Grab Your Paddle. More Regulatory Ping-Pong is Coming

“In a range of large industries — technology, energy, resources, financial services, transportation, trade — the regulatory situation is volatile and prone to significant change,” senior leaders from PricewaterhouseCoopers recently declared. Leave it to accountants to make what could be an understatement of the year. Over the past several decades, the federal government has grown to an unprecedented size, with Americans and U.S. businesses now contending with a $2 trillion regulatory burden each year, equal to 12 percent of overall domestic spending. Adding to that burden is ongoing regulatory uncertainty whose economic repercussions are bad for American families and businesses, holding up key business deals and even restricting Americans’ access to credit.

Indeed, well before the pandemic hit, regulatory fights had intensified, with many rules remaining unsettled and continuously litigated between administrations based on the policy preferences and political expectations from their supporters and allies. In response, each administration’s opponents turn to the judicial system and court public pressure to delay or throw out new rules or changes they don’t like. The result, as a National Association of Manufacturers’ study of business leaders found, is regulatory instability that hurts U.S. competitiveness internationally and economic growth at home.

While forward-thinking public affairs professionals are gearing up for the “mad dash” of the transition period following the November election, they must also prepare for the next match of regulatory ping pong on key labor and healthcare rules in the coming administration. Here’s what you need to know to get ready:

State of Play: With more financial backing and an expanded ability to activate supporters than ever before, an ever-broadening range of advocacy and interest groups can relentlessly litigate rules and regulations – shifting seamlessly from influencing a sympathetic administration to doing battle against the next if it’s hostile to their views. As the PwC leaders wrote, “Many organizations have found that these shifts impact their industry, the specific markets in which they operate, and the general environment for business.” Unfortunately for these businesses caught amid never-settled rules, “hiding under a rock is not a suitable option.”

Labor Loops: Labor standards are among the most ostensible ways that the federal government affects the day-to-day life of working Americans, and as such, are often a top priority for presidential administrations. After just 10 days in office, President Barack Obama rolled back three significant Bush era labor regulations to make it easier for unions, who had strongly backed his presidential bid, to organize. When President Trump took office eight years later, he began an overhaul of these and other major rules enacted by the Obama Administration, none of which remain fully settled if outside interests have their way next year. These include:

  • Among the more contentious of these reversals were the Trump Administration’s actions on the Persuader Rule, created by the Obama White House to force businesses to disclose to the federal government any firms they hired to help in negotiations with organized labor. The National Federal of Independent Business fought the rule in court, arguing that it compromised businesses’ ability to confidentially interact with their legal counsel. When a federal court judge in Texas blocked the regulation from taking effect in 2016, the Trump Administration formally rescinded it in June 2017, calling it a win for the “rights of Americans to ask a question of their attorney without mandated disclosure to the government,” while the leftwing Economic Policy Institute condemned it as a “huge blow to workers’ abilities to negotiate for better treatment on the job,” reaffirming that the two political parties couldn’t be farther apart on the issue.
  • Meanwhile, overtime regulations continue to be caught in the back-and-forth of presidential transitions. According to the Department of Labor, businesses are exempt from paying overtime if their workers are considered “white collar” and make above a certain pay threshold. The Obama Administration more than doubled this cap and enacted a rule that included an automatic update provision increasing it every three years. The business community largely opposed this regulation, as it would have been costly to deem between 2.8 million and 4.2 million more workers eligible for overtime. A coalition of states and business groups opposed the measure, filing suit in district court asking for a preliminary injunction to halt the implementation of the rules. A judge agreed, deciding the Obama Administration overstepped its authority in its rulemaking. With an appeal pending, the Trump Administration updated the regulations in a way that would expand benefits but scale back the number of qualified workers to just 1.3 million. While business leaders heralded it as a major achievement, union conglomerates, like the AFL-CIO, called it a “pay cut for working people” that would compound over time.
  • The National Labor Relations Board, which adjudicates major labor disputes on behalf of the federal government, typically changes control of its five-person board when a president appoints a new representative to fill a five-year term. Currently, there’s a 3-2 majority for the GOP, which recently ruled against “micro-unions,” a multitude of smaller labor groups within the same company that many corporations say make it impossible for them to negotiate unified terms among their employees. Democrats and their progressive allies are strong proponents of micro-unions, as they help expand labor union control in workplaces. If party control shifts, the panel could greenlight micro-unions again, costing industries billions of dollars in new administrative costs.
  • The Joint Employer Rule remains one of the most controversial in labor policy, as it affects upwards of 14 million American workers. In February 2020, the Trump Administration reinstated the decades-old joint employer standard under the National Labor Relations Act that “an entity can only be a joint employer if it actually exercises control over the essential terms and conditions of another employer’s employees.” This rule overturned one created by the Obama Administration that many believed unfairly targeted franchise businesses or those who outsource services, like cleaning and maintenance. The International Franchise Association (IFA), for example, argued that the Obama rule would cost upwards of $33 billion in annual compliance costs and remove 376,000 job opportunities. Labor activists have fought hard against the Trump reversal alongside important allies, including blue state attorneys general like New York’s Attorney General Letitia James. James demanded the Trump Administration stop the implementation of the new rule, while the IFA and other business coalitions joined forces to oppose these efforts. In early September, a Manhattan-based federal judge agreed with the demands of the state AGs, halting the implementation of the Department of Labor’s new test. The Trump Administration has vowed to continue fighting for it, though a Biden Administration would likely return to the Obama era standard that drew the ire of a range of business advocates, who would certainly once again fight a standard they view as unfair and burdensome.

The Fight That Will Never End. Perhaps one of the greatest regulatory uncertainties for businesses’ labor practices is the disjointed implementation of Obamacare. Much of President Obama’s landmark legislation is applied via regulation, which makes key provisions easily reversible once a new administration takes office. The Trump Administration has undone many foundational components of the law, such as the contraceptive mandate, which forced all employers to provide birth control and abortion coverage in their employees’ health care plans, and the individual mandate, which required all eligible Americans to carry health insurance policies. They also reduced the open enrollment period from 90 days to 45, while ending cost-sharing reduction payments and enacting new Medicaid work requirements. Whether via executive action, legislative overhauls with Republican Congressional leaders, or defending their positions in court, the Trump Administration has sought to dismantle sizable portions of Obamacare piece-by-piece, leaving businesses constantly adapting to an ever-changing regulatory environment in health care policy. Even a decade later, many of these fights have only just begun, with activists are vowing to reinstate provisions the Trump Administration has removed, while the presidential campaigns are making it a centerpiece of their electoral efforts – and courts at every level will continue to hear cases about different aspects of the law.

Competitive Intelligence Is Your Spin Move: On each of the aforementioned issues, public affairs professionals must face not only their ideological opponents on key matters but also activists mobilized to stand in their way. No longer can industries wait to find out who is going to be in office in a few months. Instead, they must lay the groundwork among policymakers, interest groups, and aligned industry organizations, understanding that a regulation they support or oppose could end up in the crossfire of other political fighting or draw unprecedented attention from those who wish to thwart their aims. To navigate this uncertainty, competitive intelligence is key. It is not enough to have a few ideas about what an organization wants to see in an administration’s regulatory policy, or even to be closely allied with the decisionmaker. Public affairs professionals need to know far more if they want to prevail: who is on which teams, what their motivations may be, what their tactics are, and how they connect and collaborate with policymakers and other stakeholders. Delve can give you the intelligence advantage to prepare for tomorrow’s matches today – and win.

If the future of work is remote, when will policymakers login?

Here’s what you need to know…

Coronavirus has changed so much about how we live our lives – and many of those life modifications just may turn out to be permanent. Perhaps the most significant of these changes is the shift among businesses to allow more work to be done remotely. While time-honored traditions like the business lunch may return, many Americans are eager to cling to one particular aspect of the new way of working: teleworking. In fact, 6 in 10 respondents told Gallup pollsters they’d like to continue working from home after the coronavirus crisis is over.

As companies become more comfortable with allowing telework, however, they are finding a surprising reality welcoming them. While some of those surprises are pleasant, such as the increased productivity of remote workers and greater flexibility for parents balancing work with “Zoom school,” there are also unpleasant surprises as companies learn more about the confusing tangle of state and local regulations and unexpected costs awaiting them when employees can work from anywhere.

So before public affairs professionals celebrate their companies’ decision to move all operations offsite or allow employees to work remotely, here’s what you need to know to ensure the decision does not come with unexpected costs and compliance challenges thanks to regulatory regimes still largely based on a business’ physical footprint that is increasingly inapplicable to the future of work.

COVID-19 showed employers productive telework is possible, and employees want to keep the flexibility.

The Big Shift: In 2014, just 6 percent of respondents told Gallup they worked at least 20 hours each week from home. By the time pandemic shutdowns began nationwide in mid-March 2020, 31 percent of Americans were working remotely. In the weeks that followed, that number doubled. According to Pew Research, 90 percent of those who lost jobs due to COVID-19 shutdowns worked in industries or for organizations where telework was either not permitted or impossible. For Americans able to work virtually, technology provided job security – jobs they might have otherwise lost if Internet-based tools were unavailable. For employers, the promising results of this great remote work experiment means many are thinking employees could live anywhere, reducing relocation costs and expanding the talent pool nationwide.

