Articles Posted in Economic News

New Jersey CapitolThe overall economic outlook for New Jersey is cautiously optimistic, at least according to some sources. The New Jersey Business & Industry Association (NJBIA) describes a gradual increase in “business confidence” in its annual Business Outlook Survey, but it also notes several downward trends. People are apparently leaving the state in substantial numbers, as are many businesses, resulting in fewer jobs and less income statewide. The NJBIA offers possible explanations for why this is happening and what might be done about it. The state is also taking steps to evaluate the situation. A bill that recently passed the New Jersey Senate, which is now awaiting action in the Assembly, would direct the New Jersey Department of Labor and Workforce Development (LWD) to conduct detailed surveys of businesses that are leaving the state.

In 2007, the New Jersey Legislature enacted the Millville Dallas Airmotive Plant Job Loss Notification Act, also known as the NJ WARN Act. P.L.2007, c.212; N.J. Rev. Stat. § 34:21-1 et seq. The law applies to employers that have done business in the state for over three years and that have at least 100 full-time employees. Covered employers are required to provide a notice, in a specified form, to any employee who is terminated as part of a “mass layoff” or to all employees who lose their jobs as a result of a “transfer of operations” or “termination of operations.” Id. at § 34:21-2. The law also directs the LWD’s response team, whose purpose is to assist laid off employees, to offer to consult with the business’ management and workers.

While the NJBIA’s 2017 Business Outlook survey shows optimism among business owners, another study published in early 2016 shows significant rates of “outmigration” by both residents and businesses. From 2005 to 2014, the NJBIA estimates that more than two million people moved away from New Jersey, and this cost the state about $18 billion in net revenue. It further estimates that the state has lost about 75,000 jobs and $11.4 billion in “lost economic activity.” Despite these grim statistics, other measurements seem much more hopeful. Another organization, for example, reported that home sales in New Jersey have increased by more than 30 percent since early 2015.

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careerSmall businesses must overcome a near-countless array of obstacles in order to succeed and prosper. Competition from larger companies, which might have more resources, more institutional experience, and more connections can be a significant hurdle for a small or startup business. Many companies never clear this particular hurdle, but the Small Business Administration (SBA) offers some tools to help small businesses overcome various obstacles and disadvantages. It recently unveiled a new program designed to help small business “protégés” obtain guidance from large business “mentors” with regard to government contracts. Under the Small Business Mentor-Protégé Program (SBMPP), qualifying pairs of businesses will be able to bid on government contracts as joint ventures.

The federal Small Business Act defines a “small business concern,” in a very general sense, as a business that is “is independently owned and operated and…not dominant in its field of operation.” 15 U.S.C. § 632(a)(1). The SBA has promulgated additional rules for determining whether a particular business qualifies as a “small business concern.” 13 C.F.R. § 121.101 et seq. Prior to the establishment of the SBMPP, the SBA only offered a mentor-protégé program for “disadvantaged businesses” under § 8(a) of the Small Business Act, 15 U.S.C. § 637(a). Congress authorized the expansion of the SBA’s mentor-protégé program in § 1345 of the Small Business Jobs Act of 2010, Pub. L. 111-240, 124 Stat. 2546 (Sep. 27, 2010); and § 1641 of the National Defense Authorization Act for Fiscal Year 2013, Pub. L. 112-239, 126 Stat. 2076 (Jan. 2, 2013). See also 15 U.S.C. § 657r.

The purpose of the SBMPP, according to the new rule issued by the SBA, is to “improve the protégé firms’ ability to successfully compete for federal contracts.” 13 C.F.R. § 125.9(a). A business may qualify to act as a mentor by “demonstrat[ing] a commitment and the ability to assist small business concerns.” Id. at § 125.9(b). This includes demonstrating “good moral character” to the SBA. Id. A small business that meets the SBA’s size standards may qualify as a protégé. A company acting as a mentor may only have one protégé, unless the SBA approves a request to have more than one, and small businesses are generally limited to one mentor.

