NATIONAL
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Latest News from the National Restaurant Association
- Last updated 08.30.24 -
FTC Non-Compete Rule Set Aside
August 20, 2024
What Happened: On Tuesday, August 20, 2024, the U.S. District Court for the Northern District of Texas granted Plaintiffs’ Motions for Summary Judgment in Ryan LLC v. Federal Trade Commission. This is the main case challenging the FTC’s Non-Compete Rule, which was scheduled to go into effect on September 4, 2024, that would have made all non-compete agreements illegal.
How we got here: The Restaurant Law Center, on behalf of the industry, and other business groups argued in court that the Commission premised the Final Rule on a seriously flawed cost-benefit analysis that cherrypicked data to support its pre-set agenda of striking down noncompete agreements, while ignoring well-established evidence of their benefits.
The Industry Policy Position: The Law Center and the Association strongly discourage non-compete agreements for hourly workers in the restaurant industry and does not oppose targeted protections for these workers, such as compensation thresholds, enacted by state legislatures. It is not uncommon for waiters, line cooks and other hourly paid workers to work at two different competing restaurant brands on different days of the week, all with the knowledge of their restaurant employers. However, there are all manner of employees who have access to their employers’ most sensitive business, marketing, pricing, and technical information, as well as relationships with their employers’ vendors and customers that could harm their employer without a non-compete agreement. For example, strategic information about future advertising campaigns, branding, menu changes, expansion plans, and target markets is all highly confidential and would be extremely damaging if it were to land in a competitor’s hands, an issue that can be addressed through a non-compete agreement.
What the Court held: The Court concluded that the Commission promulgated the Non-Compete Rule in excess of its statutory authority and that the Rule is arbitrary and capricious. Given the Court’s conclusion, it held the rule unlawful and set it aside. The Commission asked the Court to enjoin the rule only as to the Plaintiffs, but the Court reasoned that the Administrative Procedure Act (APA) “does not contemplate party-specific relief” and set the rule aside “nationwide” and made it “not party-restricted” to cover all “persons in all judicial districts equally.”
What’s next: The Commission is considering an appeal and has stated openly that it may still try to impose its rationale arguing that all non-compete agreements are illegal through enforcement actions that ignore the Court’s analysis as well as historic precedent and practice. The Restaurant Law Center will continue to track the Commission’s actions and will be ready to get involved in the courts again on this issue, if needed, to push back against government enforcement overreach.
Tax Relief
August 1, 2024
What happened: A bipartisan plan to provide temporary tax relief for thousands of restaurant operators failed to advance today (8/1/24) in the Senate (48 yays, 44 nays). The Tax Relief for American Families and Workers Act (H.R.7024), which overwhelmingly passed the House in January, would have restored two key tax deductions through 2025. No further action on tax relief is expected before the November election.
Bottom line: When operators lose pro-growth tax deductions, they see higher tax liability when they invest in their restaurant. Accelerated (“bonus”) depreciation deduction for capital expenses, like a new kitchen oven or catering truck, is gradually falling from 100% in 2022 to 40% in 2025. Beginning in 2022, the business interest expense deduction under the EBITDA standard significantly tightened for many medium-sized restaurant operators who access debt equity.
1. The Tax Cuts and Jobs Act of 2017 (TCJA) deliberately reduced the value of both tax deductions over time, and even more TCJA benefits are scheduled expire at the end of 2025.
2. Learn more about the landscape ahead for restaurants and the need to renew portions of TCJA.
What can we do now: It remains essential for restaurant operators to continue educating lawmakers on the need for tax relief and ask them to cosponsor permanent, pro-growth legislation:
1. The ALIGN Act (H.R. 2406/S. 1117) restores immediate tax deductibility of capital expenses, making permanent the 100% accelerated depreciation deduction.
2. The AIM Act (H.R. 2788/S. 1232) brings back the full business interest expense standard, making permanent the standard EBITDA deduction which includes depreciation and amortization.
Get involved: While today’s Senate vote was extremely disappointing, restaurant industry advocacy will be increasingly important across the next 17 months to prevent massive tax increases from taking effect in 2026. Please contact Aaron Frazier (aafrazier@restaurant.org) to directly participate in ongoing tax policy discussions.
Proposed Heat Illness Prevention Rule
August 30, 2024
The proposed OSHA rule requires employers to include:
Heat Injury and Illness Prevention Plan (HIIPP): Develop and implement a plan with site-specific information to evaluate and control heat hazards.
Initial Heat Trigger Control Measures (80°F heat index): Provide cool drinking water, break areas with cooling measures, indoor work area controls, acclimatization protocols for new and returning employees, paid rest breaks if needed, and regular effective communication.
High Heat Trigger Control Measures (90°F heat index): Mandatory rest breaks of 15 minutes every two hours, observation for signs and symptoms of heat-related illness, a hazard alert, and warning signs at indoor work areas with ambient temperatures that regularly exceed 120°F.
Emergency Response Plan: Develop a heat emergency response plan and take steps if an employee is experiencing signs of heat-related illness.
Training Requirements: Provide initial and annual refresher training for supervisors, heat safety coordinators, and employees.
Recordkeeping Obligations: Maintain records of indoor monitoring data for at least six months.
Cost-Free Implementation: Ensure all requirements are implemented at no cost to employees.