Now What? With a return to normal appearing slowly on the horizon, organizations are preparing for what a future with reduced in-person office presence would look like. According to CNBC, 43 percent of employees said they would like to continue teleworking permanently. Employers sensed this trend, and by late March, 74 percent of company executives interviewed by Gartner said they anticipated at least 5 percent of their company workforces would telework after the pandemic concluded.

Indeed, many organizations have already begun that transition for great numbers of their employees. Most notably, Facebook, which had once given $10,000 bonuses to team members who lived within 10 miles of their offices, says it will now permanently shift tens of thousands of its employees to remote work. Other tech companies like Google, Twitter, and Shopify have also announced making virtual collaboration from home permanent, and because the industry often sets trends for top employers across the nation, many more will likely follow suit to compete for the best talent. However, as organizations cast a wider net in their recruiting and retention strategies, picking the best candidates from far and wide, there are hidden costs and complexities that may surprise them.

Before moving operations online, organizations should anticipate compliance costs and confusion.

Postcards from Paradise: Now unbound from their offices, teleworking employees have the opportunity to pick where they live, not based on where a job may be but on where they want to be. While employees may move to the Florida Keys or atop a mountain in Montana, their mobility comes at a price to their employers. The new virtual workspace will require organizations to be familiar with the rules governing a myriad of potential residences of their employees, both current and future. Benefits like workers’ compensation, disability insurance, and unemployment insurance vary wildly from state to state. So, too, do licensure and business registration requirements, which often are not clear because they were written for a physical world of business with storefronts and official offices, not for a virtual world. Organizations will now have to look into whether or not they’re required to register in each state where an employee lives, which means that 12 employees living in 12 different states could potentially necessitate 12 different registrations, with such costs rising exponentially and unexpectedly for employers.

Even More Tax Men Come Calling: Another complication facing organizations considering virtual work options are the vastly different tax structures for different states and municipalities. Some states, like Texas and Florida, do not have state income tax. Then, there are issues with sales tax, as rates and what is taxable can differ wildly from locality to locality. These considerations include not only e-commerce transactions but also state and municipal sales taxes imposed on service-based offerings such as consulting or digital subscriptions. Still other locations have different withholding and pay stub requirements.

All of these can leave human resources and accounting departments scrambling to ensure they are constantly in compliance with thousands of different tax conditions simultaneously. When all the accounting is complete, many companies will face a shocking uptick in taxes owed and compliance costs – expenditures for which they might not have budgeted prior to a remote working shift. Indeed, many organizations choose their operating base on a location’s tax and regulatory environment. With team members scattered across the country, these considerations are no longer in the hands of corporate officers, but of employees who are moving with other considerations in mind.

Jurisdictional Confusion: A persistent concern among employers remains the correct application of rules that depend on number of employees within a firm, office location, or certain jurisdiction. For example, the Family Medical Leave Act (FMLA). Current regulations say that in order to receive qualified medical leave, an eligible employee must be “employed at a worksite where 50 or more employees are employed by the employer within 75 miles of that worksite.” This complicates matters for teleworking employees, whose employers may think that they are not covered by FMLA if they live elsewhere.

According to legal experts at Lowenstein Sandler, LLP, however, the employee’s worksite “is the office to which the employee reports and from which assignments are made,” not where the employee lives. “So, for example, the lone Massachusetts employee who works from her home, but who receives all of her work assignments from her supervisor in New York where the company employs more than 50 employees, may be eligible for FMLA leave,” Lowenstein explains, adding, “State leave laws may impose additional leave obligations upon employers.” Multiply that across various jurisdictions and a plethora of federal, state, and local work rules, which often conflict with each other, and companies shifting to remote work could face considerable legal and regulatory confusion.

Despite a few emerging solutions, policymakers are still applying 20th century rules to 21st century work.

Practical Solutions: In one of the country’s regions most devastated by coronavirus, business advocates have come up with solutions to navigate each state’s tax laws for employees working from home. There’s a growing movement in the tristate area of New York, New Jersey, and Connecticut to allow for reciprocity, so employees can avoid paying taxes in multiple states as they work from home for an extended period. Illinois already has a similar arrangement with nearby states, so employees working there but living in Kentucky, Michigan, Wisconsin, or Iowa may pay taxes where they live. Employees across America may soon demand the Illinois model, especially if they reside in states with low or no income tax but work in states that charge it.

20th Century Rules Meet A 21st Century Workforce: Most of the rules and regulations governing labor in the U.S. originate from 20th century practices and standards. However, the future of work was changing even before the pandemic, and with the American workforce increasingly going virtual, compliance requirements must change, too. This leaves organizations in a tough spot: their workforce demands the kind of flexibility that working from home provides, while the laws and regulations make delivering these benefits difficult, time-consuming, and expensive. As companies try to adapt while maintaining compliance, mistakes are inevitable, leaving them exposed to reputational and legal challenges.

No More HQ2 Competitions? This shift to a more remote workforce could also add complications for states, counties, and cities, who for years have wooed businesses to their territory for the promise of tax income and jobs. Now, employees can vote with their feet, regardless of where the business chooses to locate its headquarters. This shift in power dynamics means something like the Amazon HQ2 competition may be a relic of the past.

Work from home is here to stay, and in the months ahead, we will discover just how many Americans will maintain their telework flexibility. As organizations modify their practices to accommodate this trend, they will have to navigate a compliance landscape that is more complicated than they may have realized. They will also need to consider new challenges that can arise as a result. By understanding these challenges ahead of time, leaders will be able to save themselves time, money, and headaches while creating a safe, desirable workplace that keeps current team members happy and recruits the best and brightest, too.

And the Rockets’ Red Glare

Here’s what you need to know…

As our nation celebrates its 244th birthday, we remember the tremendous achievements of our country and the great sacrifices made by many men and women to ensure America remains strong, independent, and free. While our 2020 festivities may look different than years past, they may still involve the time-honored tradition of fireworks illuminating the night sky.

These days, however, a lot more goes into creating fireworks than imagined by the Chinese monks who accidentally invented them more than 1,000 years ago. In our modern times, bringing fireworks to the people requires navigating a complex public affairs environment that is  a far cry even from 1777, when John Adams suggested we celebrate America’s freedom with “Bonfires and Illuminations.”

Between a complex regulatory landscape, competing pressures from a diverse array of stakeholders, a supply chain reliant on China, and an operating landscape impacted by COVID-19 and recent social unrest, the fireworks industry’s public affairs challenges may seem all too familiar to many of you. So if you are like 80% of Americans hoping to watch some much needed “Bonfires and Illuminations” for Independence Day, here is what you need to know about the challenges the industry navigated to brighten your holiday.

  • Complex Regulations That Vary Greatly Across State And Local Jurisdictions: Just as fireworks colors and displays vary wildly, so too do the laws that regulate them. At the federal level, fireworks are regulated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and are defined by two categories: “display fireworks” and “consumer fireworks.” At the state level, most states permit some or all types of “consumer” fireworks, but three states (Illinois, Ohio, and Vermont) limit them to sparklers and other novelties, and one state (Massachusetts) bans the use of consumer fireworks all-together. Within states, many counties, cities, and towns set their own additional rules on the purchase and use of fireworks. It is important for suppliers and consumers alike to be aware of the laws, which often include age and time restrictions.
  • Pressures From A Broadening Range Of Stakeholders With Competing Interests: Despite being largely viewed by Americans as a fun summer activity, the pyrotechnics industry has faced mounting pressure by a diverse array of activists with a range of concerns. Environmentalists complain air pollution and alleged traces of chemicals that could be harmful to animals or bodies of water. Other pushback has come from veterans’ groups worried about fireworks triggering PTSD in veterans, as well as animal rights activists who claim the loud explosions can spook pets, causing them to run away. These advocates often argue that Americans should seek alternatives to fireworks, like laser light shows or limiting flames to the barbeque grill.
  • Potential Tariffs And Other Supply Chain Challenges: While most see fireworks as a quintessential American tradition, nearly 95 percent of the fireworks that are detonated in the U.S are imported from China. That is why many in the industry were concerned last summer as President Trump considered including fireworks in a round of tariffs on Chinese imports. Ultimately, they were excluded from the list, but the reliability and safety of its supply chain remains a challenge for the industry. Companies must constantly evaluate the reputability of Chinese suppliers, and remain on-guard for potential counterfeiting that could endanger consumers. Because of the high demand and hyper seasonal nature of the industry, many fireworks suppliers place their orders a year in advance—which has saved suppliers from COVID-19 related inventory issues, but that left the industry exposed to other economic impacts from the virus.
  • Economic Impact Of COVID-19 Lockdowns and Cancellations: Because many suppliers place orders a year in advance, many are now vulnerable to oversupply issues as lockdowns and social distancing regulations have many municipalities cancelling their annual Fourth of July fireworks events. This reality has been extremely painful for businesses that execute professional displays, with one Pennsylvania based company losing over 400 of their events this year, and leaving it unclear if companies in this industry can survive until next year without assistance from the federal government. In contrast, consumer fireworks retailers’ sales have boomed more than 200% higher than last year.
  • Caught In The Middle Of A Social Movement: Like many brands trying to do and say the right things in the current moment, fireworks have become an unintended flash point. In densely populated areas, 9-11 call centers have been overwhelmed by calls complaining about unauthorized fireworks. Some panicked residents are falling prey to conspiracy theories, fearful it could be coordinated police responses, attempts to frame minorities, the early signs of an impending civil war, or gun violence. The reality, though, may be much simpler, with officials pointing to boredom after months of quarantine leading to early, unauthorized observances of the summer holiday. In a time when even such long-held traditions can have new meaning – real or imagined – public affairs professionals must be mindful of how their product is perceived by the public.

