With big changes in Congress as a result of the 2006 elections,
and possibly bigger changes coming in 2008,
ICCFA Government and Legal Affairs Committee Chairman Irwin Shipper
gives us his annual legal and legislative update.
Political power shift brings opportunities, challenges
Irwin W. Shipper, CCE, has been involved in the cemetery business for more than 50 years. He is President of Rose Hills Memorial Park in Putnam Valley, New York, and formerly was president of Beth Israel Cemetery Association and Woodbridge Memorial Gardens, Woodbridge, New Jersey; with The Loewen Group (now Alderwoods) for several years, before returning to private cemetery ownership. He chaired the New Jersey State Cemetery Board 1972-1994 and earned a law degree from Brooklyn Law School. He is an ICCFA past president; has been chair of the ICCFA Government and Legal Affairs Committee since 1992; and is a member of the ICCFA Hall of Fame.
Irwin, it’s a pleasure to welcome you to our 15th annual interview. Let’s cut to the chase: What is the greatest development in federal legislative and regulatory activities that affects our industry today?
I’d say the power shift in Congress has already changed our priorities in the six months since it happened. A year ago, Congress was firmly under the control of the Republican Party and most political observers thought the Democrats would pick up a few seats in the House in the November elections, with the Republicans maintaining control. But with the Democrats taking over both houses, the chairmanships of all committees changed party control, which meant those committees’ priorities changed, too.
We’ve seen how the debates on immigration, the war in Iraq and global warming have changed, but are cemeteries and funeral homes being directly affected by the power shift?
Yes, and the best example I can give is the “Employee Free Choice Act,” a bill designed to help labor unions increase their membership. This might not seem objectionable on its face, but to achieve this goal, the bill would abolish basic constitutional safeguards for employees such as secret ballot voting on whether or not to accept a particular union.
The bill also would require binding arbitration if the union and management do not reach a collective bargaining agreement within 30 days. So the resulting contract could be something mandated by the arbitrator over the objections of both the union and management.
To show how times have changed on Capitol Hill, this bill was introduced while the Republicans were in charge, but never made it out of committee. When the House version (H.R. 800) was introduced earlier this year, it already had 233 co-sponsors (almost all Democrats), and it was passed on March 1 by a comfortable margin of 241-185. The Senate companion bill (S. 1041) was introduced in late March by Sen. Edward Kennedy (D-MA) with a total of 46 co-sponsors, just a few votes shy of the necessary margin to pass. So this is not some obscure bill but an important piece of legislation many observers believe will become law if not actively opposed.
Is the ICCFA actively opposing the Employee Free Choice Act?
We have joined forces with the Coalition for a Democratic Workplace, a group sponsored by the U.S. Chamber of Commerce, to stop this bill from becoming law. The ICCFA is not opposed to unions, but we believe this bill is a bad bargain for employers and employees alike. It also would impose new and higher fines on employers and an irony is that it would preserve the secret ballot if employees want to vote to decertify a union.
It is difficult not to become cynical in discussing this bill because there is a great deal of hypocrisy being exhibited by its proponents. For example, we are told that this bill is all about helping workers, when the true beneficiaries would be the unions, at the expense of employees.
Perhaps the most noteworthy reaction to this bill came from The Washington Post and Los Angeles Times. These newspapers surprised a lot of people by coming out against the bill for encroaching on employees’ rights. Also, President Bush has said he will veto this bill should it reach his desk.
If the president says he will veto the bill, doesn’t that end the controversy?
No, because the unions are apparently depending
on the bill for their growth and survival. As a result, unions are heavily invested in this legislation and will look to the November 2008 national elections to increase their support in Congress and the White House. So I feel confident in saying that this bill is not going to disappear. In fact, just the opposite will occur—efforts to pass it will intensify in the future.
Many ICCFA members are small businesses with only a handful of employees. Given their size, can’t they ignore the Employee Free Choice Act even if it does become law?
That was our original take on this bill. It was easy to realize that the bill was harmful to large businesses, but we assumed it would not affect most industry members due to their small size. Then we did some research and discovered that today unions are willing to organize businesses with as few as three employees. This is symptomatic of the low level of union membership today among American workers.
At its peak in 1955, about 35 percent of the workforce belonged to unions. Today, membership is at 8 percent of the private sector, 12 percent if we include civil service employees. In fact, the civil service is the only sector growing in terms of union membership; private sector membership is shrinking. Therefore, unions are looking at smaller businesses. So virtually all our members should be concerned with the Employee Free Choice Act.
