ManufacturerTHE ILLINOISwww.ima-net.org Spring 2014

END OF THE ROAD FOR UNPAID INTERNSHIPS?

INSIDE:HMO: Delivering value and quality careMeet Adam Pollet, Director, IDCEO

IMA Chairman Andrew Faville,President & CEO of Falex Corporation

16HMO: Deliveringvalue and quality care

Mission StatementThe object for which the IllinoisManufacturers’ Association wasformed is to strengthen the eco-nomic, social, environmental andgovernmental conditions for manu-facturing and allied enterprises inthe state of Illinois, resulting in an enlarged business base andincreased employment.

ChairmanAndrew Faville

PresidentGregory W. Baise

EditorStefany J. Henson

The Illinois Manufacturer is publishedquarterly by the Illinois Manufac -turers’ Association. All rightsreserved. The title, The IllinoisManufacturer, is a trademark of theIllinois Manufacturers’ Association.

Copyright 2014© IllinoisManufacturers’ Association.Reproduction of all or any part isprohibited except by written permis-sion of the publisher. Published arti-cles do not necessarily reflect theviews of the magazine or its pub-lisher. Information in this publica-tion should not be substituted foradvice of competent legal counsel.

For address changes and adjust-ments, write to The IllinoisManufacturer. Presort standardpostage paid at Bloomington, IL.Postmaster: Send address changesto The Illinois Manufacturer, 220East Adams Street, Springfield, IL62701. Telephone: 217-522-1240.

If you have any questions, pleasecontact Stefany Henson, Editor andDirector of Publications at 217-522-1240, Ext. 3017, or email shenson@ima-net.org.

Spring 2014

Share your company newswith IMA . . . News information, press re leases and articles may besent to Stefany Henson, Editor and Director ofPublications, Illi nois Manu facturers’ Associa tion(IMA), 220 East Adams Street,Springfield, IL 62701, oremail: shenson@ima-net.org.

The Illinois Manufacturer is underwritten by Constellation — an Exelon Company

Negative images created by some earlyHMO attempts in the 80’s has continuedto create some confusion over the truevalue of the HMO health care model.

ColumnsPresident’s Report: It’s Rauner versus Quinn for the Governor’s office in November — IMA’s Board of Directors will invite both to discuss their plans for Illinois ............................................................................... Page 4

Legislative Report: The philosophy of the IMA is that we need a “manufacturing majority” comprised of Democrat and Republican officials who support our sector .............................................................................. Page 6

Management Techniques: Have we come to the end of the road for unpaid internships? — by David B. Ritter and Adam Bartrom, Barnes & Thornburg LLP ............................................................................ Page 7

Human Resources: Talent management, trends and strategies — by Tracey Racette Fritcher, Baker Tilly Virchow Krause, LLP ........................... Page 13

Government Regulations: U.S. EPA’s Boiler MACT regulation summary — by Lauren Laabs and Britt E. Wenzel, Mostardi Platt ..................................... Page 19

Energy & Environmental Issues: Electricity Capacity Cost. What is it and can I do anything to manage it? — by Constellation ................................... Page 21

Legal Issues: Much ado about abusive patent litigation — by Anthoula Pomrening, McDonnell Boehnen Hulbert & Berghoff LLP ............................... Page 23

Manufacturers & Technology: Take down your Website — immediately! — by Joel Freimuth, Blue Pearl Consulting ..................................................... Page 25

IMA Member News ................................................................................. Page 28

New IMA Members: Welcome! ................................................................... Page 30

IMA Calendar of Events ........................................................................... Page 30

MEMBER PROFILE: IMA Chairman Andrew Faville, Falex Corporation President & CEOBy Dan Naumovich .........................................................................10

Meet Adam Pollet, Director, Illinois Department of Commerce and Economic Opportunity ......................................15

Our Board of Directorswill invite each nominee to appear at a meeting to have a dialogue. The discussion will centeraround issues such asWorkers’ Compensationreform, tax and fiscalissues, education and training issues, their views on environmental regulations, and howthey plan on makingIllinois a good place to do business again.

4

So it’s Rauner versus Quinn

President’s ReportGREGORY W. BAISE

E very election season you always hear the same refrain, “this is the most important election ofour lifetime.” For Illinois, the statement may finally be true.As some of you know, I have been involved in and around state government in Illinoissince the mid 1970’s. As a college student in 1972, I saw a completely unknown Democrat namedDan Walker defeat Republican incumbent Richard Ogilvie with shoe leather. Walker was an out-sider, (a former business executive with Montgomery Ward) who wore a red bandana around hisneck as he walked from Cairo to Rockford, ambling through communities and pressing the flesh.He promised to tame the Chicago machine, run then by Mayor Richard J. Daley. The people ofIllinois gave Walker a chance.

Walker lasted just one term. He was defeated in 1976 in the Democrat Primary by then-Secretary of State Michael Howlett, who was then defeated in the General Election by anothernewcomer, Jim Thompson.*

Eleven elections later, we have another newcomer with business experience: Republican BruceRauner. He is facing an incumbent governor, Pat Quinn, who signed a “temporary” income taxhike but who now says the tax needs to be permanent. Quinn is presiding over a stagnant stateeconomy that ranks near the bottom in almost every measure of economic strength.

The list of what’s wrong with Illinois is long. I’ve expressed my views here before on howIllinois is heading in the wrong direction. (See “Illinois is closing one day at a time,” page 4 in thefall 2013 issue of The Illinois Manufacturer magazine.) Now, each candidate must give us theirview on how they plan to fix it.

In past elections, the Illinois Manufacturers’ Association has played an important role in help-ing manufacturers decide on who they should support. It is a decision we take very seriously.

This cycle will be no different. Our Board of Directors will invite each nominee to appear at ameeting to have a dialogue. The discussion will center around issues such as Workers’Compensation reform, tax and fiscal issues, education and training issues, their views on environ-mental regulations, and how they plan on making Illinois a good place to do business again. Asin the past, it will be a fair and civilized exchange of ideas.

During my tenure as your president, I have viewed giving members a voice — to lawmakers,the news media and the public in general — as one of my most important roles. Listening careful-ly to members is a prerequisite for that to be successful. Today, the message I hear, loud andclear, is this: “If this state does not change the way it does business, we are out of here. The factthat many have already made the decision to leave is proof of just how serious this concern is tomanufacturers.

Repeatedly, the refrain echoes the soul-wrenching frustration many feel: “Our business hasbeen here for years but . . .” or “I want to make sure my kids don’t have to operate our businesshere,” or “They just don’t get it in Springfield, do they?”

The people making these statements are not being flippant. They’ve had it. But contrary tothose who seem to want to make the situation look like class warfare, it’s really not all aboutmoney. Illinois manufacturers are more than willing to support policies that better our society as awhole. But they have had it with lopsided policies authored and implemented by those who havelittle or no understanding of what it takes to operate a business. The perception outside of ourstate is that we’re the dregs of the business world. And, problematically, those who are fed uphave the wherewithal to make a move.

Unfortunately for Illinois, our neighbors in surrounding states get it. Governors Walker, Penceand Snyder speak repeatedly about the joy they take in Illinois’ woes. They advertise their statesas safer havens as they cherry pick from a growing list of willing listeners.

Gregory W. Baise is President and Chief Executive Officer of the Illinois Manufacturers’ Association. He may be reached at 630-368-5300, or viaemail at gbaise@ima-net.org.

see BAISE page 8

*Pat Quinn worked for Dan Walker’s administration and I worked for Jim Thompson in 1976. I went on to serve inThompson’s administration.

Our mission is toadvocate, protect and strengthen the manufacturingsector so that ourmembers can continue making products in Illinois.

Legislative Report

MARK DENZLER

6

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Magicians and masters of illusion are fond of putting the old expression that “perceptionis reality” into play when performing their tricks on an audience. Despite the fact thatDemocrats have ruled both the executive and legislative branches of government for thepast 10 years, Governor Pat Quinn and Democrat lawmakers are now asking Illinoisans tobelieve their perception that Illinois’ economy is recovering and on the rebound while ignoringthe reality that our state has the second highest unemployment rate in the United States andlags far behind our neighboring states in job growth.

