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The American Clean Energy and Security Act

Congress and the Obama Administration are aggressively pursuing energy efficiency, renewable energy, pollution reduction, and energy independence. One element of the Administration’s environmental plan is called “cap and trade,” a policy approach for controlling large amounts of emissions from a group of sources. While proponents point to the public health benefits and environmental protections of emissions control, critics voice concerns about possible effects cap and trade could have on the investment the federal government is making to stimulate the economy.

What Is Cap and Trade?

The goal of cap and trade is to reduce CO2 and other greenhouse gases (GHGs) by setting a limit on carbon emissions while allowing emissions sources to buy or trade for “carbon credits,” if needed to get in under the limit. Key elements are as follows:

  • The cap: The federal government would establish a cap, or limit, on the amount of CO2 each source could emit each year. (The Clean Air Act of 1990 created a similar form of cap and trade for sulfur emissions, by which owners of coal-fired power plants could purchase pollution credits.)
  • The trade: Some companies will find it easier than others to reduce pollution levels. Companies whose pollution levels fall below the cap can sell their pollution credits to other companies directly or trade credits through a pollution credit trading house.
  • The profits: The federal government could auction CO2 credits and take a fee, or issue CO2 permits and sell or give them to firms with historically or projected low pollution emissions.

The American Clean Energy and
Security Act (H.R. 2454)

In June 2009, the U.S. House of Representatives passed H.R. 2454, the American Clean Energy and Security Act, commonly called the Waxman-Markey bill after its sponsors. The goal of the bill is “to create clean energy jobs, achieve energy independence, reduce global warming pollution, and transition to a clean energy economy.” To reach that goal, H.R. 2454 calls for the federal government to:

  • Regulate GHGs from power plants and other industrial facilities.
  • Regulate hydrofluorocarbons (HFCs).
  • Require electricity utilities to purchase renewable energy (a national portfolio standard) or buy renewable energy credits (RECs). Six percent of the power must be from renewable sources by 2012 and 20 percent from renewable sources by the year 2020.
  • Require major companies to track and report on their energy use and related emissions.
  • Create the Carbon Storage Research Corporation, with a $1 billion budget to “establish and administer a program to accelerate the commercial availability of carbon dioxide capture and storage technologies and methods” through “competitively awarded grants, contracts, and financial assistance.”
  • Create the Clean Energy Deployment Administration to provide loans and loan guarantees to spur more private investment in energy technology.
  • Authorize the U.S. Department of Energy (DOE) to issue loans of up to $25 billion to the auto industry under the Advanced Technology Vehicle Manufacturing Loan Program.
  • Hold an emission credit auction four times per year with projected revenues of $973 billion over the 2010–2019 period.
  • Create a strategic reserve of 2.7 billion “allowances.”
  • Issue $3,500 to $4,500 vouchers for consumers to use in purchasing more fuel-efficient vehicles.
  • Create a program to compensate U.S. workers who lose their jobs due to cap and trade. The federal government would pay 70 percent of their pay for up to 3 years and would cover 80 percent of their health insurance costs.
  • Create energy efficiency programs costing $6.7 billion over the 2010–2019 period ($3.1 billion for lighting, $2.1 billion for energy efficiency in buildings, $1.5 billion for energy efficiency for industry and certain state and local government buildings).
  • Enforce civil penalties for non-compliance.

Financial Estimates

The Waxman-Markey bill calls for an increase in federal revenues by $846 billion over the 2010?2019 period, with $821 billion in direct spending, a reduction in future deficits of $24 billion, and an increase in discretionary spending of $50 billion.

Increased administrative costs to the Environmental Protection Agency for 2010 are estimated to be $40 million, with total costs for 2010?2019 of an additional $8.9 billion. Administrative costs to the Federal Energy Regulatory Commission are estimated to be $7.9 billion over the same period—an average annual cost increase of $878 million per year.

Estimates on the cost of the bill for the average household vary widely, from as low as $98 per year to as high as $3,000.

What would an energy cost increase mean to your company and its customers? One example: an increase of $1.60 per Dth of natural gas might be absorbed due to the downturn in natural gas prices in 2009. While there are no guarantees on natural gas commodity prices, natural gas prices likely will return to traditional levels as the economy improves (see figures 1 and 2). Companies need to be able to predict their costs to intelligently price their products and services—which means considering the costs if natural gas prices return to their previous levels.

Not a New Idea

Europe has been implementing cap and trade programs for years with mixed results. The theory is that a market will develop for CO2 credits, with the value of the credit driven by the market. For example, in July 2008, a CO2 unit in Europe was being sold for 29.33 euros. Four months later, the CO2 credit price was 18.25 euros.

In the United States, RECs can be purchased to subsidize renewable energy projects that often have poor returns on investment without RECs. If a company cannot reduce its energy consumption and carbon footprint, the company can purchase RECs from a certified renewable energy producer. Currently, the supply and demand challenge is that only 7 percent of the energy market qualifies as green/renewable. Wind energy has grown dramatically in recent years, but solar photovoltaic energy has been slow to be adopted due to its longer payback period.

Most states have “portfolio standards” for electric generation companies. These states have goals—some have requirements—to obtain 10 to 25 percent of electricity production from renewable energy. Because wind energy has been commercialized in some states, this becomes a ready market for electricity generation providers to meet their obligations. There has been some discussion of making this portfolio standard a federal standard, providing uniform access across all states and electric utilities companies.

How Insulation Fits In

Some proponents of CO2 reduction want to give credits for all energy conservation projects, asserting that energy management projects would have higher return on investment (ROI) due to energy savings, demand-side management rebates, plus energy credit for pollution reduction. Under such a system, every insulation project could create a tradable energy credit. Of course, someone needs to certify the energy savings and, therefore, the credit.

The Energy Policy Act (EPACT) of 2005 provides an immediate expense election for energy projects that reduce a building’s energy consumption at least 16 2/3 percent below the ASHRAE 90.1-2001 edition. The election—under section 179 D—must be supported by certification from a registered professional engineer or a contractor licensed to work in the jurisdiction. Lighting retrofits are relatively easy to certify since the Internal Revenue Service (IRS) issued interim rules: the lighting EPACT opportunity is $0.30 to $0.60 per square foot. The balance of a building can be worth up to $1 per square foot, for a total of $1.80 per square foot. Non-lighting projects require building energy modeling using one of the IRS-approved energy modeling software programs.

