Labor and Employment

The Federal Trade Commission does not have the authority to enact the sweeping noncompete ban it finalized in April, a federal judge ruled Tuesday (The Wall Street Journal, subscription).

What’s going on: “U.S. District Judge Ada Brown ruled that the commission’s authority to police unfair methods of competition couldn’t be used to issue substantive regulations that ban an entire category of conduct. ‘The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do,’” she wrote, adding that the ban was “unreasonably overbroad without a reasonable explanation.”

• The rule—which had already caused companies’ costs to increase in anticipation of the Sept. 4 effective date—sought to prohibit noncompete agreements between employers and their employees.

The NAM’s role: In May, the NAM’s Legal Center filed an amicus brief asking Brown’s court to stay the rule on the grounds that a ban on noncompete agreements would “hamstring innovation in the manufacturing sector and damage the competitiveness of American industry.”

• Brown issued a limited stay in July. Her ruling this week—echoing the NAM’s argument that the rule is  “not reasonably explained”—prohibits enforcement of the FTC rule nationwide.
• “The NAM expressed concerns throughout the rulemaking process, and a 2023 NAM survey showed that a broad noncompete ban would disrupt most manufacturing operations in the U.S.,” NAM Director of Transportation, Infrastructure and Labor Policy Max Hyman said following Brown’s ruling this week.

What’s next: The FTC is considering an appeal of the decision, a spokeswoman told the Journal.

• But “[i]f lower courts remain split as the litigation moves through the legal system, the matter might ultimately fall to … [the] Supreme Court, [which] has taken a dim view of government agencies invoking new regulatory powers from long-ago statutes.”

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What’s going on: On Thursday, as part of its 2025 tax campaign, “Manufacturing Wins,” the NAM hosted Noelle Britton, deputy chief of staff for Rep. Lloyd Smucker (R-PA), and Caroline Oakum, tax counsel for Sen. Steve Daines (R-MT), in a virtual roundtable to discuss what’s being done in Congress to maintain the Section 199A pass-through deduction.

• The 20% deduction—created by the 2017 Tax Cuts and Jobs Act to help the many small and medium-sized businesses in the U.S.—is among several vital tax provisions scheduled to expire at the end of 2025. (Pass-throughs are companies whose profits are “passed through” to the owners, who then pay taxes on the entities’ incomes on their personal tax returns.)
• Both Rep. Smucker, who leads the House Ways and Means Main Street Tax Team, and Sen. Daines are leaders of legislation that would make the deduction permanent.

What they’re doing: Sen. Daines introduced the Main Street Tax Certainty Act in the Senate last May, while Rep. Smucker introduced the House’s version of the measure last July.

• The legislation would make the pass-through deduction permanent, providing much-needed certainty to the small and medium-sized manufacturers that have relied on it to increase investments and job creation.

What you can do: The House Ways and Means Committee Tax Teams are collecting companies’ perspectives on how the pass-through deduction has helped manufacturers and other businesses. Similarly, the NAM is collecting stories that can be used as part of our Manufacturing Wins tax campaign.

• Manufacturers willing to share their own stories about the pass-through deduction can email [email protected] or contact the NAM’s tax team.

Nearly 100 veterans attended a manufacturing career fair at Fort Riley, Kansas, last week, including many who had prepared for their new careers via the Heroes MAKE America program (Kansas Biz News).

What’s going on: “The career fair and other events held by Heroes MAKE America and Manufacturing Institute [the NAM’s 501(c)3 workforce development and education affiliate] aim to grow the manufacturing industry’s workers for the advancement of modern manufacturing and offer programs, including informational sessions, career fairs, networking, career readiness, placement support and manufacturing tours.”

• More than 30 regional and national manufacturers had booths at the event.

How it helps: HMA—an MI program with a 90% graduate placement rate—offers career help to job seekers transitioning out of the military and into the civilian workforce. The aid is in the form of training and introductions to manufacturing leaders seeking employees.

• One military member who attended the fair said “she’s received help with resume writing, interviewing for jobs and how to translate military experience into tools you can use in the civilian world.”
• HMA, which hosts virtual career fairs throughout the year, also offers resources to employers. These include online training, courses and access to the research of the Society of Human Resource Management Foundation.

Why it’s important: The industry could create about 3.8 million new manufacturing jobs on net between this year and 2033, according to a new study by Deloitte and the MI.

• However, if the current manufacturing employee deficit is not shored up, approximately half of these jobs—or 1.9 million—could go unfilled.

What’s next: Interested employers can participate in an information session to be held later this month, where they can learn more about attracting, hiring and retaining military talent through upcoming career fairs and virtual hiring events.