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By Ken Lund [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia CommonsManaging employment-related matters can be one of the trickiest, most difficult aspects of owning and running a business. A vast array of laws at the local, state, and federal levels affect the employer-employee relationship, including wages, hours of work, workplace safety, family and medical leave, non-discrimination, and reasonable accommodations for certain needs and conditions. While the vast majority of employment statutes and regulations have the best of intentions, maintaining full compliance with all applicable laws can be difficult for businesses with entire staffs devoted to the task. Small businesses may inadvertently run afoul of an employment law and face substantial penalties as a result. Recent news from the U.S. Department of Labor (DOL) illustrates the magnitude of the issue for New Jersey businesses. The DOL is holding more than $7 million collected from New Jersey employers in wage and hour claims, which remains unclaimed by employees.

The DOL’s Wage and Hour Division (WHD) enforces certain provisions of the federal Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., the statute that sets the nationwide minimum wage. Since 2010, the federal minimum wage has been $7.25 per hour. 29 U.S.C. § 206(a)(1)(C). The FLSA also establishes overtime pay of time-and-a-half for employees working over 40 hours in a week, with some exceptions. 29 U.S.C. § 207(a). The WHD can take legal action against employers for alleged violations of FLSA wage and hour provisions. The DOL maintains a website entitled “Workers Owed Wages,” or “WOW,” where people may search to see if their employer is listed, and then if they are included in any recovery of back wages.

New Jersey’s equivalent statute is the New Jersey Wage and Hour Law, N.J. Rev. Stat. § 34:11-56a et seq. It has similar provisions for overtime but sets a higher statewide minimum wage. As of January 1, 2015, New Jersey’s minimum wage is $8.38 per hour. N.J.A.C. § 12:56-3.1(a). The New Jersey Department of Labor and Workforce Development enforces state wage and hour laws.

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1.12.02NewYorkStockExchangeByLuigiNovi1.jpgThe number of initial public offerings (IPOs), in which a company first offers its stock for sale on public exchanges, has skyrocketed during the first nine months of 2014. 220 companies went public during that time, raising about $77 billion. The record-breaking IPO of the Chinese company Alibaba alone raised $21.8 billion, but the vast majority of 2014 IPOs reportedly consist of “emerging growth companies” (EGCs), a category established in 2012 by the Jumpstart Our Business Startups (JOBS) Act. EGCs are smaller companies that have often been unable to meet the regulatory requirements for IPOs, but now they account for most or all of the growth in the number of IPOs in recent years.

The JOBS Act was introduced in Congress as H.R. 3606 in March 2012. It quickly passed both houses of Congress, and the President signed it into law that April. The law relaxes various regulatory requirements for smaller public companies and expands their eligibility to go public. It also increases, from 500 to 2,000, the number of record stockholders a company may have before it must register with the Securities and Exchange Commission (SEC).

The JOBS Act amends the Securities Act of 1933 and the Securities Exchange Act of 1934 to include “emerging growth companies.” H.R.3606 §§ 101(a) – (b), 15 U.S.C. § 77b(a)(19), 15 U.S.C. § 78c(a)(80). An EGC is defined as a company that began issuing securities to the public after December 8, 2011, and that had less than $1 billion, adjusted for inflation, in annual gross revenues during the most recently ended fiscal year.
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Tesla_Roadster_Japanese_display.jpgNew Jersey officials are invoking a state law regulating the purchase and sale of automobiles to prevent Tesla Motors, a California-based electric car company, from operating stores in the state that effectively sell cars directly to the public. Laws in New Jersey and at least forty-seven other states prohibit auto manufacturers from selling cars themselves, instead requiring them to sell through franchised dealers. New Jersey adopted amendments to an administrative rule to make it clear that Tesla does not qualify as a dealer under state law. The rule change could be construed as good for New Jersey businesses, since it arguably benefits locally-owned or -managed car dealerships. It has also, however, incurred the anger of Tesla and other major companies.

