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Business Talk Podcast Special Coverage

We are excited to announce that BusinessWest has launched a new podcast series, BusinessTalk. Each episode will feature in-depth interviews and discussions with local industry leaders, providing thoughtful perspectives on the Western Massachuetts economy and the many business ventures that keep it running during these challenging times.

Go HERE to view all episodes

Episode 144: January 9, 2023

George talks to  Rick Sullivan, president and CEO of the Western Mass Economic Development Council

Rick Sullivan

As 2023 begins, there are many question marks —as well as an abundance of cautious optimism — concerning the region and it’s economy. On the next installment of BusinessTalk, BusinessWest Editor George O’Brien and his guest, Rick Sullivan, president and CEO of the Western Mass Economic Development Council, sort through it all, touching on everything from workforce issues to the prospects for needed growth and new jobs. It’s all must listening, so tune in to BusinessTalk, a podcast presented by BusinessWest in partnership with Living Local 413 and sponsored by PeoplesBank.

 

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Law

Five Important Things to Know Going into 2023

By Amelia J. Holstrom, Esq. and John S. Gannon, Esq.

 

Massachusetts employers are used to the ever-changing employment-law landscape. As we close out another year and ring in a new one, it is clear that 2023 will bring new challenges and new requirements for employers throughout the Commonwealth.

AMelia Holstrom

Amelia Holstrom

John Gannon

John Gannon

We’ve rounded up the top five things employers need to know and keep an eye on as we turn the page to 2023.

 

Decision on Micro-units May Be Troubling for Employers

When a union attempts to organize a group of employees at a business, it files a representation petition with the National Labor Relations Board (NLRB), identifying the proposed bargaining unit, which is the group of employees the union seeks to represent and who will be eligible to vote on whether it gets to do so. Sometimes, employers will seek to add additional employees to the union’s proposed bargaining unit, as larger proposed bargaining units may be favorable for employers in representation elections.

In a recent decision, American Steel Construction, the NLRB, which interprets and enforces the National Labor Relations Act (NLRA), gave a powerful tool to unions by clearing the way for small bargaining units, often called ‘micro-units.’ Specifically, the board decided that it will approve a smaller subdivision of employees as a bargaining unit if they meet certain criteria.

Under this standard, unions are likely to be very successful in getting the NLRB to approve micro-units. As a result, employers are placed at risk of having to bargain with several small units of employees in one workplace.

 

NLRB to Surveil Employers’ Surveillance Measures

Businesses regularly monitor employees in the workplace. For example, employers may monitor telephone calls for quality-assurance purposes, install cameras in the workplace or dashcam systems in vehicles, or monitor communications sent and received on employer-owned devices. Such monitoring appears be under attack by the NLRB.

In early November 2022, the general counsel of the NLRB issued a memorandum regarding employee surveillance, in which she urges the NLRB to adopt a “new framework” for determining whether employer surveillance violates the law. Under this framework, violations may occur when the surveillance would tend to interfere with an employee’s rights under the NLRA or “prevent a reasonable employee from engaging” in activity protected by the NLRA.

“In a recent decision, American Steel Construction, the NLRB, which interprets and enforces the National Labor Relations Act (NLRA), gave a powerful tool to unions by clearing the way for small bargaining units, often called ‘micro-units.’.”

This could involve employee surveillance of suspected organizing activity. The employer will then get the opportunity to explain their legitimate, business-based reasons for the surveillance. At that point, the new proposed framework would require the NLRB to weigh the employer’s business needs for the surveillance against the rights afforded to employees under the NLRA. If the NLRB determines that the employer’s reasons outweigh the rights of employees, the NLRB will require the employer to disclose all electronic monitoring, the reasons for doing so, and how the employer uses the information it obtains. This crackdown on employee surveillance impacts unionized and non-unionized workplaces alike.

 

Update That Handbook for New Protected Characteristics

Massachusetts law prohibits employers from discriminating against employees based on a number of protected characteristics, including but not limited to race, color, sexual orientation, and gender identity. Effective Oct. 24, 2022, Massachusetts added natural and protective hairstyles to the list of protected characteristics under the law.

Accordingly, employers need to update their handbooks and other policies to reflect the additions. Your handbook should also include language on many other employment laws, including the state Paid Family and Medical Leave Act.

 

Changes to Paid Family and Medical Leave

Speaking of the Massachusetts Paid Family and Medical Leave Act, last month the Department of Family and Medical Leave released updated model notices reflecting new contribution rates effective January 1, 2023. If you have not already done so, those new notices need to be distributed to your entire workforce as soon as possible. Employers should also ensure that their payroll providers are planning to implement this change.