With many communities canceling traditional fireworks displays due to the ongoing pandemic, Americans have flocked to the stores to buy their favorite bottle rockets, sparklers, and Roman candles, causing further public safety concerns the pyrotechnic industry and its public affairs representatives may need to address. So, as you safely enjoy fireworks displays with friends and family, remember the pyrotechnic industry has carefully navigated regulatory and reputational terrain that is all too familiar to those in other less explosive industries just to bring us these bright displays in celebration of our Independence.

From all of us here at Delve, have a happy and safe Fourth of July!

p.s. – Want an even greater information advantage at your holiday soiree? Check out 2019’s examination of the plant-based meats joining Independence Day barbeques across the nation, or 2018’s look at the reputational scrutiny facing Bourbon.

Let There Be Flight

Here’s what you need to know…

With work and leisure plans suspended due to coronavirus, many Americans have canceled their flights or delayed future travel. According to Transportation Safety Administration (TSA) data, the number of passengers clearing TSA at airports each day fell from 2,122,898 on March 10, 2020 to just 124,021 by April 2,2020. Conde Nast Travel estimates there was an overall 95 percent drop in flying in the U.S. by mid-April, with more than half of all planes grounded at the height of the pandemic. In May, three small airlines shut down their shuttle service, which means that fewer short distance flights are now available to consumers, even as major airlines suspended operations in key markets.

Unfortunately, as we enter what would traditionally be the summer travel season, the pain felt by airlines is just beginning. Industry experts say current hardships are merely a harbinger of what is to come. Despite significant growth leading up to the pandemic, industry representatives say they “anticipate a long and difficult road ahead.” Airlines for America points out that it took three years for the industry to recover from the 9/11 terrorist attacks and more than seven years to return to normal after the 2008 financial crisis. With an unprecedented public health crisis whose remedy remains unclear, the industry must brace for years of financial uncertainty as customers continually assess the health risks of flying.

These challenges affect not only airlines but also the airports and businesses who support them. As air traffic lags, so, too, does the recovery for these elements of the air travel sector. Here’s what public affairs professionals working in this field need to know to prepare for the unique challenges posed by the “new normal” of air travel.

As air travel returns, new health and safety policies create risk of another kind of viral moment.

Consumers Remain Concerned About Virus. Even as airlines institute new policies they say will ensure the safety and well-being of their customers, consumers may not be convinced these measures are enough. According to The Wall Street Journal, 85 percent of travelers now say cleanliness in airports and on airplanes would affect their decision to travel – as high a factor as ticket price. Industry officials say this is the first time they have seen any customer consideration factor as much as cost. As coronavirus infection rates ebb and flow, so, too, will customers’ willingness to go to airports and fly on planes.

Uneven Masking Rules Create Confusion – And Potential For Clashes. For those customers who elect to fly, the uneven application of masking rules can be very frustrating, leaving some worried about their safety on-board and others angry about the new requirements. These fears are exacerbated by the diverging policies among U.S. airlines, as some require face coverings only at boarding while others mandate consistent wear throughout the flight. There are also concerns about a lack of social distancing on some flights, since airlines are canceling many of them and as a result, some airlines are packing remaining flights.

Are Airlines Ready For Their Close Up? Airlines must also develop procedures to handle customers who refuse to adhere to coronavirus guidelines. In May, American Airlines began instructing their staff to avoid escalation with passengers once they have boarded by informing them of the masking policy, rather than actually enforcing it. Conversely, American Airlines, Jet Blue, and Hawaiian Airlines have said they are prepared to ban, whether temporarily or permanently, any customer who does not adhere to the airline’s masking policy. In the midst of current social unrest, passengers-turned-documentarians are just a single viral video away from creating a real public relations nightmare for airlines. This puts pressure on airline personnel who must stand ready to pacify customers irritated with each other and with the airlines themselves while simultaneously maintaining the safety of all on-board. Outbursts that disrupt travel could create reputational challenges all too familiar to the airline industry.

Social Distancing Comes At A Cost. While some airlines have created new systems to allow space in between seats, this accommodation can come at a cost to customers. Frontier Airlines faced blowback from members of Congress as it attempted to charge passengers an extra $39 fee to sit in a row that had no middle seat, ultimately rescinding its plan after federal lawmakers intervened. Now, American Airlines says it will start flying at full capacity next week, abandoning social distancing guidelines that kept middle seats empty and more space between customers.

Federal support brings new scrutiny on worker and consumer protection, and renewed climate demands.

CARES Act Saved Airline Jobs, But For How Long? With historic losses in passengers and profits, the airline industry secured financial relief in the CARES Act, which provided airlines $25 billion in taxpayer support under the conditions that they “keep at least 90% of workers employed through September, they will return one-third of the funds they receive, suspend stock buybacks and dividends, and limit executive pay.”

However, airlines are now acknowledging that after the September 30th deadline passes, many are planning to lay off employees. Philip Baggaley, the chief credit analyst for airlines at Standard & Poor’s, tells CNN he anticipates 95,000 to 105,000 jobs lost across the U.S. airline industry this fall. News from American Airlines supports this expectation, with the airline giant saying it will cut its management and support staff by 30 percent, or about 5,100 jobs. While these job cuts are a reality of lessened consumer and business demand for flights, it will still cause scrutiny and challenges for airlines that received taxpayer support with the expectation it would protect workers.

No Refund For Consumers Even As Taxpayers Foot The Bill. Missing from the legislation was any redress for customers whose flights had been canceled in response to the pandemic. Passengers instead have been offered vouchers with strict terms and potentially unrealistic expiration dates. So, while taxpayers foot the costs of industry relief, many have not been made whole for their canceled plans. Angst directed toward airlines for failure to return money to customers could compound frustrations towards companies that existed long before COVID-19 halted air travel – and had already spurred demands for new or expanded legislation to protect consumers.

And Don’t Forget Flight Shaming. In another source of scrutiny for the industry, during the CARES Act negotiations, some Democrats sought to force airlines to adopt more aggressive green initiatives to combat climate change. While such conditions were not ultimately included in the legislative package, climate change pressure on the industry began well before the pandemic began, and demands to enact carbon emissions offsets or reductions are likely to continue, driving up the costs for airlines and passengers when neither can afford it. Should the November elections shift party control in Washington, airlines can expect such demands to be renewed with a fervor.

Struggling airports and related services are pushing for their own relief, even if it means higher taxes for travelers. 

Airport Struggles Could Lead To Tax Hikes. The pandemic has not only affected airlines, but also the airports and businesses who support them, too. According to the Airports Council International, airports worldwide are expecting a decline of more than 4.6 billion passengers, creating a $97 billion revenue loss for airports. In fact, airports have already lost nearly $40 billion in revenue. Despite receiving $10 billion in the CARES Act, airport revenue losses have already put large construction projects on hold. Because airports are typically funded through the combination of airline fees and taxes, this dramatic drop in air traffic could mean that airports may seek additional bailouts, or absent that relief, potentially seek local tax increases to recoup their losses. However, airlines are quick to point out consumers already pay nearly $7 billion annually in airport taxes, often as part of the ticket prices they pay.

Restaurant And Retail Concessions Hope To Board The Next Relief Bill. Meanwhile, airport restaurants and retailers say that the 95 percent decline in passengers in recent months have left them financially insolvent. “We’re trying to tell Congress that ‘You missed us. You totally overlooked concessionaires.’ We’re hoping and urging that they will provide relief,” Rob Wigington, executive director of the Airport Restaurant and Retail Association, said. To that end, these organizations are now asking Congress to ease the burden of just $38 million in April 2020 sales, compared to $825 million during the same time last year. The association, which represents companies employing 125,000 concession workers, says that just 5 percent of its workforce remained employed by May and that it would need $5 billion in loans and grants to stay afloat. Right now, additional coronavirus relief bills remain in flux, so industry representatives must urgently make the case they should be included.

The airline travel industry can fly right with an information advantage.

While the $25 billion airline relief in coronavirus legislation was a victory for the industry, there are still many obstacles ahead. From hygiene on-board to fewer passengers in the skies and in the airports, the air travel industry must be prepared to convey their commitment to customers and their willingness to adapt to the new way of travel while navigating heightened reputational scrutiny. With competitive intelligence, public affairs professionals in the industry can anticipate and mitigate these risks while advancing the interests of their companies’ and coalitions’ efforts to keep Americans at work and in flight.

