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Nuclear Energy

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Earl R. Hall Executive Director – Syracuse Builders Exchange

In 2019, the Climate Leadership and Community Protection Act (CLCPA) was passed by the New York State Assembly and the New York State Senate, then signed into law by former Governor Andrew Cuomo. This legislation requires New York State to reduce greenhouse gas emissions by 40% in 2030, and 85% by 2050 from 1990 levels. In addition, the CLCPA requires establishing a 100% clean electrical grid by 2040.

Recently there has been a renewed interest in nuclear energy to supplement other clean and renewable technologies such as wind, solar and batteries. Elected officials and others engaged in the New York energy industry have realized it is impractical to reach the above noted requirements within the CLCPA without nuclear energy.

With increased demand from large manufacturers, industrial owners, future data centers associated with Aritificial Intelligence (AI) and other rate payers, nuclear energy is required to support those important industries and technologies that require clean, reliable, on-demand power 24/7/365. Micron alone will require 400 megawatts for each of the five potential semiconductor manufacturing facilities in Clay, NY. To put that into perspective, it would take 12,000 acres of solar panels to produce 100 megawatts of power.

Nuclear energy has proven to be the most effective and efficient energy source to assist in replacing fossil fuels. The positive characteristics of nuclear energy include:
• Renewable
• Low-carbon emissions and
footprint (four times less than solar)
• Safe and reliable
• Small land footprint
• Clean and efficient

Oswego, New York is home to the largest producer of nuclear energy in New York State. The four nuclear reactors along Lake Ontario (one in Wayne County, three in Oswego) produce 20% of the electricity in the state of New York. The Oswego County community has embraced the nuclear industry over the past 40 years, enjoying the benefits of excellent paying jobs and associated economic development.

The nuclear industry supports nearly half a million jobs in the United States and contributes an estimated $60 billion to the U.S. gross domestic product each year. Nuclear plants can employ up to 700 workers with salaries that are 30% higher than the local average. They also contribute billions of dollars annually to local economies through federal and state tax revenues.

Nuclear energy technology has transformed industry over the past few decades, with today’s nuclear power plants being smaller, safer, and more efficient than their predecessors from the 1980s. Nuclear energy will ensure affordable, safe, secure, and reliable access to electricity services for New York State’s residential and business consumers, at fair and reasonable rates, while protecting the natural environment.

Advanced nuclear development has led to innovative technologies and efficiencies associated with various Small Modular Reactors (SMR). SMR technologies and capabilities provide different reactors for different solutions. There are grid scale reactors, industrial scale reactors, high temperature gas reactors and micro-reactors which may be deployed in the future to solve unique challenges in society.

Nuclear remains the largest source of clean energy in the United States. It generates nearly 800 billion kilowatt hours of electricity each year and produces more than half of the nation’s emissions-free electricity. This avoids more than 470 million electric tons of carbon each year, which is the equivalent of removing 100 million cars off the road.

To achieve New York’s goals as a leader in economic development, including hosting future data centers and supporting the nation’s most robust semi-conductor manufacturing industry, the Public Service Commission and elected officials in the State of New York must include nuclear energy as an additional clean, renewable energy solution. Now is the time to adopt new, advanced nuclear development technologies to meet immediate and future energy consumption demands of the State of New York, and to comply with the overly aggressive requirements within the 2019 CLCPA.

Sources:
• United States Energy Department
•NYS Public Service Commission
•NYSERDA Future Energy Economy Summit
•NYS Blueprint for Consideration of Advanced Nuclear Energy

Workers’ Compensation Rates Continue to Defy Inflationary Pressures

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Steven Bell Vice President of Underwriting and Sales, Lovell Safety Management Co., LLC

Despite the on going inflationary environment, workers’ compensation costs are set to decrease for the eighth consecutive year on October 1, 2024. Overall, loss costs and resulting rates will drop by an average of 9% across all class codes. However, this change may vary depending on specific class codes, with some seeing increases and others decreases, but the overall net decrease averages 9%.

During this same period, workers’ compensation insurance carriers have enjoyed several profitable years. Their profitability is typically measured by the combined ratio, which compares total expenses—including losses and operational costs—against premiums earned. The chart below highlights the accident-year combined ratio performance in the New York State (NYS) workers’ compensation market, consistently showing combined ratios below 100%.

Accident Year Combined Ratios

Source: NYCIRB State of the System 2023

Understanding the Combined Ratio

So, what does this mean? For every $100 of premium earned in 2023, carriers paid out $90.10 in expenses and losses, leaving the remaining 9.9% as underwriting profit. It’s worth noting that the combined ratio does not account for investment interest income, which can be significant for workers’ compensation due to the long-tail nature of claims. Workers’ compensation has been a reliable profit center for many carriers, thanks to factors such as reduced claim frequency and severity. Moreover, wage growth during this period has increased premiums for carriers, further contributing to their profitability.

