Michigan Developments
Eric Rule,
Director of Governmental Affairs

Tobacco-tax increase passes House

Governor Jennifer Granholm emerged victorious in the House on her proposed tobacco-tax increase. The bill raising the tax by 75-cents per pack passed by the narrowest margin, with 42 Democrats and 13 Republicans providing the 55 votes required.

Opponents of the bill, which included MRA, did gain a few key amendments, including the exclusion of other tobacco products (OTP) from the tax increase. This is especially important to owners and operators of cigar and specialty tobacco shops in Michigan.

However, the effective date was moved up from October 1 to July 1. The measure is expected to generate about $269 million a year and help plug major holes in the state budget.

The bill now goes to the Senate, where some of the changes made to the bill could be stripped out. If that happens, the bill would be sent to a conference committee.

MRA will continue to aggressively oppose the tax increase, as it will hurt Michigan retailers who sell a legal product. MRA will also work to keep OTP out of the bill as it moves forward.

Gas-pricing bill awaits FTC ruling

At MRA’s urging, House Transportation Committee Chair Gene DeRossett (R-Manchester) requested an opinion letter from the Federal Trade Commission (FTC) on a bill requiring businesses that sell gasoline to justify their expenses and costs of doing business when setting a price for the gas. His action followed sharp testimony from MRA Chairman and CEO Larry Meyer.

The legislation (House Bill 4757) is a revision of an earlier bill that set a mandatory minimum markup. Instead of setting a fixed amount for the mandatory markup, the revised bill requires a gas station to submit its costs of doing business if a competitor challenges the price at which it is selling gasoline.

Components of the costs include, but are not limited to: labor costs, salaries of executives and officers, fair market rent value, interest on borrowed capital, depreciation, costs for maintenance of equipment, credit card fees, all license fees, taxes, insurance and advertising costs.

Other states with similar laws requiring gas stations to justify their prices are fighting to repeal them and have also asked the FTC to weigh in on the issue. To date, the FTC’s findings have supported MRA’s assertions that these laws produce more harm than good.

Sales-tax package clears House

The House finally took up and passed the Streamlined Sales Tax package designed to help level the playing field between in-state retailers and remote sellers.

While some legislators tried to make the argument that this is a new tax or a tax on Internet usage, members had been too well educated by MRA to believe the misinformation.

The package passed the chamber by a vote of 78-26. It is hoped that the bills will be ready for the governor’s signature before summer recess.

Living-wage preemption vetoed

As expected, Governor Jennifer Granholm vetoed legislation that would have preempted local living-wage ordinances. This comes after years of business groups trying unsuccessfully to get the preemption legislation to Governor John Engler when he was in office.

In her veto message, Granholm indicated that the bill would have prevented local governments from adopting local living-wage ordinances, and that these wages are typically equivalent to the poverty level for a family of four plus health benefits for affected employees.

State agency seeks retail partners

Families with school-age children who are eligible for Family Independence Program benefits in August will receive extra money—the School Clothing Allowance—to help with the cost of school clothing.

The Family Independence Agency is encouraging clothing stores in Michigan to work with them to offer extra discounts on clothing to these families.

If you wish to be a participating retailer, please contact Judi Brown-Clark at the Family Independence Agency at 517.335.2364. Your business name will be listed on the FIA website, encouraging its clients to shop at your store.

Participating retailers should expect these customers to be visiting their stores in early August.

Update from Washington
James Goldberg,
MRA Washington Counsel

Overview: 'white collar' overtime rules revised

For the first time in more than 50 years, the U.S. Department of Labor has issued a complete revision of its regulations implementing overtime pay exemptions under the federal Fair Labor Standards Act (FLSA) for so-called “white collar” employees.

The new regulations, which have sparked much controversy, take effect August 21, unless Congress acts in the interim to ban their implementation. Although the rules face a challenge in the Senate, the White House has promised to work hard to have the rules take effect as scheduled.

The new rules continue the three general criteria for “white collar” exemptions that have been in effect for several decades, i.e., employees must be compensated on a salary basis, employee salaries must exceed a specified level and employee duties must meet specified criteria.

Salary Basis: As before, eligible employees must be paid on a “salary basis,” i.e., receive guaranteed compensation of at least $455 per week regardless of the number of hours worked. Thus, workers who are paid on an hourly basis cannot qualify for overtime exemption.

Salary Level: Under the new rules, employees making less than $455 per week ($23,660 per year) must be paid overtime, regardless of their job duties. The old salary minimum had been $155 per week ($8,060 per year).

The new rules provide, for the first time, that highly-compensated employees earning in excess of $100,000 annually are automatically exempt from overtime, as long as their compensation includes a salary of at least $455 per week and their duties involve office or non-manual work.

Duties Test: The new rules continue existing requirements that duties are measured by actual job content and that job titles are irrelevant in determining overtime exemption. The duties test for each exempt category is measured by the employee’s “primary duty,” defined as “the principal, main, major or most important duty that the employee performs.”

Existing rules applying percentages to the amount of non-exempt duties that can be performed—for example, 40 percent for retail workers—have been eliminated.

The following categories describe which employees meet the duties test.

Executive Employees: The new rules provide that an executive employee is one whose primary duty is management of the enterprise in which the individual is employed or of a customarily recognized department or subdivision thereof. The individual must also customarily and regularly direct the work of two or more other full-time employees (or their part-time equivalents).

The person must also have the authority to hire or fire other employees or his/her suggestions and recommendations as to the hiring, firing, advancement, promotion or change of status of other employees must be given particular weight. Many retail assistant managers might qualify under this exemption.

Administrative Employees: The new rules provide that an administrative employee is one whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer and whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. Sales functions are specifically excluded from this definition.

The fact that an employee’s decisions are revised or reversed after review does not mean that the employee is not exercising independent judgment and discretion. The exercise of independent judgment or discretion must be more than the use of skill in applying well-established techniques, procedures or specific standards defined in manuals or other sources.

Professional Employees: The new rules provide two categories of professional employees: “learned” professionals and “creative” professionals. A “learned” professional is one whose primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning. The new rules specifically provide that bookkeepers do not qualify for this exemption.

A “creative” professional is an individual whose primary duty is the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor. This includes graphic designers.

Other Exempt Employees: The new rules continue long-standing overtime exemptions for certain computer employees (i.e., computer systems analysts, programmers, software engineers or other similarly skilled workers) and outside-sales employees, whose primary duty is making sales or obtaining orders or contracts for services or the use of facilities, and who are customarily and regularly engaged away from the employer’s place of business in performing such primary duty.

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