The Business Owner’s Case for a $15 Minimum

Today’s highlights: When do salaried employees deserve over-time? How is the wedding industry adapting? And can technology allow fine whiskey to bypass the aging process (Derek Jeter thinks so)?

OPINION

Gene Marks, a small business owner, says bring on the $15 minimum wage: “Please do it and do it as fast as possible. Why? Because a higher minimum wage is the medicine that small businesses need. Like working from home, this legislation will force us all to do what we should have been doing in the first place: Get rid of our unskilled hourly employees and replace them with technology. Because that is what will happen. A higher minimum wage will cause a significant bump in our overall compensation costs. It won’t just be entry level. When you raise the minimum, all wages will eventually need to be increased correspondingly to keep levels on par. So how do you think small business owners will respond? Will they run their businesses at a lower income level? Will they shut down? Perhaps, some will. But most will respond as entrepreneurs have responded for thousands of years. They will pivot. They will innovate.”

• “They will find a way to get their products and services out the door less expensively and more profitably.”

• “And they will do this with technology. Technology that already exists and will come down in price as the demand for it skyrockets.”

• “With a $15 an hour minimum wage, tomorrow's small businesses will have fewer employees, more technology, higher profits, fewer headaches and less stress.” READ MORE

THE 21 HATS CONVERSATION

In this video, Charlie Gaudet, founder of a business-coaching firm Predictable Profits, talks about why it still makes sense to pick up a telephone to make a sales call, how his clients have fared during the pandemic, how his own business grew more than 700 percent January 2021 over January 2020, and how to find opportunities in a bad economy: “It's like going to Disney World, and nobody's in line for the rides.”

THE MORNING REPORT PODCAST

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HUMAN RESOURCES

Here’s one way managers can support the mental health of employees: “A leader who encourages employees to prioritize healthy behaviors and balance but doesn’t prioritize their own vacation, constantly puts in long hours, and denies their own physical needs for rest and exercise is sending mixed messages to their team members. A manager who encourages healthy behaviors and prioritizes them in their own life will be much more credible and will be better able to perform in their own work.”

• “One way I like to do this is by taking my 1-1 calls as walking meetings and encouraging my colleagues to do the same if they wish.”

• “Without fail, I find I am more focused and present during the conversation, and I return to my workstation refreshed.” READ MORE

FINANCE

The SBA has been rejecting PPP applications at a high rate: “Congress authorized a third round of PPP in late December replenishing the program with $284 billion, but the Small Business Administration has been slower to approve these loans and is denying them at higher rates, according to people in the banking industry. One factor is that the SBA is doing more due diligence of applications to reduce fraud. The rejection rate was as high as 25 percent nationally a few weeks ago when the agency began reviewing new loans, but has since fallen to 10 percent after the SBA refined its validation procedures, according to Dan O’Malley, chief executive of Numerated, a Boston firm that provides lending software to banks and credit unions across the country. O’Malley urged applicants to work with their lenders to resolve issues with the SBA.”

• “Quincy Miller, president of Eastern Bank, said the majority of its 3,900 applications so far are for ‘second-draw loans’ — small business owners seeking a second PPP.”

• “This time, he said there is more back and forth between bankers and customers navigating different requirements, such as proof that business revenue was down 25 percent in any one quarter.”

• “In the earlier rounds, with loans based on payroll, bigger companies that had that information readily available were able to apply for money more quickly. ‘This time around it’s slower for all companies,’ said Miller. ‘It is without a doubt more work.’” READ MORE

OPPORTUNITIES

The wedding industry is adapting to a very different environment: “In 2019, the average wedding cost nearly $25,000, with most going toward the reception, according to the Wedding Report, a market research firm. But with nuptials increasingly taking place outdoors or online, the average couple now spend significantly less, forcing retailers and vendors to adapt. Hotels are offering elopement packages, bridal gown designers are creating simpler, shorter dresses, and bakers are churning out miniature cakes. And a growing contingent of videographers and wedding planners will produce and host Zoom nuptials, often with a price tag in the thousands.”

• “In Baltimore, photographer Dave McIntosh recently added a live-streaming service, starting at $850, to his lineup of photo and video packages.”

• “Azazie, an online bridal boutique based in Silicon Valley, has doubled down on virtual showrooms where brides and their friends can select, share and vote for their favorite dresses.”

• “‘The ring is more important than ever,’ said [Signet Jewelers President Jamie Singleton]. ‘As couples have smaller weddings or postpone them, they’re putting a little more of their budget in rings.’” READ MORE

LITIGATION

When do salaried employees deserve over-time? “The suit, filed in May in Chicago federal court, accuses Jewel-Osco, the largest grocery chain in the Chicago area, of misclassifying assistant store directors as salaried employees exempt from receiving overtime pay under state and federal law. It is one of numerous lawsuits claiming grocers and retailers cut their labor costs by giving employees managerial titles even as they do mostly manual work. Assistant store directors ‘spend the vast majority of their time performing the same duties as non-exempt employees, including helping customers, working the cash register, moving products, stocking shelves, setting and resetting displays, counting inventory, cleaning the store, and otherwise standing in as cashiers, stockers, or other hourly workers,’  the suit alleges.”