Declining Rates Amid Carrier Profitability

While insurance carrier profitability has remained stable, workers’ compensation rates have steadily declined. Since 2017, rates have cumulatively decreased by an average of 53.9% across all class codes. In the same timeframe, wages have increased by approximately 34.5%. Although rising wages have offset some of the rate decreases, employers who haven’t seen corresponding wage growth should have experienced a reduction in their workers’ compensation costs. The ongoing profitability of the market, paired with decreasing rates, may seem counterintuitive, but the key question for many employers is whether these benefits have translated into lower overall costs for them.

Safety Groups: A Path to Profit-Sharing for Employers

For employers looking to capture the benefits of underwriting profits, there are alternatives in the fully insured market that offer low-cost, low-risk options. One such program is the workers’ compensation safety group, which operates with a different model that prioritizes the financial well-being of participants.. A safety group is a collection of businesses who are in the same trade or industry. The members of the safety group are homogeneous or have similar work conditions, safety hazards, and job risks.

Employers with similar operational hazards are grouped together to reduce their workers’ compensation costs, spreading the risk from the individual policyholder to the entire group. The premiums of the group are pooled together, while the group works to improve safety and limit injuries. These fully insured, not-for-profit programs compile members’ annual workers’ compensation premiums and then deduct the costs of claims plusand administrative expenses and charges are deducted. All safety groups maintain a contingent balance to fund future increases of on–going claims. Any money left over after accounting for these expenses is available for payment of a dividend.

The Benefits of Safety Group Programs

For businesses in New York State, joining a safety group program is a proven strategy for reducing insurance costs and ensuring excess premiums are returned as dividends. These programs incentivize employers to maintain safe working environments, fostering a culture of prevention that benefits both employees and the bottom line. The potential savings in a safety group depend on how the group is managed and its combined ratio. For members of Lovell Safety Management’s 13 industry-specific safety groups, over $1.24 billion has been returned to participants in the form of dividends to date.

A Proven Path Forward

The workers’ compensation rate decrease on October 1, 2024, marks yet another chapter in an eight-year success story for the industry. Workers’ compensation safety groups, in particular, stand out as a model for how businesses can thrive under a well-managed insurance program. While insurance carriers have benefited from lower rates and improved profitability, participants in workers’ compensation safety groups have shared directly in the financial rewards, enjoying both reduced rates and returned higher dividends. As safety groups continue to prioritize safety and financial transparency, their members can look forward to sustained savings and ongoing financial returns for years to come.

For more information on Workers Compensation Rates or similar issues you may contact Lovell directly at 1-800-556-8355 or visit online at www.LovellSafety.com.

Understanding Contract Surety Bonds

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By Ron Metcho, Surety Specialist, OneGroup

In the realm of construction and development, contract surety bonds are indispensable tools that ensure the successful completion of projects. Contract surety bonds can be categorized into four primary types:

1. The Bid Bond – ensures that a bidder will enter into the contract and provide the necessary performance and payment bonds if awarded the contract.

2. The Performance Bond – guarantees the project’s completion according to the contract’s terms and conditions.

3. The Labor & Material Payment Bond – ensures that subcontractors and suppliers are compensated for their work and materials.

4. The Subdivision Bond – guarantees that developers will complete improvements in line with local government specifications.
Underwriting contract bonds is a meticulous process based on three critical factors:

1. Character – involves evaluating the business and personal background of the company principals, including any prior bankruptcies.

2. Capacity – assesses the organization and key personnel, as well as the type, size, and location of previously completed projects.

3. Capital – reviews fiscal year-end financial statements prepared by a third-party financial professional.
For contracts generally valued at $1 million or less, the underwriting process is simplified. This transactional bond underwriting relies on the personal credit history of the construction company principals, without requiring company financials. The bond rate typically ranges from 2.5% to 3%, and personal guarantees are required from owners and their spouses. This process can apply to a single contract or multiple contracts totaling $1 million or less.

For larger contracts, a more detailed underwriting process is followed. The underwriting process involves an evaluation of character, capacity, and capital. It includes a detailed assessment of the business and personal background of company principals, an in-depth evaluation of the organization and key personnel, and a comprehensive review of financial statements, including the quality of presentation and the basis of revenue recognition.
Specific financial analysis factors under capital underwriting considerations include the company’s history of profitability, working capital, corporate equity, total debt to equity, surety credit limits, and the availability of bank credit.

The surety industry plays a vital role in the construction sector, emphasizing its importance in risk management and insurance. A thorough understanding of contract surety bonds, their types, and the detailed underwriting processes involved is essential for anyone involved in construction and development projects, ensuring they are well-equipped to navigate the complexities of surety bonds

Ron Metcho is a surety specialist at OneGroup with over 40 years of experience and serves as a resource to organizations for all surety-specific questions and concerns. OneGroup has a team of specialists, dedicated to risk management and construction industry specific insurance issues. Our team takes great pride in being at the forefront of industry trends and assisting others where we can.