Government Loans Bear Unexpected Public Interest

Here’s what you need to know…

In late April, Allied Progress, a project of activist group Accountable.us, launched TrumpBailouts.org, a website calling out public companies that have received federal funds as part of relief efforts for businesses impacted by COVID-19 and the governmental response to the pandemic. The website, which outlines how much these firms received, how much their executives make, the value of their most recent stock buyback, and their 2019 net income, was just the latest indication of efforts to shift public attitudes and perceptions regarding economic aid for businesses hit by the pandemic and accompanying lockdowns.

In March, lawmakers passed historic spending legislation that dedicated trillions of dollars in benefits to remedy coronavirus shutdown losses for businesses large and small alike. Companies had to make a decision: accept loans from the federal government whose terms were unclear, or risk closing forever, leaving behind millions of unemployed workers and their families who relied upon income from these businesses to live?

As the country reopens, there is now more space for media and activists to examine just who got federal relief dollars and how was it spent, leaving companies vulnerable to attacks for their decision to prioritize their survival and care for their employees. Fueled in part by activist efforts such as Allied Progress’ website, the media is feverishly seeking to unearth anyone who receives a loan, with NBC News’ Senior Business correspondent, Stephanie Ruhle, tweeting she will “search … until my last breath on Earth” to match the publicly disclosed EINs of loan recipients with those of hedge funds and private equity firms because, she believed, “these loans aren’t for you.”

The competing pressures on firms will only increase as time goes on and the pandemic, hopefully, dissipates, particularly in sectors that were already boogeymen for partisan actors and many in the media. To ensure public affairs professionals can anticipate what comes next, here’s what you need to know.

There’s no such thing as free money.

Your Receipt of Taxpayers Dollars Will Be Public: Because they’re benefiting from a taxpayer-funded loan, no business will be able to conceal its receipt of the funds. Sen. Marco Rubio (R-Fla.) who chairs the Small Business Subcommittee in the U.S. Senate, has already promised the public will be able to find out who exactly received coronavirus relief loans, and if the Trump Administration won’t do it, his subcommittee will. In fact, concerns regarding fairness and transparency of the programs are already mounting with major media corporations suing the Small Business Administration (SBA) to secure access to government records of the administration of the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) Advance.

Prepare For A Potential Audit – By the Government and the Press: Businesses who receive rescue loans related to the coronavirus will experience extra scrutiny, with Treasury Secretary Steve Mnuchin telling Fox Business that the IRS will perform a full investigation of any company that received $2 million or more in loans before forgiving them. If the agency discovers loans were not properly managed by recipients, these organizations may be subject to criminal liability. Meanwhile, the Securities and Exchange Commission (SEC) has launched a “PPP Loan Sweep” of public companies, documenting what qualifications businesses believe enables them to receive a loan. And of course, the press and the public will do “audits” of their own, and organizations must be prepared for what they might find.

As public sentiment shifted, so did the loan terms.

State of Confusion: At first, loans like the Small Business Administration-managed PPP and EIDL were articulated as stopgaps meant to stimulate the economy and keep American workers paid. But as time went on, the Treasury Department and the Small Business Administration issued more than 40 pieces of guidance in the form of “frequently asked questions,” often providing new or conflicting information to overwhelmed businesses trying to make sense of the terms of their loans. New direction on the loan terms just kept coming, even after the federal government had granted up to $500 billion in aid.

In an effort to curb the issuance of loans to those who might not need them, the Trump Administration issued a rule in late April that would require PPP loan recipients to certify that they couldn’t access any other sources of capital without significantly damaging their “ongoing operations.” Other guidance confirmed PPP funds had to be dedicated mostly to payroll, but often varied on how that payroll could be paid and to whom. This persistent ambiguity left business owners confused and countless others excluded from the aid all-together. As The Washington Post noted, some were holding the money or returning it because they couldn’t figure out the rules.

Easier to Opt Out: For some businesses, the money they’d receive from an SBA loan wasn’t worth the confusion surrounding its administration. In particular, many start-ups in Silicon Valley say they don’t have the time to parse through the intricate and ever-changing regulations governing the loans. For others, opening themselves up to liability in the form of potential audits and media opprobrium isn’t worth the risk. Still others say that the loan is too restrictive, limiting the benefits of its intended purpose of economic support while tying the hands of businesses. The result is increased unemployment claims the loans were intended to curb and businesses left to struggle under lockdowns and other restrictions that prevent them from operating during the pandemic. Already, nearly 100,000 small businesses have shut down since the pandemic began.

Public pressure on organizations meant workers lost.

Pressure Point: As Americans return to normal life, increased scrutiny of who took advantage of their eligibility for these loans is inevitable. We are already seeing stories of small businesses who shuttered because they couldn’t receive critical assistance while others the American people never considered could be eligible received them. The Washington Post reports $1 billion in small business loans went to public companies, while Forbes senior contributor Erik Sherman claims many of those corporations had plenty of cash in reserves. Even the Catholic Church, which runs tens of thousands of schools and hospitals across America, came under fire for receiving a PPP loan to pay its employees.

Politicians are also getting in on the blame game, with House Speaker Nancy Pelosi (D-CA) demanding a San Francisco-based property management company return its $3.6 million PPP loan. On the right, conservatives successfully forced Harvard University, which enjoys an endowment of nearly $41 billion, to pay its dining hall employees after furloughing them due to coronavirus lockdowns, even as the college obtained a $9 million loan it ultimately returned under pressure.

Return to Lender: Dozens of major corporations have already returned the money they received in small business loans – to the tune of hundreds of millions of dollars. While food service corporations like Potbelly and Ruth’s Chris were among the more notable names to do so, small businesses also chose to return their loans, citing a desire to avoid public scrutiny and potential audits. These range from think tanks like the Aspen Institute to mattress fabric manufacturer Culp. Experts lament that pressure from lawmakers, media, and the public have shamed impacted companies from receiving a needed benefit that would keep their employees paid. As Allyson Baker, a partner at Venable law firm who has been working with companies to secure government loans, explained to Politico, “There’s another side to it, which is, ‘If I don’t take, I might be laying people off, I might be hurting my business, I might be hurting the people I employ. It is something that a lot of people are struggling with right now.”

In the case of the restaurant industry, their decision to forego federal funds might have spared them the pain of a temporary public relations crisis, but it might have prolonged their financial woes and further endangered the jobs of those they employ. Nowhere is that more apparent than Shake Shack, which caved to public pressure after receiving a $10 million PPP loan they obtained to cover lost wages for their hourly workers. In addition to lockdowns artificially depressing their sales, restaurants like Shake Shack now face skyrocketed costs of meat due to production plant shutdowns – exactly the time of “economic uncertainty” contemplated in the PPP application – which makes the cost of doing business even higher even as consumer demand plummets.

Stay ahead of the scrutiny

Coronavirus forced a lot of organizations to make a lot of tough decisions. While things are reopening, they’re not out of the woods yet. Smart public affairs professionals have anticipated the operational and reputational risks associated with receiving federal funds, and they’re planning their response. A competitive intelligence advantage from Delve is the best tool they have.

The Forthcoming Pandemic of Litigation

Here’s what you need to know…

As Americans begin returning to some semblance of normal life, organizations have more to consider than simply how to resume their usual operations and stay afloat in a shaky economy. Their actions leading up to, during, and after the coronavirus pandemic are now under a magnifying glass, as eager plaintiff’s attorneys prepare a tsunami of lawsuits and class action litigation to take advantage of the sympathy of the courts and frustrations of the public. Since the response to COVID-19 has affected Americans of all walks of life, trial lawyers will have little trouble finding plaintiffs for the cases they want to make.

As Congress considers the next steps it can or should take to help get Americans back to work, the debate over liability protections for businesses is heating up. While that debate remains ongoing, public affairs professionals must quickly mobilize to ensure their organizations or industries are included in reform legislation while simultaneously preparing their companies and industries for an onslaught in litigation. To help you understand and navigate this challenge, here’s what you need to know:

What is liability reform, and why does it matter?

What Is Under Debate: In the context of COVID-19, liability reform is meant to protect organizations against unreasonable lawsuits occurring as a result of the pandemic. For medical facilities like nursing homes and hospitals, lawsuit protection is especially crucial, as they have faced exceptional strains on their health care systems due to labor and resource shortages amid heightened demand. Manufacturers say they also deserve relief from potentially onerous liability, as they quickly retooled their operations to make needed products for the first time, such as personal protective equipment. And small businesses worry that, should employees or customers contract COVID-19 despite their best efforts to maintain safe and hygienic facilities, their organizations could crumble under the costs associated with fighting lawsuits. However, labor unions and trial lawyers say corporations already enjoy too much protection under the law, and liability reform would only further inhibit employees’ and the public’s rights to access the courts for financial remedy.

Why It Matters: Business advocates have long argued that tort reform, legislation that restricts excessive or meritless litigation, improves productivity, lowers consumer costs, and increases employment opportunities. In the midst of an extraordinary public health crisis, advocates say that such efforts are not necessary merely for success but also for survival for many organizations. Coalitions ranging from the National Restaurant Association to the National Retail Federation pointed out in a letter they sent to lawmakers that “without Congressional action, the threat of litigation will mire our recovery and negatively impact the economy writ large by injecting great uncertainty and risk into the ability of our businesses to operate during the pandemic.” The U.S. Chamber of Commerce argues that without significant liability reform, businesses will lack the confidence to reopen, exacerbating America’s current economic hardships. On the other side, powerful labor unions and trial lawyer groups stand ready to fight any measure they believe artificially limits workers’ ability to sue their employer.