When faced with Illinois’ poor economic performances, some elected officials have chosento criticize groups like the IMA for pointing out the reality that certain state policies like hikingtaxes hurt the economy and discourage capital investment. Instead of focusing on addressingkey issues that will encourage job creation, like Workers’ Compensation, tort costs and taxreform, these lawmakers accuse us of engaging in negative rhetoric for the sole purpose ofpolitical gains.

Nothing could be further from the truth. The Illinois Manufacturers’ Association is the oldeststate manufacturing trade association in the United States and was founded 18 months beforethe national organization. Our mission is to advocate, protect and strengthen the manufacturingsector so our members can continue making products in Illinois. Our philosophy is that weneed a “manufacturing majority” comprised of Democrat and Republican officials who supportour sector.

Illinois has enormous potential and the IMA wants to be part of the solution in returning ourstate to the national and international world stage economically. Illinois is blessed with tremen-dous natural resources, a centralized location, rich and abundant farmland, a skilled workforce,great colleges and universities, and a transportation system with air, rail, roads and waterways.Our state has all of the tools to regain its luster if the Governor and General Assembly will allowthe business community to innovate and flourish.

However in many cases, so-called “pro-business” legislators push legislation that simplyincreases regulation and costs for employers with little, if any, thought as to the impact of theiractions.

In the spring legislative session, the IMA has fought numerous proposals. These include:• a new graduated income tax that penalizes successful businesses; • a hike in the state’s minimum wage that would make Illinois’ minimum wage

the highest in the nation;• imposition of paid family leave programs; and • burdensome environmental regulations on coal and petcoke that would close down

facilities and put an industry out of business in Illinois.

Regrettably, there is much less focus and debate on cutting state spending to balance thebudget, reducing tax rates, reforming Workers’ Compensation and eliminating unnecessary orcostly rules that stifle business growth and development.

Illinois’ perception and the current reality of our state’s economy does impact the behaviorof companies looking to expand, invest or create jobs. It’s time the Governor and lawmakerswork with the IMA and the general business community to make Illinois’ reality match the per-ception that we would like to have. n

Illinois: Perception vs. reality

Mark Denzler is Vice President and Chief Operating Officer of the Illinois Manufacturers’ Association. Mark can be reached at 217-522-1240, extension 3008, or mdenzler@ima-net.org.

David B. Ritter is an employment attorney and partner in the law firm of Barnes & Thornburg LLP. Mr. Ritter works out of the Chicago office. He may bereached at 312-214-4862 or David.Ritter@BTLaw.com. Adam Bartrom is also an employment attorney at the firm. He may be reached at 260-425-4629or Adam.Bartrom@BTLaw.com. or Barnes & Thornburg LLP is an IMA member company.

F inally, the snow has melted,ponds have thawed, and theseemingly endless winter hascome to a close. For college stu-dents, this means Frisbee on thequad, cramming for finals, and thehope of a professional internshipthat will push them toward their ulti-mate goal of post-graduationemployment. And for employers,this means the conclusion of alengthy process of sifting throughhundreds of resumes from hopefulinternship candidates, holdingcountless interviews and devotingsubstantial hours to selecting thosefew lucky interns who will walkthrough their doors and reap thebenefits of getting real world experi-ence for a few months. This is amutually advantageous situationwhere both parties get what theywant for the summer, right? Not sofast. The National Association ofColleges and Employers reportedthat almost half of the internshipstaken by college students in 2013were unpaid. The flood of recentlawsuits that have been filed byunpaid interns against their formeremployers demonstrates that theseinterns do not just want the experi-ence; they also want to be paid.And unfortunately for employers, theinterns are getting what they want.

The problemThe legal landscape is straight for-

ward. Under the Fair Labor StandardsAct (FLSA), most individuals whowork for an employer must be com-pensated. This generally includesinternships. In particular, internshipsin the “for-profit” private sector drawthe highest scrutiny and will mostoften be viewed as employment.This means that interns in the “for-profit” private sector are actuallyemployees who must be paid at leastthe minimum wage as well as over-

time compensation for hours workedover 40 in a workweek. And theonly way to avoid these obligationsis for the intern to qualify as a“trainee” under the narrow legalguidelines described here.

In addition to federal require-ments under the FLSA, most stateshave laws governing the paymentand timing of payment of wageswhich carry stiff penalties. Forexample, the Illinois Wage Paymentand Collection Act imposes substan-tial penalties for violations of thestate law. Even more troubling,these penalties can be imposedupon any officer of a corporation oragent of an employer, personally,who knowingly permits the employ-er to violate the Illinois wage law.

The fallout: See you in courtHistorically, interns were afraid of

pushing the envelope for fear ofbacklash or being blackballed withinan industry. However, that fear hasdissipated as the stampede of law-suits by fellow interns has increased.It all began with a lawsuit by unpaidinterns against Fox Searchlight.These interns, who worked on thefilm Black Swan, alleged that Foxviolated state and federal wages pro-visions by failing to pay them mini-mum wage and overtime for theirhours worked. On June 11, 2013, afederal judge agreed and decidedthat Fox Searchlight should havepaid the two interns as if they wereregular employees. The judge relied

7

Management Techniques

DAVID B. RITTER & ADAM BARTROM

Have we come to the end of the road for unpaid internships?

see INTERNSHIPS page 8

8

on guidance from the Department ofLabor (DOL) and found that the fed-eral agency’s six-part test (describedbelow) merited judgment in favor ofthe unpaid interns. The FoxSearchlight case is currently onappeal and is being closely moni-tored by employers and employmentattorneys around the country.

Yet it does not just start and stopwith Fox Searchlight — there havebeen similar lawsuits filed by formerunpaid (or underpaid) internsagainst Hearst Magazines, NBCUniversal, Atlantic Records, WarnerMusic, designer Norma Kamil,Gawker Media LLC, Fox SoccerChannel and others. Charlie Roseand his production company recent-ly settled a lawsuit brought byunpaid interns for $110,000. Andwhile the potential for damages mayappear to be small given the mini-mum wage claims, in the case of theNBC Universal case, the plaintiffs areseeking more than $5 million indamages under both the FLSA andNew York state law.

In fact, faced with this dilemma,mega-publisher Conde Nast decidedto end its internship program in2014 after being hit with a wage andhour lawsuit from former interns in2013. In that case, a former internalleged that she was given a stipendof $300 for the summer that sheworked for the publisher whichamounted to approximately $12 perday for twelve hour shifts ($1 perhour). Given the current legal land-

scape and the potential liability andnegative press, it will be no surpriseif more employers make changes totheir internship programs.

Department of Labor guidance: Howto avoid legal trouble

So how do employers run intern-ship programs without running afoulof the law? The DOL answers thatquestion through its six-part test. Ifinterns receive training for their owneducational benefit, then compensa-tion is not required. The determina-tion of whether an internship ortraining program meets this exclu-sion depends upon the facts and cir-cumstances of each program. Thefollowing six criteria must beapplied when making this determi-nation: 1. Whether the internship, even

though it includes actual opera-tion of the facilities of theemployer, is similar to trainingwhich would be given in an edu-cational environment;

2. Whether the internship experi-ence is for the benefit of theintern;

3. Whether the intern displaces reg-ular employees or works underclose supervision of existing staff;

4. Whether the employer that pro-vides the training derives noimmediate advantage from theactivities of the intern (and onoccasion its operations may actu-ally be impeded);

5. Whether the intern is not neces-sarily entitled to a job at the con-clusion of the internship; and

6. Whether the employer and theintern understand that the internis not entitled to wages for the

time spent in the internship.If all of the factors listed above

are met, an employment relationshiplikely does not exist under the FLSA,and the employer is not required topay minimum wage and overtime tothe intern. However, this exclusionfrom the definition of employment isquite narrow because the FLSA’sdefinition of “employ” is very broad.Employers should be fully awarethat they are climbing uphill to meetthis six-part test.