For more information please contact Brett Findlay, Senior Vice President Business Risk Specialist at
(315) 280-6376 or BFindlay@OneGroup.com

Potential to Deliver Services to Contractors in the Mohawk Valley

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Earl R. Hall Executive Director – Syracuse Builders Exchange

In July 2023, representatives of the Mohawk Valley Builders Exchange (MVBE) Board of Directors, including their President, met with me regarding a potential merger of MVBE into the Syracuse Builders Exchange (SBE). That initial meeting has resulted in 14 months of due diligence by both MVBE and SBE as both organizations evaluate what is in the best interest of their Associations and the regional construction industry which they serve.

On September 10, 2024, the MVBE Board of Directors voted to merge with SBE, with SBE being the successor organization. Prior to that, the SBE Board of Directors met with legal counsel, and voted to approve SBE’s merger proposal to MVBE, merger agreement with MVBE and to continue the merger and due diligence process.

To legally effectuate a merger of two not-for-profit Associations in the state of New York, and to comply with both Associations’ By-Laws, the following must occur:


• Proper due diligence;

• Proper calling of membership meetings by both Associations;

• Approval by each Associations’ members;

• Approval by each Associations’ Board of Directors;

• Approval by the NYS Attorney General’s Anti-Trust Bureau

In the weeks ahead, SBE will provide members with a formal Membership Meeting notice, advising of the meeting purpose, date, time and location, and the ability to vote either in person or via written proxy. The MVBE will do the same with their member employers.

Although SBE has approximately 40 member employers located in the Mohawk Valley region, SBE remains extremely excited about delivering important industry services to all construction industry employers throughout the Mohawk Valley region. Many argue the Mohawk Valley is inclusive with Central New York, which is the region SBE’s By-Laws identify as the geographic footprint of SBE.

The SBE staff is prepared for this next chapter of the Association, which dates back to 1872, and well equipped to begin delivering services to construction industry employers throughout the Mohawk Valley effective January 1, 2025.
As a fiduciary Officer of SBE, it remains my opinion, and that of the SBE Board of Directors, merging MVBE into SBE is in the best interest of the Association and the member employers which SBE serves. In addition, and in accordance with SBE By-Laws, such a merger is in the best interest of the regional construction industry and the public which SBE serves.
For the above-noted reasons, I recommend SBE member employers vote to approve of the MVBE merger into SBE. The SBE Board of Directors and I look forward to working collaboratively with our friends and colleagues on the MVBE Board of Directors in our effort to achieve a January 1, 2025 merger

I welcome feedback from our members and remain prepared to address any questions or concerns. Feel free to email me at ehall@syrabex.com or call (315) 437-9936.

A&M Graphics: Revolutionizing Visual Spaces in CNY and Beyond

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By Elizabeth Landry

In high school, Matthew Ferguson was deeply invested in art, taking every available class in Auburn, NY. Initially aiming to become an art teacher, his path shifted when he began working at a local sign shop. Ferguson’s experience in the sign shop later combined with a short career in sales and managing wireless company stores like Verizon, where he delved into technology during the dawn of the smartphone era. The result of Ferguson’s varying experience was a fused passion for art and technology, which, along with a knack for problem-solving and customer service, led him to where he is today: Creative Director and President of A&M Graphics, a company he helped found in 2009 and of which he has been the sole owner for the past four years. 

Located in Auburn, A&M Graphics has carved out a niche in what the team has dubbed “Premium Graphic Environments,” offering a full range of products and services from Vinyl Wall Murals and Wall Coverings to Dimensional Letters and Logos, ADA and Wayfinding Signage, Custom Displays and Exhibits, 3M DI-NOC Architectural Films, and 3M FASARA Window Films. On the other end of A&M Graphics’ business, the team has also proved themselves as the premier Vehicle Wrap and Fleet Graphics provider in the area. No matter what kind of service the team at A&M Graphics is providing, the central goal is always the same: to provide the highest quality of design, printing, fabrication, and installation as illustrated in their tagline: “design. create. deploy.”  This tagline, along with the company’s logo, was recently trademarked by Ferguson and is all fueled by passion, creativity, and strong relationships with fantastic clients. According to Ferguson, this has been true since the very beginning of the business, which will be celebrating 15 years this coming fall. 

“Since day one, we’ve forged a reputation for not just providing quality work but also continuing to set the bar for top levels of quality and service in what we do and what we offer. We’ve continued to build relationships based on these values, and that has really gotten us to where we are today,” said Ferguson. 

Crafting Impactful Visual Experiences

Many of the different mixed-media services A&M Graphics provides come together to form premium graphic environments that transform entire spaces, including office spaces and whole campuses, and significantly boost a brand’s visual communication. Ferguson explained how the creativity, expertise, and passion behind the team’s large-scale graphic installations play a large role in how the company sets itself apart from competitors. 