Tesla Motors, based in Palo Alto, California, currently offers the Model S, a fully-electric luxury sedan, for sale through its website. It previously sold an electric sports car model called the Roadster. A Model S sells for around $69,000, so its retail appeal is selective. Rather than sell the cars through dealerships, Tesla operates stores around the country that reportedly act as showrooms. Consumers can learn about the cars there, but all actual purchases take place via the internet. Many states have successfully argued that the showrooms effectively serve as retail stores owned and operated by Tesla, which violate state law.

New Jersey law requires a dealer’s license in order to sell motor vehicles to the public. NJ Rev. Stat. § 39:10-19. All motor vehicle sales must take place through dealerships that have a franchise agreement with a manufacturer, NJ Rev. Stat. § 56:10-27, and manufacturers are expressly barred from owning or operating their own dealerships. NJ Rev. Stat. § 56:10-28. The state has argued that Tesla cannot, under state law, operate retail stores or dealerships directly, nor may the company operate them through a subsidiary.
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America_minwage.svg.pngOn Election Day, voters in New Jersey overwhelmingly approved an amendment to the state constitution raising the minimum wage to $8.25. The $1 increase, which takes effect January 1, 2014, will be followed by an annual cost-of-living increase. New Jersey’s minimum wage is among the highest in the country, although several states either have or are phasing in minimum wage rates of $9 per hour or more, and at least one city recently enacted a significantly higher minimum wage. Unlike many employment laws, the minimum wage applies to all businesses regardless of size. Small businesses in New Jersey with minimum-wage employees should prepare for the upcoming wage increase.

Federal law sets a baseline minimum wage, which has been $7.25 per hour since July 24, 2009. States are free to enact their own minimum wage limits. The state of Washington has the highest state-level minimum wage, at $9.19 per hour. New York and Connecticut are phasing in minimum wage increases that will eventually reach $9. The city of SeaTac, Washington approved a ballot initiative on November 5, 2013 that will raise the minimum wage for some workers to $15 per hour.

According to the U.S. Department of Labor, as of January 1, 2013 nineteen states and the District of Columbia set the minimum wage higher than the federal level. New Jersey’s minimum wage, established by state law, was the same as the federal minimum wage until now. Under state minimum wage law in New Jersey, employers who pay less than the minimum amount may be subject to both administrative and criminal penalties, including fines and jail time.
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1109014_14946774.jpgBusiness conditions for manufacturers in New York are gradually improving, according to the latest report from the Federal Reserve Bank of New York, commonly known as the “New York Fed.” The report, which the New York Fed releases on a monthly basis, helps economists and business owners evaluate the health of the manufacturing sector, and the economy in general. Many business indicators for manufacturing have slipped, while others have improved, but the overall trend seems to be upward since Hurricane Sandy hit New York, New Jersey, and other parts of the East Coast in late 2012. The report offers a useful overall view of business conditions in New York.

The New York Fed released its latest report in the Empire State Manufacturing Survey on June 17, 2013. The report collects survey responses from manufacturers all over the state on indicators such as new orders, unfilled orders, shipments, delivery time, inventories, prices paid and received, number of employees, and average work weeks. It also asks respondents to rate general business conditions, and it uses the responses to create an index of statewide business conditions for the manufacturing sector. A supplemental report released in June asked New York manufacturers about business disruptions caused by Hurricane Sandy, and compared responses between businesses in the New York City area and businesses located upstate.
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1QPS.pngLawmakers often use state and federal tax laws to encourage certain types of business activity, or to discourage activities in lieu of banning them. Tax breaks often serve as incentives to investors and entrepreneurs to focus on a particular industry or market. Bills pending in the U.S. Congress and the New Jersey Legislature propose various tax incentives for businesses, including technology investments, infrastructure development, and hurricane relief. Supporters of these bills hope to promote job creation by spurring business activity. Critics contend, however, that similar New Jersey incentives have not had the desired impact on job creation in the past. New Jersey and New York businesses should be aware of pending legislation in order to take advantage of any tax breaks or tax incentives that might benefit them.