The department also updated the mandatory PFML workplace poster, which should be posted in a location where it can be easily read by your workforce. The poster must be available in English and each language which is the primary language of five or more individuals in your workforce, if these translations are available from the department.

The department is also considering changes to the PFML regulations intended to clarify employer obligations to maintain employment-related health-insurance benefits while employees are out on leave. Stay tuned in 2023 for developments on these proposed regulations.

 

Speak Out Act Requires Changes to Employment Agreements

On Dec. 7, 2022, President Biden signed the Speak Out Act into law (see story on page 27). The new law prohibits employers from including non-disclosure and non-disparagement provisions applicable to sexual-assault and sexual-harassment allegations and claims in agreements executed before the allegation or claim arises. It does not impact agreements with those provisions entered into after such a claim arises.

Although it may seem insignificant because it only applies to pre-dispute agreements, employers need to carefully review their confidentiality, employment, and other agreements executed by employees and ensure that the non-disclosure and non-disparagement paragraphs in those agreements do not prohibit the employee from disclosing or discussing sexual-assault or sexual-harassment allegations or claims. Employers would be prudent to include language carving out those claims.

Businesses are encouraged to continue to consult with counsel regarding these changes in labor and employment laws. The team at Skoler Abbott also wishes readers a happy and prosperous new year.

 

Amelia Holstrom and John Gannon are attorneys at Skoler, Abbott & Presser, P.C. in Springfield; (413) 737-4753; [email protected]; [email protected]

Opinion

Editorial

 

As we turn the page on 2022 and look ahead to a year filled with question marks, those of us at BusinessWest offer up some thoughts on what we’d like to see in the year ahead.

Some wishes would fall in the category of ‘obvious’ — a slowing of inflation, fewer and less dramatic interest-rate hikes (how about none at all?), improvement on the workforce front, and some real movement on job growth — while others might be less obvious. Here’s a short list:

 

Less Whitewater

The past three years have been a long, grueling grind for area businesses, large and small. They have had to cope with COVID, a workforce crisis, supply-chain issues, dramatic price increases, recession fears, waning consumer confidence, a microchip shortage, incessant employment-law challenges, cybersecurity issues, the various challenges of remote work, early retirement among Baby Boomers … the list doesn’t seem to end, and we certainly forgot a few.

The region’s business community could use a break, a breather, some real ‘party like its 2019’ normalcy, not the new normal. Let’s hope some is coming in 2023.

 

A More Impactful MGM Springfield

Let’s start by saying the casino complex on Main Street has had to deal with everything on the list above, just like everyone else. So it has certainly not had an easy ride since the parade that marked its grand opening in late August 2018. That said, few if any would say that MGM Springfield has had anything close to the kind of economic impact we were all hoping for, if not expecting, when it was blueprinted and then built.

Yes, it has had a stake in several meaningful initiatives, like the project to revitalize the old Court Square Hotel. But, overall, gaming revenues are not what were projected, and the same can be said for vibrancy in the casino area, the list of things to do at the complex, meetings and conventions, and impact. We’ve said it before, and it bears repeating … there are many days when, if you didn’t know there was a casino on Main Street, you wouldn’t know there was a casino on Main Street. This needs to change, and hopefully we’ll see some progress in 2023. Maybe sports betting will help.

 

Continued Growth of the Entrepreneurship Ecosystem

This has been one of the better economic-development stories of the past several years, and the region needs to continue and build upon its efforts to encourage entrepreneurship. As the immense competition for manufacturers and other kinds of businesses, and the jobs they create, only increases, perhaps the most realistic opportunities for growth in this region are of the organic kind. Progress in this fashion comes slowly and, in most cases, undramatically. But we have to continue to plant seeds.

 

Relief on the Workforce Front

We’re not sure if or how it can happen, but the area’s employers need some relief from the crushing workforce crisis. As the stories that begin on page 13 clearly show, workforce is the issue that is keeping business owners and managers up at night. Worse, it’s keeping many businesses from reaching their full potential and realize some of the opportunities that are coming their way.

The region and the state cannot simply wave a wand and bring thousands of people into the workforce. But what they can do is continue and accelerate the work to make this state more attractive, not just for businesses, but for the people who will work at them, by creating more affordable housing and taking other steps to bring people here instead of compelling them to look or move elsewhere to find a job, start a career, or write the next chapter.

Construction

Waiting for a Correction

supply challenges would help builders and buyers move forward on projects with confidence

Dave Fontaine Jr. says a ‘correction’ on cost and supply challenges would help builders and buyers move forward on projects with confidence.
Photo by Joe Santa Maria, Kill the Ball Media

Dave Fontaine Jr. hears talk of a recession that could affect the construction industry, but he prefers to use a different word: correction. After a couple years of soaring costs, he feels one is necessary, and coming.