“We are so much more than just a sign shop or wrap shop,” Ferguson said. “We’ve really forged our own niche in the industry based on our passion for what we do with these premium graphic environments – centered around the creativity, time, and dedication poured into each custom project. Keeping the emphasis on creativity as part of our process and not just being a ‘feed the beast’ or ‘churn and burn’ kind of shop has always been our focus. We have definitely kept that credo the nucleus of our business.”  

Ferguson and his team recently completed several large-scale graphic installations for the Pall Corporation, a global leader in filtration solutions, at its Cortland and Long Island locations. The A&M Graphics team worked with the Pall Corporation to achieve a vibrant, high-impact space at both locations, which features a mixed-media timeline of the company’s history and legacy. Designed, printed, fabricated, and installed by Ferguson’s team, the projects took many hours of labor and weeks of creative, high-end graphic design work, ultimately achieving the Pall Corporation’s vision through the use of varying shapes and thicknesses of acrylics and the stand-out effect of the DryTac Polar Chrome material. 

Although the details and vision for custom graphic design projects can vary greatly from one client to the next, each premium graphic environment that A&M Graphics creates is intended to have a strong impact on those who enter the space. This aim remains true whether the space is intended to impress visiting clients or instill a sense of company culture with employees. Mike Durkin, Vice President of Client & Investor Relations for VIP Structures, which has been a client and partner of A&M Graphics in recent years, described how a similarly high-impact design with a very different strategy was achieved for a client in the healthcare industry.

“I toured the new Nappi Wellness Institute at SUNY Upstate Medical University, and in their MRI room, they have this panoramic image of the Adirondack mountains wrapping an entire wall that Matt and his team installed,” said Durkin. “Going to see a doctor and getting an MRI done can be nerve-wracking, but when you walk in the room and see this gorgeous image, I think it can really ease patients’ concerns – it gave me a sense of calm immediately. It’s such a better experience than walking into a room with a stale, blank white wall. A&M Graphics really listens and brings so much creativity into the solution to achieve the impact a client is hoping for. Their creativity, focus on what the client is trying to convey in the space, and delivery of a product that far surpasses expectations are what set Matt and his team apart from the rest.”

Upstate’s Nappi Wellness Institute is one of A&M Graphics’ marquee projects of the last few years. Led by project manager Todd LaFlamme, the team completed hundreds of wall murals, premium sign components, and art pieces throughout the five-story new construction in the heart of Syracuse. “SUNY Upstate and VIP Structures are two important relationships that we feel very fortunate to be able to service,” commented Ferguson. A&M Graphics also completed Wall Murals and Signage for VIP Structures’ new downtown home at “The Post.” 

Nationally Recognized for Excellence

Among A&M Graphics’ clientele are manufacturers, contractors, architects, healthcare organizations, and the higher education sector, and the team is often brought into larger organizations’ projects early during the formation of architectural plans to ensure direct involvement from the start and a smooth result. Having completed numerous projects over several years for Central New York-based organizations such as SUNY Upstate University Hospital and VIP Structures, A&M Graphics has also begun to receive interest from national and even global organizations due to Ferguson’s drive to achieve and maintain important quality standards. 

The company holds two certifications from 3M, which is considered the graphics industry leader and sets the highest bar of quality for graphic application businesses. Ferguson first earned A&M Graphics’ designation as a 3M Certified Graphics Company, which placed the company on 3M’s national registry, signifying that A&M Graphics is not only one of the best in the business but is fully insured and abides by certain business practices and a code of ethics. Later, Ferguson trained, tested, and received 3M’s Endorsed Architectural installer certification, which deems A&M Graphics a certified installer for 3M’s architectural line, including DI-NOC architectural finishes, glass finishes and window films. Both certifications were achieved at 3M’s global headquarters in St. Paul, Minnesota and they put A&M Graphics on the radar of national organizations that only look to 3M’s national registry for companies they can trust to provide top-quality, reliable graphics services. For Ferguson, pursuing these certifications was non-negotiable. 

“We’re nationally connected with industry peers and always keeping our finger on the pulse with the latest and greatest technologies, materials, and techniques. We’re constantly finding the best methods and products to bring back home to our clients, and being 3M Certified is a big part of that, so obtaining the certifications for our business was very important. We pursued and earned these certifications, and they really show that A&M Graphics is committed to being among the best in our industry,” Ferguson explained.

Ferguson has now started taking this a step further, recently participating in industry training demonstrations for different manufacturers in Boston and Chicago.  

People at the Heart of the Vision  

Another way A&M Graphics is naturally expanding beyond Central New York is through Ferguson’s involvement within his industry on a national level. Whether by attending trade shows or simply connecting with his peers around the country, Ferguson expressed a passion for bettering the graphic industry at large. 

“I’m very involved in my industry on a national level – not just for myself and my business, but as a way to advocate for our industry as a whole. I’m trying to help my peers both locally and nationwide by making sure we keep moving the goalposts as the industry expands and helping to grow it even further,” stated Ferguson. 