On April 9, 2013, a Democratic lawmaker from Maryland introduced H.R. 1415, the Innovative Technologies Investment Incentive Act of 2013 (ITIIA), in the U.S. House of Representatives. The bill would allow a tax credit for qualified investments in “high technology and biotechnology business concerns,” H.R. 1415 § 2 (113th Cong.), equal to twenty-five percent of the investment amount. This would be a direct credit against the amount of tax owed by the investor, as opposed to a deduction from the investor’s total taxable income. The total amount of the credit would be subject to a nationwide limit of $500 million per year, and the Small Business Administration (SBA) would be responsible for allocating credits among qualified investors. To qualify for the credit, the investment must be a stock purchase or other capital investment in a high-tech or biotechnology business with less than five hundred employees. Investors must hold onto their investments for at least three years. The purpose of the bill is to encourage investment in technology and biotechnology companies, which in turn will hopefully promote innovation and job creation.
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800px-Hurricane_Sandy_New_Jersey_Pier.jpgHurricane Sandy caused massive devastation across the eastern United States, destroying property, displacing people, and disrupting communications and transportation from Pennsylvania up to New England. New Jersey and New York were particularly hard-hit. Dozens of people lost their lives because of the storm in New Jersey, with even more fatalities in New York. Millions more lost electrical power and other services. Businesses that are trying to rebuild after the storm may face difficulties with insurers, who may contest claims for damages, and suppliers, who may have suffered their own losses. An often overlooked feature in many contracts is the force majeure clause, which businesses may be able to invoke to delay or excuse obligations they cannot fulfill. They should also be on guard, however, for attempts by others Behring Intern. v. Imperial Iranian Air Force, 475 F.Supp. 396, 401 (D.N.J. 1979). It typically refers to a “natural cause without the intervention of man.” Id. The Behring case involved a breach of contract claim between an American company and the Iranian government, with the Iranian government claiming that the unrest of the 1979 Iranian Revolution constituted force majeure excusing it from performance. The court found that this was clearly “within the control of human agencies” and therefore could not justify non-performance.
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800px-Hurricane_Sandy_damage_Long_Beach_Island.jpgHurricane Sandy, also known as Superstorm Sandy, hit the east coast of the U.S. on October 29, 2012, causing catastrophic damage across the eastern seaboard, particularly in New Jersey and New York. After touring damaged areas several days after the storm made landfall, Governor Chris Christie called the damage “unthinkable.” The state’s death toll in early November stood at twenty-three, and power outages affected up to 2.7 million people. Estimates of total damages went above $20 billion, making Sandy one of the most brutal and damaging storms in U.S. history.

New York and northern New Jersey suffered significant damage to buildings and infrastructure. The storm had a drastic impact on New Jersey small businesses, with power, transportation, and communications disrupted throughout the state. Local, state, and federal government assistance has become available to help businesses regain their feet as the state rebuilds. Businesses should also review their insurance coverage and business contracts to see how the storm has affected their rights and obligations.

New Jersey has made a “Business Recovery Check List” available on its website to assist businesses in assessing damages, making repairs, and getting business operations started again. It includes tasks like contacting the business’ insurance representative, filing claims, and assessing structural damage and infrastructure losses. New Jersey’s Business Action Center has a hotline and website to assist businesses with disaster loans, disaster unemployment benefits, building inspections, and other disaster relief. The New Jersey Governor’s Office has announced multiple programs to provide micro-loans and additional insurance coverage to businesses affected by Sandy. REBUILD New Jersey, for example, is a program operated by New Jersey Community Capital that can provide loans between $10,000 and $30,000 to assist businesses with repairs and replacement of inventory or equipment.
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