The Bottom Line

Higher energy prices push American businesses and consumers to focus on energy conservation, including the oldest energy conservation measure: insulation. A recent National Insulation Association (NIA) effort with the Oak Ridge National Laboratory and the DOE helped quantify the value of additional insulation in large and medium-sized industrial plants. Proper levels and types of insulation in plants could save $1.9 billion in annual energy savings and create 12,000 green jobs. NIA has estimated that the energy savings for the power/utility sector beyond the ASHRAE 90.1-2007 energy standard for process piping and HVAC could yield an additional $2.3 billion in annual energy savings and equal 15 million metric tons of CO2 reduction. All the energy savings from additional insulation identified was estimated to produce $4.8 billion in annual energy savings and 89,000 green jobs for the United States.

Proponents of cap and trade believe higher energy prices will reduce energy consumption and pollution, while critics think cap and trade will impose an unfair burden on consumers. In any event, the concept—with the Waxman-Markey bill—is broadening the dialog.

Figure 1
Figure 2
NIA Sites > Insulation Outlook Magazine > Global

Special Report: Stimulating Mechanical Insulation

With the federal government pumping billions of dollars into the economy, most businesses are asking themselves, “How can we take advantage of this opportunity?” Insulation end users now have more opportunities than ever to receive funding for their projects. The National Insulation Association (NIA), through its Mechanical Insulation Marketing Initiative (MIMI), responded by publishing a Toolkit (www.insulation.org/mimi) for those involved with the mechanical and specialty insulation industry. This comprehensive site includes resources to help users reach their state’s governor, senators, and state energy director to promote energy efficiency and “green” jobs.

MIMI has been working to promote the benefits of mechanical insulation for more than a year now, but the government stimulus package gave new impetus to the efforts. MIMI’s educational materials make the case for mechanical insulation not only to government officials but also end users. As everyone watches budgets, mechanical insulation’s incredible return on investment makes more sense than ever.

Successful Case Study

E.J. Bartells, a contractor member of NIA, made a conscious decision to adapt its business model to the new emphasis on energy efficiency. This strategy included contacting state energy directors and congressional representatives, as advised in the MIMI Toolkit. The company is helping community colleges, industrial facilities, schools, and water-treatment facilities, among other organizations, become more efficient through the addition and maintenance of mechanical insulation.

Rick Smith, CEO of E.J. Bartells, talked with Insulation Outlook about how his company has taken advantage of the stimulus. In the conversation excerpt printed below, he shares his company’s experience working to educate others about mechanical insulation.

There is still funding available for energy-efficiency improvements at federal, state, and local levels. We hope you will use this information to gain funding for your own projects.

Q: What advice do you have for others who haven’t come up with a plan to take advantage of the stimulus money out there?
A: Don’t wait for opportunities or business to happen or come to you. The opportunities are out there, and there are enough of them for our entire industry. I have been in this business for 25 years and I have never seen an opportunity like the one in front of us today. If you don’t get excited about this, then you have ice water in your veins!
Q: Where did you get the idea to form your stimulus business plan?
A: Actually, we had already developed a plan to use the NIA Insulation Energy Appraisal Program (IEAP) within our sales group to perform energy audits on facilities and had enjoyed some success. By looking at the stimulus plan and realizing that we had the tools and products to be effective, we were able to create additional awareness.
Q: What was your first step?
A: We had a company-wide conference call to set specific tasks in motion for current accounts and to begin to look at the financial opportunities at the local, state, and federal levels. Most are still trying to decide how to spend the money. The MIMI Toolkit was helpful in reaching out to government officials.
Q: How does your stimulus business plan differ from your previous methods?
A: It has really become an extension of our everyday business model. In the past, we were strategically looking at opportunities to save dollars, reduce emissions, and promote the value of insulation. Now, with NIA’s Mechanical Insulation Awareness Campaign beginning to take place, we can leverage our products and services at a higher level. We have increased the awareness internally and equipped our employees with the tools they need to sell on an individual basis.
Q: Did you encounter resistance? If so, how did you overcome it?
A: There is still a lack of knowledge about mechanical insulation. We continue to educate, focus on opportunities, and talk with those who make decisions. The other item is that there is competition for the stimulus dollars. Most states are looking for housing-related items (windows, siding, etc.); light bulbs; grid-related [considerations]; wind, solar [energy], etc. We have to continue to explain that mechanical insulation works and is ready to be put into service now without further development cost. This is an education process, and NIA has been great in supporting those efforts at the federal level.
Q: What types of jobs have resulted from your stimulus business plan?
A: We have had a lot of new business, including:

  • Commercial insulation projects
  • Industrial insulation projects
  • High-end residential projects
  • Manufacturing materials/applications (fabrication and product development)
Q: What has been the biggest challenge?
A: Creating awareness. Often the project can be small to provide proof that we can provide what we say. I love those opportunities, because the opportunity to show them or have them test the product on a pilot project always leads to a successful sale or the creation of a larger project. Our industry has product(s) that will work and create energy savings and reduce emissions, and we are ready to perform right now. Mechanical insulation is not a sexy business, but it is a workhorse that will be there for years to come. Everyone wants flash, visibility, and notoriety, and overcoming that can be a challenge.
Q: What has been the
biggest surprise?
A: There is awareness that there is money to spend, but I have been surprised at how uncoordinated this whole stimulus effort has been at the various levels of government. The potential for waste is there if we do not slow down and understand with clarity how the money can be spent in the right applications without wasting it. Our industry has the opportunity to show the country that we have technology that is ready and available and can be effective right now.
Q: For how long do you expect to see benefits from the stimulus?
A: Because of the mechanical insulation awareness that has been developed by NIA, it can and should have a lasting impact for years to come. After the stimulus money is gone, it will always make sense to use and maintain mechanical insulation in any facility.

Your Time Will Pay Off

Stimulus money is still available—make sure your company doesn’t lose out on this rare opportunity to receive federal and state funding for your mechanical systems insulation improvements. Schedule time in your day to visit the MIMI website, familiarize yourself with the resources available, and start educating your bosses or clients about the benefits of mechanical insulation. Your company will definitely benefit.

NIA Sites > Insulation Outlook Magazine > Global

Mechanical Insulation Goes Worldwide

Everywhere you turn these days, you hear about social media and Web 2.0 tools. They are great for catching up with long-lost friends and far-flung family, but are they relevant for businesses like yours? The National Insulation Association (NIA) may give you some ideas with its debut on Facebook and Twitter, part of our ongoing effort to keep you informed about the industry and what NIA is doing to grow and support it.

By becoming a fan of NIA on Facebook and following us on Twitter, you will receive updates on all things related to insulation for mechanical systems. Get the latest on everything from the progress of the legislation promoting mechanical insulation and the mechanical insulation tax credits being worked on by the Mechanical Insulation Marketing Initiative to what’s coming up in the next issue of Insulation Outlook. It’s an easy way for you to keep up with what you need to know.