Building relationships with industry peers in different parts of the country mirrors Ferguson’s value of strong relationships with both clients and members of his team, who he calls the “DREA&M TEA&M.” For Ferguson, it’s those genuine relationships and pride in his team’s excellence that really drive his passion for the work he does every day. 

“At A&M Graphics, we’re all about relationships,” Ferguson emphasized. “Whether that’s our hometown relationships or the accounts we service nationwide. Everything is handled the same way – the right way – and we really enjoy the relationships we’ve forged and that we continue to forge. The relationships I’ve made with my amazing staff, who are more like family to me, are also what I enjoy the most about coming to work each day. They really are a dream team because they’re all professionals who have worked at a high level in the industry before we all came together and who work hard to produce spectacular outcomes that blow our clients’ expectations away.” 

Future Expansion and a New Location 

With great relationships to build on and new ones to be made, the future looks bright for A&M Graphics. The exciting next phase for the business will be bolstered by a brand-new facility being built in partnership with VIP Structures that is planned to be completed in the latter part of 2024. The new space will more than double A&M Graphics’ current square footage, which will allow the company to add additional team members as well as increase the amount of equipment in fabrication and installation areas. The facility will also sit on a plot that allows for future expansion. Ferguson stated that the new location will be an important next chapter for the company. 

“The new space is going to be really impressive, and it will be unlike anything currently in our area. I couldn’t be more excited about where the company is headed and about what the new space will allow us to do,” said Ferguson. 

Certainly, with a leader like Ferguson and a focus on providing high-value premium graphic environments for its clients, A&M Graphics will continue to find success in the future. As Durkin described Ferguson, “He’s a natural-born leader, and it’s clear that his team is all-in on delivering his vision for the company. With Matt and his team, there really is an art form to the design, the production, and the installation they provide. They really do care about the impact of the end product and not just mass-producing for the sake of closing a product order. That’s why I’m really excited to continue to work together and see what we can accomplish.” 

NONCOMPETE AGREEMENTS BANNED NATIONWIDE

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By: Monika Herrera, Sheats & Bailey, PLLC

FTC BAN

On April 23,2024, the Federal Trade Commission (“FTC”) issued its final ruling banning noncompete clauses across the United States. The FTC’s new rule comes into effect September 4, 2024. 

The FTC defines noncompete clauses as follows: a term or requirement in an employee contract that forbids, fines, or prevents a worker from (i) looking for or taking a job in the United States with another individual, where the job would start after the employment that contains the term or condition ends; or (ii) continuing to run a business in the U.S. following the conclusion of the job that contain the term or condition.       

Prior to this act noncompete clauses acted as a barrier to shield businesses from employees who might seek to exploit confidential information gained through their employment to start a competing business.  Noncompetes were common practice across many industries to protect their trade secrets and to keep a competitive advantage. The FTC’s new rule strips businesses of this protection.

The FTC’s ruling bans new noncompetes for all workers including senior executives and invalidates prior noncompetes for all workers, except senior executives. Existing noncompetes for senior executives remain enforced. The FTC defines senior executives as employees that earn at least $151,164 and are in policy making positions. Policy making position refers to a business’ president or chief executive officer or officer equivalent with final authority to make policy decisions over the enterprise such as restructuring, company expansion through mergers or acquisitions, and resource allocation.

In addition, noncompete agreements entered into by a person pursuant to a bona fide sale of a business entity are exempt from the ban by the FTC. According to the FTC, a bona fide sale is one in which the seller has a reasonable opportunity to negotiate the terms of the sale and is made between two independent parties at arm’s length. State law will control the noncompetes permitted by the bona fide sale exception.

IMPACT ON CONSTRUCTION BUSINESS

The construction industry relies on skilled talent and strong relationships. The FTC’s new rule is broad and applies to all employees and independent contractors.  Noncompete clauses have allowed contractors to protect their proprietary information and methods, things like bidding practices/formulas and project management techniques.

Contractors who relied on noncompete clauses to prevent workers from leaving the company and utilizing the information gained while working at the company must now find alternative ways to protect confidential information.

The ban on noncompetes could leave contractors vulnerable to the sharing of their valuable information regarding customers and business development strategies. To stay ahead of the curve companies should look into alternative strategies for protecting proprietary information. Intellectual property protections such as trade secrets are legal tools for protecting valuable information. In order to satisfy trade secret requirements businesses should consult with an attorney to enact the necessary measures.  

Although noncompete clauses are no longer valid there are other restrictive covenants that can be used.  A non-disclosure or non-solicitation agreement can still protect certain aspects of the business.  A non-disclosure agreement keeps workers from revealing confidential information learned through their employment to other companies, but it does not prevent them from quitting to work for a rival company or starting their own business with that knowledge in mind.  A non-solicitation agreement prohibits an employee from leaving the company and taking other employees or clients with them after their departure. Both NDA’s and non-solicitation agreements can lessen the harm caused by the FTC’s new rule.

