Mark Sanchez: In a nutshell, the Department of Labor, U.S. Department of Labor under the Biden administration, put this rule out in the field more than a year ago for public comment. It drew more than 50,000 comments. These are regulations over who is legally, technically, fill in the blank, an independent contractor? And at what point do you become or should become a payroll employee? So, these are new rules. It's a final rule that the department announced January 10th takes effect on March 11th. Rescinds what was put in place since January 2021 under the Trump administration and goes back essentially to what was in place for many years prior to that. It creates a six-part test to determine what is a contract employee versus somebody who should be classified a payroll employee. Among those is integral to the business, to the work. And Brian Calley at the Small Business Association for Michigan the other day had an online update and briefing on this. And he said, well, why would you bring somebody on board if they're not integral to the company? So, I said, that's one of the subjectiveness. And in his take, it's really subjective, these rules. And it's also the question of how stringently, how far will the department go in enforcing these and interpreting these rules? Because yes, court precedent and everything was worked through prior when something very similar was in place, but these are new folks at the department. These are new folks enforcing the regulation. So that's one of the six tests that also goes looking at it. Are you economically dependent on one employer? If you're doing the bulk of your work for that one employer or solely for that one employer as a contractor, the department may consider if you, somebody raises a, raises the case, the department may consider that somebody who should be classified as an employee and not a contractor. So, it's something that businesses of all sizes should pay attention to and look in to. All businesses, you know, you have one of your advisors is your good, good lawyer, you should have on retainer, get with them and start understanding these new rules, because it's going to affect a lot of businesses. It's going to affect a lot of people out there who go to work as an independent contractor.
Patrick Center: Was the spotlight shown on independent contractors during the pandemic and gig workers, you think of Lyft and Uber employees, is that the crux where this all took shape and why it became such an issue?
Mark Sanchez: Yeah, basically, whether it was the pandemic that gave rise to it, or just simply the way the economy is evolving. But yeah, this is really directed at these tech giants that use basically contract labor as their business model. Uber, Lyft, DoorDash, the other delivery services, Grubhub, that predominantly use contract labor. And you're getting that vehicle, maintaining that vehicle specifically for that job and for a lot of folks or some folks, that's their primary employment. So, the argument is at what point should they be considered payroll employees that get benefits and have those protections under the federal regulation? So that's the question and you have seen this rise in the gig economy the last number of years. And that's primarily what the Department of Labor is really looking at is preventing wage theft and those other issues. So again, for employers that use contract labor, for folks who make their living as independent contractors, this is really something you want to pay attention to and learn about and understand to see exactly how it's going to affect you.
Patrick Center: Staffing firm Express Employment Professionals has released its annual wage report and it's showing a slight easing in West Michigan's tight labor market.
Mark Sanchez: Yeah, this is one of those stories a couple of weeks ago got kind of lost a little bit in the holiday shuffle there as we all transitioned into the new year. And this is an annual report that the Grand Rapids Office of Express Employment Professional puts out. And you’re right, it shows just a little bit of easing in the wages that folks are paying for entry-level positions. It's something that in the last couple of years we've seen significant, well, maybe not significant, but we've seen higher rates of pay raises in the last few years. And we've seen particularly entry-level positions paying a lot more in the last couple of years. So, this is data that employment, cross-employment professionals, it gets from all the positions that it places for employers here in Kent County and Ottawa County and around the area. And it kind of looks at the numbers. And this is what it came out with this year, which is just a little bit of easing and pay raises going up, but still pretty good solid numbers getting going out there for entry level positions. And just to give you, give you an example in 2020, the year the pandemic began, 24% of entry-level jobs that this company filled paid about $13 to $14 an hour, 22%, 14$ to $16 an hour. By 2023 toward the end of 2023, there were no positions that the company filled that paid less than $15 an hour. And in the third quarter, one in five was at $16 to $17 an hour to start, and almost 30% was $17 to $18 an hour to start. This is all reflective of this kind of worker shortage, so to speak, that the economy has been feeling for a number of years now and worsened in the pandemic. So, employers have really had to bring up those entry-level wages to get people in the door and certainly paying a little better increases and pay for the last couple of years to keep people on the payroll. Because when there's a lot of jobs available and the labor market's tight, people do tend to look around a little more to see if there's maybe a little better position down the street that pays more.
Patrick Center: We're talking with Crain's Grand Rapids Business Senior Writer Mark Sanchez. You're reporting venture capital investments in Michigan companies fell once again in 2023.
Mark Sanchez: Little bit, but I always like to do the comparative analysis. Venture capital overall has been down the last couple of years across the country and fell a pretty big way nationally in 2023. Michigan held up fairly well and comparatively well. Just to throw the numbers out there, $1.05 billion put into 169 deals in Michigan last year. That's for Michigan-based companies. That compares to $1.08 billion in 186 companies in 2022. Nationally, boy, you saw the number of deals decline 30% in the amount invested declined more than 10%. So comparatively, you know, Michigan did okay. It held its own and did pretty well comparatively last year for this investing in startup companies in that part of the economy.
Patrick Center: Crain's Grand Rapids Business, senior writer Mark Sanchez, thank you so much.
Mark Sanchez: Thank you, Patrick.