In addition, for NIA members, we will be posting bonus content to our Facebook page, such as candid convention photos, that you won’t be able to find anywhere else. We will also post information about NIA events and activities.

Speak Up!

Social media isn’t just about us talking to you, though—it’s about having a dialog. We encourage you to let us know what you’re thinking. We hope you will use these new tools to help us keep up with the industry. Let us know about hot topics: what’s new, what you think we should be doing. We are the voice of the mechanical insulation industry, so don’t hesitate to tell us what you think. We need your opinions and your voice now more than ever as we make progress on Capitol Hill.

To that end, we will be using these new tools, as well as some established ones, to periodically post surveys about various topics, including our products and services. We want to make it easy for you to give us feedback about how we can continue to improve.

For Insulation Outlook readers, this is your chance to make an impact on the magazine. We are always looking for new topics and new writers. Social media make it easy for you to pass along your ideas or build on other people’s suggestions.

New Tools, New Audiences

Many other organizations are successfully using social media to get their message out. The Department of Energy’s Energy Efficiency and Renewable Energy program has an Energy Savers Facebook page, where they post energy-saving tips and news for their fans, in addition to their blogs. Many construction and engineering firms follow Twitter and use other social media tools.

NIA hopes to reach these users and engage them in conversations about the value of mechanical insulation. Educating the public, particularly those who may be in a position to address mechanical insulation issues in their facilities, is a vital part of NIA’s mission. To reach the public, we have to go where they are, and millions of them are on Facebook and Twitter.

It’s free to sign up: just go to www.facebook.com and search for National Insulation Association and to www.twitter.com/InsulationInfo. We hope you’ll join us as we explore this new frontier.

NIA Sites > Insulation Outlook Magazine > Global

Federal Funds Seek to Boost Penetration of Combined Heat and Power in the United States

Mechanical insulation is often overlooked in search of a single solution to clean, affordable energy, but for those pioneering energy solutions, mechanical insulation remains fundamental to nearly every thermal application.

Volatile fuel prices, a battered economy, a woeful environmental outlook, and a concerted thrust for enhanced national security have created a domestic energy climate that is reconsidering conventional power production and promoting energy efficiency. As policy makers reach for capable, market-proven technologies that can immediately contribute to enhanced energy efficiency across the commercial and industrial sectors, legislators and energy experts tout combined heat and power (CHP) as a crucial element of the near-term energy efficiency equation.

While configured in various ways, CHP consists of a combustion-based system that generates electricity as well as usable quantities of heat. Similarly, waste energy recovery systems use existing combustion systems to capture and reuse waste thermal energy for electric generation or usable thermal applications. Thermal energy—used for space heating, domestic hot water, or even process heat in industrial applications—and electricity are universal throughout the built environment across all sectors of the economy. Another aspect of CHP that makes the technology attractive to potential customers is that CHP introduces a distributed generation model to provide both thermal and electric energy from facility- to district-wide.

An expansion in the application of CHP systems offers a significant opportunity for mechanical insulation. CHP systems universally require the retention of useable quantities of heat in power generation, thermal recovery, and distribution. Minimizing heat loss with sound mechanical insulation is crucial to effective CHP solutions. Insulation becomes even more critical as CHP systems scale up to provide district heating and hot water, as piping and duct work require insulation throughout the distribution system.

CHP has been validated by successful deployments among heavy energy users in industrial, commercial, municipal, and institutional applications over the past couple of decades; however, recognition and support from federal policy makers has only come in the past few years. To illuminate the traction CHP has experienced among federal legislators, one can follow a clear trail of incentives and funding opportunities in nearly every significant piece of energy legislation over the past half-decade.

EISA 2007

The Energy Independence and Security Act of 2007 authorized a number of programs and incentives to spur adoption of CHP and waste energy projects. However, these authorizations were not backed up by appropriations from the U.S. Congress, so many of these initiatives are still largely unfunded. Under Section 451 of EISA 2007, the U.S. Environmental Protection Agency (EPA) was tasked to initiate a nationwide survey of all major industrial and commercial combustion sources and sites within the United States and document the quantity and quality of waste energy available by site. Recommendations will then be made by EPA, in collaboration with the U.S. Department of Energy (DOE), to each entry in the registry to optimize combustion systems and recycle waste energy for electricity generation or useful thermal energy. Additionally, funding will be made available (up to 50 percent cost-share) by DOE to conduct feasibility studies to determine those projects offering a simple payback of 5 years or less.

To further support the deployment of waste energy recovery systems, Section 451 under EISA 2007 authorizes a Waste Energy Recovery Incentive Grant Program, which offers $10 per MWh of electricity generated from recovered thermal energy. Similarly, $10 per 3,412,000 Btu is authorized for thermal applications employing recycled thermal waste.

Emergency Economic Stabilization Act of 2008

The Stabilization Act of 2008 offered a number of key tax provisions to promote the deployment of CHP systems. An investment tax credit was introduced to cover 10 percent of the costs for the first 15 MWh of CHP or waste energy systems that achieve energy efficiency of 60 percent or higher. This tax credit remains valid through 2016.

Three other preexisting tax provisions were extended, including an accelerated 5-year depreciation schedule for eligible CHP systems, a 10 percent investment tax credit for the purchase of eligible microturbines, and an extension of renewable energy tax credits. To qualify for the renewable energy tax credit, CHP systems must burn biomass or solid waste as a primary fuel.

American Recovery and
Reinvestment Act of 2009

Stimulus funding under the American Recovery and Reinvestment Act of 2009 (ARRA 2009) provides additional incentives for CHP, some of which are layered over provisions of the Stabilization Act of 2008. Under ARRA 2009, the Internal Revenue Code declares the 10 percent investment tax credit for CHP “refundable.” Refundability is most significant to small companies, institutions, or non-profit organizations. Refundability allows tax credit owners to reduce their tax liability below zero—in other words, authorizes eligibility for a tax refund.

ARRA 2009 also provides “bonus depreciation” for CHP systems through 2010, allowing property owners to not only depreciate according to the accelerated 5-year schedule, but also depreciate new systems 50 percent over the first year.

The most significant action under ARRA 2009 was the stimulus funding appropriations. ARRA 2009 provided a total of $16.8 billion to the DOE’s Energy Efficiency and Renewable Energy (EERE) program. Funding announcements for research and development, as well as deployment of efficient CHP and waste energy recovery systems, have recently been released by the DOE’s Industrial Technologies Program (ITP) under EERE. The research and development solicitation totaled $40 million, while the deployment solicitation will be capped at approximately $156 million. Awards will be structured as cost-share agreements with funding recipients. Both solicitations were received with great interest from both the commercial and industrial sectors, demonstrating a hearty appetite for increased CHP and waste energy recovery deployment.