The last word: “Members of the military community often possess valuable skills and qualities—such as discipline, teamwork, leadership and problem-solving abilities—that are in demand for manufacturing careers,” said MI President and Executive Director Carolyn Lee.

• “That’s why manufacturers are increasingly connecting with this top talent through an array of resources provided by the MI’s Heroes MAKE America initiative.”

The NAM recently launched “Manufacturing Wins,” the manufacturing industry’s campaign to preserve the benefits of the 2017 tax reforms that are currently scheduled to disappear in 2025—particularly those tax incentives that make it easier for small manufacturers to hire employees and raise wages, invest in equipment, grow their businesses and contribute more to their communities.

NAM Vice President of Domestic Policy Charles Crain explains what’s at stake in 2025 and how manufacturers can get involved in the effort to prevent tax increases.

Q: Manufacturers are facing “tax Armageddon” at the end of 2025. Can you explain what’s happening?

Crain: Tax reform in 2017 was rocket fuel for manufacturers, leading to record job creation, capital investment and economic growth. For example, manufacturing production grew 2.7% in 2018, with December 2018 being the best month for manufacturing output since May 2008. Manufacturing capital spending grew 4.5% and 5.7% in 2018 and 2019, respectively—this shows the direct impact of pro-growth tax incentives on manufacturers investing in new equipment and facilities. But many of tax reform’s pro-manufacturing provisions will expire at the end of 2025. If these provisions are allowed to expire, virtually every manufacturer will face devastating tax increases.

Q: What policies will sunset in 2025, and how will their expiration impact SMMs?

Crain: For small manufacturers organized as pass-throughs—meaning the business’s owners pay tax on the business’s income on their personal returns—two key changes are coming down the pike. First, their tax rate will increase, from 37% to 39.6%. Second, they will lose the pass-through deduction, which provides a tax deduction equal to 20% of the business’s income. In combination, these tax hikes will increase pass-throughs’ effective tax rate by at least 10 percentage points (from 29.6% to 39.6%), resulting in significantly less capital available for equipment purchases, job creation and community investment.

For small manufacturers organized as corporations, the NAM is fighting to prevent any increases in the corporate tax rate. The corporate rate decreased from 35% to 21% in 2017 and is not scheduled to expire—but President Joe Biden has proposed increasing the rate to 28%. The NAM remains staunchly opposed to corporate tax rate increases that punish manufacturers for investing and creating jobs here in America.

For family-owned small manufacturers, their estate tax obligations are scheduled to increase. Tax reform doubled the value of assets that can be passed on without incurring the estate tax; at the end of 2025, the estate tax exemption threshold is scheduled to be reduced by half. The NAM is calling on Congress to maintain the increased exemption—or to repeal the estate tax entirely, preventing family-owned businesses from being sold for parts to pay a tax bill when a loved one passes away.

Q: What else is at stake in 2025?

Crain: Manufacturers of all sizes continue to face uncertainty about the tax code’s treatment of R&D expenses, capital equipment purchases and interest on business loans. Immediate R&D expensing—which allows manufacturers to write off the entire cost of R&D spending in the year incurred—expired in 2022. So did a tax reform provision that allowed businesses to deduct more of the interest they pay on loans when they debt finance a project. And in 2023, 100% accelerated depreciation—which reduces the cost of capital equipment purchases—began to phase down. These expired provisions are vital to manufacturing growth, and the NAM is working to restore and extend them as Congress prepares for the 2025 tax fight.

Q: How can SMMs learn more?

Crain: The NAM recently published “What’s At Stake: Manufacturers Face Devastating Tax Increases in 2025,” which highlights the tax reform provisions that will expire at the end of 2025. The NAM calls on Congress to act to prevent these expirations from stunting manufacturing job creation, growth and innovation.

Q: How can SMMs get involved?

Crain: Manufacturing voices are crucial to the 2025 tax fight. NAM members with a story to tell about the impact of 2017 tax reform on their business—or the damage that the 2025 expirations could inflict—are encouraged to reach out to their NAM membership advisor or to the NAM tax team.

You can also take a few minutes to record a video testimonial calling on Congress to prevent devastating tax hikes on manufacturers. Instructions for submitting a video testimonial are available here—it’s as easy as having a coworker use a smartphone to film a video of you on your shop floor! Completed testimonials can be emailed to the Manufacturing Wins team to be posted to our campaign site: NAM.org/MfgWins

A labor strike on the U.S. East and Gulf Coast strike would have dire consequences for the maritime supply chain, the NAM and partner organizations told the Biden administration this week—which is why it’s vital the administration intervene now to restart stalled labor negotiations between dockworkers and an alliance of port operators and ocean carriers.