Now what?Manufacturers across Illinois and

the country are preparing for internsto enter their doors this summer. Itis important for employers to give along, hard, and honest look at theirinternship programs. Because, whilethe economics of cheap labor cancertainly help a company’s bottomline, paying hundreds of thousandsof dollars in attorneys’ fees andunpaid wages (and penalties) cer-tainly does not.

Here are some practical tips:• Structure your internship program

around some level of classroominstruction;

• Tie your internship to the internreceiving college credit;

• Make sure the intern is not dis-placing an employee;

• Have the internship be for afixed time period;

• Let the intern know in advancethat he/she will not be paid andthat it does not automatically leadto a job offer; and

• Research your state law to see ifthere are additional factors toconsider. n

INTERNSHIPSCont. from page 7

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With so much at stake, we expectto meet with Governor Quinn andMr. Rauner in mid-June. Followingmy column you will find the emailsand phone numbers of our Board ofDirectors’ leadership, as well asmine. We welcome your questions,views or sentiment so that we canbest represent you as the IMAdecides on whom to support in this

year’s gubernatorial election.And remember, this may be the

most important election in Illinoishistory. n

Andrew Faville: amfaville@aol.com630-556-3669

William Hickey, Jr.: bhickey@lapham-hickey.com 708-496-6111

Karla Olson-Teasley:karla.teasley@amwater.com 618-239-3247

Greg Baise:gbaise@ima-net.org800-875-4462, ext. 9370

BAISECont. from page 4

R esponding to a reporter’srequest for background infor-mation on his professionalcareer, Andy Faville of the FalexCorporation had to admit that ithad been a while since he updatedhis resume.

“I have been working here forover 30 years and haven’t really hada need to look elsewhere,” he said.

While job security can lead tocomplacency, that is obviously notthe case for Faville.

Faville, who graduated fromArizona State University with adegree in aeronautical engineering,joined Falex in 1982. During hisearly years with the company hewas responsible for managing pro-duction, inventory control and pur-chasing, plant construction andmodifications, and other operationalduties. His journey up the corporateladder eventually led to his appoint-ment as president and CEO in 2004,a position that he still holds today.

Leading the IMAFaville also holds

the title of chairman ofthe Illinois Manufac -turer’s Association, aposition he was electedto this year.

At its essence, hesees his role with theIMA as similar to theresponsibility borne byeveryone who lives ina democracy. Faville’sson is a fighter pilot inthe Marines and hisfather also served.Their efforts — alongwith those of everyoneelse who has worn theuniform — in fightingfor and preserving free-dom, bestows aresponsibility on every-one to be informedand active in the politi-cal process.

“Each vote we cast ispowerful and can influ-ence or make change. Iconsider it an honor tobe able to vote andattempt to elect the bestpeople to representmanufacturers’ interestsin keeping a strong,pro-business environ-ment in Illinois.”

“I have alwaysunderstood the need

for manufacturing in our economyand how it has an expanding effecton jobs in other sectors. Illinoisneeds manufacturers in order to staystrong and competitive in globalmarkets, as well as in the UnitedStates itself. I like being part of thatprocess. It makes the connectionbetween being engaged in politics,on a local and State level, and inpolicy for Illinois that keeps manu-facturing in our state strong.”

As chair, one of his primaryobjectives is to ensure that all IMAmembers’ voices are being heard,while also bringing new members tothe table.

“I see a lot of great opportunitiesto expand and connect with mem-bership. We have a wonderful groupof members from all over the state.Regional input is an area we want totry to embrace with more regionalmeetings and more representationfrom members in far away areas thatdon’t have the opportunity to get tomeetings or some of our events.”

While growth is important, stabil-ity is essential, especially duringtough economic times when thefocus is more on survival thanopportunity. Planning and prepara-tion has helped to keep the IMA onsteady footings.

“IMA has done very well recently.Like all organizations, we had sometough times in past years, but wehave a very strong financial basenow. When I was treasurer we creat-ed an investment policy and man-aged our reserve funds to that guide-line. Those have done well as we tryto make sure that the organizationstays stable for decades to come.”

Faville says much of the credit forthe IMA’s success goes to the peoplewho are conveying the needs of themanufacturing industry to those whoset the agenda for which directionthe state will go in promoting ahealthy business environment.

“We have a team of individuals,including wonderful leadership, who

Falex’s Lab Manager, (top photo) running a data analysis of a tri-bolgy test. A laboratory technician (bottom photo) running a fuelcertification test for octane rating.

MEMBER PROFILE:IMA Chairman Andrew Faville, Falex Corporation President & CEOby Dan Naumovich

10

are highly qualifiedand capable. Theyhave the ability toinfluence decisionsby helping legisla-tive and politicalleadership under-stand how a policywill affect businessin Illinois. Theykeep up with what’sgoing on and get afeel for which waythe political windsare blowing.”

Among thoseissues that the IMAhas been instrumen-tal in is the fightagainst the grossreceipts tax, a taxthat would havebeen a burden tomany businesses inthe state. Faville alsosaid that the IMA hasmade its voice heardon other critical mat-ters such as workers’comp and pensionreform. He’s hopefulthat utility taxes canbe reduced, if noteliminated complete-ly, and is dedicatedto keeping the dis-cussions moving inthe right direction.

“There is alwaysa legislative agenda. We keep our ear to the rail on that. Wetune into what is happening, looking into issues from health-care to general policy on taxation in the state. All of thosethings are ongoing. As much as we’d like to take one thingand finish it and put it to rest and move on, that is not possi-ble if we are to be most effective “

As chair, he believes that it is critical to continue tofocus on workforce training. He believes that this willstrengthen IMA’s value to its members, while alsostrengthening the individual manufacturers who are ableto bring on more capable employees.

“One key focus we have now is the IMA EducationFoundation. We’re offering programs that will allowemployers to hire individuals who come in with a higherknowledge base. This not only allows those individuals todo better for themselves by earning a higher wage, but italso helps employers be more productive by eliminatingthe need for some of their lengthy training programs.”

As the minimum wage continues to climb, businessescan no longer afford to bring aboard workers who requireextensive training in even the most basic of areas of beinga capable and reliable employee.

“An important first step is having people understand thefundamental issue of what a job is. It’s about more than justlearning to run a particular machine or learning to draft. It’sabout the basic things an employee needs to do. It’s about

being to work ontime. Dressingappropriately.Answering a tele-phone appropriately.There are also anumber of programswe could institute tohelp with more spe-cific training. Theseare things that Ihope to work on inmy tenure as chair-man.”

Through both theIMA and Falex’sown workforcedevelopment initia-tives, Faville believesit is important to beinvolved in the com-munity through localassociations and inthe schools.

“I look forwardto expanding ourrole in education,not only workingwith the communitycolleges, but also atthe high school andmiddle school lev-els.”

One objective inreaching studentssooner is to dispelfalse perceptionsabout the manufac-turing industry that

unfortunately still pervade. Movies and television often depictdowntrodden laborers filing into foreboding factories thatloom over the landscape in dirty coal or steel towns. Favillewants young people to know that, in reality, modern daymanufacturers operate out of state-of-the-art facilities. Andwhile a strong back may still be required for some positions,a strong mind and professional demeanor are even more indemand.

“We have advanced technology. We have a need foreducated people and there are a lot of opportunities forthose people to do very well and make a very good living.And, of course, the more manufacturing jobs we can createin Illinois, the stronger Illinois can become.”

Going to BrazilIn 2012, while serving as vice chair of the IMA, Faville

participated in a trade mission to Brazil, a country with theseventh largest economy in the world as measured by bothgross domestic product (GDP) and purchasing power pari-ty. The purpose of the six-day mission was to continue toharvest new markets for Illinois business and to createfavorable trade relations. In 2011, Brazil ranked among thestate’s top five export markets totaling $2.55 billion. Thatfigure was up 24 percent from the previous year.