Today, Congress is tasked with tackling transformative energy legislation to usher in a new era of clean, reliable energy on which the United States can build a prosperous economy and healthy environment. It is unclear exactly how the legislation will look and when it can be expected, although it is virtually certain efficiency will be a critical component. Federal agencies, the private sector, and state energy programs have all taken a supportive stance on CHP technologies, which continue to indicate promise for mechanical insulation in the coming age of energy efficiency.

NIA Sites > Insulation Outlook Magazine > Global

Cap and Trade and the New Energy-Efficient Economy

On June 26, 2009, the House of Representatives passed the American Clean Energy and Security Act (ACES) of 2009 (H.R. 2454). ACES provides a critical and effective framework to make the United States a world leader in advancing energy efficiency and addressing climate change. The bill establishes an economy-wide cap on greenhouse gas emissions and puts the United States on a trajectory to reduce emissions by 83 percent below 2005 levels by 2050. In addition, hidden within the voluminous bill are cost-effective energy efficiency provisions that are the “golden keys” to addressing the nation’s most pressing economic and environmental concerns.

By creating a market-based incentive to reduce emissions through the lowest-cost means available, the ACES cap-and-trade program has the potential to be the most significant energy efficiency policy ever implemented in this country. The cap will encourage people to become more efficient and will drive innovation in energy efficiency technologies. According to a recent EPA analysis, under the ACES cap-and-trade mechanism energy consumption would not increase between now and 2050, thus avoiding the 17 percent increase in energy consumption through 2050 projected without the cap.

ACES also addresses one of the greatest energy market failures—the carbon externality cost—but recognizes that other barriers to energy efficiency must be addressed as well. The bill creates a variety of complementary energy efficiency policies and provides funding for a variety of energy efficiency programs. Importantly, the bill also provides some safeguards to help ensure that allowances are allocated in a way that does not mute the price signal to electricity consumers and that cost-control mechanisms (namely offsets) do not undermine the carbon cap.

Complementary Policies

ACES includes several policies to overcome barriers to investment in energy efficiency, including new and improved efficiency codes and standards, better consumer information, and transportation planning. Following are a few highlights.

ACES includes an aggressive policy and timetable for the development and nationwide implementation of improved building energy codes. It encourages independent code-setting organizations to develop the codes and state and local governments to adopt and enforce them, but provides a federal “backstop” if they do not. ACES directs DOE to establish codes that achieve 30 percent savings within 1 year of enactment, 50 percent savings by the end of 2014 for homes and 2015 for commercial buildings, and an additional 5 percent savings every 3 years until 2030. DOE is to give technical and financial assistance to the code-setting organizations to develop the codes, but it would step in if the independent organizations did not meet the targets.

For code implementation, ACES directs states to adopt these or equivalent codes within 1 year and to demonstrate high rates of compliance with the codes within 2 additional years. ACES provides 0.5 percent of all allowance value to states and local governments for this purpose, and states can elect to use value from other allocations for this
purpose as well. If states do not meet the compliance targets, they will lose an increasing percentage of their allocation, and if they do not develop codes to meet the targets, DOE would enforce the federal energy code. The Alliance to Save Energy has strongly advocated for a comprehensive provision on codes because codes are an essential tool for improving the efficiency of new and renovated buildings but are not effectively used in much of the country. We estimate this provision alone could reduce U.S. energy use in buildings by 8 percent by 2030, for an estimated annual savings of 4 quadrillion Btu.

ACES creates a combined efficiency and renewable electricity standard (CERES), which requires that 20 percent of electricity sales be met with a combination of renewable energy and energy efficiency by 2020. Energy efficiency program savings can entail up to one-fourth of the RES requirement (5 percent of total electricity sales), or two-fifths (8 percent of total electricity sales) if a state governor deems it necessary to meet the requirement. Eligible efficiency programs include customer electricity savings, combined heat and power and fuel cells, and reduced distribution system losses, with limited trading of efficiency credits. It is expected that many, if not most, utilities will meet as much of the CERES requirement with efficiency as they are allowed, since energy efficiency is generally less costly than renewable energy.

The cap on the energy efficiency component of CERES severely limits the energy and monetary savings from the provision: the 5 percent efficiency gains will not exceed business-as-usual program savings expected under existing state-level energy efficiency resource standards (EERS) and other policies in many states, though 8 percent savings could provide a significant boost to utility energy efficiency efforts, especially since building codes and standards cannot be used to meet the energy efficiency component of CERES. Additionally, a late amendment to the bill discounts electricity from nuclear generating plants or plants with carbon capture technology from the baseline electricity use under CERES, significantly weakening the stringency of the standard.

ACES establishes several policies to improve building efficiency. The Retrofits for Environmental and Energy Performance (REEP) program would facilitate home and commercial retrofits by providing performance-based grants for certifiable efficiency improvements. Under this program, commercial buildings would receive grants per square foot of demonstrated energy savings. This program would reduce the upfront costs of energy efficiency improvements while providing an incentive to achieve the most cost-effective energy savings possible. A model building performance labeling program established under ACES would reduce information barriers to building energy efficiency by directing EPA to establish measures of designed energy performance for different building types, develop one or more building energy labels, run pilot programs, and work with states and local governments to implement labeling and disclosure programs. An eleventh-hour amendment to H.R. 2454 reduced the labeling provision to new construction only, severely limiting its effectiveness on existing buildings.

ACES also establishes new appliance efficiency standards—notably one on outdoor lighting—and makes a number of improvements to the process by which DOE sets standards. One provision would allow state building codes more flexibility to address the efficiency of heating and cooling equipment and lighting within the limitations of preemption of states by federal appliance standards.

Complementary Funding

The Alliance estimates funding for energy efficiency in ACES would total more than $100 billion over the 2012?2050 period, an average of about $3 billion per year. Because energy efficiency shares funding with renewable energy and smart grid initiatives, it is difficult to estimate the exact funding total for energy efficiency, but our estimates range from $84 billion to $173 billion over the 2012–2050 period, averaging $2.2 billion to $4.4 billion per year. As long as the existing funding sources for energy efficiency do not decline, ACES funding could represent roughly a doubling of 2008 spending by utilities and state and local governments of $3 to $4 billion.