What’s going on: “Earlier this month, contract negotiations broke down between the International Longshoremen’s Association and the US Maritime Alliance,” Bloomberg Government (subscription) reports. “The current agreement, which covers about 45,000 dockworkers at facilities including six of the 10 busiest US ports, expires Sept. 30.”

• The NAM and more than 150 other industry organizations on Wednesday urged the administration to “immediately work with both parties to resume contract negotiations and ensure there is no disruption to port operations and cargo fluidity.”

Why it’s important: Other global shipping-related setbacks and threats mean the U.S. cannot withstand another challenge, the groups said. Continued Houthi terrorist attacks on commercial ships in the Middle East have resulted in “congestion and lack of equipment at overseas ports, carrier capacity issues as they continue to divert vessels away from the Red Sea and increased freight rates.”

Precedent set: Last September, after 14 months of negotiations and several work stoppages and walkouts, West Coast dockworkers reached a labor agreement with the Pacific Maritime Association—following NAM-urged intervention by the Biden administration.

• “We witnessed a significant shift of cargo from the West Coast to the East Coast and Gulf Coast ports because of the challenges and uncertainty during the last West Coast port labor negotiations,” said the groups. “While much of that business has remained at the East Coast and Gulf Coast ports, we are starting to see a shift back to West Coast gateways, where a long-term contract is in place, especially as we enter the busy peak shipping season.”

Washington, D.C.–Yesterday, the U.S. Court of Appeals for the Fifth Circuit ruled in the National Association of Manufacturers’ favor in NAM v. SEC, overturning the Securities and Exchange Commission’s rescission of critical provisions of its 2020 proxy advisory firm rule. NAM Chief Legal Officer Linda Kelly released the following statement on the ruling:

“This decision confirms that federal agencies are bound by the rule of law, even as administrations change. Manufacturers depend on the SEC to be a steady regulatory hand at the wheel of America’s world-leading capital markets—an obligation the agency abandoned in rescinding the commonsense, compromise 2020 proxy advisory firm rule.

“The NAM Legal Center is proud to have secured this critical victory, which strikes down the SEC’s unlawful about-face and preserves important provisions from the 2020 rule designed to protect manufacturers and Main Street investors from proxy firms’ outsized influence. We will continue to fight in court to uphold the 2020 rule—and to work with the SEC and with Congress to ensure appropriate oversight of these powerful actors.”

Background:

• The NAM has long called for increased oversight of proxy advisory firms. In July 2020, the SEC issued final regulations to enhance transparency and accountability for proxy firms, a move NAM President Jay Timmons called a “long-sought, major win for the industry and millions of manufacturing workers.” In October 2020, the NAM filed a motion to intervene in ISS v. SEC (ISS’s attempt to overturn the rule) in support of these reforms—a case that is still ongoing in the U.S. Court of Appeals for the D.C. Circuit.
• In June 2021, the SEC announced that it was suspending enforcement of the 2020 rule; the NAM filed suit against the SEC in October 2021 challenging this unlawful suspension. The U.S. District Court for the Western District of Texas ruled in the NAM’s favor in that case, vacating the SEC’s suspension of the rule.
• In July 2022, the SEC rescinded critical portions of the 2020 rule, a move that Timmons said “epitomizes ‘arbitrary and capricious’ rulemaking”; the NAM later filed suit to challenge the rescission. The Fifth Circuit decision overturns the SEC’s 2022 rescission of important provisions that increased transparency into proxy firms’ recommendations.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.89 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Washington, D.C. – The National Association of Manufacturers released its Manufacturers’ Outlook Survey for the second quarter of 2024, which highlights the immediate need for Congress to take action to prevent tax increases that will limit the industry’s ability to create jobs, support their communities and compete in the global economy.

“When Congress passed tax reform, manufacturers in the U.S. invested in their workers and businesses at a level that had never before been seen. In 2018, we experienced the best year for job creation in 21 years and the best year for wage growth in 15,” said NAM President and CEO Jay Timmons. “Tax reform was rocket fuel for our industry, but our latest Manufacturers’ Outlook Survey illustrates our industry’s deep concerns about the reversal of these pro-growth incentives. If Congress does not take action, job creation, wage growth and investments in communities—in short, America’s manufacturing edge—will be at risk, as well as our country’s ability to attract meaningful investments into our economy. The House, the Senate and the White House need to come together to reinstate the critical provisions that have already expired or begun phasing out, and to stand strong to protect those set to expire at the end of 2025.”