Businesses that wish to safeguard themselves moving forward should consider adding these kinds of clauses to their employee contracts and handbooks.  Consult an attorney to guarantee compliance with the new rule and prevent such revisions from appearing as a noncompete.  

MOVING FORWARD

In order to be compliant with the ruling, employers must provide clear notice in writing to their employees that they are no longer bound by noncompetes by September 4, 2024, and should remove noncompete clauses from all employment documents. There is a lot of resistance from companies and business groups to the FTC’s authority to remove all active noncompete agreements from millions of employee contracts. There are currently two lawsuits pending, one of which is from the U.S. Chamber of Commerce to contest the enforceability of the new rule.

At this point in time businesses should monitor the progress surrounding the ruling and whether a court will delay its enforcement. In the meantime, employers should understand how this rule affects their businesses and seek protective measures.   

 

For more information or assistance contact Sheats & Bailey, PLLC, Tel: (315) 676-7314, www.TheConstructionLaw.com.

 The information provided in this article is not intended to serve as specific legal advice for any particular situation. Competent legal and experienced counsel should be consulted.

Prevailing Wage – What Do I Need to Know?

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Lori A. Beirman, Director of Audit Quality, Dannible & McKee, LLP

Micron Technologies is slated to build a semiconductor fabrication facility in Onondaga County. The project may receive, among other things, up to $5.5 billion in tax incentives from Albany’s “Green CHIPS” program. This program requires construction projects to comply with prevailing wage rules.

Prevailing wage laws are designed to level the playing field for local workers. These laws apply to public projects and require contractors to pay most of their workers a set minimum wage of no less than the local “prevailing wage” rate. This rate is often based on wages and benefits paid to union employees. By standardizing compensation rates across union and nonunion worksites, the higher standards and benefits obtained by unions through collective bargaining agreements are extended to a much larger base of workers.

For some background, federal construction projects are covered by the Davis-Bacon Act, which is a federal law that protects construction workers’ wages on government-funded projects. It covers all 50 states. In addition, 32 states have their own prevailing wage laws for state government-owned construction projects. The New York State Department of Labor (NYSDOL) is responsible for calculating the prevailing wage for state and local government projects, except for New York City, where the city comptroller publicizes prevailing wage rates. While the U.S. Labor Department determines prevailing wage by conducting periodic surveys of area employers, New York State does not conduct a wage census. Instead, the NYSDOL copies the terms and conditions of construction union contracts, for each trade and region. This difference is due to the assumption that at least 30% of the workers in every trade in every part of the state belong to a trade union. Because these “prevailing” wages are often based on union contracts, including union fringe benefits, they can equal or even exceed a worker’s hourly cash pay on private work. In other words, in addition to the basic hourly cash pay rate, prevailing wage schedules include supplements (fringe benefits) that vary based on the craft, trade or occupation. Prevailing wage supplements may be provided to workers in the form of a cash payment (wages), or through irrevocable contributions to a fund, plan or program, or any combination of the two. Deciding which method of payment for supplements to use can be complicated and should involve discussions with a financial professional.

To further support local workers and boost the local economy, lawmakers continue to work to broaden the definition of public work and expand the reach of the prevailing wage to more projects across the state. For example, since prevailing wages drive up costs, it may encourage contractors to have more work performed off-site. To counteract this issue, in 2017 and again in 2023, lawmakers worked to pass laws to apply prevailing wage rules to certain off-site fabrication of goods used on a public works job site. In February 2022, New York State passed a law relating to the payment of prevailing wage for work involving the delivery to and hauling of aggregate supply construction materials on a public works job. Additionally, state and federal lawmakers have proposed legislation to broaden the definition of public works projects to include those paid for in whole or in part out of public funds.

Due to these constant changes in the law, it is important for construction contractors in New York to stay up to date with the laws and their responsibilities, not just for their employees but also for the employees of their subcontractors. According to Section 198 (e) of the New York State labor laws, contractors are liable for all claims on unpaid wages, benefits and wage supplements for workers employed by their subcontractors.  Therefore, it is critical for contractors to perform due diligence on their subcontractors. Recordkeeping is critical to ensure compliance with prevailing wage laws in New York. Proper documentation of employee hours worked ensures contractors adhere to the law and assists in any possible investigations or audits conducted by the NYSDOL.

Prevailing wage laws support good wages and benefits, thereby helping to close racial, gender and geographical pay gaps, promote quality work and improve the value received for each taxpayer dollar. However, for employers, prevailing wage laws can be confusing and complex. The repercussions of noncompliance can be devastating to any business. Therefore, it is important for employers to have a clear understanding of prevailing wage laws and to know when to ask for assistance.

