Michigan Developments
Eric Rule,
Director of Governmental Affairs

Backers abandon minimum-wage ballot proposal Following Governor Jennifer Granholm’s signing of Republican-led legislation boosting the minimum wage, the Democratic Party announced it would abandon its efforts to put the issue on the ballot in November.

This is a significant victory for retail, as the ballot proposal would have indexed the minimum wage to the rate of inflation every year. Under that scenario, the minimum wage would have risen to $9 within four years, assuming an inflation rate of 5 percent.

Republican leaders and business groups collectively decided that hiking the minimum wage via legislation—without indexing—was preferable to having the indexed wage put into the state constitution via a ballot proposal.

The legislation signed by the governor increases the minimum wage in Michigan from the current $5.15 to $6.95 beginning October 1, 2006; $7.15 beginning July 1, 2007; and $7.40 beginning July 1, 2008.

One unforeseen effect is that the new wage law may alter overtime requirements and exemptions, according to the law firm of Dykema Gossett. Key differences between the federal Fair Labor Standards Act (FLSA)—which most employers use to determine overtime exemptions—and the Michigan Minimum Wage Law may come into play now that Michigan’s minimum wage will be higher than the federal minimum wage.

Legislation may be taken up to clarify this situation before October.

Governor vetoes SBT repeal
The House sent legislation repealing the Single Business Tax (SBT) to Gov. Granholm, who vetoed it as expected.

House Bill 5743 moved up the scheduled sunset of the tax from December 31, 2009, to December 31, 2007. Granholm had said repeatedly that by ending the SBT prior to enacting a replacement tax, the legislature was being careless and could replace it with something burdening consumers, not businesses.

Republicans took away part of her argument by placing language in the bill clearly stating any replacement should be “less burdensome and less costly to employers, more equitable, and more conducive to job creation and investment,” while not increasing income, sales or property taxes.

Republicans and business groups are in the process of securing the necessary signatures for an initiative petition drive. That would enable the measure to be rubber-stamped by the legislature and enacted into law without Gov. Granholm being able to veto it.

MRA raises concerns over computer sales plan
The Granholm Administration announced it will launch a program to make it easier for Michigan households to have a desktop or laptop computer. Pronounced “My PC,” the MiPC program would establish a purchasing pool and allow residents to choose from three levels of desktop computers and services or two levels of laptops and services.

The Associated Press reported that RFPs already have been sent to vendors and computer manufacturers. The state plans to administer the program but not subsidize the cost of the equipment.

While lauding the governor’s goal of putting computers and Internet service in more households, MRA urged the governor to slow down and consider the effects on Michigan retailers. If the program picks winners and losers and/or cuts into the profits of retailers selling these products and services, MRA will vigorously oppose such price setting and intrusion into the free market system.

The governor’s office responded to MRA via the news media, stating that conversations would be held with MRA. No word yet from Granholm’s office on when such a meeting will be scheduled.

Youth employment bill vetoed
As expected, Gov. Granholm vetoed Senate Bill 179, legislation attempting to clarify the number of hours students under 18 can work during the school year. Current law states that a student cannot have more than 48 hours a week of combined school instruction and work.

With different school districts having different hours of instruction, businesses that employ teens have found it difficult to keep track of allowed hours for each employee. SB 179 said a youth could not work more than 20 hours per week. Granholm vetoed similar legislation last session that would have allowed youths to work 22 hours per week.

Update from Washington
James Goldberg,
MRA Washington Counsel

Federal meth law overrides state controls
When President Bush signed the extension of the USA Patriot Act, he also approved a provision imposing new federal controls on the retail sales of cough and cold products containing ephedrine, pseudoephedrine or phenylpropanolamine (PSE products).

The new law will override conflicting—but not stronger—provisions in a Michigan law enacted last year, and similar laws in more than 30 other states.

Effective April 7, the federal law places a daily sales limit of 3.6 grams PSE per customer, regardless of the number of transactions, and a limit of 9 grams PSE in any 30-day period. Because of the way it measures covered products, this new law will undoubtedly cause confusion for Michigan retailers who sell these products.

For example, a retailer must now ascertain how many tablets of a given product equal 3.6 grams PSE, and the answer might vary depending on the strength of the product. Retailers with questions on specific products are advised to contact the product manufacturer or supplier.

While Michigan’s law limits a single sale to two packages (48 tablets or capsules), the federal law will impose a limit of approximately 120 tablets per day (for all sales to the same individual) for so-called “low dose” PSE products.

Effective September 7, the federal law requires placement of all PSE products behind a counter not accessible to consumers or in a locked display case located on the selling floor. That means Michigan’s requirement that products may be stored within 20 feet of a counter that allows a store employee an unobstructed view of the product will be overridden.

September 7 will also be the effective date for the federal requirement for retailers to maintain a logbook of information, including purchaser’s name, address and signature, date and time of sale, name and quantity of product sold. Retailers will have to ask for photo identification of customers and can maintain the logbook in either electronic or written form.

In addition, retailers must train applicable sales personnel to ensure they understand the requirements of PSE product sales and submit self-certifications concerning the training to the U.S. attorney general.

Wal-Mart in banking business?
What do Wal-Mart, Merrill Lynch and GMAC have in common? Right now, nothing. But if the world’s largest retailer gets its wish, it will join the others as operators of an industrial loan company (ILC), which would allow Wal-Mart to cut $5 to $10 million annually from its credit card processing costs.

An ILC is a type of state-chartered financial institution available to companies that can’t qualify to own and operate commercial banks. Of the more than 60 ILCs currently operating, most are run by companies like American Express, Morgan Stanley, Merrill Lynch, GMAC Automotive and BMW and are used to provide financing options to customers without the costs associated with outsourcing those options.

However, the retailer’s ILC application has run into a firestorm of protest. Commercial banks worry that the retailer will take advantage of the ability to open branches in more than 20 states.

Interestingly, there was virtually no protest when Target Corp. opened an ILC two years ago to issue commercial credit cards.

Small-business health plans may finally make it
After being passed by the House on more than five different occasions, a bill authorizing the establishment of small-business health plans (SBHP) may finally make it through the Senate this year.

The legislation, formerly referred to as association health-plan legislation, has been approved in modified form by a Senate committee and is scheduled for floor consideration later in the spring.

The bill would allow for the creation of fully insured small-business health plans by bona fide trade associations; self-insured plans would be prohibited. The plans would be required to offer one comprehensive benefit option, modeled after the fee-for-service Federal Employee Health Benefit plans.

The primary beneficiary of the SBHP approach may well be national associations, which have been effectively precluded from offering health insurance plans for members because of the varying coverage mandates in the states.

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