The outcome of this battle could determine if and how the economy begins to rebound after artificial shutdowns saw nearly 40 million Americans unemployed and hundreds of thousands of businesses shuttered. As business magnate and former Democratic presidential hopeful Michael Bloomberg noted, “It’s essential that companies take actions that protect their employees,” but “Even those that take every conceivable precaution … will face unprecedented liability concerns that could paralyze investment and prevent them from rehiring workers they may have laid off or furloughed.”

While Congress debates, states are leading the way.

The State of the Capitol Hill Debate: Senate Majority Leader Mitch McConnell (R-KY) has been vocal about the need to pass meaningful liability reform to stave off frivolous lawsuits, arguing a “lack of protection for businesses owners from lawsuits related to the coronavirus would ‘dramatically slow’ the economic recovery.” Republicans on Capitol Hill have said they will not consider any forthcoming coronavirus response bills that do not prominently feature measures to protect businesses from frivolous lawsuits. The White House has indicated President Trump is supportive of Congressional GOP efforts to mandate liability reform as a part of any future coronavirus legislation.

While Senate Minority Leader Chuck Schumer (D-NY) has minimized such an effort as merely creating “immunity for big corporations,” some Congressional Democrats have vocalized a willingness to consider litigation protection in future COVID-19 legislation. According to The Wall Street Journal, Rep. Ro Khanna (D-CA) is “pushing legislation that would require OSHA to force companies to develop worksite-specific coronavirus-protection plans,” and that he is “open to a liability shield for companies that comply with strong mandates.” On the other side of the aisle, Rep. Michael Turner (R-OH) has introduced legislation to shield employers from lawsuits associated with employees catching COVID-19 after returning to work, so long as the employer is abiding by state and federal laws.  

States Are Already Providing Protections, Especially To Healthcare Industry: While federal lawmakers weigh different legislative options, states are taking matters into their own hands. Governor Gary Hebert (R-UT) has signed what may be the broadest protections into law so far, “provid[ing] businesses liability protection stemming from an individual contracting coronavirus on their property,” which ensures business owners are “immune from civil liability for damages or an injury resulting from exposure of an individual to COVID-19” that occurs on their premises, as long as there is no reckless or intentional infliction of harm.

Time Magazine reports that at least 15 states led by governors of both parties have implemented liability protection for nursing homes, maintaining exception for “gross negligence and willful misconduct.” In New York, the state’s hospital association secured special protection from both civil lawsuits and criminal prosecution, as the health care system was overwhelmed by the worst outbreak of COVID-19 in the U.S. While they’re not immune to prosecution for intentional misconduct or gross negligence, medical professionals and facilities are protected from liability concerning “decisions resulting from a resource of staffing shortage.”

Democratic governors in Illinois and Michigan, not typically known for their support of tort reform, have enacted measures to protect health care professionals during the pandemic. Meanwhile, Republican legislators in Louisiana are pushing a bill that would provide liability coverage to health care workers, some real estate owners, and certain companies for actions taken during the pandemic. In Massachusetts, state legislators are considering offering liability immunity to higher education institutions who have offered emergency aid. 

Pandemic-related lawsuits could impact recovery for years.

The Lawsuit Pandemic Has Already Begun: In an editorial, The Wall Street Journal points out that the lawsuit pandemic is already well underway, explaining, “Trial lawyers are filing suits against emergency-supply manufacturers (false advertising), colleges (refusal to refund student fees), cruise lines (emotional distress), retailers (wrongful death), nursing homes (negligence), and governments (denial of hazard pay)—and much more.” Even in the early days of the pandemic, trial lawyers had begun filing class action lawsuits against a wide array of institutions and industries. Some plaintiffs are angry that airlines are providing credits instead of refunds to their customers, while others claim that they were wrongfully denied federal stimulus payments. The entertainment industry is already being hit, with SXSW organizers facing a lawsuit for its refusal to refund tickets due to the festival’s cancellation. Law 360 says these cases are only the tip of the iceberg, with Adam Levitt, a partner at Chicago-based plaintiff’s firm DiCello Levitt Gutzler LLP, telling the outlet they’ve “never been busier.”

Lawsuits Are A Multi-Year Process: With or without liability protection, lawsuits that do move forward may take many years, costing both sides an inordinate amount of time and money. In fact, there is significant historical precedence for protracted legal battles lasting long after catastrophes and crises take place. These cases can take many years to make it through the courts. In fact, it took a group of 35 plaintiff’s attorneys more than 11 years to collect just $20 million in payments for 120,000 claims against the U.S. Army Corps of Engineers and construction firms whose alleged failures resulted in widespread destruction during Hurricane Katrina. For a group of more than 150 home and business owners in New York, fires sweeping the Rockaway Peninsula of New York City before or after Hurricane Sandy meant spending seven years fighting two of the state’s utility companies through multiple courts just to secure a jury trial for their claim. As businesses and governments spend time and money on these suits, they are not focused on the recovery.

An Ounce of Prevention is Worth the Investment: Savvy public affairs professionals have anticipated this lawsuit pandemic since COVID-19 began. They understand the tremendous financial and reputational damage that lawsuits both valid and frivolous could pose to their companies and industries, and they know that being armed with the best information possible is key to weathering the storm. Every organization needs a competitive intelligence advantage to make the case to lawmakers that they should be included in any reform legislation and to protect themselves against litigation risk. Delve can help by going deep beneath the surface of the news to find out which industries and companies are being targeted and why. We use a custom approach to uncover the motivations and organizing tactics of those posing a risk to organizations, as well as the teams they’re assembling to make it happen, ensuring you are well-positioned to prepare for the risks and fight back successfully should they arise.

Delving In Together: Regulatory Relief Will Lead The Recovery

Graham Nash of Crosby, Stills, Nash, and Young fame once wrote, “Rules and regulations, who needs them? Open up the door. We can change the world.” While the hippie crooner likely had other ideas in mind, he wasn’t wrong in his claim that excessive regulatory burdens stifle innovations for our country, our communities, and our lives.

Never before has this struggle been clearer than in the coronavirus crisis. We have seen federal, state, and local governments roll back rules that stalled the delivery of medical services or blocked access to important products. We have also discovered that rules governing particular industries might do more harm than good. And we have learned that many day-to-day regulations meant to direct human behavior are perhaps unnecessary after all.

While the country of course needs some degree of regulation to safeguard our people and our economy, the pandemic pause of regulations offers the promise of sanity and simplification in the future. As policymakers take a closer look at which of these rules are actually useful in serving American interests and which stand in the way of meeting America’s needs, we’ve compiled a greatest hits album of pandemic-related regulatory relief.

The federal government has reversed dozens of rules since the coronavirus pandemic began.

  • Freeing health care workers to cross boundaries – online and IRL (in real life): As the deadly reality of COVID-19 became apparent, the federal government acted swiftly to ease rules on the health care industry, hoping to extend more options for patients and providers. To provide support for coronavirus hotspots in dire need of qualified medical personnel, the Department of Health and Human Services (HHS) waived state licensure requirements for health care providers wishing to serve where they were most needed. Meanwhile, the Centers for Medicare and Medicaid Services (CMS) announced that seniors could now take advantage of a wide range of telehealth services, irrespective of where they lived. HHS also encouraged the use of telehealth options, permitting health care providers to use video platforms like FaceTime and Zoom to safely serve their patients.
     
  • Getting supplies and technology to those who need it: In mid-March, the Food and Drug Administration (FDA) began allowing private companies to advertise COVID-19 tests directly to the general public in efforts to address test kit scarcity. The Federal Emergency Management Agency (FEMA) also granted permission for Puerto Rico, the District of Columbia, and other U.S. territories to purchase personal protective equipment from foreign suppliers, a reversal of a nearly century-old regulation enacted by the Hoover Administration.
     
  • Flexibility in flight and on the open road: In the midst of an unprecedented public health crisis, the reliable transportation of vital goods has become especially important. As a result, the Department of Transportation has lifted hours of service regulations that will create greater flexibility for truck drivers delivering medical supplies, equipment, or food. Meanwhile, the Transportation Security Administration (TSA) has eased liquid limitations to allow passengers to travel with up to 12 ounces of liquid hand sanitizers in their carry-on bags until further notice.
     
  • Educational flexibility works: Widespread closures of college campuses have caused the Department of Education to rethink its rules governing higher education. They announced in mid-March that they had granted “broad approval” to schools wishing to be exempt from federal standards on calendars and course schedules as they enacted “distance learning” programs to open virtual classroom alternatives. Acknowledging the unique financial pressures on students, the Department of Education also permitted colleges and universities to extend current financial aid eligibility for students who qualify for federal work-study and Pell grants, even if they aren’t on campus.

States and cities led by both Republicans and Democrats also embraced regulatory relief.