“I think in the last two years, costs have risen over 20% each year. When you go back over the last 30 years, the average increase per year is 2% to 4%,” said Fontaine, CEO of Fontaine Brothers Inc. in Springfield. “It’s been very difficult for projects to absorb, and for clients to absorb. We’ve seen several projects — some we’ve been involved in, some we’ve watched from the outside — that have either stalled or been canceled because of cost challenges.

“We’re hopefully undergoing a correction. And I like to use that word, the idea being that we need to get back to a correct place. Sometimes [rising costs] are a necessary evil: things get overheated; COVID brought challenges with supply chains, labor, and transport that affected materials and pricing. But I think, frankly, construction costs are in need of a correction. When that happens organically, when we’re able to broaden the supply chain again, get things flowing … we’ll get back to a place where people know what the cost is to build, and move forward with confidence.”

That said, Fontaine noted, “it’s been a really good year; we’ve been busy across all the geographies we serve and all the different sectors as well.”

Bill Laplante, president of Laplante Construction Inc. in East Longmeadow, which specializes in home building and remodeling, had an equally strong report.

“The demand carried over from 2021; demand for remodeling was really high, and a lot of that was just people being home during the pandemic. They were able to work from home and wanted to make a nice office or put a bedroom suite in.”

“We had a fantastic 2022. It was probably one of our best years in the last 20 years,” he said, noting that some of that success was driven by expansion onto Cape Cod, but some was based on demand that carried over from 2021. “Some of it was pandemic-related, but we actually have a really strong outlook for 2023 with the jobs we have in the pipeline.”

He agreed, though, that supply and cost challenges have been discouraging.

“Some materials, things like plastic pipe and conduit, have increased five times the cost. It’s not as simple as a 8% or 9% increase here and there; for some materials, it’s completely off the charts. It makes it difficult to sign a contract and build a house, when you’re not going to be purchasing those materials for four months, not knowing where things are truly going to land. Obviously, once costs go up, you try to plan for the next house.

“The supply-chain issues have been brutal over the last couple years,” he went on. “It seems like it’s something different every week. You can’t get the plastic for the buckets for drywall cement. Then the next week, you can’t get runners for cabinet drawers. The next week, you can’t get a hinge. That’s been very, very difficult. Plus, a lot more planning goes into it, with the increased lead times for windows, doors, and appliances. We need to get selections a lot sooner than we would from our customers so we can get orders placed. With high-end appliances, we’re out 10 to 12 months.”

Fontaine echoed those sentiments. “Lead times are still challenging. There are some items getting better, which is good, and most items are not getting worse, which is also good. But we’re still seeing a lot of difficulty with items like electronic components, chips, boards, stuff like that. That’s affecting things like rooftop units, electrical equipment, and generators.

demand has been up for new homes

Bill Laplante says demand has been up for new homes and remodels alike, despite rising interest rates.

“For us, it’s not anything that’s stopped our projects from opening on time,” he added, “just something we’ve had to pay much more attention to, and we’ve become more creative with how we procure things and meet our schedules.”

 

Ups and Downs

Despite reports that some area contractors had a strong 2022, rising interest rates are expected to impact construction nationally in 2022. The 2023 Dodge Construction Outlook predicts U.S. construction starts will drop by 3% next year.

Meanwhile, the Architecture Billings Index, a forward-looking indicator for construction activity, dropped significantly in October after 20 months of positive growth. And the Associated Builders and Contractors backlog indicator, which tracks work construction firms have booked but haven’t yet begun, fell below its pre-pandemic reading from February 2020, largely due to a decline in the commercial and institutional category.

“The construction sector has already started to feel the impact of rising interest rates,” said Richard Branch, chief economist at Dodge. “The Federal Reserve’s ongoing battle with inflation has raised concerns that a recession is imminent in the new year. Regardless of the label, the economy is slated to significantly slow, unemployment will edge higher, and for parts of the construction sector, it will feel like a recession.”

Some sectors are expected to perform well, he added, including data-center construction, manufacturing starts — especially chip-fabrication plants and electric-vehicle battery plants — and publicly funded infrastructure projects. Meanwhile, the office, warehouse, hotel, and retail sectors are expected to lag. Branch also expects single-family starts to drop about 5% next year.

“There’s got to be more emphasis put on job training and vocational schools. The opportunities out there for tradespeople, and what a skilled tradesperson can make, are incredible.”

Laplante said remodeling, additions, renovations, and home improvements comprise 30% to 40% of his firm’s work, and the pandemic played a role there.

