This Week in Springfield – 100-25

RESTRICTIVE SCHEDULING
SALES TAX CONFIDENTIALITY & RESPONSIBILITY
STATE WORKERS’ COMPENSATION PROGRAM

This Week in Springfield lawmakers moved one step closer to providing confidential taxpayer information to for-profit third party audit firms and moved one step closer to restricting employee scheduling flexibility.

RESTRICTIVE SCHEDULING

Lawmakers are set to consider legislation that would remove employer and employee scheduling flexibility. As introduced, HB 5046 (Rep. Chris Welch, D-Westchester) would require a 72-hour notice of an employee’s weekly schedule and would impose statutory penalties if any part of the employee’s schedule is reduced or canceled after the notice. It applies to part time, full time, non-salaried, and salaried employees who make $50,000 or less. The legislation also prohibits an employer from dismissing an undocumented foreign national. Not since the Gross Receipts Tax debate have we seen such a collaboration of different industries collectively opposing a legislative initiative.

HB 5046 assumes that every restaurant, bar, grocery store, movie theatre, fitness center, pharmacy, hardware store, bank branch, school system, farm, manufacturer, construction project, municipality, daycare, park etc. operate in the exact same manner.  Different industries have unique business, employee, and regulatory variables to consider when providing schedules that promote and support their employees and HB 5046 undermines the ability of each industry to properly manage their business and support the various flexibility requests of their employees.

HB 5046 eliminates scheduling flexibility, forces employers to deny last minute requests, and creates confusion. A “one-size-fits-all” mandate fails to recognize the negative impact that the regulations will impose on employees. Once a regulation is in place, businesses are less able to respond to employee preferences and emergencies.  Restrictive scheduling constraints on flexible scheduling reduce the ability of employers to respond to changes in employee circumstances—this reduces the opportunities for employees. For instance the Full Service Workers Alliance of Seattle, which represents restaurant, retail, and hospitality workers, argues the regulations instituted by the Seattle City Council: (1) prohibit the flexible schedules they value (picking up shifts and dropping them as needed); (2) result in fewer work opportunities; (3) result in fewer benefits that are offered as perks by many establishments; and (4) create an unnecessary environment of stress between employers and employees.

A flexible scheduling model is used in various industries in order to attract and retain employees. High school, college, and post-secondary students are drawn to retail because of the opportunity to work and design a flexible schedule around their classes.  Many workers are attracted to retail positions on a seasonal basis because they can pick up a few hours in order to supplement income or pay for holiday shopping. Additionally, retailers provide flexible employment for defined populations such as youth at risk, people with disabilities, or senior citizens.  For instance, Beatrice Garza President and CEO of the Association for the Advancement of Mexican Americans (AAMA) represents at risk youth and opposes restrictive scheduling for the following reasons:

“Through our charter school, work readiness, training, and job placement programs, we help meet the stark challenges confronting at-risk youth.  Many live in single-parent homes where they are forced to shoulder financial burdens and family obligations at an early age.   Others must work part-time to finance their higher education.

These talented and deserving young Americans need flexible part-time work.  Earning income from an employer that understands their circumstances builds self-esteem and responsibility and gives them a paycheck that keeps their dreams alive.  Without part-time employment, many young people would be forced to give up their education or make other unfortunate sacrifices.

Critical to breaking the cycle of poverty is to open the door of opportunity to people from difficult circumstances.  While onerous scheduling practices benefit no one, neither do policies that punish employers willing to work with young Americans who want a brighter future.

We fear proliferation of laws recently enacted in San Francisco, and currently before city and state governments in Seattle, Washington, DC, and New York, that slash part-time work and straight-jacket the relationship between managers and their employees.  Employers across the country will eventually have fewer such positions available, and restrictive scheduling requirements will discourage the hiring of applicants with unusual life challenges.”

While considering the requests and preferences of employees, businesses must consider those through the framework of needs of the business.  A variety of data points that may be used include: employee requests, sales forecasts, productivity of the store, historic payroll and hour reports, workload, marketing or other in-store events, transportation (truck, train, barge, delivery, etc.), civic events, and guest traffic patterns. Despite a business’ best efforts to predict scheduling needs accurately in each location, the need for employees in any given location is subject to these external factors, and others, that may change frequently, unpredictably, and with little or no notice.

Finally, HB 5046 prohibits an employer from firing an undocumented foreign national that is in the U.S. illegally. Federal law prohibits employers from employing foreign nationals who are illegally present in the U.S. This would require businesses to choose between violating federal law or state law.