  • It turns out adults are responsible enough to buy alcohol and takeout: With hundreds of millions of Americans stuck at home, the restaurant industry stood ready to provide meals – if only they could. In many places, regulations on delivery, takeout, and the sale of alcohol made it difficult. So, governors and mayors stepped in. In New York, Governor Andrew Cuomo announced that bars, restaurants, distilleries, and wineries could offer alcohol for takeout orders. In New York City, City Hall waived a rule that prevented delivery workers from using e-bikes to transport orders. And in Boston, city officials waived existing regulations to allow all restaurants to offer takeout, even if they did not have a license to provide the service.
     
  • Trucks that deliver booze are also capable of delivering food: In Texas, Governor Greg Abbott reversed a longstanding rule that prevented alcohol delivery trucks from delivering supplies to grocery stores. In doing so, he provided another way for grocery stores to keep their shelves stocked. In another move to ease transportation regulations, Governor Abbott waived certain commercial trucking regulations to “expedite commercial vehicle delivery of more supplies.”
     
  • Expanding patient access to health care providers: Echoing efforts from the federal government to loosen the regulatory stranglehold on the health care industry, state governments also offered relief to the medical field. In New York, Governor Cuomo expanded “scope-of-practice” rules to permit physician assistants, nurse anesthetists, and nurse practitioners to perform jobs they’ve trained to do without additional supervision. In Washington, the government is allowing out-of-state health practitioners to practice without a license from their state. To deal with increased pressure on pharmacies, Pennsylvania now permits out-of-state pharmacies to ship goods into the state, while they also allowed pharmacy supervision to be conducted by phone or computer. While patients cannot see their providers, the Alabama Board of Pharmacy is temporarily allowing pharmacies to process emergency refills on essential medications. And in North Carolina, their Department of Health and Human Services temporarily lifted a rule requiring hospitals to receive permission from the state government to add more beds, the first reversal of the state’s “Certificate of Need” laws in decades.

With political will, some of the sound policy solutions detailed above could become more than short-term remedies, cutting red tape that has long delayed or prevented the delivery of patient-centered care. However, more common-sense regulatory rollbacks are needed for the recovery, most immediately to fortify our health care industry. For example:

  • Reform regulations to expand access to care: A number of scholars have pointed to further regulatory strangleholds that limit access to care by restricting medical professionals’ ability to practice. Competitive Enterprise Institute experts suggest states expand their “scope of practice” laws, which would allow qualified health care workers to perform functions that will be curtailed due to an anticipated physician shortage. Cato Institute is even more ambitious, arguing that licensure laws should be reformed to the point that they’re eliminated all-together. On the technology front, Cato Institute calls for the FDA to expedite its emergency use authorization of a new ventilator, as bureaucratic delays have stymied innovation and can cost lives.
     
  • New lifesaving drugs need a streamlined regulatory process: Hoover Institute scholars Charles L. Cooper and David R. Henderson argued in The Wall Street Journal the FDA should revoke its efficacy requirement for new drugs to speed up the delivery of vital therapeutics. They point to a regulation enacted in 1962 that forces companies to prove both the safety and efficacy of new drugs. Before, companies had only been required to provide assurance that new drugs were safe for patients. Now, this two-hurdle system delays the availability of medicine as researchers await clinical trials that confirm new medicine is not only safe but also conclusively effective at treating an illness. Experts say that if individual patients and their providers feel that proposed regimens are safe for use, they should be allowed to try them.
     
  • Loosen rules on diagnostic tests so professionals can perform more of them: If coronavirus has taught us anything, it’s the value of widespread testing to control the outbreak of a virus. With testing, health care professionals can treat and isolate infected people, protecting the general public as the sick patient recovers. That’s why the Competitive Enterprise Institute says FDA regulators should stop requiring premarket approval for laboratory-developed diagnostic tests. “The FDA has used its enforcement discretion to waive the premarket review requirement for tests developed and used exclusively within a single laboratory, known as ‘laboratory developed tests’ (LDTs). However, when the Secretary of Health and Human Services declares an official public health emergency, the agency does require premarket approval for LDTs, though it will grant an expedited Emergency Use Authorization for LDTs that meet the necessary criteria…The FDA should permanently waive the premarket approval requirement for LDTs, and Congress should write the exemption into the statute.”

All of this regulatory relief did not happen in a vacuum. These positive steps were made possible in part by industry representatives passionately making the case to decisionmakers that, if unhindered by superfluous rules, the companies they represent could better contribute to our country’s public health and economic security. Policymakers agreed.

By removing regulatory barriers, government officials are implicitly acknowledging that a number of regulations on the books are not necessary to safeguard the American public. Instead, cumbersome rules can inhibit progress, especially at times when it is needed most. In the weeks ahead, policymakers will make further regulatory adjustments to meet the immediate needs of those they serve. And after this crisis is over, they should thoughtfully examine which rules can be permanently revised or repealed so that our country and our states are never in this position again.

While policy experts have largely focused on reducing unnecessary regulations in health care, expect rules governing a variety of industries to be reviewed in the months ahead to aid in the economic recovery. As policymakers develop new regulations and update current rules, informed and trustworthy public affairs professionals have an opportunity to make the case for responsible reforms to help revitalize their companies, coalitions, and industries. Those who have consistently invested in such efforts are best poised to shape these reforms and thwart unnecessary regulatory overreaches to this pandemic.

TL;DR: Are You Ready For IMO 2020, Corporate’s Candidate Play, And Artificial Intell-inois

Here’s what you need to know…

Are you ready for “the biggest change in oil market history”? If not, you may be in for a surprise next year. On January 1, 2020, a mandate will take effect impacting maritime trade and it is not getting the public attention it deserves. With more than 90% of the world’s trade carried by sea, the ramifications will be far-reaching, which is why the United Nations’ International Maritime Organization (IMO) 2020 emission standards should be on your radar. Here’s what you need to know about this new rule and what it can mean for your organization’s operating landscape:

  • What Is IMO 2020? IMO 2020 is a nickname for the mandate taking effect on January 1, which will require the more than 39,000 ships and tankers that sail international waters to either switch to lower-sulfur diesel fuels or alternative fuels, or adopt technologies that help their fleets reduce their sulfur emissions to meet the new standard. In 2016, the IMO made the decision to reduce the acceptable sulfur content in shipping fuels from 3.5% to 0.5%, in part because the standard fuel used by the world’s fleet produces 90% of the world’s sulfur emissions. In fact, 15 of the largest ships produce more sulfur than all of the world’s automobiles combined. The fuel change is supported by more than 170 countries, including the U.S.
     
  • Shipping Costs Are About To Go Up For Businesses And Consumers: Maritime shipping is “by far” the most cost-effective way to move goods and raw materials, and the industry has been preparing its fleets to pass police inspections and avoid having vessels impounded when the mandate takes effect. It’s estimated that the container industry will spend approximately $10 billion to comply, with the two largest carriers – A.P. Moller-Maersk and MSC – incurring added costs of $2 billion each. These costs will go toward the added expense of switching to IMO 2020-compliant fuels such as cleaner low sulfur fuel or liquified natural gas (LNG), estimated to be 50% more expensive than current fuels, or toward installing costly exhaust scrubbers that remove sulfur oxides from current fuels (and that require ships to be taken out of service to install). According to consulting firm AlixPartners, the shipping industry will need to impose fuel surcharges ranging from 30% to 40% to offset the costs of compliance, which could increase the costs of goods by 5% to 10%.
     
  • A Cold Winter Could Mean A Fuel Shortage: There is expected to be an oversupply of high-sulfur fuel oil and a demand for IMO-compliant products, which will put pressure on the refining industry to produce more low-sulfur fuels. Energy companies with refining capacity are well-positioned to take advantage of this need, as well as companies already producing low-sulfur crude and LNG, particularly as the shipping industry expands LNG-powered vessels. With IMO 2020 coming during the U.S. winter heating season, timing “could not be worse” should it be a very cold winter, and a surging American energy industry already facing challenges due to takeaway capacity, anti-fossil fuel activists, and their like-minded policymakers in elected office, may well create a shortage of needed fuel both domestically and for the shipping industry.
     
  • Does IMO 2020 Help Or Hinder Outstanding Trade Deals? With negotiations for a U.S.-China trade agreement ongoing, the approaching mandate may put added pressure on both sides to come to an agreement before the end of the year in order to help minimize any disruption stemming from increased shipping costs that carry the vast majority of goods between the countries. Corporate interests operating in both countries could make a last-minute lobbying push to finalize the deal, and given the strength of the U.S. economy compared to that of China, the latter may want to remove further uncertainty by coming to an agreement. Regarding USMCA, while maritime shipping is not as critical for moving goods throughout North America, the approaching mandate could similarly influence corporate interests and policymakers to want to come to a breakthrough before the end of the year, or else risk the possibility that the Administration will follow through on its threat to withdraw from NAFTA – thereby adding further uncertainty to global trade.
     
  • What Might The Mandate Mean For The Global Economy? When the supply of compliant fuels tighten and costs increase, the result could be fuel prices that increase by 20% to 30% as maritime fuel buyers are put in “direct competition with trucking, planes, trains, and other forms of transportation.” That can lead to more expensive prices for other modes of transportation, and in a globalized world that benefits from business travel, these increased costs could impact companies’ bottom lines in a range of industries. In addition, the mandate is likely to negatively impact Middle Eastern oil producers, like Saudi Arabia, who rely heavily on high-sulfur crude. With rising geopolitical tensions in the region and continuing challenges for the Saudi state oil company as it seeks to go public, it remains to be seen how the global economy will respond to IMO mandate-driven developments in the Middle East.