“Again, the demand carried over from 2021; demand for remodeling was really high, and a lot of that was just people being home during the pandemic. They were able to work from home and wanted to make a nice office or put a bedroom suite in. We saw that pretty much across the board. People weren’t traveling overseas; they were putting in poolhouses and sunrooms and outdoor kitchens, things like that.”

While he expects interest rates to slow activity in the home-building and remodeling industry, Laplante said the large size of some of his projects, which can take from six months to a year, tends to dampen any slowdown.

“Smaller remodelers are probably seeing more of an effect with interest rates slowing things down quicker than we will see it,” he said. “And then, of course, we’re working with a lot of customers who aren’t interest-rate-sensitive.”

He added that subcontractors may see a slowdown before builders because they don’t deal with the same project duration.

The Cape Cod expansion is a strategic move partly based on the fact that Laplante was already building there, and it’s also a fairly high-end market, where, as he noted, clients are more willing to weather higher interest rates. “So part of that was a hedge against the economy; you don’t see the deep swings in demand you would see in the Western Mass. market.”

the facade of the former Court Square Hotel

A worker from Fontaine Brothers works on the facade of the former Court Square Hotel.
Photo by Joe Santa Maria, Kill the Ball Media

Fontaine said his company, while also expanding its reach geographically, is taking on more housing work now that it’s starting to become a priority again. “We did a lot of it for a long time, and we’re seeing a lot more public housing, affordable housing, make its way back through the funding pipeline.”

His most notable current project in that realm is the ongoing transformation, with Winn Development, of the Court Square Hotel in Springfield into 71 units of market-rate housing, accompanied by retail on the ground floor.

Fontaine’s longtime presence in the education sector is also strong right now, with projects including the new DeBerry-Swan Elementary School in Springfield, an elementary school in Tyngsborough, a middle school in Walpole, a project at UMass Chan Medical School in Worcester, and the $240 million Doherty Memorial High School, the largest project in the city of Worcester’s history.

 

Help Wanted

After inflation and supply woes, the third challenge construction companies are dealing with remains a workforce crunch, which has affected many other sectors of the economy as well.

“The number of people going into the trades is way, way down,” Laplante said. “There’s got to be more emphasis put on job training and vocational schools. The opportunities out there for tradespeople, and what a skilled tradesperson can make, are incredible.”

To that end, he works directly with area vocational schools to cultivate talent, and often schools that aren’t vocational, per se, but have vocational programs. For example, an intern from Longmeadow High School will come on board soon, and Laplante hired another intern from that school last year.

“Through COVID, we’ve had people who have been borderline on retirement, and COVID pushed them to retire,” Fontaine said of one of the stress points in the construction workforce. “But we honestly haven’t had as significant labor challenges as some of our peers.”

That’s partly due to working with some of the large local unions, which can supply a more reliable workforce, he said. “But we’ve also put a lot of focus the last few years into workforce development, even before COVID. We actively go into the community and work with workforce programs, with community organizations, to bring people into the workforce.”

Those efforts are crucial, he added. “When I look at the next 20 to 30 years, that’s one of the biggest challenges, to be able to recruit people into the trades.”

Fontaine added that his company has been able to integrate a lot of technology into projects over the last few years, which has helped overcome challenges related to cost, lead times, and workforce. “We’re using technology to track lead times and inform other projects, so we avoid those ‘gotcha’ moments, and we’re using technology to coordinate mechanical systems and prefabricate them off-site, which helps with some of that labor and lead-time burden.”

In short, he said, “we’re trying to modernize an industry that’s by nature not modern, to the best extent possible. That’s been a big theme for us the last couple years.”

That said, the main theme across the industry in 2023 could be the impact of those rising interest rates finally coming to roost.

“Our planning process is so long, and the jobs we’re getting ready to start now are jobs that were planned four months ago, and when the financing is finally put together, we’re ready to get shovels in the ground. That’s a house that people ultimately will be moving into in the fall,” Laplante explained. “So, because of that, we see a little more of a lag in the drop in demand based on the interest rates, but it certainly is coming.”

Still, Dodge’s Branch believes any downturn in the construction industry will not be as dire as the Great Recession, which settled over the U.S. almost 15 years ago.

“The funds provided to the construction industry through the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act will counter the downturn, allowing the construction industry to tread water,” he said. “During the Great Recession, there was no place to find solace in construction activity — 2023 will be quite different.”

 

Joseph Bednar can be reached at [email protected]

Law Special Coverage

A 2022 Year-end Wrap Up and a Look Ahead to 2023

By Justin Goldberg, Esq.