Background:

• The NAM released “What’s At Stake: Manufacturers Face Damaging Tax Increases in 2025,” a policy explainer which illustrates the consequences of allowing the pro-growth policies and rates from the Tax Cuts and Jobs Act to expire.
• The “Manufacturing Wins” issue page on NAM.org provides a hub for 2025 tax content, as well as opportunities for manufacturers to share their stories directly with Congress and the administration.

Key Survey Findings:

• If Congress does not act to prevent tax increases, survey respondents say that increased taxes will limit capital investment opportunities (73.0%), decrease job creation (65.4%), increase difficulty competing globally (52.6%) and reduce R&D spending (51.7%).
• Nearly 94% of respondents agree that Congress should act before the end of 2025 to prevent scheduled tax increases on manufacturers.
• In Q2, 71.9% of respondents felt either somewhat or very positive about their company’s outlook, the seventh straight reading below the moving average (74.8%).
• More than 67% of manufacturers cited the inability to attract and retain employees as their top primary challenge, followed by rising health care costs (66.7%), an unfavorable business climate (59.6%) and a weaker domestic economy (56.8%).

The NAM releases these results to the public each quarter. Further information on the survey is available here.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.89 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Marvin, a window and door manufacturer based in Warroad, Minnesota, is looking thousands of miles south to fill job openings (The Wall Street Journal, subscription).

What’s going on: Marvin employs about 700 people at its Warroad location. With older-generation workers retiring at the rate of about one employee a week and a town population that hasn’t grown in decades, the company “came up with a recruitment plan called ‘The Path North,’ which aims to find workers in Puerto Rico and Florida willing to uproot their families and settle in a cold northern town”—but it’s proving a difficult sell, even with generous relocation bonuses and temporary housing.

• Unemployment in Puerto Rico and Florida is low, so Marvin is fishing for talent in relatively sparsely populated ponds.
• Of the 115 workers who came from Puerto Rico in the past eight or nine months, just 63 remain at the company.
• Marvin has 10 other locations throughout North America.

Why it’s important: Marvin’s challenge is emblematic of “manufacturing in America today. The U.S. population is barely growing, baby boomers are exiting the workforce,” many young people are unaware of the many advantages of working in manufacturing and “[t]here is little political will for lasting immigration reform that could fill workforce gaps.”

• If current trends continue, the U.S. will have 2.1 million open manufacturing positions by 2030, according to a joint study by Deloitte and the Manufacturing Institute, the NAM’s 501(c)3 workforce development and education affiliate.

Well worth it: Still, for those who come to Marvin, the rewards are significant.

• The company helps employees find permanent housing and is even an investor in a local apartment complex.
• There is job security, too. When orders slowed at one of its factories a few years ago, the company offered cash bonuses to employees willing to relocate to Warroad.
• Marvin has also helped Warroad schools hire Spanish-language translators to assist the children of new hires.

The final say: “Tapping into new talent pools is especially critical in rural areas, whether it’s done via relocation support, engaging second chance populations or participating in initiatives such as the Manufacturing Institute’s Heroes MAKE America program, which is building connections between the military community and the manufacturing industry by bringing in new workers,” said MI President and Executive Director Carolyn Lee. “We need to engage all talent pools to fill the 500,000 jobs in manufacturing today.”

Rep. Tim Walberg (R-MI) recently visited Madsen Steel Wire Products in Bronson, Michigan, to discuss critical tax priorities with company leadership and members of the National Association of Manufacturers.

The visit, led by Madsen Steel Wire Products General Manager Steve Cochran, focused on the importance of maintaining a competitive tax code to support growth and innovation in the manufacturing sector in the face of scheduled expirations of key pro-manufacturing tax policies in 2025. The visit also underscored the essential role manufacturing plays in economic growth and stability.

The topline: During the tour, Rep. Walberg witnessed firsthand the impact of pro-growth tax policies on manufacturers.

• “Visiting Madsen Steel Wire Products reinforced the need for tax policy that supports manufacturing growth and job creation,” Walberg said. “We in Congress must act before the end of 2025 to preserve 2017 tax reform and avoid the devastating impacts to small manufacturers that will come to pass if these pro-growth policies are not preserved.”

A close-up view: Cochran shared the company’s experience with 2017 tax reform, highlighting how tax reform enabled significant investments in new equipment and workforce expansion.