Different industries have unique business, employee, and regulatory variables to consider when providing schedules that promote and support their employees and HB 5046 undermines the ability of each industry to properly manage their business in support of their employees.

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SALES TAX CONFIDENTIALITY & RESPONSIBILITY

The confidential and sensitive tax information of businesses is one step closer to being handed over by local governments to unaccountable third-parties.

HB 2717 (Rep. Chris Welch, D- Westchester) seeks to allow local governments to share the specific financial information of businesses within their borders with third-parties. The justification is local governments are struggling to make ends meet and last year the state reduced some of the revenue they had shared with locals. These decisions should not result in exposing Illinois businesses to fishing expeditions using partial information, and risk spilling confidential information into the public domains.

Currently, local governments receive three reports from the Illinois Department of Revenue (IDOR). First, on an annual basis and free-of-charge, they receive a geo-location report of all the businesses in their jurisdiction. This report is available more frequently upon request. Second, on a monthly basis, they receive a report of any new Certificates of Registration (i.e. new businesses) that were issued to addresses within the local government. Third, they receive three times a year a report that contacts the business name, address, amount of sales tax distributed to the local government from sales at that business as part of the municipality’s 1% share of the 6.25% state sales tax, and the amount of sales tax distributed to the local government from any sales tax imposed by that local government on sales occurring at that business. This report is provided to the chief executive of the local government under a strict confidentiality agreement that carries misdemeanor penalties for violations. This third report is what HB 2717 seeks to allow third-parties to obtain.

During testimony, the proponents claimed HB 2717 would make the current process more confidential and that there are no protections currently in place. Both claims are demonstrably false. Under current law, the chief executive of a local government cannot share the financial information with anyone. The financial information is provided to the chief executive of the local government pursuant to a strict confidentiality agreement. We already know from the testimony of the proponents at a subject matter hearing on May 1st that some chief executives are, today, violating these confidentiality agreements and sharing the information with third parties. HB 2717 would legalize and reward their disregard for the law by removing the penalties. In other words, if HB 2717 were to pass, local governments and third parties could share this information without repercussion regardless of the existence of a confidentiality agreement. It takes a tremendous leap of faith to believe that allowing this information to be shared with other parties somehow makes it more confidential. If some local governments are willing to break the law, one can only imagine what a for-profit company would be willing to do with the information.

Given the admitted abuses and violations local governments have admitted are occurring today, the Assembly should be discussing revoking local government’s access to this information particularly given the fact they cannot justify a true need for it. Despite this, the opponents, led by IRMA, have offered two separate compromises. The only item we cannot agree to is allowing these sharing arrangements by contingency-fee. Contingency-fees incentivize casting the widest net possible. That is why entities such as the National Conference of State Legislators (NCSL), the Council on State Taxation (COST), and the American Institute of CPA’s have condemned the practice. Only one state, California, currently allows them and they are ranked dead last for ease of tax administration by COST.

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STATE WORKERS’ COMPENSATION PROGRAM

Lawmakers passed HB 4595 (Rep. Laura Fine, D-Glenview) out of the House Labor and Commerce Committee that would take $10 million in employer money from the Workers’ Compensation Commission Operations Fund to create a state-run Illinois Employers Mutual Insurance Company to compete with the over 300 private insurance companies already competing in Illinois. Illinois changed its workers’ compensation system in 2011 by limiting payments for carpal tunnel syndrome and for employees who can still work but whose injuries force them into lower-paying jobs. There was also a 30 percent cut to payments for doctors, hospitals and pharmacies treating those injured on the job. As a result, Illinois experienced a 13 percent decline in workers’ compensation medical costs between 2010 and 2014.

Despite these changes, Illinois insurers’ and self-insured companies paid an estimated $2.75 billion in workers’ compensation benefits in 2014, according to the National Academy of Social Insurance. By contrast, employers in Indiana paid an estimated $589.2 million. Additionally, Illinois’ employers pay $2.23 for every $100 in payroll, while those in Indiana pay $1.05-the national median is $1.84. Today, Illinois is tied for having the eighth-most expensive premiums in the nation. Supporters of HB 4595 argue that workers’ compensation costs are still high for companies because insurance companies have not passed on the savings realized from the 2011 changes. They argue that in 2015, 332 insurance companies underwrote workers’ compensation policies in Illinois, more than in any other state, collecting $2.83 billion in premiums. In 2010, insurers reported losses of nearly 11 percent; four years later, they reported the same in profits. The insurance companies contend that while the 2011 changes likely decreased the insurers’ losses, insurers in Illinois only averaged 6.1 percent profit annually between 2011 and 2014.

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