• “It claims they don’t perform managerial duties like hiring and firing and should be classified as hourly workers eligible to receive time-and-a-half pay when they work more than 40 hours a week.”

• “Employers can exempt salaried employees from overtime laws if they earn more than $35,568 and they primarily perform office or non-manual managerial work, plus exercise discretion or independent judgment in their jobs.”

• “In retail, roles such as assistant store director raise questions because those employees can end up shouldering extra work after overtime-eligible hourly workers are sent home at the end of their shifts — a burden magnified early in the pandemic, when stores were especially busy and short-staffed ...” READ MORE

A judge has ruled that a Boston restaurant doesn’t have to pay rent for months when it was ordered closed: “Superior Court Judge Kenneth Salinger ruled that a Caffe Nero shop on Newbury Street did not have to pay back rent for the nearly three months last spring when indoor dining was halted under state orders to combat the spread of COVID-19. The Newbury Street location ultimately closed in October — business was flagging even after it reopened — but the ruling could give leverage to struggling restaurants in sometimes-thorny lease negotiations as the pandemic drags on.”

• “‘This decision might encourage landlords and tenants to try and work things out,’ said Andrea Martin, an attorney with Burns & Levinson who represented Caffe Nero.”

• “A similar lawsuit involving a Beacon Hill SoulCycle studio is also moving through Suffolk County court, in a case which could shed light on how courts view rent for non-restaurant tenants.” READ MORE

THE COVID ECONOMY

U.S. home prices are surging at an accelerating rate: “The median sales price for existing homes in each of more than 180 metro areas tracked by the National Association of Realtors rose in the fourth quarter from a year earlier, the association said Thursday. That is the second consecutive quarter that every metro area tracked by NAR posted an annual price increase, marking the first time this milestone has been achieved in back-to-back quarters. The latest data underscores how the home-price rally, which over the years has played out in distinct pockets such as Idaho or across parts of the Sun Belt, has become much more widespread and continues to gain momentum. In the fourth quarter, 161 metro areas posted double-digit-percentage price increases, up from 115 metro areas with double-digit gains in the third quarter.”

• “The biggest home-price gainers in the fourth quarter were in the Northeast, led by the area around the seaport city of Bridgeport, Conn., where prices shot up 39.2 percent from a year earlier.”

• “In Pittsfield, Mass., they rose 32.2 percent, while in the coastal resort town of Atlantic City, N.J., home prices gained 30 percent.” READ MORE

Forecasters are increasingly optimistic about economic growth: “Economists on average expected gross domestic product to expand nearly 4.9 percent this year, measured from the fourth quarter of the prior year, according to the business and academic economists surveyed in February, an improvement from their 4.3 percent  forecast in January. They cited the distribution of Covid-19 vaccinations and the prospect of additional fiscal relief from Washington for the brightening outlook.” READ MORE

STARTUPS

Can technology age fine whiskey overnight? “Whiskey, in other words, is ready to be hacked — at least according to Stuart Aaron and Martin Janousek. Their company, Bespoken Spirits, in Menlo Park, Calif., says it can make whiskey in just a few days, using heat and pressure to force alcohol in and out of small pieces of wood that give the spirit its characteristic flavor and color. ‘With modern material science and data analytics, we can change this antiquated industry,’ Mr. Aaron said. Bespoken, whose first bottles appeared in stores last fall, joins a crowded field.”

• “Nearly a dozen companies claim that they can speed, or even bypass, the aging process.”

• “Many have attracted significant attention from investors: Endless West, in San Francisco, has received nearly $13 million in funding since it was founded in 2015, while Bespoken’s backers include the retired New York Yankees shortstop Derek Jeter. READ MORE

THE 21 HATS PODCAST

Episode 48: I Want Clean Hands: This week, Paul Downs, Jay Goltz, and Dana White give quick PPP updates—and then dive into a discussion of what a $15-an-hour federal minimum wage would mean for smaller businesses. Will it put businesses out of business? “I'm listening to you, Jay,” Dana tells us, “and I'm thinking about the coffee shop owners I know who have to close.” To which Jay responds, “They say they have to close, but did they try raising their prices 5 percent first?” We also tackle a listener-submitted question about the best way to avoid unemployment claims, which can require forceful management. “There's no way around it,” Paul tells us. “You gotta be hard at some moments, as a boss. You just have to be.”

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