Two dozen sections of ACES carry some potential for energy efficiency funding, and six sections of ACES specify that part of the allowance value must be used for energy efficiency. A couple of these provisions provide prescriptive programming language, but in most cases funding recipients are left to determine the program details and the role of energy efficiency. The other efficiency sections in the bill authorize programs but do not dedicate funding for energy efficiency; therefore, their funding depends on future appropriations.

Of this funding, ACES directs DOE to establish State Energy and Environmental Development (SEED) accounts to be used by state and local governments for energy efficiency and renewable energy programs. Allowances are provided to the SEED accounts according to the following schedule and account for the large slope seen in Figure 1:

  • 2012 thru 2015: 9.5 percent of total allowance value
  • 2016 thru 2017: 6.5 percent of total allowance value
  • 2018 thru 2021: 5.5 percent of total allowance value
  • 2022 thru 2025: 4.6 percent of total allowance value
  • 2026 thru 2050: 4.5 percent of total allowance value

Of these allowances, as little as 20 percent or as much as 80 percent could be used for energy efficiency. Five percent of SEED allowances must be used for the REEP program&151;awarding performance-based grants for achieving energy savings in commercial and residential buildings—and would receive $7.4 billion in SEED funds over the lifetime of the program, or $200 million annually. On the whole, the SEED program could receive $30 billion to $118 billion for energy efficiency over the 2012–2050 period, averaging $800 million to $3.0 billion annually.

While acknowledging that these spending levels would be a significant increase over historical levels of federal funding for energy efficiency, the Alliance continues to champion energy efficiency program funding as a primary cost-containment mechanism in climate legislation and a measure to ensure reductions in areas difficult to reach with a price signal alone. In the Senate negotiations, the Alliance asks that the strong complementary funding framework developed in the ACES be maintained and strengthened, and that new efficiency funding not simply displace current funding. Both these considerations are necessary to realize the full potential of energy efficiency savings under a cap-and-trade mechanism.

Offsets

One of the major concerns the Alliance has is with the bill’s provision for offsets. We believe it is critical that offsets be “real” (actually occur) and additional. ACES would allow a maximum of 2 billion tons of CO2 equivalent to be offset by credits for reductions in greenhouse gas emissions outside the cap. Carbon offsets can be an effective cost-containment tool, but only if the claimed emissions reductions are real. If the reductions are not real, the cap itself would be undermined, and the cost per ton of real emissions abatement would increase.

Two billion tons of CO2 equivalent is roughly one-third of current U.S. emissions and twice the total allowed covered emissions in 2050. Offsets constitute an increasing proportion of total allowance over time, up to 60 percent in 2050. Given the magnitude of the offset program in ACES, the Alliance recommends that significant measures be put in place to ensure the offsets are real and additional. Offset regulations must prescribe how to address the great challenge of evaluation, measurement, and verification, as well as ensuring the entities tasked with making key decisions are independent of political pressure.

Determining real carbon abatement from offsets is a challenging task, involving measurement and verification of emissions reductions and confirmation that the reductions occurred outside a business-as-usual framework. The Clean Development Mechanism, the world’s largest offset program, is expected to issue only 2.7 billion tons of CO2 equivalents (roughly 1.5 years of ACES legislation) in the 4 years between 2008 and 2012 and has already demonstrated the challenge of verifying offset credits. The program is fraught with controversy and no small amount of “hot air” (i.e., emissions reductions that would have occurred without the project investment).

House negotiations on the jurisdiction of the offset provisions in ACES demonstrate the vulnerability of offsets to political pressure. ACES provides the EPA with jurisdiction over most offset projects—excluding domestic agriculture and forestry projects, which were transferred at the eleventh hour to jurisdiction of the U.S. Department of Agriculture. Hopefully, both entities will ensure that carbon offsets are rigorously measured and verified by upholding the Offsets Integrity Advisory Board and other oversight mechanisms established in ACES, but many of the details are still to be worked out.

Where Do We Go From Here?

The Senate Energy and Natural Resources Committee has passed the American Clean Energy Leadership Act (ACELA), which is intended to be the energy title of a future Senate climate bill. It is expected that the Senate will consider climate legislation in October. Once this legislation is passed by the Senate, a conference committee will be convened to reconcile it with ACES.

While a tough Senate battle will inevitably influence any climate legislation that ultimately reaches the President’s desk, the current bill provides a strong framework for addressing our current climate change challenges and realizing the great potential of energy efficiency in saving energy, reducing greenhouse gas emissions, saving money for consumers, and creating jobs. As the Senate drafts and debates this bill, the Alliance will encourage the following:

  • It is critical that the Senate bill maintain strong complementary energy efficiency policies. ACELA includes a number of important energy efficiency policies that will help achieve—and reduce the cost of achieving—a limit on carbon emissions. Building energy code provisions should remain strong and sufficiently funded. Energy efficiency provisions, either within a renewable electricity standard or a separate energy efficiency resource standard, should be robust enough to encourage real energy savings for consumers. Building energy efficiency labeling programs should be improved with adequate implementation and disclosure plans.
  • The bill should increase funding for energy efficiency and ensure real and additional savings. Preserving at least the 3–6 percent of allowance value that goes to energy efficiency under H.R. 2454 is a must; increasing the value of allowances made available to energy efficiency should be a priority, since energy efficiency is a proven cost-containment strategy. Additionally, the Senate bill should add language ensuring that funding does not simply displace existing funding and results in real energy savings. If the allocation funding is used to displace existing funding, there would be no net increase in energy efficiency. SEED allocations should include support for retrofits and low-income weatherization. Additionally, the Senate bill should maintain and strengthen the provisions in H.R. 2454 relating to workforce development and investments in clean energy innovation, funding for research and development, and clean energy financing through the Clean Energy Development Administration to support innovation and facilitate the commercialization of new technologies.
  • The Senate bill should ensure that allowance allocations do not discourage consumers or energy providers from aggressive deployment of energy efficiency measures and practices. While we recognize and applaud policy makers’ desire to ensure climate legislation does not unduly burden consumers or the overall economy, if free allowances to electric utilities are returned to customers in a way that offsets the carbon price in their electric bills, end-use energy efficiency would be underinvested, requiring other, more expensive abatement options instead.

If these principles are followed and a strong climate bill is passed, the insulation industry stands to be a major beneficiary. Over the next decade, climate legislation in its current form is expected to create 1.7 million jobs impacting almost all sectors of our economy, including an estimated 250,000 new jobs in the energy efficiency sector.

