Looking Ahead: 2023 Policy-Making Environment
U.S. Congress – New leadership in the U.S. Senate and the U.S. House (regardless of party) will have to corral razor-thin majorities, presenting significant governance challenges. A few extreme members in either chamber will be able to, in effect, grind either legislative body to a halt. The House Freedom Caucus is already flexing its muscle and demanding the restoration of the motion to vacate (a rule that would allow for a new House Speaker election at any time) in exchange for supporting Minority Leader Kevin McCarthy’s bid for House Speaker. With such narrow margins, the rule could be used effectively as a veto on any legislative package and exemplifies the challenges for the next House Speaker. One unifying theme for House Republicans will be Congressional oversight / investigation of the Biden Administration. Expect the new House Speaker to provide members leeway in how they pursue that oversight – as a carrot – to earn their continued support. For the industry and for individual brands, that will necessitate strengthening relationships with key committee chairs and members, like the Education and the Workforce Committee, to ensure the focus is trained on key issues like NLRB and Labor Department action on the joint employer issue.
While many traditional labor community legislative priorities like the Protecting the Right to Organize (PRO) Act languished in the previous Congress, with a new Republican majority likely in the House, the door is now closed on those types of bills. As a result, the labor community will be exerting enormous pressure on the Biden Administration to use every possible regulatory lever at the agency level to pursue their agenda. Finally, taking cues from Governor Ron DeSantis’ landslide victory in Florida expect Republicans on Capitol Hill to be more combative with “woke” corporate brands and taking on ESG -related issues more broadly.
State-Level Contests – Democrats did exceedingly well at the state-level. In fact, if Democrats hold control in Nevada, this will be the first time that the party in power hasn’t lost a single state chamber in the midterms since 1934. The biggest shift in 2023 will be new Democrat trifecta states (four total). These states are likely to become overnight battlegrounds on a variety of business model issues as the labor community pushes for immediate action on key priorities.
Assuming that current results hold then the 2022 Election will produce the highest number of trifecta states – 41 total – in the modern era. Further, heading into Election Day only one state in the country had a divided legislature – Minnesota. With Democrats flipping that chamber and turning the state into a blue trifecta, no state in the country now has a divided legislature. (With votes still being counted, Democrats may flip the Pennsylvania House which would break one-party control in the Pennsylvania legislature.) It’s difficult to understate the policymaking impacts of this type of political environment. In an era where partisan differences – at all levels of government – are as sharp as ever, every state in the country is either under one-party control or has a governor of one party fending against a legislature controlled by the other party. This dynamic is going to create wildly different policy making environments state-by-state. Brands will face unique challenges navigating the dynamics in each state.
Here’s a breakdown of where things stand today:
- New Democrat Trifectas
- Maryland
- Massachusetts
- Michigan
- Minnesota
- New Super Majorities in Both Chambers
- Vermont
Democrats gained super majorities in both chambers which will allow them to override a gubernatorial veto.
- Florida
Republicans earned super majorities in both chambers.
- Broken Trifectas
- Arizona
*As of this writing, Democrat Katie Hobbs leads Republican Kari Lake but the race is dead even and votes are still being counted. If the results hold, the state’s Republican trifecta will be broken.
- Nevada
*As of this writing, Republican Joe Lombardo leads Democrat Steve Sisolak but the race is close and votes are still being counted. If the results hold, the state’s Democrat trifecta will be broken.
In state legislative contests, perhaps the most notable development is that Democrats earned super majorities in both chambers in Vermont, which has a Republican governor. This will allow for the legislature to override gubernatorial vetoes. On the other side of the aisle, Florida Republicans gained super majorities in both chambers. Republicans had hoped to gain supermajorities in Wisconsin and North Carolina, as a check on Democratic governors in those states, but they fell short on both fronts. Other than that, the map stayed relatively static. As noted above, if Democrats hold control in Nevada, this will be the first time the party in power hasn’t lost a single state chamber in the midterms since 1934.