The “brick wall” of IMO 2020 has been built over the past two years, and if they haven’t yet, companies and organizations will need to run through it or find a way around it. For such an impactful regulation, the mandate has not gotten the attention it deserves, and it serves as an instructive lesson on how obscure multilateral organizations (to say nothing of the myriad of regulations made by federal agencies) can have large consequences. Going forward, the best protection against such consequences is to proactively monitor developments through the lens of a company’s or organization’s risk – and therefore anticipate the actions and better influence them to a favorable outcome for their interests.

News You Can Use

CORPORATE’S CANDIDATE PLAY

The world’s largest retailer is taking a local approach when it comes to politics in its hometown. With seven of nine seats on the Seattle city council up for election, Amazon invested nearly $1.5 million dollars in an effort to support business-friendly candidates that may be more open to their interests. The council, which has included vocal company critics that enjoy the support of national politicians such as Sens. Bernie Sanders and Elizabeth Warren, has promoted policies targeting the company from increased taxes to mandated employee benefits.

When the dust settled, two of Amazon’s candidates won and we can speculate that it will have more success as it continues to invest in running candidates in key elections. This may in turn lead to a trend of corporate interests investing beyond general industry advocacy efforts and more in campaigns and candidates to protect and advance their interests when faced by governments filled with hostile policymakers.  

ASTHMA SUFFERERS FACE GREEN PERIL

Climate change could soon force people living with asthma to make a life or death decision – whether they want to or not. A new study by Cambridge University researchers claims asthma has a carbon footprint “as big as eating meat” because inhalers release greenhouse gases linked to climate change. The researchers argue patients should switch to “greener” medications and that these patients should become vegetarian to reduce their environmental impact.

However, switching to a new type of inhaler can create health complications and is simply not an option for all patients – which may be why researchers also are putting pressure on pharmaceutical companies to find ways to reduce their carbon footprints. The beginning of the evaluation of medications and treatments through the lens of climate change that people living with illnesses depend on represents a worrying trend, and if patients and companies that use and produce such medications do not prepare to defend these treatments, pressure could build for government to force patients to change medicines, even if it impacts their health.

ARTIFICIAL INTELL-INOIS

Companies have increasingly started using artificial intelligence (AI) in the hiring process to help screen the deluge of candidates that apply to any single posting. Some algorithms seek to infer characteristics about job performance through facial and voice recognition technology that examines traits such as brow raising, eye widening, use of language, and other verbal skills, spurring ethical and legal concerns. In response, the state of Illinois has adopted legislation to limit facial recognition use, citing possible discrimination on the basis of race and gender and biases toward previously successful candidates that could lead to homogeneity in employees.

Illinois’ law is the first of its kind and will go into effect on January 1, 2020, likely serving as a model for similar laws in other states and potentially for future regulation at the federal level. For companies producing this technology, those using it, as well as policymakers and regulators, the implications of Illinois’ law will serve as an important test case as we move deeper into the 21st century.

ON-CAMPUS LIVING VOTES

The most important battleground in next year’s election may not even be a state. Political groups on both sides of the aisle are honing in on college campuses in the hopes that student turnout could impact tight races in swing states. The tactic was recently used in 2018 by now-Democratic presidential candidate Tom Steyer’s NextGen group, which spent $38 million on campus voter participation efforts and is expected to be active again in 2020. Meanwhile, conservative groups such as Turning Point USA are currently outspending their counterparts on the left.

While politics on campus is nothing new, the concerted effort by political groups to swing (and there are even reports to suppress) college voters suggest that campaigns believe they can get more students to register using their campus address than in the past, rather than remaining registered back home as has been traditionally the case. If successful in securing results in coveted swing states, this tactic will make campaign professionals in the future think twice about shaking off the views of vocal students or conceding their votes to a particular party.

TL;DR: Corporate Values At Water’s Edge, Private Sector Pravda, & Science Is Real (Until It’s Not)

Here’s what you need to know…

When the NBA brought preseason games to China this month, they were expecting positive press and an opportunity to leverage a shared love of basketball to strengthen ties between cultures and continue the growth and popularity of the league overseas. Instead, the NBA was plunged into a full-blown public affairs crisis by its reaction to a posted-then-deleted tweet by Houston Rockets General Manager Daryl Morey supporting the Hong Kong pro-democracy protests.

The since-deleted tweet, and especially the bungled response from across the league, sent shockwaves throughout corporate America as companies and customers faced uncomfortable questions about corporate values in the United States and abroad, and how brands engaging as politically enlightened at home are exposed to greater reputational risk if their actions abroad contradict that narrative. With the world smaller than ever and today’s public affairs environment fraught with risk, here’s what companies operating globally can do to help minimize the risk they may face:

  • First, Some Background: The NBA spent a decade building its $4-billion business in China and it’s the most popular sports league in the world’s most populous country. Morey’s tweet – which he promptly deleted and apologized for – caused swift outrage from the Chinese government, with Chinese entities such as state-run television suspending plans to broadcast pre-season games and sponsors halting cooperation with the NBA. The NBA’s sluggish response, including NBA Commissioner Adam Silver’s first statement that seemingly appeased the Chinese government and then a later one that clarified the league’s support for free expression (although that support differed from Mandarin translations of his comments), only added to the controversy.
     
  • Reputational Risk Goes Worldwide: This controversy illustrates the reputational risk facing companies and organizations operating globally, and particularly those based in free countries that have decided to embrace corporate activism and engage in key societal issues in the public arena. This corporate activism may be a component of a brand to capitalize and engage a customer base in one country, but it can lead to turmoil when corporate and financial interests overseas clash with an executive’s values and the “cultural values of an enterprise and its home country.” The lesson here is one that applies to any company, organization, or industry that operates around the world – especially in countries whose cultural and political values differ greatly from one to the other.
     
  • More Scrutiny Will Bring Charges Of Hypocrisy: We’ve written about the consequences for companies when their actions are not consistent with the brand’s values. For example, the NBA “gestures towards wokeness” in the U.S., but its business decisions in China seem to present a glaring contradiction to this narrative and a vulnerability. The episode then sparked renewed attention and scrutiny toward other global companies’ actions to appease China, such as Nike (whose stores removed Rockets merchandise in China) and Apple (who removed an app used by Hong Kong pro-democracy protesters to monitor police movement). Under increased scrutiny in today’s globalized world, companies considered enlightened domestically have now opened themselves up to charges of hypocrisy due to how (and who) they do business with overseas. At the same time they may boycott business with states over the result of legislation passed by democratically elected officials at home, they continue to do business with China, Saudi Arabia, and others who defy democratic norms.
     
  • Protecting Your Company From Reputational Scrutiny Amidst Geopolitics: The days when executives of global companies were simply versing themselves in basic cultural customs and phrases are over. Now, companies need to take a cohesive approach that aligns their brand strategy and policy stances both at home and abroad. With the globalization and digitization of scrutiny, inconsistencies and contradictions in any operating environment can quickly be leveraged against a company’s reputation. To help protect your company’s reputation and anticipate domestic and foreign political pressures, you need to assess risk from both a global and local perspective so that you can better understand and address key vulnerabilities – before they are pointed out in the public arena, and before you lose control of the narrative.

Foreign countries with large and emerging markets hold heavy sway over companies seeking access to their consumers. When concessions to gain it are made that contradict company values, the result is reputational risk that can become a full-blown public affairs crisis that can not only jeopardize overseas operations, but those at home as well.

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SCIENCE IS REAL (UNTIL IT’S NOT)

If your diet has been impacted by the slew of reports, studies, and advice advocating eating less red meat, well you may be in for a shock. It turns out that an international collaboration of researchers “produced a series of analyses concluding that the advice, a bedrock of almost all dietary guidelines, is not backed by good scientific evidence.” In fact, the certainty of evidence that one should limit red meat to improve health outcomes is “low to very low.”

Faster than you can lunge for that hamburger, opponents of this *new* science such as the American Heart Association, American Cancer Society, and Harvard’s School of Public Health “savaged” the evidence and the journal that published it because it contradicts the *old* science better aligning with their respective agendas. A physicians group advocating a plant-based diet even went so far as to file a Federal Trade Commission petition against the journal. 

The new series of analyses also suggest that the meat industry can expect further challenges from environmentalists and animal welfare groups, whose goals (aligned with recent trends) to reduce livestock production and industrial farming are challenged by this new revelation. In the meantime, it’s a good reminder that science and knowledge are always evolving, and that it is crucially important to have the best information possible before implementing policy and regulatory frameworks impacting consumers, companies, and industries.

PRIVATE SECTOR PRAVDA

Much has been made of recent disinformation campaigns and bots on social media stemming from nefarious government actors, and now it’s time for companies and even individuals (!) to prepare to protect their reputations and interests from smearing. After studying the issue by setting up a fake company to commission disinformation projects, threat-intelligence company Recorded Future concluded that “disinformation-as-a-service” is easy to purchase and highly customizable within a broad price range, with sellers that are “exceedingly professional and amenable to feedback.”