Figure 1
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Business 2.0: Marketing with Social Media

I was recently in the local Verizon store upgrading my Blackberry, and while the salesperson was showing me the features on the latest Blackberry, a mature couple slid up next to us and listened to our conversation. After I made my choice and the salesperson went to grab the phone from the back, the couple asked me if I liked the phones and why did I choose that particular model.

I looked the couple over and the first question I asked was, “Are you on Facebook?” The lady’s face brightened and she said, “Yes, I am!” I told her that she could Facebook right from the Blackberry and it was really easy. I then asked the gentleman if he did any of his banking or investing online, and he answered, “Yes, I do. Can I do that on the phone?” I said, “Yes, you can!” So the nice couple each got a new Blackberry and were happily being trained as I walked out.

Social media sites such as Facebook, Twitter, LinkedIn, MySpace, Classmates, and others are exploding in popularity across many different age groups. My kids (16 and 14) communicate over Facebook everyday, and it is how most of their friends stay connected while not in school. I think it is second only to texting, and my kids Facebook more than they text!

I joined Facebook to reconnect with long-lost friends from high school. Many of them are still in my home town, but some are scattered all over the country. It has been great to reconnect and share what has been going on in each others’ lives over the last 30 years. We even used Facebook to organize and communicate our 30th high school reunion.

Social Media for Business

Many companies use Facebook and other media to communicate about their products. Some companies pay for advertising; some just create a free page or group and ask friends to join as “fans.” This can spread quickly, and it is common to have hundreds, thousands, tens of thousands, even millions of fans of one product or company. The companies include Harley-Davidson, Starbucks, Sub-Zero, Porsche, Reverend Marvin’s BBQ Sauce, and many, many others.

While Facebook is more of a “social” media, LinkedIn is a professional network designed to connect people across many different industries and 200 countries. You will find many of your colleagues from the insulation industry and NIA on LinkedIn, where they share information, ideas, and leads. LinkedIn estimates that a new member joins every second and that approximately half its members are from outside the United States.

Where do these media fit in for you, your company, and the insulation industry?

  • For you, it’s a fun and free way to connect with family and friends from all over the world using Facebook, Classmates, MySpace, etc.
  • For your company, you can create a free “fan” page to promote your company’s products and services, or you can pay to advertise and have sidebar ads that will drive customers to you.
  • For the insulation industry, these media could provide a way to spread the word about how important our industry is in saving energy, protecting the environment, providing more efficiently operating plants, preventing the spread of fires in buildings, and noise control.
  • For NIA, these media could also provide means to promote events, training classes, and the benefits of membership in the association.

The Future of Online Marketing

These social sites are here to stay and are growing in members every second. Facebook was formed in early 2004 and now has over 65 million members. LinkedIn was formed in 2003 and now has over 47 million members.

A primary rule of marketing is: be where your customers are. As more and more of your customers spend time on social media, you’ll need to be able to reach them there. You can build loyalty among your customers by making them feel part of your world—and vice versa. Spending a few minutes every day posting updates or reviewing comments can pay off in the long run.

Remember: it’s free and fun, so don’t miss out.

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OSHA Controlling Employer: New Decision

The Occupational Safety and Health Review Commission (OSHRC) has just issued its decision on review of the Summit Contractors case. The Commission’s previous decision was overturned by the Eighth Circuit Court of Appeals in its decision in March 2009.1 The appellate court remanded the case to the OSHRC to review its prior ruling.

In its recent decision issued on July 27, 2009, the OSHRC reversed its prior decision and affirmed the serious safety citation issued to Summit Contractors under the controlling employer policy of OSHA. In reaching its decision, the OSHRC adopted the language of the appellate court that Section 1910.12(a) of the Code of Federal Regulations “is unambiguous in that it does not preclude OSHA from issuing citations to employers for violations when their own employees are not exposed to any hazards related to the violations.”2

Of concern are some unanswered questions. To address these we must first look at the facts in Summit. Summit Contractors had a contract with the owner of the property and with its subcontractor, All Phase Construction, Inc. In the contract with the owner, Summit was assigned “exclusive authority to manage, direct, and control” the construction. Summit’s subcontract with All Phase indicated that “control of the Work Schedule, use of the site, and coordination of all on-site personnel will be performed under the complete direction of” Summit’s staff. The subcontract also provided different remedies for Summit to exercise against All Phase for any failure to comply with OSHA. Finally, Summit had four of its own employees on the site at the time of the inspection.

Initially, the OSHRC concluded that Summit could not be held responsible for the employees of All Phase because Summit’s employees, even though they were on site, were not exposed to the hazards to which All Phase employees were exposed. The OSHRC also concluded that Section 1910.12(a) of the Code of Federal Regulations only required employers in the construction industry to be responsible for the safety of their own employees and that OSHA could not establish a policy to abrogate that limitation. Following the decision of the appellate court, the OSHRC concluded that the controlling employer has responsibility for exposure to the hazard of workers employed by other companies, even if its own employees were not exposed.

The appellate court concluded that under Section 1910.12(a), OSHA “may issue citations to general contractors at construction sites who have the ability to prevent or abate hazardous conditions created by subcontractors through the reasonable exercise of supervisory authority regardless of whether the general contractor created the hazard…or whether the general contractor’s own employees were exposed to the hazard.”3 The OSHRC concluded in its decision on remand that the Secretary’s controlling employer citation policy provides this level of protection. It defines a controlling employer as one who has the general supervisory authority over the worksite, including the power to correct safety and health violations itself or require others to correct them.

In the Summit case the OSHRC found that Summit’s contract assigned it the exclusive authority to manage, direct, and control the construction, as well as the responsibility to comply with safety laws and to take safety precautions for all employees on site. The OSHRC also found that Summit had required corrective action regarding safety violations by All Phase employees in the past. In the end, because Summit admitted that it had knowledge of the cited conditions, it failed to take reasonable steps and measures necessary to obtain abatement.

It appears that the decision of the OSHRC, when combined with that of the Eighth Circuit, has tightened the concept of the controlling employer and made it, more than ever, a matter of contract. What do we take from these decisions?

First, if you are a general contractor or construction manager on a project, carefully read the language of your contract to determine your responsibility for safety on the job. Clearly, if you have taken any responsibility to ensure safety on the jobsite in your contract, you will be held accountable by OSHA as long as you have any employees on the job site. What remains unanswered is whether, depending on the strength of the contract language, you can be held responsible for always having someone on the jobsite to ensure safety. In other words, can you take on a level of responsibility in your contract with the owner or the general contractor or the construction manager that makes you responsible for ensuring that any contractor’s employees are not exposed to hazards at any time, whether or not you have someone on the site?