Lori A. Beirman is the director of audit quality at Dannible & McKee, LLP, a public accounting firm with offices in Syracuse, Auburn, Binghamton and Schenectady, NY, and Tampa, FL. She has over 23 years of experience in audit, reviews and compilations in a variety of industries, such as construction, manufacturing and professional service firms. For more information on this topic, you may contact Lori at (315) 472-9127 or visit online at www.dmcpas.com.

State of the Construction Industry

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Earl R. Hall, Executive Director, Syracuse Builders Exchange

 Considering the multi-year, $2.5 billion Route 81 project, and the highly anticipated start of Micron’s 20-year, $100 billion semi-conductor chip fabrication project in Clay, the media and elected officials have used the word “megaprojects”.   These unusual megaprojects garner great interest and typically lead to questions about the impact of these projects on society.  As a result, people have asked me about how such megaprojects impact the construction industry in central New York.

To begin with, it is important to understand that the construction ecosystem, although resilient, is fragile.  The tripartite balance that exists between project owners, contractors and labor has never experienced projects of this magnitude happening at once, so forecasting the impact on the industry may be difficult.  Making assumptions is what a good actuary does to assist in predicting the future, so I will make assumptions to provide better context.

Assumption #1 – Labor

The lack of labor continues to plague the industry, which in some cases may result in a contractor’s inability to complete a project on time.  Failure to complete projects on time may contractually lead to liquidated damages.  Delivering labor to Micron will certainly be a challenge as the regional industry today does not have such capacity; however, one can assume much of the labor for Micron will be imported from other regions of the United States.  As a result, I do anticipate the project will have the labor force necessary to achieve project delivery requirements, but certainly there will be labor challenges.  Moreover, regional contractors serving traditional clients, such as hospitals, universities, industrial and institutional facilities may not be materially impacted to the extent of not having available labor.

Assumption #2 – Project Schedules

Project owners’ delivery schedules are becoming increasingly aggressive, both in the public and private sectors.  Often the contractor’s ability to achieve the schedule is dependent upon a wide variety of items but having adequate labor and timely delivery of construction material, such as concrete, is essential to achieving schedule goals.  Although much of the labor on the megaprojects may come from out of state, one should assume meeting project owners’ future aggressive schedules may be more challenging due to the potential labor pressures associated with megaprojects.

Assumption #3 – Wage Growth

Anticipating future regional wage growth is paramount for construction contractors and project owners alike.  How will the megaprojects impact future wage growth?  Over the past two years, construction industry employees have enjoyed advantageous conditions leading to above average wage growth.  I expect this environment to continue, with wage adjustments far exceeding inflation.  Additionally, many employers are rewarding their best employees with additional compensation, benefits and other incentives to remain with their employer.

Forecasting future regional wage growth will be difficult as it remains unknown the incentives required to attract labor to Micron’s project.  While Micron’s 20-year project has a Project Labor Agreement which contains the unions’ wages and fringe benefit schedules, I anticipate such wage schedules will be the “minimum wage” requirement for this project.

“What does this all mean?”

The most asked question is, “How will these megaprojects impact other project owners?”  This question is most difficult to answer; however, one can assume:

  • Continued exceptional craftsmanship from labor.
  • Continued exceptional project management, execution and delivery from construction industry employers.
  • Renewed focus on the tripartite relationships.
  • Increased cost of labor and associated increased cost of construction project budgets.
  • Less compressed project delivery schedules.
  • Billions of dollars in new construction spending for new projects surrounding and supporting these megaprojects.
  • Continued labor shortages.
  • Enhanced Career and Technical Education programs in public schools.
  • Increased construction in the housing market.
  • A revitalization of the central New York region.

These two megaprojects, along with additional capital investments from both the public and private sectors, will directly fuel the incredible economic development central New York will experience over the next decade.  It will be essential that the construction industry, and society in general, take advantage of these opportunities and overcome any of the barriers associated with change. 

Steering Through New York’s Construction Safety Landscape

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Wael Khalil, VP & Director of Safety & Health. Lovell Safety Management

In the challenging construction landscapes of New York State, employers face the formidable task of navigating through terrain complicated by the steep costs of insurance. This situation is largely exacerbated by the rigorous absolute liability laws that pertain to falls. For years, these falls have not just been a leading cause of significant injuries within the construction industry but have also escalated the financial implications of such incidents to new heights. Constructing a high-rise building in New York can incur higher expenses compared to other states, largely due to the elevated costs of insurance. Despite legislative initiatives that mandate comprehensive training on proper fall protection measures, these types of accidents continue to pose a persistent threat to the wellbeing of construction workers and the economic stability of their employers.

Drawing on three decades of experience in the health and safety field, I have witnessed firsthand the evolution of job site safety. Today’s construction sites are undoubtedly safer than those of 30 years ago, a testament to the progress achieved through relentless advocacy, improved standards, and technological advancements. However, our quest for “absolute safety” is an ongoing endeavor.