“It’s reminiscent of how the United States was back in thesee FAVILLE page 12

IMA Chairman Andrew Faville

11

1950s when we didn’t have all of theinfrastructure, but you could see thebeehive of activity. There’s a massiveuse of credit by consumers thatshows that there is a huge base ofpotential for all sorts of productsales.”

Other IMA members who partici-pated in the mission were ArcherDaniels Midland, Baxter Internation al,Boeing, Caterpillar, Motorola andUnited Airlines. They were joined byrepresentatives from state universitiesand other educational institutions,and government leaders at the stateand local level. Faville believes thatthis type of public/private partnershipis important for supporting eachother’s interests and for facilitatingintroductions into areas where oneparty is familiar and the other is not.

One aspect of the trip that partic-ularly stood out for Faville was theleadership provided in getting theabsolute most out of the six daysthey spent in Brazil.

“What I found interesting, on apersonal note, was just how hard ourgovernor works. Not only in havinghis staff put together and havinggood plans, but he’s also a non-stopworker and it was really a challengeto keep up. We were on the goalmost every minute of every day.There was very little downtime.”

Back in Sugar GroveFalex Corporation was founded

in 1927 and Faville has been onboard for over one-third of the com-pany’s 87 years in business. Hecredits the long-term success to thepeople who have worked there overthe years.

“We’ve always had employeeswho have been interested in ourvery specialized field. And they’vebeen further interested in doingadditional learning, training andgrowing in the direction of whereour product lines have gone.”

Falex is one of the leading manu-facturers and suppliers of petroleumand tribology testing equipment andservices that are used to evaluate thephysical properties of fuels, lubri-cants and other materials.

While many manufacturers areconstantly improving their productsto increase performance, Falex must

balance the desire for efficiency withthe need for consistency. Becausetheir equipment is involved in thetesting of materials, it is imperativethat the results being generatedremain repeatable over the longterm, year after year.

“With every test there are con-sumable pieces that have to be man-ufactured as they were 60 years ago,when they first started being used inthe industry. One of the main rea-sons we’ve been able to remain suc-cessful is because we’ve been ableto maintain the quality and consis-tency of our test pieces so that ourcustomers can accurately compareresults, years after.”

Falex has among its clients someof the largest corporations inAmerica, including Caterpillar, JohnDeere, IBM, and Exxon. Althoughthe company is an industry leader,they’re currently experiencing chal-lenges as the market they servebecomes narrower.

“The consolidation of businessesthat have the budget to purchasethis capital equipment has been areal deterrent. And, of course,research and development budgetreductions, which typically occurthrough economic cycles, tend to bemore pervasive these days, alongwith more outsourcing of R&D.”

One way they have responded isby offering testing services for com-panies that lack the capital expendi-tures to purchase the equipment.

“They come to us to do testing onour equipment and we’ll developcustomized programs for them or usestandardized tests. That’s been a greathelp for many of our customers.”

The company is also alwayslooking for new markets. One areawhere their specific expertise isbeing put to good use is ensuringthe safety of our troops overseas.

“Recently we developed amachine for the Department ofDefense that is used in portable test-ing labs. It’s used in battle theaterswhere the troops need to ensurethat the fuel they are getting isusable or hasn’t been compromised.So we worked a program in thatarea. We have supplied almost 200machines and that line is expanding.We see a lot of potential in the fueltesting market. It holds a lot ofpotential for us globally as thecapacity around the world expandsalong with the continuing need toverify the quality of the fuel.”

Serving the communityFaville has been committed to

Falex, the manufacturing industry andthe business world in general formany decades. He has also sharedhis talents and leadership with peo-ple and organizations in the commu-nity. He is currently servingWaubonsee Community CollegeFoundation Board as the chairman ofthe investment committee and as amember of the executive committee.He also works with the NorthernIllinois Food Bank, where he servedas campaign chairman to raise fundsfor new facility in Kane County.

A commercially rated pilot, Favillehas also put his 37 years of flyingexperience to use helping the under-privileged. He is a volunteer withLifeLine Pilots, a Peoria-based organi-zation that provides free air trans-portation to financially distressedindividuals who are in need of med-ical or humanitarian care. The serviceis provided by trained pilots who vol-unteer their time and resources

“There’s a large group of pilotswho volunteer and it gives us achance to fly, which we all love todo. But when you can combine itwith a cause like this, it makes itmore meaningful.”

ConclusionFaville has certainly had a mean-

ingful career, positively impactingmany people and organizations.He’s also grateful to those who havepositively impacted his own careerand have helped Falex continuedown the road as a thriving Illinoismanufacturer.

“Groups like the IMA and otherindustry groups help to support ourbase of operations here in Illinois byproviding good lobbying efforts andgood policy direction for the statelegislature. That translates back as abenefit to a company like ours andit has allowed us to stay in Illinoisfor the past 87 years.” n

Author Dan Naumovich is a free-lance journalist and business copy-writer. He can be reached atdan@naumo.com or through hiswebsite at www.naumo.com.

View the interview with AndrewFaville in the IMA video library:www.youtube.com/watch?v=0KU5bT7__R4.

FAVILLECont. from page 11

12

13

Human Resources

TRACEY RACETTE FRITCHER

T he state of Talent Managementwithin manufacturing has a fewemerging trends, regardless oflocation in the world. These trendsand changes are making hiring andmanaging talent quite difficult andrequire the attention of HR leaders.Some of these trends include: • populations of knowledgeable

senior workers are due to retirewithin the next five years;

• younger workers with therequired (and sometimes eventhe most basic of) skills are diffi-cult to find;

• workers expect corporate tech-nologies in the workplace toreflect the look and feel of con-sumer technologies, like facebook;

• shifts in how people find jobs onsocial media (LinkedIn, Twitter,Facebook, craigslist) compared to10 years ago; and

• lack of investment in enterprise-wide and HR technology (mostlikely resulting from the econom-ic downturn many companieshave been dealing with in thelast five years).

In the recent white paper, TalentManagement: Strategies for a NewEra, authors Ann Blakely, Directorof the Human Capital Services prac-tice at Baker Tilly Virchow Krause,LLP (Baker Tilly) and Brian Sommer,Strategy and Technology Consultantwith Vital Analysis and Founder ofTechVentive, stated that companiesthat are still clinging to old talentmanagement methods, businesspractices, and technologies may bein serious trouble when it comes tothe War for Talent. They need tomodernize their talent initiatives andtechnologies on two fronts: 1) theymust substantially upgrade their tal-ent acquisition and 2) their talentdevelopment methods. Winning

companies are those that are able toacquire the best people in theirindustry and retain them longer thanthe industry average.The new worker mindset

Blakely and Sommer also discov-ered that since the recession beganin 2008, large numbers of younger,mobile/smartphone enabled workershave entered the workforce. Theybring with them a number of newtechnologies but more importantly,new perspectives on how they wantto be contacted regarding newcareer opportunities. This is evidentin how people look for work andtheir desire to use their mobiledevices in all areas of their lives.

Additionally, people in their 20’sand 30’s seem less inclined to applyfor multiple jobs. Rather, they lookfor jobs that they find most appeal-ing and then invest the time toapply only for those positions. Thisreduces the pool of applicants whenjobs become available and shifts theneed for HR and hiring leaders tosource more people through socialmedia. This requires HR to post andpromote job opportunities on the

social channels that these potentialcandidates frequent.Modernize your HR technology

In the last five years, technologyhas changed very quickly in the con-sumer world, but it hasn’t necessarilychanged as quickly in the manufac-turing world. This creates many inter-esting talent acquisition and manage-ment issues for organizations.