Given the importance of this legislation, we have noticed that some of the funeral industry trade press and trade associations have not reported on the Employee Free Choice Act. Would you comment on this?
Let me put it this way: Everyone concerned with the future of this legislation should immediately contact their trade associations and the independent funeral news media outlets to express their concerns. I am puzzled by the silence of some organizations that normally follow legal and legislative issues but seem to be ignoring this one.
As I have said before, as industries go, we are not a very large one. So with an issue as crucial as this one, we need all the support we can get.
What about other legislation pending in Congress?
There are a number of pending bills I would characterize as “benign.” Some bills, such as S. 1326 and S.1334, would improve veterans’ burial benefits. H.R. 1264 would remove the dollar limits on funeral trusts established as “qualified funeral trusts” under Internal Revenue Code 645.
Senate bill 989 would codify into federal law the policy of the Social Security Administration that exempts certain funds paid for irrevocable funeral and burial
preneed contracts from being considered as resources to qualify in the supplemental security income program. Most of these bills have been introduced in previous Congresses.
One bill the ICCFA actively supports—because we urged its introduction—is H.R. 1273, which would restore the veterans’ plot allowance and marker reimbursement allowance for veterans and their families who choose burial in private and religious cemeteries.
These two benefits were eliminated by Congress in 1990 and, we believe, forced some veterans into national cemeteries who otherwise would have preferred interment in non-government cemeteries for personal, religious or ethnic reasons. We are grateful to Rep. Shelley Berkley (D-NV), who introduced this bill in the House on March 1. Currently we are seeking additional sponsors in the House and Senate.
Is there any downside to H.R.1273 in restoring the plot and marker allowances?
As far as we can determine, this legislation is win-win for everybody, including the
taxpayer. Both these benefits were popular with veterans prior to their termination
in 1990. We estimate that as many as 70 percent of eligible veterans were disqualified when Congress changed the law.
If these benefits were available today, the number of interments in national cemeteries would be reduced, producing major savings on future maintenance costs in those cemeteries. The offsetting costs of providing the plot allowance (currently $300) and marker allowance (based on the wholesale cost to the government) would be comparatively minor in comparison to the expense to the government of maintaining these gravesites in perpetuity.
However, we have no illusions, and we understand it will take a number of years of work if this bill is ever to become law. The mood on Capitol Hill is excellent as far as providing enhanced benefits for veterans, but there are also a number of benefit bills competing for votes. We view this project as a long-term commitment.
Before we leave the area of federal legislation, whatever happened to the Dodd bill?
They say that no idea on Capitol Hill is ever forgotten, just saved for future use. The so-called Dodd bill is a case in point. As most people will recall, Sen. Christopher Dodd (D-CT) introduced a bill twice into past Congresses that would subject funeral homes, cemeteries, crematories and related businesses to regulation by the federal
government.
At 33 pages, the Dodd bill was complicated and, frankly, more of an exercise in bureaucracy than a means for protecting consumers against dishonest sellers.
A companion bill was introduced into the House by Rep. Mark Foley (R-FL), who resigned from Congress last fall in a highly publicized scandal.
Neither bill ever came to a vote, and Sen. Dodd seems to have moved on to other issues. Right now he is running for president, so the optimistic thinking is that we have heard the last of this legislation.
Are there any circumstances that would cause the Dodd bill to be reintroduced today or in the future?
Definitely. We have to remember that the Dodd bill was originally a response to two events that made national headlines in 2002, one involving cemeteries and the other, a crematory. Without any new funeral industry problems attracting national attention, the Dodd bill would seem to be an anachronism.
I think the states have done a good job of handling cases of misconduct and wrongdoing in recent years. A case in point is the ongoing investigations in Michigan, Tennessee and Arkansas involving an individual named Clayton Smart. He was an oil and gas speculator who bought up a number of funeral homes and cemeteries in those states.
Today he is accused of not honoring burial insurance contracts, and raiding preneed and maintenance trust funds, then investing them in his own business ventures. Thousands of preneed purchasers are affected and tens of millions of dollars are involved.
As bad as this story is, the state law enforcement agencies are on the job and Mr. Smart is incarcerated. It is difficult to claim the federal government could have done a better job or that the Dodd bill would have prevented the problem from happening.
But I am trying to be practical here, and politicians do not always approach
an issue in a practical manner. To answer your question, almost any type of problem in any state could serve to justify the introduction of the Dodd bill again. Our best defense is to communicate with our elected representatives on an ongoing basis, help them understand our business and address any concerns they may have.