An analysis by The National Institute for Occupational Safety and Health (NIOSH), published in September 2017 and titled “The construction FACE database — Codifying the NIOSH FACE reports,” sheds light on fall-related fatalities. The findings reveal that since 1982, approximately one in five individuals documented in the Construction FACE Database (CFD) succumbed to injuries within their first two months on the job. Notably, 75% and 43% of the reports recommended the implementation of safety training and the installation of protective equipment, respectively.

Yet, a detailed examination of job sites plagued with safety violations uncovers a recurring issue: the failure of employers to enforce established safety protocols. It becomes evident that while education and training are crucial components, they alone do not complete the puzzle. The most significant gap lies in the enforcement of known safety regulations—a duty that falls squarely on the shoulders of employers. As per NYC Department of Building, as of January 2023, falls constituted approximately 70% of all construction-related incidents, yet New York City imposes the most comprehensive employee training regulations in the state and in most cases the country.

The legal framework, particularly embodied by New York State’s Sections 240 and 241 laws, looms large over the construction sector, highlighting the critical necessity for employers to intensify their focus on safety enforcement. This could encompass an array of proactive strategies, such as conducting surprise inspections, initiating unannounced audits, and engaging third-party evaluators for impartial site assessments. Such measures not only ensure adherence to safety standards but also cultivate a culture of diligence and accountability.

The message is unequivocal: Employers must elevate their management of job site safety to mitigate risk exposure. In an industry marked by considerable stakes, the repercussions of complacency can indeed be profound.  As we continue to strive for a safer tomorrow, the commitment to rigorous enforcement of safety protocols remains the beacon guiding our efforts. The path to reducing the financial and human costs of construction accidents is clear, and it begins with a steadfast dedication to safety at every level.

For more information on this issue and other safety related concerns on the job site you may contact Wael Khalil, VP & Director of Safety & Health, Lovell Safety Management at wkhalil@lovellsafety.com or 917-692-9108.   You may also visit online at www.LovellSafety.com.

 

NYS 2024 Workers’ Compensation Updates

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By: Brett Findlay, Sr. VP, Business Risk Specialist

There have been significant changes applicable to New York State workers’ compensation in 2024. However, none have been as impactful as the 2022 change to the experience modification rating formula (or EMR), which all experience-rated policyholders have now seen the effects of. The volatility of loss impacts to policyholder EMR’s has been significant. There may be some help on the way, through rate decreases.

For the ninth consecutive year, an aggregate rate decrease is on the horizon. Furthermore, the New York State Assessment was dropped again in January. Also, the impacts to individual workers’ compensation policies from the changes to the experience rating (EMR) formula have been experienced by all policyholders since our last update.

In a press release dated May 9, 2024 the New York Compensation Insurance Rating Board (NYCIRB) filed its annual loss cost indication with the New York State Department of Financial Services. An approved and published filing for the expected decrease of 9.0% of the overall loss cost level should be confirmed and announced by August 1, 2024. The change in rates is effective on policies renewing on or after October 1, 2024.

The impact of the loss costs, or rates, will vary depending on each individual classification code. For an understanding of the potential impact to your business and individual class codes utilized on your policy, please feel free to reach out to OneGroup using the contact information below.

It is important to note that these rate changes will not go into effect on any individual policy until October 1, 2024. If your effective date is before that date, you will have to wait until your policy renewal before any potential rate changes apply. Regardless of when your effective date is, you should know the exact rate changes to your classifications sooner rather than later. It’s important to not only forecast the future costs of your program, but also to develop a plan for your upcoming renewal.

In January, the New York State Assessment saw another decrease. This year the assessment dropped from 9.8% to 9.2% in 2023, even moreso from 10.2% in 2022, and 11.8% in 2021. Overall, there’s been a nearly 20% decrease in the aggregate cost to policyholders since 2021.

As far as the new formula to determine Experience Modification Ratings, or EMR’s, those changes went into effect on October 1, 2022. The formula is significantly different than it has been in the past and is affecting policyholders who’ve experienced workers’ compensation losses from both a frequency and severity standpoint. OneGroup has been monitoring the impact to policyholders, hosted multiple educational seminars, and developed materials to explain the changes in detail. The formula change has impacted many businesses, both positively and negatively. For more information on how you have been or will be affected, please do not hesitate to contact us directly.

So, what does this mean for New York State contractors? For any individual questions and/or concerns, please do not hesitate to contact Brett Findlay, Sr. Vice President of Business & Construction Risk.

OneGroup has a team of specialists, dedicated to risk management and construction industry specific insurance issues. We’re able to serve as a resource to your organization for all your construction specific questions and concerns. OneGroup takes great pride in being at the forefront of industry trends and assisting others where we can. You can find out more about us here: www.OneGroup.com or about our construction expertise, http://www.OneGroup.com/business-insurance/unique-industry-solutions/construction-industry/.

For more information please contact Brett Findlay, Senior Vice President Business Risk Specialist at (315) 280-6376 or BFindlay@OneGroup.com