Many manufacturing companiesare faced with finding new workerswith old technology products. Theseold products are often on premise,disparate, and unintegrated systemsthat were purchased from multiplevendors. They yield zero insight intomanaging and compensating work-ers. If your systems were purchasedand launched before the advent ofLinkedIn and other social media out-lets, then you are most likely lackingthe features needed to compete intoday’s market for talent. Sourcing through referrals

“Leveraging the connections ofyour existing employees is also criti-cal,” said Nagaraj Nadendla whentalking about Oracle’s social sourc-

Talent management, trends and strategies

Tracey Racette Fritcher is a director in the Human Capital Services group at Baker Tilly in Minneapolis. She may be contacted at 612-876-4616, or email tracey.racettefritcher@bakertilly.com. Baker Tilly Virchow Krause, LLP (www.bakertilly.com) is an IMA member company.

see TALENT page 18Download the white paper now at:www.bakertilly.com/sign-up/tm

MANUFACTURERS

SUMMIT

Crain’s MidwestManufacturers Summit

Crain’s Midwest Manufacturers Summit Aimed At Senior Management At Manufacturing Companies

Association Partner:

Summit Opening: Registration, Networking and Exhibitor Hall

Keynote Breakfast:

Louis Schorsch, CEO of ArcelorMittal Americas ArcelorMittal is the world’s largest steelmaker outside of China, supplying many major manufacturers including the Big Three automakers. Mr. Schorsch is responsible for Flat Carbon Americas and Long Carbon Americas, as well as strategy, technology, R&D, global automotive and commercial coordination.

Caralynn Nowinski, CEO, UI LABSCaralynn will provide an overview of UI Labs tech center, the goals and impact of this center on manufacturing locally and broadly.

Panel: Midwest CompetitivenessAmerican manufacturing is coming back, but will Illinois and the rest of Midwest share in the rebound? States in other regions are typically viewed as friendlier toward business, with cheaper wage rates and right-to-work laws. However, Illinois has a strong labor pool, superb transportation networks and an infrastructure ready for the digital age. An examination of what Midwest business and government leaders can do to join in the manufacturing sector’s expansion.

Charles Demirjian, president, Tillotson LimitedBarry MacLean, president and CEO, MacLean-Fogg CompanyLaurette Rondenet-Smith, CEO, Edlong Dairy Technologies

Luncheon Buffet and Networking

Roundtable Discussion on Public PolicyAttendees engage in discussion around this critical topic and share take-aways with the entire group.

Afternoon Keynote (tbd)

Registration open with Summit details added weekly at ChicagoBusiness.com/manusummit

Guest Speakers: Mayor Rahm Emanuel

1515

To Adam Pollet, the race hasbegun, and Illinois companiesare positioned to finish “in themoney.”

It’s a derby for economic advan-tage in a global marketplace that hasseen technology, energy costs anddemand from emerging nationsupend business strategies and expec-tations. Pollet, director of the IllinoisDepartment of Commerce andEconomic Opportunity (DCEO),believes that today’s imperatives inbusiness all work in the state’s favor.

“The race for economic growth inthe next 10, 20, 50 years will be arace for talent. Companies need to bewhere the talent is. Talent is, in somesense, setting the terms of wherebusiness wants to be,” he said.

Pollet, 35, said Illinois will enjoythe gains from that megatrend, pro-vided it continues to invest in edu-cation and the world-class trans-portation infrastructure that distin-guishes Illinois.

Whether the cause is reviving anoutmoded industrial district or bring-ing sustainable businesses to Afghan -

istan — something Pollet worked onin a past job with the United Nations— the best place to start is by invest-ing in people, he said.

Pollet spent a year in Afghanistanbefore career goals took him toChicago. “I learned a lot from theAfghan people,” he said. “I learned alot from my colleagues and I sawfirst-hand how hard it is to buildinstitutions in an environment whereyou really are starting from scratch.But at the end of the day, the peopleare what matter most. They musthave the skills and the physical infra-structure for growth to occur.”

He might be his own example ofhis maxim about talent findingIllinois. Pollet grew up in Atlanta, butwent to school on both coasts and in

London before headingto Chicago. He earned anundergraduate degree ininternational relations atStanford University and alaw degree at HarvardUniversity.

Pollet came to Chicagoin 2009 for the chance towork at the managementconsulting firm McKinsey& Co. and gain insightsinto private enterprise.But he retained his inter-est in public sector workand saw potential in theIllinois economy. He pre-sented his credentials toGovernor Pat Quinn’sadministration, which in2011 named him directorof DCEO’s Office ofTrade and Investment, thedivision that promotes the

state to international companies andhelps domestic firms expand exports.International trade has been animportant growth area in Illinois, withthe state’s companies reporting a 63percent increase in the value of theirexports from 2009 through 2012.

Quinn named Pollet DCEO direc-tor in November 2012. Since then,

Pollet has stumped the state in pur-suit of new jobs, negotiated incentivepackages for companies, put Illinoisin front of large businesses looking atnew locations around the countryand overseen grants for job trainingand critical public improvements.

For Pollet, it’s the perfect job tolet him work at all forms of econom-ic development and the underlyinghuman needs. Quinn, he said, is like-minded in his approach.

“He understands on a very fun-damental level what the economyneeds,” Pollet said. “He has madevery hard — I would call themcourageous — choices to reduceuncertainties for all businesses andto make sure education and publicinfrastructure have the support theyneed.” One such action, Pollet said,was to overhaul public pensions,which put the state on a moresound financial footing, pleasingthe bond-rating agencies and mak-ing Illinois a better bet for the pri-vate sector.

State taxes here often are lowerthan those in neighboring states thathave made a point of wooing Illinoisbusinesses. Nevertheless, Pollet saidthat when other states roll out incen-tives, Illinois never has to answer ona dollar-for-dollar basis because ithas built-in advantages. Moreover,incentives from DCEO are contingenton a company fulfilling promises injob creation and retention, and capi-tal investment.

“We are going to be a high-valuemanufacturing competitor,” he said.“We are not going to be bargainbasement. That’s not our valueproposition. We bring the best tech-nology, the best workforce and thebest transportation network to bear.”

Meet Adam Pollet, DirectorIllinois Department of Commerce

and Economic Opportunity

see POLLET page 18

With Governor Pat Quinn looking on, Adam Pollet, directorof the Illinois Department of Commerce and EconomicOpportunity, speaks to reporters during the announcedexpansion of John Hofmeister & Son Inc. The Chicago meatproducts company, known by its Hof Haus label, received a$2 million loan from the state to help with a $9.6 millionexpansion. Pollet said the state’s Advantage Illinois loanprogram improves access to capital for small businesses.

16

In this era of healthcare reform,the term, “patient-centered care”has become a popular phrase.Perhaps no model of health insur-ance coverage embodies “patient-centered care” more than the HMO,or Health Maintenance Organization.Unfortunately, the HMO has a lin-gering image problem, the genesisof which can be found decades ago.President Richard Nixon, with broadbi-partisan congressional support,signed the HMO Act of 1973 intolaw. But it wasn’t until the mid-1980s, when the national expendi-ture on healthcare as a percentageof our gross domestic product(GDP) had soared to over 10 per-cent, that HMOs truly began to gainacceptance in the health benefitsmarketplace.

The HMO model was seen bymany as the best option to controlcosts. Unfortunately, some of theseearly iterations fostered dissatisfac-tion with doctors, patients and poli-cy makers and HMO’s were criti-cized as focusing on cost savings byproviding less care rather than bet-ter care.

By the end of the 80’s, for-profit

HMOs surpassed not-for-profitorganizations in enrollment. Manyemployers desperate to rein inhealthcare costs saw the model astheir only option. The pace of HMOenrollment annually during the 80’swas more than 12 percent growth.However, not all HMOs met withsuccess as the industry shrank, with76 HMOs going out of business bymid-1990.

The Blue Cross experienceThe negative images created by

those early HMO attempts in the80’s has continued to create someconfusion over what the true valueof the health care model reallymeans to both employers and mem-bers. Our HMO Illinois benefit plansoffered to our member-owners hasconsistently delivered value, qualityand satisfaction and, we are proudto say, continues to flourish.