• “Tax reform in 2017 was a game-changer for us; it allowed us to invest in our people and technology, driving our competitive edge,” said Cochran. “But the looming expiration of key tax reform provisions creates significant uncertainty for our future planning.”
• “In particular, we face a potential double-whammy as our tax rates are scheduled to increase next year at the same time the pass-through deduction expires—resulting in significant and damaging tax increases for us and other small manufacturers.”

An economic impact: The economic impact of manufacturing on local communities was a central theme of the discussion.

• “Manufacturers like Madsen Steel Wire Products are vital to communities like Bronson,” said Branch County Economic Growth Alliance Director Audrey Tappenden. “Their strength is critical to our local economy and broader industries.”

The big picture: Walberg and Cochran also discussed the broader economic impact of tax reform. The NAM’s recent survey found that 94% of manufacturers believe Congress should act before the end of 2025 to prevent tax increases. The survey also indicated that if tax increases take effect, 73% of manufacturers would limit capital investments and 65% would reduce job creation.

• “Manufacturing is the backbone of our local economy,” said Cochran. “Our ability to invest in new technologies and expand our workforce is dependent on preserving tax reform, which will directly translate to more jobs and better wages for our community.”

The bottom line: “The stakes are high,” said Walberg. “We need to ensure that the tax code continues to support the hardworking men and women in manufacturing. It’s about maintaining a level playing field and ensuring that manufacturers like Madsen Steel Wire Products can thrive—supporting small business growth and the economic health and prosperity of our communities.”

The takeaway: “The NAM launched ‘Manufacturing Wins ’ to preserve tax reform, and Rep. Walberg’s visit to Madsen Steel underscores the critical role of tax policy in driving the success of manufacturers in America,” said NAM Vice President of Domestic Policy Charles Crain. “Congress must act before the end of 2025 to prevent devastating tax increases—bolstering manufacturing across the country and supporting the economic stability and growth of local communities like Bronson, Michigan.”

Washington, D.C. – The National Association of Manufacturers has launched an industry-wide effort to educate Congress and the administration on the need for urgent action to preserve the pro-growth 2017 tax reform provisions set to expire at the end of 2025.

NAM President and CEO Jay Timmons, Ketchie President and Owner and NAM Small and Medium Manufacturers Group Chair Courtney Silver and Husco President and CEO and NAM Executive Committee member Austin Ramirez released the following statements:

“The transformative impact of 2017 tax reform cannot be overstated. Tax reform was rocket fuel, igniting a resurgence in the manufacturing sector. It put into place competitive policies that fueled record job creation, wage growth, capital investment and innovation,” said Timmons. “However, if Congress does not act, next year’s expiration of these powerful force multipliers will undo much of the progress made by our industry and America. Manufacturers are putting a stake in the ground and warning policymakers to stand up against any tax increases on the people who make things in America.”

“If Congress does not act before the end of 2025, manufacturers will be competing with one hand tied behind our back. Manufacturers across the country promised to take tax reform’s pro-growth provisions and ensure they had a direct positive impact on American lives,” said Silver. “We kept our promises. We created jobs, we purchased equipment and we gave back to our communities. I urge Congress to build on the promise of tax reform to enable manufacturers to do even more.”

“The stakes are high—the economic damage will be severe if Congress decides that it’s time to end tax reform,” said Ramirez. “Allowing tax reform to sunset means tax hikes on manufacturers and manufacturing families, which will slow our sector’s growth and prevent us from investing in job-creating projects that support communities across the country and boost our economy.”

Background:

Critical tax reform provisions are set to expire at the end of 2025, resulting in significant tax increases for virtually all manufacturers.

• A recent NAM survey found that 94% of manufacturers believe Congress should act before the end of 2025 to prevent these tax increases.
  • If Congress fails to act, 73% of manufacturers would be forced to limit capital investments, 65% would have to reduce job creation and 52% would spend less on R&D, among other damaging impacts.
  • Additionally, 93% of pass-through manufacturers said that the loss of the pass-through deduction, which ensures a level-playing field for small businesses that pay tax at individual tax rates, would harm their ability to grow, create jobs and invest in their business.
• Released by the NAM today, What’s at Stake: Manufacturers Face Devastating Tax Increases in 2025, explores the pro-growth policies from the Tax Cuts and Jobs Act and explains why allowing them to expire would damage the manufacturing economy.
• The “Manufacturing Wins” issue page on NAM.org provides a hub for 2025 tax content as well as opportunities for manufacturers to share their stories directly with Congress and the administration.
• The NAM submitted a letter today to House Ways and Means Committee Chairman Jason Smith (R-MO) and Ranking Member Richard Neal (D-MA) and Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) outlining manufacturers’ tax priorities for 2025.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.89 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.