Speaking of communicating with our members of Congress, has there been any follow up to the ICCFA’s Capitol Hill meetings last year?
We continue to meet with key members of Congress, mainly back in their home districts, but we are planning another session of Capitol Hill visits later this year. It is interesting to see what a difference a year can make in national politics. Many of the Democrats we visited last year are now powerful members of important committees, some are even chairs of those committees. The Republicans we visited were running things then but today are out of power.
This is why I believe it is important for the ICCFA to keep open channels with members of both parties and to appeal on issues of importance to us in a bipartisan way. H.R. 1273, the plot and marker allowance bill, is a good example of this policy.
What’s new at federal agencies such as the Federal Trade Commission and Internal Revenue Service?
The agencies tend to be more responsive to initiatives from the White House rather than Congress, so perhaps it is not surprising they are relatively quiet in terms of issues that interest us. We are still waiting for the FTC staff to make recommendations regarding changes in the Funeral Rule and official word is they are six months away from doing that. Of course, this has been the timetable for over seven years now.
I interpret the delay as meaning that the FTC has greater priorities, such as identity theft, Internet fraud and other high-tech scams that did not exist when the Funeral Rule was new. Also, each year the FTC publishes its list of “Top 10 Consumer Fraud Complaints.” I’m pleased to say that funeral-related activities have never made the list or even received “dishonorable” mention.
However, Internet technology also allows the FTC to keep close tabs on consumer complaints, and today it is easy and convenient for consumers to file complaints with FTC by e-mail. As a result, the ICCFA has filed Freedom of Information Act (FOIA) requests with FTC for the last several years to obtain copies of funeral-related consumer complaints that the agency receives. We are currently reviewing the complaints the FTC received for 2005 and 2006.
How do the volume of these complaints compare to previous years?
We had a total of 571 complaints for 2003 and 2004. A number of them were against third parties or were business-to-business complaints that did not involve consumers directly. Some were not complaints but requests for information.
We are still reviewing the 2005-2006 complaints, but there seem to be more than in earlier years. We have already seen a few consumer complaints involving the Clayton Smart properties, so the uptick in the volume of complaints could be due to that factor alone—we’re not sure yet, because we haven’t finished our review.
What types of complaints are you seeing?
It’s too early to identify trends. So far, what we are seeing is typical of past years. The most common complaint involves funeral homes not giving out a general price list or refusing to accept a casket purchased from a third party.
Whether these problems are anecdotal or part of a trend remains to be determined.
What will you do with the results of your review?
We will publish the summary for our members and send a report to the FTC. Our review helps document and quantify actual problems and focus attention on areas of concern. In the past, industry critics would often highlight a handful of complaints that may have been indefensible but also were anecdotal and several years old. When it comes to consumer protection, regulation by anecdote can be dangerous and wasteful.
Our conclusions, reached by objectively reviewing all complaints sent to the FTC, are much more valid. We share our work product with FTC staff members so they can confirm our findings if they wish.
Looking beyond the Funeral Rule, do you see any other funeral service initiatives from the FTC?
There’s no question the FTC is very interested in anti-competitive practices by state funeral boards. In April, the Missouri Funeral Board accepted an FTC Consent Agreement whereby the board agreed it would no longer restrict third parties from selling caskets at-need to the public.
In 2005, the FTC published an advisory letter stating the Funeral Rule’s “cash advance” requirements do not apply to merchandise funeral homes obtain from third parties, such as caskets and vaults, and sell to their customers. This issue was raised when a circuit court in El Paso, Texas, ruled otherwise.
They completely blur the distinction between goods obtained wholesale for resale to customers and true cash advance situations where the funeral home acts as agent for the customer in obtaining something it does not stock as a courtesy to the customer.
The commission also published a letter criticizing a Maryland law that prohibits corporations from owning funeral homes. So the FTC continues to monitor the funeral industry and takes action accordingly.
It sounds like we’re moving into another area that can affect our members—
pending litigation. You just mentioned the Texas case involving the Funeral Rule. Please update us on its status.
The El Paso litigation is officially called Hijar v. SCI Texas Funeral Services Inc. At the county circuit court level, the plaintiffs brought a class action against the defendants claiming breach of contract, illegal contracts and various other allegations. Of particular interest to industry members was the plaintiffs’ claim that the FTC Funeral Rule’s provision on cash advance disclosures included caskets, vaults and other merchandise sold by the funeral home. Further, the markup on those items also had to be disclosed, according to the plaintiffs.