The HMO Illinois plans providequality patient outcomes and care,at a lower price, with higher mem-ber satisfaction. To explain how thisis accomplished, we have to goback to the term, “patient-centeredcare.” The “M” in HMO reflects the

model’s primary focus on “maintain-ing” wellness by arranging, througha broad network of independentlycontracted providers, the delivery ofpreventive, coordinated care andcondition management.

In an HMO, all roads to care andtreatment begin with a primary carephysician that the member chooses.The clinician is typically an internalmedicine physician, general practi-tioner or a pediatrician, in the caseof children. This means that themember has a very real “medicalhome,” a doctor who has tools totrack their patient’s health and com-pliance with a care plan. At a timewhen many PPO physicians areconcerned with patients often“Googling” their symptoms, self-diagnosing and referring themselvesto specialists, the HMO member’sprimary care doctor uses his or herexpansive medical knowledge toassess, diagnose and if necessary,refer the patient to a specialist.

That coordinated, effective caremodel means, in many cases, fewerunnecessary treatments or testingand therefore, helps to lower overallhealthcare costs. Such coordinated

HMO: Delivering value and quality careby Kevin Cassidy, Blue Cross and Blue Shield of Illinois

care is especially invaluable whencaring for patients with chronic dis-eases, a population that typicallyrepresents the highest cost individu-als in the health care system. In thecase of HMO Illinois, the proof is inthe results. From 2010-2012, well-controlled HMO asthmatics had 64percent fewer hospital admissionsand 41 percent fewer emergencyroom visits. HMO diabetics had 69percent fewer hospital admissionsand 51 percent less ER stays.*

This brings me to another impor-tant aspect of the HMO. Our health-care system in the U.S. is historicallybased on a fee-for-service model forproviders, meaning that the volumeof services drives reimbursement toproviders. In an HMO, physiciansparticipate in quality improvementprograms that reward them for thequality of outcomes and the healthi-er they keep their patients. They’rerewarded based on a specific set ofquality indicators, for instance, thatinclude how well they manage asth-matics through written action plans,how many patients succeed in quit-ting tobacco, or how many of theirpatients have breast cancer and col-orectal cancer screenings. Medicalgroups are rewarded for reachingout to members who are due forimportant screenings to assure thatthey get them done.

Blue Cross HMOs do not getinvolved in deciding any course oftreatment for members; the doctorsparticipating in the HMO practicemedicine the way they determine itshould be practiced. That’s animportant factor we believe con-tributes to why the HMO Illinois net-work includes so many providers.Physicians routinely encourage us topromote the value of the HMOmodel, because many see it as theway healthcare should be.

Blue Cross and Blue Shield ofIllinois was the first in Illinois tomake health care quality andprovider performance informationpublic. We offer our Blue Star�Medical Group and Blue Ribbon�reports annually, with medical groupsearning a blue star each time theymeet target goals for designatedhealth care goals. And, our Blue Star�Hospital Report is widely acknowl-edged by providers as a valuable

standard for measuring hospital clini-cal quality. If you’d like to find outhow your doctors and hospitals areperforming, you can find bothreports on www.bcbsil.com.

All of this contributes to betterhealth and outcomes for the mem-bers, and the data bears that out.The difference in HMO premiumcost compared to a PPO plan istypically around 29 percent, andmembers appreciate the design thatprovides financial predictabilitywith consistent copayments andout-of-pocket costs. That’s one rea-son why 95 percent of HMO mem-bers say they’re so satisfied withtheir health plan, and 89 percentalso report that their doctor alwaysor usually spends enough timewith, shows respect for, and listenscarefully to them.**

Our HMO members tell us thatthey stick with their plans becausethey’re more affordable, the benefitsare comprehensive, and it’s had apositive impact on their health andwellness. In addition, the HMOoffers members a comprehensivesuite of WellonTarget® wellness

tools that help them become moreengaged, accountable employees intheir own health matters.

Quality, lower costs, higher satis-faction and emphasis on bettercoordinated care; the next time youhear, “patient-centered healthcare,”remember the value that HMOsdeliver. n

*BCBSIL 2012 Claims DataReporting**Consumer Assessment of HealthPlans Survey (CAHPS)

Author Kevin Cassidy is DivisionalSenior Vice President, IllinoisMarkets, Blue Cross and Blue Shieldof Illinois. For more information,visit http://www.bcbsil.com.

17

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18

ing in the Talent Cloud. The bestsource of future workers often lieswithin the people who are alreadyin your company. Unleashing thepower of employee referrals is criti-cal to future business success.Coordinating this “warm” referralprocess manually requires a greatdeal of heavy lifting, but socialsourcing is a way to automate the“warm” referral process. It can helpbuild bigger and better-matched can-didate pipelines for future openroles than ever possible before.What’s next?

So how can your companybecome one of these “winning com-panies” and get a jump on the bestand brightest people? These subjectsand many others are covered inmore detail in the white paper,Talent Management: Strategies for aNew Era. The white paper addressesthe War for Talent—how it’s backand how it’s changed in the last fiveyears. It’s no longer solely aboutfinding and recruiting new workers.It’s about understanding the skillsand capabilities of people in yourorganization and retaining top talentas well. The white paper explainshow recruiting and people develop-ment has significantly changed andprovides insights from HR execu-tives, as well as strategies that com-

panies can adopt to help them winthe War for Talent.

Download the full white paper atwww.bakertilly.com/sign-up/tm.

The good news is that the perilof where businesses were in 2008has changed and many manufactur-ing companies in all sectors areexperiencing growth again. The eco-nomic recovery is steady and show-ing continuous signs of strength. A2014 jobs report revealed that theU.S. added 175,000 jobs in Februaryalong with wage increases to a U.S.wide average of $24.31/hour(Bureau of Labor & Statistics,February 2014).

This is an exciting time for manybusinesses as the recovery contin-ues. Use this uptick in business tomodernize your HR technology andget your talent processes to a placewhere they are a differentiator foryour company, rather than a distrac-tor. Resist doing things the same oldway as this will only make futureinvestments more daunting. Look forways you can provide people withinsight around their careers insteadof just providing them a job. This isall possible with the talent manage-ment technology that is availabletoday. Look to the future and buildthe case to move to new technolo-gies and away from multiple systemsthat don’t talk with each other.

Find a great partner to be yourcompany’s guide on this journey —a good external firm can help youidentify what’s most critical in your

quest to upgrade TalentManagement processes and technol-ogy in your organization. It’s notabout finding the latest technologyavailable, it’s about finding the mod-ern technology that’s right for yourorganization. This partner shouldalso be able to help you establish aroadmap that moves the companyaway from old/on premise technolo-gy to new flexible systems that arecloud-based, allowing for maximumreturn on your investment and lowertotal cost of ownership. Yes, it canbe quite challenging, but the returnon investment for all involved willmake it worthwhile. n

Author Tracey Racette Fritcher is aformer leader of global recruiting fora Fortune 500 company and has pre-viously worked for the technologyfirms of Taleo and Oracle. She loveshelping companies leverage technolo-gies that are right for them to helpthem win in the marketplace andbuild great companies for futureworkers. Follow her @traceyfritcher onTwitter. Baker Tilly is a global profes-sional services firm with a specialized Human CapitalManagement consulting practice.Headquartered in Chicago, BakerTilly works to help clients modernizeHR strategies, processes and technolo-gy that improve workforce engage-ment to drive business results.Connect with us atwww.bakertilly.com/peoplestrategies.

TALENTCont. from page 13

Everything going on in manufac-turing today seeks to reward thebrightest and punish the wasteful,and that works to Illinois’ benefit,Pollet said.

“We have an incredible set ofeconomic opportunities,” Pollet said.“The diversity of our economy issecond to none. We have a jewel ofa city in Chicago, offering urbanelife, arts and culture at a lower costthan other major cities. We havewonderful urban centers that dotthe landscape statewide and providedifferent paths of life.

“Combine that with this trend ofinnovation, a resurgence of talent

and the importance of transportationinfrastructure to economic success.You’ll see that Chicago, Metro East,Rockford, Decatur, places throughoutthe state are well-positioned to capi-talize because they have all the attrib-utes that matter.”