Within the broad realm of employment law, this past year was marked by increased protections to employees through changes to independent-contractor classifications, raising of minimum and service wages, increasing benefits for family and medical leave, safeguarding hairstyles of protected classes, and other changes.

Looking ahead to 2023, it certainly appears to be headed down a similar path, with employee safeguards continuing to solidify. Employee security and compensation guarantees to be a highly litigated issue in the coming year.

Here is a look back — and ahead:

 

U.S. Department of Labor Publishes Independent Contractor Proposed Rule

On Oct. 11, the Biden administration, via the U.S. Department of Labor (DOL), proposed to modify Wage and Hour Division regulations so as to revise its analysis for determining employee or independent-contractor classification under the Fair Labor Standards Act.

This was done with the aim to be more consistent with judicial precedent and the act’s text and purpose. This will mark the administration’s second attempt at undoing the Trump-era standard, which it claims denies basic worker protections such as minimum wage and overtime pay.

Justin Goldberg

Justin Goldberg

“Operating costs will undoubtedly increase if they are required to reclassify their independent contractors as employees, due to the tax liabilities and minimum-wage, labor, safety, and other legal requirements that apply to employees.”

Secretary of Labor Marty Walsh was quoted as saying, “while independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” and that “misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”

Industries such as gig companies, construction, trucking, home care, janitorial services, delivery, personal services, hospitality, and restaurants that use independent contractors as staff should pay close attention to this anticipated development. Their operating costs will undoubtedly increase if they are required to reclassify their independent contractors as employees, due to the tax liabilities and minimum-wage, labor, safety, and other legal requirements that apply to employees.

The Trump-era rule outlined a multi-factor test (five total) to determine if the worker is an independent contractor or an employee; however, it gave far greater weight to two core factors: the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on personal initiative or investment.

The Biden administration’s proposal would consider those two factors, but include four others for a total of six: investments by the worker and the employer, the degree of permanence of the working relationship, the extent to which the work performed is an integral part of the employer’s business, and the degree of skill and initiative exhibited by the worker.

These six factors guide the analysis of whether the “economic realities of the working relationship” show a worker to be either dependent on the employer for work or in business for themselves based on a “totality of the circumstances.”

Under the proposed modification, no one factor or set of factors is presumed to carry more weight, and the DOL may also consider additional factors beyond those six, if they indicate the worker may be in business for themselves.

 

Increases in the Minimum Wage and Service Rate

Massachusetts employees making minimum wage are going to see a pay increase of 75 cents per hour, effective Jan. 1, 2023, bringing their pay to $15 per hour. This does not include agricultural workers, whose pay remains at $8 per hour. Workers under the service rate (those who provide services to customers and make more than $20 a month in tips) will see an increase of 60 cents per hour, beginning in 2023, as the service rate is now $6.75.

 

Changes to Massachusetts Paid Family and Medical Leave

In 2022, the maximum weekly benefit for Massachusetts Paid Family and Medical Leave is $1,084.31; however, in 2023, it will increase to $1,129.82. Also beginning in 2023, the contribution rate for employers with 25 or more covered individuals will decrease from 0.68% of eligible wages down to 0.63% of eligible wages. Employers should ensure that their wage deductions and contributions are adjusted accordingly. This is the second straight year the contribution rate has decreased.

Employees are still not permitted to use their accrued sick or vacation leave to ‘top off’ their weekly benefit. While there may have been rumors that Massachusetts was planning to change this in 2023, no such change appears forthcoming.

 

The CROWN Act

In 2022, Massachusetts enacted the Creating a Respectful and Open World for Natural Hair (CROWN) Act, making it the 18th state to pass similar legislation (see related story on page XX). This law is aimed at quashing discrimination on the basis of “traits historically associated with race, including, but not limited to, hair texture, hair type, hair length, and protective hairstyles.”

The law further defines “protective hairstyles” to include “braids, locks, twists, Bantu knots, hair coverings, and other formations.” Employers who violate the CROWN Act will be liable for compensatory damages, as well as possible punitive damages and attorneys’ fees.

The CROWN ACT was inspired by two teenage twin sisters’ alleged violation of a school hair and makeup policy that prohibited extensions.

 

Bottom Line

Given the changes that have taken place — and the changes to come — it is a good idea to have your business schedule a check-in with an employment-law firm as we approach 2023.

 

Justin Goldberg is an attorney who specializes in labor and employment-law matters at the Royal Law Firm LLP, a woman-owned, women-managed corporate law firm that is certified as a women’s business enterprise with the Massachusetts Supplier Diversity Office, the National Assoc. of Minority and Women Owned Law Firms, and the Women’s Business Enterprise National Council.

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