The ICCFA and other organizations filed “friend of the court” briefs documenting that plaintiffs’ interpretation of the Funeral Rule requirements was wrong. Surprisingly, the judge refused to accept our briefs and ruled in favor of plaintiffs’ interpretation.
The FTC then published an advisory letter stating that the court was incorrect
in its interpretation of the rule’s cash advance provisions. The Hijar case was then appealed to the state appellate court.
In the meantime, the Funeral Consumer Alliance, a well known consumer advocacy group in Vermont, sued the FTC in District of Columbia federal court to require the commission to withdraw its advisory letter.
Earlier this year, the Texas appeals court ruled against the Hijar plaintiffs by stating that the Funeral Rule contains no private right of action for individuals to sue for alleged violations. In other words, only the government, specifically the FTC, can bring a lawsuit. Recently, the D.C. federal court ruled in favor of the FTC publishing its advisory letter. I don’t think we’ve heard the last of either case, but so far the news has been good.
We reported recently that the ICCFA filed a “friend of the court” brief in a Maryland federal court. Can you update us on that litigation?
That case is known as Brown v. Hovatter and was filed in the U.S. District Court in Maryland. The Institute for Justice, which is representing the plaintiffs, has a history of challenging state funeral laws that are anticompetitive in nature. (See story, page 20.)
Many members will remember the litigation in Tennessee and Mississippi where the institute challenged laws that restricted casket sales exclusively to licensed funeral directors. In both states, the federal courts struck down the laws as unconstitutional. However, a federal court in Oklahoma upheld that state’s similar law.
The issue in the Brown case is a little different. Maryland has a law dating from 1945 that prohibits corporations from owning funeral homes. The statute makes an exception for 58 corporate licenses for funeral homes that existed prior to 1945. The irony is that this law allows the widow of a funeral director or the executor of a funeral director’s estate to own the funeral home even if that individual is not a licensed funeral director.
Since U.S. Census statistics show that most funeral homes are owned by corporate entities, and there are many advantages to incorporating, we believe the Maryland law is an unconstitutional restriction on interstate commerce and is anticompetitive. Both sides have submitted briefs and the court is expected to rule in the near future.
Last year we discussed an issue that is not, strictly speaking, “government relations,” but does involve substantial government regulations: preparations for mass fatality management. What are the latest developments in that area?
Mass fatality management is one area where the various trade associations are united and working toward a common goal. The U.S. Department of Homeland Security and the Department of Health and Human Services have helped organized a joint government-private sector partnership under the heading of the Healthcare Sector Council for disaster management. The council includes the so-called “deathcare industry” in its own subcouncil, Mass Fatality Management Services. The subcouncil is co-chaired by the NFDA and ICCFA, with our general counsel, Bob Fells, representing our association. Other national associations also are represented as members of the sub-council. Our goal is to provide data and recommendations to be published in the National Response Plan for effectively responding to major emergencies and catastrophes.
Are the types of potential catastrophes defined at all?
So far most of the assumptions deal with a pandemic outbreak of the avian flu. Yet as a practical matter, the same plans would serve for terrorist attacks and natural disasters such as hurricanes.
Until recently, most of the planning has viewed any emergency in terms of a healthcare crisis, not as a deathcare crisis. This is now changing due to the efforts of our subcouncil. In fact, I understand the president is receiving a report on the mass fatality implications of a pandemic or related crisis. But a lot of work still needs to be done.
Each year we conclude our interview by asking you to look into a crystal ball to predict the year ahead. What do you see this time?
I think I’ve already covered some concerns. Clearly, the political power shift in Washington will eventually affect our industry, but the process has just started.
I don’t think it’s too partisan to say that historically Democratic majorities tend to be more consumer activist than Republican administrations.
The FTC Funeral Rule was developed during the Carter Administration in the mid-to-late ’70s. The Senate Special Committee on Aging held the first (and so far only) hearings on funeral industry sales practices during the Clinton Administration. The Government Accountability Office first investigated the funeral industry during that time as well.
By contrast, though Republican administrations have not rolled back any initiatives introduced during Democratic administrations, they have maintained the status quo.
If history is any guide, I think we can regard the present as the lull before the storm. Fortunately, the ICCFA has been using this time wisely, developing its PAC and building its Government and Legal Fund, and many of our members have
made a point of meeting their Congressional representatives. But we need a lot more
participation from other members who are still on the sidelines right now. It’s said there’s an ancient Chinese curse, “May
you live in interesting times.” Let’s just say I think we are living in interesting times.
The 2008 election and the ICCFA PAC.
Copyright ICCFA 2007
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