Neither decision goes this far, but it may be only a short step. The lesson to be learned is: Know what responsibility you are assuming for safety before you sign a contract. Try to avoid unreasonable extensions of responsibility for safety. Be sure that if you have undertaken the responsibility for ensuring the safety of other companies’ employees, you have also been given the necessary authority.

Second, if you are a subcontractor, this decision can impact you if you have language in your subcontract about your responsibility for the safety of the employees of subcontractors who may work under you. Again, know what you are signing and what responsibility you are assuming when you sign the contract. If you have taken on a site safety responsibility for your work area and if you have other subs working for you, consider having someone on site to ensure safety of all employees for whom you may have some responsibility.

Third, if you are a subcontractor, know that the fact that the general has controlling employer responsibility DOES NOT relieve you of responsibility for the safety of your own employees, whether or not you created the hazard to which they may be exposed.

We are all concerned about safety; therefore, this issue should not be about getting out of ensuring safety on the jobsite, but about knowing your safety responsibilities and ensuring you have the tools to carry them out. So, when you negotiate your contracts, give safety responsibility more than a passing glance. Remember, this may not be just about OSHA; these regulatory responsibilities can be used to determine your liability in other forums.

Notes

  1. Solis v. Summit Contractors, Inc., 558 F.3d 815 (8th Cir. 2009).
  2. Summit, 558 F.3d at 825.
  3. Summit, 558 F.3d at 818.

Disclaimer: This discussion is generalized in nature and should not be considered a substitute for professional advice. Readers are advised to contact counsel before embarking on any of the options discussed in this article.

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Managing Your Company’s Reputation with Social Media

While many insulation businesses are evaluating the promotional power of social media—sites where users swap videos, online communities where groups engage in discussions, and blogs where the mighty and the meek opine—they also need to grasp its perilous darker side. Unfortunately, careless exposure has the ability to damage or destroy a business.

Domino’s Pizza learned this lesson the hard way earlier this year when a video depicting its employees smearing mucus on sandwiches was posted—and went viral—on YouTube (www.youtube.com). The site is the number one destination for swapping and talking about videos and features virtually every subject matter imaginable.

The Domino’s video, a staged joke made by two of its employees with nothing better to do, was tossed up on YouTube as a lark. For Domino’s, it was anything but.

Within days, the reputation tarnisher was viewed more than a million times, became a topic du jour on the micro-blogging service Twitter (www.twitter.com), and showed up numerous times in the top 10 Google search returns for keyword “Domino’s.”

“It sickens me that the actions of two individuals could impact our great system,” says Patrick Doyle, Domino’s president, who made his apology about the incident in a video Domino’s posted on YouTube.

Bruce Arnold, founder of Caslon Analytics (www.caslon.com.au), a Web marketing firm that counsels clients on managing company reputations online, says no company and no industry is safe from people with bad intentions on social media sites like YouTube, Facebook (www.facebook.com), MySpace (www.myspace.com), and the like.

“Some (posts) are little more than a repository for juvenile humor: graffiti, comments that ‘X’ is the devil, animations of creatures urinating on the corporate logo,” Arnold says. “Others feature detailed and sometimes persuasive critiques, including ‘insider’ documentation, and are associated with newsgroups.

“Financial analysts have attributed falling share prices to particular campaigns, noting that some domains claim a regular audience of 20,000 to 50,000 visitors, and that information on those sites has been accepted and echoed by the mainstream media.”

For insulation businesses, the take-way from Domino’s rude awakening is to proactively develop a reputation management strategy before the horror occurs and be ready to pounce when a silly joke—or worse—threatens to go viral. According to an April 2009 study from the Aberdeen Group, companies that embrace a reputation management strategy not only guard their brand against ne’er-do-wells, but they’re also much more likely to increase shareholder value compared to companies that ignore the social media space. Specifically, the report, “Brand Reputation Management: Using Online Monitoring to Protect the Company’s Crown Jewels,” found that companies with top-notch reputation management plans are more than 12 times more likely to increase shareholder value year-over-year than their tone-deaf counterparts.

“The benefits of online monitoring and analysis in the context of brand reputation management are clear and compelling,” says Jeff Zabin, the report’s author and a research fellow at Aberdeen.

Such a monitoring strategy, Web marketing experts say, needs to encompass social media in all its forms, including video sites like YouTube, social networking sites like Facebook and MySpace, and micro-blogging services like Twitter. (With Twitter, users communicate with one another in short bursts of text exchanged over the Web.)

Fortunately, there are a number of tools and service providers companies can use to protect brand image.

Do It Yourself

One of the easiest ways to get a general idea of what’s being said about your company on the Web is to monitor the major online communities, mailing lists, and blogs—all places where those looking to shape public opinion tend to congregate. The quickest way to begin the process is to sign up for Google Alerts (www.google.com/alerts), which enables you to track mentions of your business name, including mentions on YouTube.

You’ll also want to sign up for an account on Twitter, which you can use to monitor the posts there. Signing up for an account will also prevent someone else—including a dissatisfied customer—from grabbing your brand name and masquerading as a company representative.

One caution: if a company representative does begin to post on Twitter for your brand, make sure he/she knows the neighborhood. Essentially, you need to be transparent. You can’t hide. You can’t be disingenuous. If you’re not transparent, you’ll be found out, and there will be a backlash. You only get one chance to be who you really are.

Meanwhile, posts on Web blogs—the modern-day answer to personal journals—can be tracked with the free blogwatch service Technorati (www.technorati.com), which has been around since the blog phenomenon went large. It does a great job of monitoring what’s being said and keeping track of newly created blogs.

Boardtracker.com, a free service that monitors buzz on the countless discussion boards on the Web, is also an essential do-it-yourself tool.

It’s also a good idea to keep tabs on anything that may be cropping up about your company on podcasts, the grassroots, often homemade radio-show type productions beginning to crop up on the Web. PodcastAlley (www.podcastalley.com) offers an excellent overview of what’s going on in that space.

