Wage Theft Case Shows the Need for Workforce Standards

When voters approved Proposition 39 last November, they were voting for good clean-energy jobs, and energy efficiency projects in public schools and other public facilities that would save taxpayers money.

The proposition closed a corporate tax loophole and will provide up to $550 million annually in savings that, in the first four years, will go toward energy efficiency projects.  An article that recently appeared in the industry press with the headline, “HVAC Contractor Ordered to Pay Nearly $1 Million for Violating Labor Law,” offers a cautionary tale for state lawmakers who are now considering how to spend those funds.

The article reports that California labor commissioner Julie Su ordered Ace Cooling & Heating Corporation, a contractor that installs heating and cooling systems for buildings, to pay nearly a million dollars in fines and wages to 10 employees for their work on a modernization project at El Camino Community College in Torrance.

Su called the company’s underpayment of sheet metal workers “a classic example of wage theft.” The workers earned as little as $8.50 an hour, in violation of prevailing wages laws.

Unfortunately, low wages paid by HVAC (Heating Ventilation and Air Conditioning) contractors are not confined to Ace – and the practice has serious implications for the environment as well as for workers and their families, according to a 2011 study on employment and the green economy completed by U.C. Berkeley’s Don Vial Center.

Air conditioning accounts for 30 percent of energy use during the hottest times of the year, when our utilities purchase some of the most expensive and dirtiest power. For this reason, utilities across the state invest more than $100 million annually to improve the efficiency of their customers’ air conditioning and ventilation systems. It’s intended to save the utilities – and, by extension, us – money and lead to cleaner air.  By 2020, the potential energy savings from higher quality installation and maintenance could eliminate the need for two 500 MW gas plants, according to a study cited in the U.C. Berkeley report. A functioning AC can also be a matter of life and death for the sick and elderly.

Yet lax enforcement of building standards and employment law combine to create a low-road environment in the HVAC sector. Inadequate training, limited career ladders and low pay among the many non-union companies produce high turnover. The result: An estimated 30 to 40 percent of new heating and cooling systems – and as many as 85 percent of replacement systems – are installed incorrectly.

Unless our energy efficiency investment comes with job and training standards, voters may not get what they voted for last November: good jobs, real savings and a cleaner environment. Fortunately, this challenge can be addressed if policymakers require strong standards for contractors that do retrofits, as well as skill standards for workers. This will create a demand for the kind of workforce and responsible businesses that we need to help us move toward a clean energy future.