Wages
Ballot Initiatives – Voters in Nebraska approved by an overwhelming 58 percent to 42 percent margin an increase in the state minimum wage to $15/hr by 2026 and tied to inflation thereafter. The stunning victory will reinforce to proponents the belief that the measure can pass nearly anywhere. With votes still being counted, a Nevada measure to raise the wage to $12/hr effective July 1, 2024 is winning with roughly a ten point margin. Voters in Portland, ME overwhelmingly rejected a measure to increase the local minimum wage to $18/hr and eliminate the tip credit but voters in Washington DC, as expected, voted to eliminate tipping meaning by 2027, servers would have a base wage of $16.10/hr. The mixed result is important because One Fair Wage activists had hoped to come out of Election Day with a clear message that voters supported the elimination of the tipped wage. More details.
Disney – A large coalition of employees is advocating for an increase in the company’s starting wage from $15/hr to $18/hr in the first year of a new collective bargaining contract with the company. While contract negotiations continue, Unite Local 737 surveyed its members and released the findings in a report called “Orlando Tourism Workers Need a Raise.” The local union represents 19,000 Central Florida workers including cooks, dishwashers, housekeepers, quick-service restaurant staff, and others at Disney World, the Orange County Convention Center, and a handful of other places. The vast majority of the 2,415 hourly tourism workers who responded to the survey work for Disney. About 69 percent surveyed said at one point they didn’t have money to pay their rent or their mortgage this past year while 62 percent reported having less than $100 in their bank account. Just under half surveyed said they have skipped meals because they couldn’t afford to eat. More details.
Labor Policy
Ballot Initiatives – Voters in Illinois passed a measure entitled the “Worker’s Rights Amendment” that codifies Illinois workers’ right to organize and bargain collectively, while simultaneously prohibiting any law from being passed that would interfere with those rights. Conversely, in Tennessee, voters easily passed a measure embedding their current state “right to work” law into the state’s constitution. More details.
Labor Activism
Chipotle – The National Labor Relations Board (NLRB) General Counsel filed a complaint alleging that Chipotle illegally closed a store in Augusta, Maine in response to an organizing effort by workers. Among the recommendations in the filing is that the store be ordered to reopen and the company must bargain with the union. The general counsel’s decision to issue the complaint means investigators looked into the workers’ allegations and found merit in them. If Chipotle and the general counsel can’t reach a settlement, the matter will be litigated before an administrative law judge and, eventually, perhaps the five-member board in Washington. More details.
Home Depot – By a vote of 165-51, Workers at a store in north Philadelphia rejected an effort to join Home Depot Workers United, a new independent group formed at the store. Organizers say that during the COVID-19 pandemic, many workers felt exploited by the lack of staffing and additional workload requests. That included working in different departments with little training. More details.
Starbucks – A NLRB Regional Director filed a complaint against the company alleging that the coffee chain retaliated against union workers by shuttering a popular location in Ithaca, New York, among other charges. The director found merit in the union’s claim that the June store closure was meant to dissuade workers from organizing. In the complaint, the director said Starbucks’ actions were illegal and asked that the company be ordered to reopen the location.More details.
Alcohol
Colorado – Voters rejected three ballot initiatives to expand alcohol sales in the state. Most importantly for the industry, Proposition 126, a measure to permanently allow third-party delivery platforms to deliver alcohol from liquor, grocery, convenience stores, bars, restaurants, and similar businesses, failed in a close vote. Under current law, only an individual company’s employees can deliver alcohol. More details.
Taxes
Ballot Initiatives – Two states had measures on their ballots to increase taxes on high-income residents. Voters in Massachusetts passed a measure raising taxes on incomes above $1 million while voters in California rejected a similar measure targeting incomes over $2 million. More details.
Key Takeaways
- At the state-level, Democrats had a huge night electorally, gaining four new trifectas and not losing a single state legislative chamber (if Nevada holds). Expect FAST Act copycats and the elimination of the tipped wage to be issues that the SEIU could prioritize in these new venues. Additionally, one could argue that Democrats had an even better night with regard to ballot initiatives with the vast majority of wage and benefit, tax, cannabis and abortion-related ballot questions largely going their way. How that energy is translated into legislative action will frame the 2023 agendas in some key states.
- As has been the case for a few years for most of the last decade, divided government in Washington, D.C. will lead to an even more challenging environment in 2023 pushing even more of our core business model issues to the state and increasingly local level. Special interests – most notably the labor community – will look to those venues to notch wins as Congress gridlocks.
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