 25 percent at $176.4 billion in 2005 and are expected to reach $211.4 billion by the end of this year, according to a Forrester Research survey conducted for NRF's Shop.org division that was released this week.
    
The Sensenbrenner bill now heads to the House floor, where it could be offered either as a standalone bill or as an amendment to a broader telecommunications bill expected to be considered after the Memorial Day recess. That measure, H.R. 5252, the Communications Opportunity, Promotion and Enhancement Act of 2006, was approved 42-12 by the House Energy and Commerce Committee on April 26 and is sponsored by Chairman Joe Barton, R-Texas.
    
The Barton bill includes language giving the Federal Communications Committee power to enforce net neutrality principles adopted last year that would allow consumers to access all lawful Internet content and services. It would not, however, bar Internet providers from favoring their own content or from requiring companies that want fast, reliable service guaranteed to strike special deals.
    
Besides those two bills, Energy and Commerce Democrats have introduced their own measure and the Senate Commerce, Science and Transportation Committee is drafting a bill. Senators Olympia Snowe, R-Maine, and Byron Dorgan, D-N.D., have also introduced legislation.
    
For further information, contact NRF Director of Government Relations Alison O'Donnell at (202) 626-8193.

NRF Questions Direct Challenges of Credit Reports
    
NRF this week cautioned federal regulators against a proposal to allow consumers to challenge their credit reports directly with retailers, saying the move could ultimately drive some retailers out of the credit reporting system.
    
"The consumer reporting system is not perfect. It is the consequence of a long history of economic and social tradeoffs that have resulted in the sharing of information now deemed essential to the distribution of a scare resource: consumer credit," NRF said. "Adjusting the system should not be undertaken lightly."
    
NRF's remarks came in formal comments submitted to the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration and the Federal Trade Commission.
    
The agencies are in the preliminary stages of considering whether regulations should be adopted that would allow consumers who dispute items on their credit reports to file challenges directly with retailers or other businesses who supplied the information to credit reporting agencies. Under current law, disputes can be filed only with credit reporting agencies.
    
The issue dates to 2003, when Congress passed the Fair and Accurate Credit Transactions Act, a broad measure that updated the earlier Fair Credit Reporting Act.
    
House Financial Services Committee Ranking Member Barney Frank, D-Mass., sought to include language in the FACT Act that would allow consumers to dispute credit reports directly with retailers. NRF opposed the move, and supported revised language requiring only that federal agencies examine whether direct disputes should be allowed.
    
In this week's comments, NRF argued that the need to respond to consumers' disputes would drive up costs for retailers, possibly encouraging some retailers to drop out of the voluntary credit reporting system. NRF also argued that credit bureaus are better able to make objective decisions about disputed information because they don't run the risk of losing an offended customer. In addition, retailers are unable to correct errors that are the responsibility of the credit bureau, such as mixing the files of individuals with similar names.
    
In addition, many disputed items on credit reports are the result of variations in the ways the three major credit bureaus report data. But proposals to require uniformity could force retailers to report proprietary or private data about their customers, NRF said.
    
NRF emphasized that the credit reporting system is voluntary and evolved over the past 100 years from retailers' informal sharing of information about the credit worthiness of customers. If higher costs or other considerations prompt retailers to drop out of the system or restrict their participation, the data in credit reports becomes less reliable, ultimately driving up the cost of credit or making credit less available.
    
For more information, contact NRF Senior Vice President and General Counsel Mallory Duncan at (202) 783-7971.

NRF Backs Bill to Expand Health Savings Accounts
    
NRF this week endorsed legislation that would implement President Bush's call for tax breaks and other incentives to encourage wider use of Health Savings Accounts.
    
"HSA adoption in our industry has been hindered by the nature of our business and the composition of our workforce," NRF Senior Vice President for Government Relations Steve Pfister said in a letter to House Chief Deputy Majority Whip Eric Cantor, R-Va., noting high turnover rates and large numbers of young workers, part-timers and second-income workers. "Your bill will help make HSAs more flexible and attractive to our members and their retail employees."
    
"The cost of health insurance is one of the biggest and most frustrating problems we face today," Pfister said. HSAs help retailers control those costs by encouraging consumers to be more cost and health conscious, he said. 
    
Cantor on May 2 introduced H.R. 5262, the Tax-Free Health Savings Act. The legislation would adopt most of the proposals for expanding HSAs that Bush made in his State of the Union address in January.
    
Under the bill, participants would receive tax credits equal to the amount of payroll taxes paid on both HSA contributions and on premiums for HSA-compatible insurance. HSA contribution limits would be increased, a low-income tax credit would be provided for purchase of HSA-compatible insurance, and employers would be allowed to make larger HSA contributions for chronically ill employees. The measure would also allow flexibility to coordinate HSAs with existing health coverage options like Flexible Spending Accounts and Health Reimbursements Arrangements. In addition, early retirees would be allowed to use HSA savings to pay for insurance coverage premiums.
    