Pollet said a constant theme ofthe administration is support foremerging technology and innova-tion, much of which will serve theinterests of the state’s estimated18,000 manufacturing firms. TheQuinn administration this year hascelebrated two achievements inthose sectors — the launch of theIllinois Manufacturing Lab (IML) andthe federal government’s $70 millionfunding of a new DigitalManufacturing and DesignInnovation Institute in Chicago, bothin partnership with the UI Labs, a

nonprofit spinoff of the Universityof Illinois.

State funding for both initiatives,totaling $81 million, made the federalsupport possible and will provideresources for manufacturers that mustimprove their operations and adaptto new products. The IML already isat work providing advice to 10 man-ufacturers around the state, while thedigital manufacturing institute willpool knowledge from more than 40partnering companies and universitiesin 17 states.

Pollet said the goal is to ensurethat Illinois remains a manufacturinghub. If the state provides a communi-ty for experts, entrepreneurs andventure capitalists in manufacturing,it will increase its chance of beingthe home for future jobs, he said.

POLLETCont. from page 15

see POLLET page 22

19

LAUREN LAABS and BRITT E. WENZEL (bwenzel@mp-mail.com) are Principal Consultants with Mostardi Platt in Elmhurst, Illinois. Mostardi Platt works toprovide environmental solutions for industry. They can be reached at 630-993-9017. Mostardi Platt is an IMA member company. For more information,visit http://www.mostardiplatt.com.

B oilers and process heaters aresubject to several recentFederal Air QualityRegulations, known as the “BoilerMACT” that have the potential toapply to your operations. Since thisequipment is often not central toyour manufacturing process or islocated in out of the way areas ofyour facility, these units are easy tooverlook. Therefore, potential non-compliance implications associatedwith installing and/or operating thisequipment can potentially result inpenalties and/or fines.

If you own or operate any kindof boiler or process heater, then youneed to determine whether you aresubject to the EPA’s MaximumAchievable Control Technology(MACT) standards outlined in theBoiler MACT rules.

The Boiler MACT rule was pub-lished in the Federal Register onMarch 21, 2011 and EPA finalizedchanges to the rules in the FederalRegister on February 1, 2013. Thereare actually two separate sets ofrequirements in the rule for industri-al boilers and process heaters:1) Boiler MACT for Major Sources

(found at 40 CFR 63 subpartDDDDD), and

2) Boiler MACT for Area Sources(see 40 CFR 63 subpart JJJJJJ).The Boiler MACT requirements

vary depending on boiler size, fueltype and construction date of theunit. However, even very small boil-ers may be required to make an ini-tial notification of rule applicabilityto the U.S. and Illinois EPA, mayrequire the completion of a one-timeenergy assessment, and facility’s maybe required to complete periodicunit tune-ups. In some cases (mostlylarger boilers) the rules may alsorequire the completion of perform-ance stack testing and/or fuel analy-sis to establish compliance with ruleemission standards and compliantoperating parameters.

Area sources are commercial,institutional or industrial (e.g. manu-facturing or processing) facilitiesthat emit or have the potential toemit less than 10 tons per year of asingle hazardous air pollutant(HAP), or less than 25 tons per yearof combined hazardous air pollu-tants. HAPs are a separate categoryof listed air pollutants regulated bystate and federal regulations.Facilities with HAP emissionsgreater than these thresholds aremajor sources. If your facility isoperating under a “Minor” sourcepermit (either “ROSS” or “Lifetime”)you are classified as an area sourcesince your HAP emissions must bebelow these threshold levels toobtain this type of permit. If yourfacility has a Federally EnforceableState Operating Permit (FESOP) or aTitle V (major source) operatingpermit the HAP emission levels atyour facility should already be doc-

umented and quantified in your per-mit to allow you to determine yourarea or major source status.

Area Sources are affected by thisrule if your boiler burns:• coal (including coal refuse, petro-

leum coke, or synthetic fuelsderived from coal);

• oil or other liquid fuel (for boil-ers that burn primarily gas butinfrequently burn oil, see below);

• biomass, and/or• non-waste materials.

At Area Sources, the followingtypes of boilers are not covered bythe rule (other than initial applicabil-ity notification requirements): • natural gas-fired boilers (a boiler

that primarily burns gas is stillconsidered a gas-fired boiler evenif it also burns oil or other liquidfuel during periods of gas curtail-ment, gas supply interruption,startups, or for periodic testing

see BOILER MACT page 24

Government Regulations

LAUREN LAABS & BRITT E. WENZEL

U.S. EPA’s Boiler MACT regulation summary

Energy & Environment

CONSTELLATION

Energy supply costs generallymake up about 75-80 percent ofan electricity bill and, therefore,are the primary focus for most energymanagers. However, other compo-nents like capacity and transmissioncan still result in significant costs.Understanding what they are andhow the costs are set can help youmanage your overall energy budget.In the past we discussed howTransmission rates are set, today wewill focus on Capacity costs.

Why do we need Capacity? Balancing energy demand with

energy supply is one of the mostimportant objectives of an energysystem. If there is not enough ener-gy being generated the energy gridcan experience brownouts or black-outs. So, how do system operatorsensure that there is enough electrici-ty supply available on the grid at alltimes to meet potential demand?Many markets across the country usea construct called a ‘CapacityMarket,’ which will be the focus ofthis article. Capacity markets aredesigned to ensure that there areenough electricity capacity resourcesto serve homes, businesses, hospitalsand municipal buildings on thehottest and coldest days of the year— at the lowest possible cost.

An electricity capacity resourcecan be a power plant (from nuclear,gas or coal to wind, solar or hydro)or the customer’s ability to reduceelectricity demand through programssuch as Demand Response. WithDemand Response, end-users reduceconsumption during periods of peak

demand and thus provide relief tothe system to ensure there is ade-quate supply to meet demand.The role of regional electricity grids

Regional distinctions impactenergy price and capacity. Someregions, such as the Northeast, relyheavily on natural gas to generatetheir electricity. Infrastructure limita-tions for gas pipelines and electrici-ty transmission lines can severelyimpact regional reliability duringhigh peak times when suppliers aretrying to flow power and gas intothe region to meet demand. Powerprices in the Northeast, therefore,are typically more susceptible tonatural gas availability and pricevolatility than other regions as aresult. In the Midwest, by contrast,markets are exposed to less pricevolatility due to less demand andthus congested paths and the over-all accessibility of different fuelsneeded to generate electricity.

There are seven regional ‘grids’whose main function it is to ensurethat electricity gets to its final desti-nation in a safe and reliable manner.Some of these ‘grids,’ known asRegional Transmission Organizations

(RTOs) and Independent SystemOperators (ISOs), pay power genera-tors and DR customers for their‘capacity’, which is essentially a guar-antee that there will be enough sup-ply resources available to meet theirforecasted peak energy demand intothe future. (PJM, for example setscapacity rates for a three year hori-zon, whereas MISO, sets their capac-ity rate for only one year.)What is a Capacity auction?

To facilitate the payments to gen-erators, some ISOs and RTOs setcapacity rates using competitive auc-tions. Before each auction, the ISO,or RTO provides the bidders esti-mates for peak electric usage fortheir region. Bidders then bid inexisting power plants, new powerplants, imports, demand responseand energy efficiency. The auction isdesigned to ensure that there isenough capacity to meet the estimat-ed peak usage plus a reserve margin,which is a cushion for unforeseenevents. An accepted bid is a commit-ment. If capacity resource is notavailable when needed, that resourceowner is assessed a financial penalty.

21

Constellation is the preferred energy provider for IMA members. For more information, visit www.constellation.com/IMA. Or, you may contact Constellation’s Ed Wilson at ed.wilson@constellation.com, 888-312-1563.