For the private sector, strategies to address this increasing risk and protect reputations will likely need to be as robust as those being discussed by policymakers and regulators. With everyone from competitors to investors to activists now having yet another potent tool to wield against them in the public arena, companies would be well served by monitoring key messaging, narratives, and trends targeting them, and gaining a deeper understanding of who may be behind them and why.

RIGHT OR RING?

A new phase in the ongoing struggle between privacy-rights advocates and Amazon’s Ring is underway with more than 30 civil rights organizations publishing a joint letter calling on local, state, and federal elected officials to stop the Amazon security system’s partnership with police. According to the letter, Amazon’s technology makes it easy for police “to request and access footage without a warrant, and then store it indefinitely.”

Amazon Ring has more than 500 partnerships with police departments, who are able to contact Ring device owners – some who received the devices free or at a discount from law enforcement – to obtain video footage when investigating crimes. While Ring has been pressured by privacy advocates for a while now, this letter is the first time that pressure is being directed toward lawmakers who can investigate and perhaps end such agreements between the company and police – a key strategic decision by the activists that other companies facing public pressure campaigns should take note of.

NO GOOD CSR DEED UNPUNISHED

If companies thought they’d keep anti-capitalism at bay with an announcement to put “stakeholders” ahead of shareholders, they have another thing coming. The Business Roundtable’s Statement on the Purpose of a Corporation, signed by 181 CEOs, was intended to outline “a modern standard for corporate responsibility.” Yet now those executives are facing pressure from newly-minted frontrunner for the Democratic presidential nomination Sen. Elizabeth Warren, who is demanding “tangible actions” to implement the principles outlined, such as having companies that earn more than $1 billion in revenue obtain a new federal charter, make 40% of directors employees, and serve an unclear combination of stakeholders instead of shareholders.

An increase of competing political interests holding sway over business decisions could put capital and savings invested in companies at risk, which in turn would threaten hard-earned savings invested into retirement plans for many Americans. If that’s not reason enough for executives to rethink rhetorical or policy concessions to anti-capitalism, then perhaps the lesson is this: no good deed of corporate social responsibility virtue signaling goes unpunished by those questioning the core purpose of corporations.

TL;DR: The Gig Is Up, Selfie Strategy, And Cue The Breakup Playlist

Here’s what you need to know…

California is once again making waves by laying down a key policy marker in the form of Assembly Bill 5 (AB5), which last month was signed into law by Governor Newsom. The law aims to reshape the gig economy and what it means to be a worker in the 21st century, but its implications will go well beyond Uber, Lyft, or whichever other platforms you may use out of convenience (or to make some extra money yourself) in daily life.

AB5 changes California employment law to limit companies’ usage of independent contractors, leaving companies and workers across the country scrambling to determine how it impacts them, whether and how they can push back, and if similar measures may be coming in other states. Here’s what you need to know about AB5 and what might come next in this clash between the 21st century gig economy and 20th century regulatory frameworks:

  • What Is AB5? Assembly Bill 5 codifies and expands a 2018 California Supreme Court decision making it more difficult to classify workers as freelancers. AB5 requires the reclassification of gig economy workers to employees instead of contractors. As noted by the American Action Forum (AAF),  whether a worker was an employee or a contractor was previously determined by evaluating several factors such as how they were paid, their work hours, investment in work equipment, and the extent to which the employer could control the worker and the way the work is done – as is done at the federal level across the U.S. AB5 reverses the existing framework by assuming workers are employees unless they meet three specific criteria, known as the “ABC test.” The law takes effect on January 1, 2020.
     
  • Why Flip The Script On The Existing Contractor – Employee Classification? The new law seeks to address the idea that employers are classifying workers as contractors in order to reduce compensation and benefit costs, as well as legal requirements like unionization, payroll taxes, and insurance coverage. This factor motivated the law’s support among organized labor, some gig economy workers, and Democratic presidential candidates like Bernie Sanders, Elizabeth Warren, and Pete Buttigieg.
     
  • Implications For Workers: The shift to employee status could mean minimum wage protections, overtime, workers’ compensation, sick and family leave, employer contributions to Social Security and Medicare, and mileage reimbursement. However, such benefits would not come without a cost. Gig workers could find their flexibility and hours limited, resulting in less money and opportunity or required working hours that don’t align with their preferences, to say nothing of the costs of complying and figuring out the appropriate classification of certain “gigs” they may have.
     
  • Implications Far Beyond Ridesharing: While companies such as Uber, Lyft, Doordash, Instacart and other technology companies come to mind when thinking of the gig economy, the ramifications of AB5 are actually much broader. Despite some professions receiving carve-outs, the bill has the potential to change the status of 1 million workers in California, ensnaring those in non-tech jobs such as yoga teachers, barbers, truck owner-operators, paper carriers, freelance writers, and more. Yet, some of the main targets of the legislation – the popular, tech-centric ridesharing companies – suggest that their businesses don’t fall under the law’s legal framework at all, and are preparing to counter its enforcement.
     
  • Companies Are Taking Their Case To The Voters In 2020: After unsuccessfully trying to influence lawmakers for a more favorable regulatory framework (including a $21 minimum wage in the Golden State), Uber, Lyft, and Doordash are taking the lead in challenging the implementation of the law (and its application to their businesses). Each company has pledged $30 million each – $90 million total – to fund a ballot measure to make their case directly to voters to exempt gig workers. An Uber executive stated that these funds will go toward hiring “the best campaign team and best advisors we possibly can to run a successful ballot initiative.” As other companies and states wonder if California Attorney General Xavier Bercerra’s assertion that “as California goes, so goes the nation” is indeed true, there will likely be significant resources – both from labor and businesses – poured into influencing the outcome of the 2020 ballot initiative.

The passage of AB5 into law may mark the end of the beginning for the wild frontier of the 21st century gig economy, and how it is implemented and challenged will determine its effect on policy and regulatory frameworks in other states. An analysis by AAF’s Isabel Soto estimates that the implementation of AB5’s “ABC test” nationwide would impact “over 13 million workers who produce over $1.6 trillion in economic output, about 8.5 percent of gross domestic product.” If such is the case, many companies and industry groups may find an investment in California’s 2020 ballot initiative now to be an appealing strategic decision for later.

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THE SELFIE STRATEGY

While Sen. Elizabeth Warren may not know the definition of a selfie, she definitely knows how to use them to her advantage. Ending every campaign rally with a well-executed selfie line, her campaign staffers snap pictures of the candidate with voters, and the lines keep getting longer and longer. At a recent rally in New York, Warren spent four hours taking about 4,000 pictures, bumping up her total tally to more than 59,000 selfies since she kicked off her campaign.

Warren’s strategy strives to build individual connections by creating original digital content and gaining free advertising in the process as her supporters excitedly post the pictures to social media. As one political strategist pointed out, 4,000 selfies multiplied by an average social network of 150 people equals 600,000 viral impressions just from one rally. As recent polls show, this grassroots strategy just may be working, and may change the way candidates approach campaigning well into the future.

ACTIVISM CLOSURE OR OPENING? 

It was a slow day in the office for many on September 20th as people skipped work and businesses shut down to participate in the youth-led Global Climate Strike. According to the American Sustainable Business Council, more than 450 businesses either gave workers the day off, closed stores, or halted manufacturing. In addition, over 7,000 companies participated digitally by giving ad space to promote the strike, and thousands of tech workers staged walkouts.

Companies condoning and even encouraging participation in this strike marks a new level of corporate employee activism that has not been seen at this large of a scale before. If more and more companies leverage their corporate brand, reputation, and resources on public policy issues, it may succeed in influencing elected officials to support particular policies as they seek to gain political (and financial) support. Also, it may enable more employee activism, which could turn on the employer itself and lead to potentially negative implications for employees.

CUE THE BREAKUP PLAYLIST 

A love story that reached its peak during the Obama Administration is now headed for a nasty divorce. Once the party of Big Tech, Democrats are now attempting to break away from Silicon Valley as a “techlash” gains popularity. Mark Zuckerberg has even gone so far as to call an Elizabeth Warren presidency an “existential” threat to Facebook due to the Senator’s calls to break up the company.

However, some Democratic presidential candidates are still wooing Silicon Valley while continuing to publicly attack it. With regulatory scrutiny and the breakup of Big Tech now safely a bipartisan issue, this reality may ironically present an opportunity for Big Tech to strategically engage with policymakers from across the political spectrum to favorably influence whatever regulatory outcomes may come – without being viewed through a partisan lens and the baggage it can bring.

TINSELTOWNS ABOUND

As Amazon and HBO proved at the Emmys, streaming services have dramatically changed Hollywood, but the streaming wars have done a lot more than shakeup awards shows. In an effort to develop original content local to their global viewers, streaming giants are spending billions on content producers in foreign countries – using local languages and storylines – which has resulted in the creation of “mini-Hollywoods.

These new production regions are popping up in places such as Croatia, Serbia, and in Latin America, with Hollywood investment lured by large tax incentives and low labor costs. Besides attracting cash and tourism to host countries, these streaming-enabled “tinseltowns” have disrupted the traditional Hollywood model by creating a unique competitive advantage: highly-localized content that can be quickly leveraged to become the next global hit, thereby at once capturing more subscribers around the world while reducing operating costs.