The measure, which was introduced with 35 co-sponsors, has been assigned to the House Ways and Means Committee for consideration.
    
For more information, contact NRF Vice President and Employee Benefits Policy Counsel Neil Trautwein at (202) 626-8170.

NRF Updates Retailers on State Health Care Legislation
    
NRF this week continued its series of conference calls on health care measures pending in the state legislatures, bringing members of the NRF Tax on Jobs Coalition up to date on recent action in two states where intense battles are being waged over bills that would mandate retailers' level of spending on employee health insurance.
    
More than 30 retailers, state retail association executives and representatives of other trade associations participated in Tuesday's call, which featured presentations by New Jersey Retail Merchants Association President John Holub and Rhode Island Retail Federation Executive Director Paul DeRoche.
    
The New Jersey Senate Labor Committee two weeks ago approved legislation that would require companies with 1,000 or more workers to provide at least $1.65 in health benefits per hour worked by most employees. The amount would be increased to $3.30 over a three-year period and indexed after that. Companies that spend less would have to contribute the difference to a state insurance fund. The measure has now moved to the Senate Budget and Appropriations Committee.
    
In Rhode Island, the House Finance Committee last week held a hearing on legislation that would require companies with 10,000 or more workers to spend at least 8 percent of payroll on health care. The measure is one of the top issues for the Rhode Island legislature, along with casino gambling legislation.
    
In both states, health care is beginning to be overshadowed by budget considerations as lawmakers move into the annual appropriations process. The New Jersey legislature meets year-round but Rhode Island faces a June 30 adjournment date.
    
The state-by-state fight over employer health care mandates began in January, when Maryland enacted legislation requiring companies with 10,000 or more workers to spend at least 8 percent of payroll on health care -- the model for the bill now pending in Rhode Island. The AFL-CIO then launched a campaign to pass similar legislation in as many as 30 states. Many of the bills, like the Maryland measure, have been crafted to specifically target major big-box retailers.
    
About a dozen states still have pending either spending mandates or bills to require that the number of employees accepting public assistance for health care be reported, but most bills are not expected to see action before legislative sessions come to an end. In other states, most bills introduced missed procedural deadlines or saw sessions expire before action could take place. In Massachusetts, legislation was enacted requiring all state residents to purchase health insurance, while in Vermont, legislation was signed requiring companies with eight or more workers to spend at least $365 a year on health care. A bill requiring reporting of workers on public health care was signed into law in Washington state, while it is uncertain whether a reporting bill passed in Colorado will be signed.
    
NRF does not lobby at the state level, but formed the Tax on Jobs Coalition earlier this year to coordinate efforts by state retail associations and individual retail companies to fight the mandate legislation.
    
NRF has argued that the mandates drive up already-skyrocketing costs for employers while doing nothing to address issues contributing to high insurance costs. NRF has supported a variety of federal initiatives to make health care more affordable and accessible, including Small Business Health Plans, expanded Health Savings Accounts and medical malpractice reform.
    
For more information, contact NRF Vice President and Government and Industry Relations Counsel Maureen Riehl or Director of Government Relations Alison O'Donnell at (202) 626-8134.

Retailers to Meet with Nevada Congressman
    
NRF will hold its third Retail Education Event of the year next week when local merchants outside Las Vegas meet with Representative Jon Porter, R-Nev.
    
Health care, energy costs, tax policy and other issues important to retailers are expected to be discussed with the second-term congressman. Porter is a member of House Education and Workforce Committee, the House Government Reform Committee and the House Transportation and Infrastructure Committee.
    
The meeting is scheduled for 5:30-7 p.m. Thursday at Chevy's Restaurant, located in the Galleria at Sunset Mall, 1300 W. Sunset Road in Henderson, Nev. The meeting is co-hosted by the Retail Association of Nevada.
    
Similar sessions were held with Representative Mark Kennedy, R-Minn., and House Republican Conference Chairwoman Deborah Pryce, R-Ohio, in April. Others are planned later this year.
    
Retail education events are informational meetings -- not political endorsements -- held in lawmakers' home districts to help Congress understand the importance of the retail industry to the economy. The meetings give retailers an opportunity to meet new members of Congress and to reinforce relationships with veteran lawmakers.
    
For more information or to register, contact NRF Director of Grassroots and Industry Relations Marsha Dionne at (202) 626-8152.

Congress in Recess
     Congress is in recess for the Memorial Day holiday and is scheduled to return the week of June 5. The next scheduled issue of Washington Retail Insight will be published June 9.

Congressional Outlook:
House: Returns 2 p.m., Tuesday, June 6.
Senate: Returns 12 noon, Monday, June 5

NRF Events:

• June 1, Retail Education Event with Representative Jon Porter, Henderson, Nev.
• June 27, General Counsels Forum, Washington, D.C.

    
For information on NRF events, contact Eileen Pryor at (202) 626-8114 or pryore@nrf.com.

    
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