You may also want to check out other free reputation management tools:

Reputation Management Service Providers

If do-it-yourself daily monitoring becomes overwhelming, look into more comprehensive services:

  • BlogSquirrel by CyberAlert (www.cyberalert.com/blogmonitoring.html) will monitor blog postings containing your company’s name and/or other keywords and send you daily reports via e-mail. The service also offers tools to ensure you’ll receive fewer alerts about posts you consider irrelevant. Plus, you’ll be able to maintain a “digital clip book,” which you can refer to when necessary.
  • Webclipping.com, a long-established service, will track what’s being said about your company on the Web, keep you apprised of competitors’ activities, and send out alerts about copyright or trademark abuses.
  • Nielsen Online (www.nielsen-online.com) combines the auto-monitoring of blogs with human analysis. One especially interesting feature: its software is programmed to include analysis of “natural language,” so you’ll be sure to find positive or negative posts about your company, even if those posts are rendered in poor grammar.
  • Factiva Insight: Reputation Intelligence (www.factiva.com/factivainsight/reputation) monitors what’s going on with your brand across virtually all media. Offered as a joint venture of Dow Jones and Reuters, Factiva tracks company mentions in mainstream media (radio and TV) and on Web sites, blogs, and discussion groups. The firm’s “reputation analysis tool” automatically sifts through all mentions of your company and churns out reports about potential problem areas. Reputation Intelligence can also portray such data in graphical form for easier dissemination companywide.
  • Radian 6 (www.radian6.com).
  • Visible Technologies (www.visibletechnologies.com).

However you choose to do it, you need to be monitoring social media. It’s free to sign up, and you can’t afford not to be part of the conversation.

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Managing Different Generations in the Workplace

Miscommunication and conflict across generations can cost your company thousands of dollars in lost time and employee turnover. In today’s economy, the skills and talents of every single employee are valuable. Your people are a vital resource in making your company successful. In most companies, one of your largest expenses is payroll, so it makes sense that you would do everything you can to understand your work force and learn how to recruit, develop, and retain good people directly affecting your bottom line. The key to harnessing the talents of each generation is clarifying common goals and objectives while teaching each to respect and value the others’ contribution. The central question is how to do this!

The four generations in the work force today are Radio Babies (born 1930–1945), Baby Boomers (born 1946–1964), Generation Xers (born 1965–1976), and Generation Ys (born 1977–1990). However, conflicting perceptions, worldviews, experiences, and communication styles can damage their ability to work together effectively. Wise employers understand the differences across generations and tailor their employee recruitment and retention programs to meet these different needs.

The recruiting message that draws employees into your company is different for each generation. Radio Babies often can be enticed back into the workplace with flexible hours and benefits. The benefits they are interested in are long-term care insurance, employee assistance programs that provide grief counseling, and medical benefits. Many Baby Boomers are locked into paying for children in college and parents in nursing homes, so it is no surprise that salary is the most important factor for most of this generation. For Gen Xers, it is the entire package, not just the money, that brings them into the organization. They want to know how much they will make combined with what time off they will have and what health-care programs the company has. Work-life balance is very important to them. They also want growth opportunities. They are not title chasers but they want to expand their knowledge, skills, and abilities. So strong training programs are a must for them. Generation Ys want a good salary, friendly and casual work environment, and growth opportunities, but it’s not all about the money for them. The top reasons they leave a company are that they feel their employer didn’t value their work, there was a lack of training, or they could have more responsibility elsewhere. They need to know how their jobs are important to the company’s success.

In a survey conducted by the Society for Human Resource Management, 40 percent of human resource professionals reported observing conflict among employees as a direct result of generational differences. The largest source of conflict is the debate about work ethic. Radio Babies worked hard out of necessity going through the Great Depression and World War II. They taught the Baby Boomers this work ethic. Both find it hard to understand the younger generations’ demand for work-life balance. They feel these generations should pay their dues, but younger employees have learned from watching their parents and grandparents that they need to take control of their work schedules. This does not mean Gen Xers and Gen Ys don’t care about their work. They are more concerned with results than doing things in traditional ways. Other differences that give rise to conflict are loyalty, respect, technology, training, and dress code.

It is important to understand how each generation responds to conflict. Radio Babies tend to respect authority and would not confront a manager even if they didn’t agree. Baby Boomers want to bring a team together but allow the manager to make the final decision. Generation Xers are independent and will ignore older co-workers’ efforts to tell them what to do. They will tell a co-worker in a straightforward way if they have a problem. Generation Ys are more casual and relaxed. They do not respond well to conflict. They want everyone to be friends in the workplace. Training on directly confronting issues and people in a positive way is necessary for many in this generation.

There are ways for managers to give feedback to employees that will minimize conflict. For Radio Babies, let them know you appreciate their effort and explain how their change in behavior will help the company. For Baby Boomers, emphasize that you need them for the team success and set a team plan for changing behaviors. For Gen Xers, you must be straightforward, honest, and focus on results. For Gen Ys, explain how their work affects the company. Companies have to learn to focus on results instead of being restricted to traditional ways of handling these issues.

Training and discussing generational differences can also help minimize conflict. Employees need to understand why other generations feel the way they do and learn how to identify common myths and misconceptions. Managers must recognize these differences when communicating with employees so that they use a method that can effectively get the desired results.

In closing, the three keys to effectively managing a multi-generational work force are to tailor your recruitment and retention messages to appeal to the interests and needs of each generation, understand and draw upon each generation’s unique perspective, and value a generationally diverse work force.

This article originally appeared in The Contractor’s Compass and is reprinted with permission of the American Subcontractors Association and Naylor, Inc.

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Legally Speaking: Don’t Discuss Your Wages

Did you know that it violates the law if your company has a policy or practice that forbids your employees from sharing their “confidential” compensation information? It’s really true.

The National Labor Relations Board (NLRB) has ruled repeatedly that confidentiality provisions in employee handbooks and other written policies forbidding the discussion among fellow employees and others of wages, benefits, and conditions of employment violate Section 8(a)(1) of the Labor Act. This includes discussions of such things as wage reviews, pay grade levels, wage increases, and overtime. It’s called the Lafayette Park Hotel doctrine. Even non-union companies are regulated by the National Labor Relations Act administered by the NLRB and subject to this rule.

The NLRB’s rationale is that the Labor Act guarantees to all employees the right to speak out, engage in protected concerted activity, and to undertake union organizing efforts. These organizing activities would most likely include a discussion by pro-union employees with union representatives about current wages and benefits at their company. Therefore, the NLRB believes a company rule like this has a “chilling effect” on employee rights, even if the company has no anti-union animus. There are even a few cases ruling that an ambiguous clause merely stating that “the company’s business and documents are confidential; disclosure is prohibited” can violate the law because the rule could be interpreted by employees to encompass wage and benefit information. But this is not the majority rule.

So, be careful about what you say and publish that may limit the rights of your employees to speak out about wages, hours, and conditions of employment. Remember that if you terminate an employee for violating such a rule, the company may very well be ordered to reinstate the employee with back pay and benefits, and the company will be required to post a public notice admitting liability and promising not to violate the law ever again.

Disclaimer: This discussion is generalized in nature and should not be considered a substitute for professional advice. Readers are advised to contact counsel before embarking on any of the options discussed in this article.