Electricity Capacity Cost. What is it and can I do anything to manage it?

see ELECTRICITY page 22

22

Who pays for capacity costs?So, who actually pays for the

insurance of having the necessaryelectricity generating capacity avail-able? Ultimately, it’s the consumerswho pay the capacity costs based onthe auction clearing price for theirzone. Energy suppliers (also knownas Load Serving Entities) charge theircustomers based on the approvedcapacity rate. This charge may be ina separate line item on the bill orincorporated into a line item withother charges. The supplier then paysthe ISO/RTO for the capacityrequired to cover the MWs they arecontracted to serve and the ISO/RTOin turn pays the participating genera-tors and demand response suppliers.

Determining capacity obligationsCapacity obligations in many

markets are generally determined byan end-user’s peak load contribution(PLC), Installed Capacity (ICAP) orpeak monthly demand during a spe-cific timeframe. When the end-usertakes supply from an LSE, the localutility provides the PLC to suppliers.Here are some examples of howend-users’ PLCs and ICAPs are deter-mined.

In New York and New England(NYISO & ISO-NE) markets, an end-user’s ICAP is determined by theirusage during the “peak hour fromthe previous year.” The peak hour isthe hour during which the usagewas the highest across the ISO, aspublished by the ISO. Once a cus-tomer’s ICAP is established, it is setfor the planning year. The planningyear is May 1-April 30 in NYISO andJune 1-May 31 in ISO-NE.

Across the 13 states (Mid Atlantic,Ohio & Northern Illinois) andWashington DC that comprise thePJM territory, an end user’s PLC isdetermined by their usage duringthe “five coincident peak hours”(totaled and averaged) from the pre-vious year. The five coincident peakhours are the hours during whichthe usage was the highest across theRTO, as published by the RTO.Once a customer’s PLC is estab-lished, it is set for the planning year,which is June 1-May 31.Managing PLCs to lower your electricity cost

Since annual capacity and trans-mission rates are based on con-sumption during these peak hours,many businesses are actively curtail-ing their demand during this time-frame and seeing significant costreductions. By participating in vol-untary programs like Constellation’sPeak Response, end-users are noti-fied on a day-ahead and day-ofbasis of expected peak settinghours. Consumers who choose toreduce their consumption canreduce capacity and transmissioncosts during the following year.

Permanent energy offsets, likeenergy efficiency upgrades can alsohelp lower PLCs and ICAP. Andnow, energy efficiency upgrades areavailable without upfront capitalrequirements with Constellation’sEfficiency Made Easy. Through in-electric bill funding, businesses andinstitutions can get much neededlighting, HVAC or motor upgradesthat reduce energy demand withshort term payback. n

ELECTRICITYCont. from page 21

The state’s manufacturing turn-around has been a leader in its eco-nomic recovery, with about 20,000jobs being added since January 2010.The change represents a 3.5 percentexpansion of the payroll base inIllinois factories.

Pollet said a primary goal of thebusiness assistance programs inIllinois is to help manufacturing.These include state-funded programsthat train workers to an employer’sspecifications and tax credits that

provide an incentive to expand. TheAdvantage Illinois loan programbacked by federal money has provid-ed about $55 million in low-costfinancing to small companies, manyof them in manufacturing.

The governor’s $42 billion publicworks effort, the largest such pro-gram in any state, also has beendesigned for the private sector, as itfunded many sewer, water and roadimprovements that employersrequired to expand in communitiesstatewide, Pollet said.

“Producing goods is essential tothe fabric of our economy,” Polletsaid. “Quite simply, without it wecannot succeed.” n

POLLETCont. from page 18 Advertiser Index

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23

Constellation — Visit www.constellation.com/IMAAD2

Legal Issues

ANTHOULA POMRENING

O f late there has been muchfocus directed to the activitiesof patent assertion entities,patent monetizing entities, non-prac-ticing entities, or as more pejorativelyreferred to, patent trolls. These areentities that do not manufacture anyproducts of their own, but obtainpatents with the intent of enforcingthem against others, often on ques-tionable grounds. Their proponentscontend they promote invention.Their critics argue they are a drain onthe economy and tax innovation.Regardless of which side is correct, itis clear that this issue has capturedthe attention of many, including theWhite House and Congress.

Nomenclature. There does notappear to be a general consensus asto what to call entities that are sole-ly in the business of asserting patentrights. • Non-practicing entities (“NPEs”),

as defined by the FormerChairman of the Federal TradeCommission, “includes any entitythat does not manufacture or sellproducts that use it[s] technolo-gy.” In patent jargon, it is an enti-ty that does not practice theclaims of a patent. Per this defini-tion, universities and researchinstitutions as well as individualinventors are examples of NPEs.But these entities are not typicallythe focus of the recent publicoutcry as they are in the businessof transferring technology.

• Patent assertion entities (“PAEs”)can be viewed as a subset ofNPEs. The Federal Trade Commis -sion has described them as entitiesthat concentrate on “purchasingand asserting patents against man-ufacturers already using the tech-nology, rather than developing andtransferring the technology.”

• Another term that has been usedis patent monetization entities,“entities whose primary focus is

deriving income from licensingand litigation, as opposed tomaking products.” Sara Jeruss etal., The America Invents Act 500,11 Duke Law & Tech Review,357-389, 361 (2012).

• The most common term used, ofcourse, is the pejorative one,namely patent trolls. The etymolo-gy is believed to go back to 1990s. For purposes of this article, the

term “patent assertion entities” or“PAEs” will be used, unless differentterminology was used in the source.

Characteristics. As set forth inthe report entitled “Patent Assertionand U.S. Innovation” issued by theExecutive Office of the President inJune 2013, the business model fol-lowed by PAEs has a number ofdefining characteristics. • They do not use or practice the

claims of the patents they own. • Unlike universities and research

institutions, PAEs are not involvedin technology transfer, theprocess of transferring the inven-tions claimed in patents into the

development of new products. • They bring suit against compa-

nies only after these companieshave made a considerable invest-ment in products.

• PAEs obtain the rights to patentsnot to manufacture a product, butrather for the purpose of generat-ing revenue from asserting thepatents.

• Their litigation strategy takesadvantage of the fact that theyare not vulnerable to typicalcounterclaims asserted in patentinfringement suits.

• They acquire patents that have anunclear claim scope and assertthem against a large number ofdefendants, some of which willaccept the offered settlement inorder to avoid the high and oftenuncertain costs of litigation.

• They often use shell companiesand non-disclosure agreements tohide their identity.Pros and Cons. Their proponents

contend that PAEs promote invention

Much ado about abusive patent litigation

Anthoula Pomrening is a partner with Chicago-based intellectual property law firm and IMA member McDonnell Boehnen Hulbert &Berghoff LLP. She can be reached at 312-935-2366 or pomrening@mbhb.com.

see LITIGATION page 24

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not to exceed 48 hours duringany calendar year);

• boilers that burn solid waste (theseboilers are subject to other emis-sion standards for incinerators);

• hot water heaters;• waste heat boilers (heat recovery

steam generators);• temporary boilers;• residential boilers; and• electric boilers.

As indicated above, sources thatare subject to the Boiler MACT rulesmay be subject to emissions stan-dards. Demonstrating that you willmeet these standards can involve avariety of requirements from theimplementation of “work practicestandards” (e.g. boiler tune-ups andenergy efficiency audits) to the actu-al demonstration of compliance withthe rule emission standards involv-ing fuel analysis or source testing. Inany event, there are requirementsfor notifications, recordkeeping andreporting. Some key elements of thefinal rules include:• Initial notification date deadline

was January 20, 2014. If youalready submitted your initialnotification, you do not need toresubmit the notification.

• Deadline for completing the initial

tune-up was extended until March21, 2014 for existing boilers.

• Deadline for submitting the noti-fication of compliance status(NOCS) for tune-ups is now July19, 2014.

• Electronic NOCS reports will berequired using the Complianceand Emissions Data ReportingInterface (CEDRI). See moreinformation about electronicreporting below.

• Existing dual-fuel fired units thatfuel switch from gas to coal, bio-mass or oil remain existingsources if they were designed toaccommodate the alternate fuel.

• New oil-fired units may combustlow sulfur oil as an alternativemethod of meeting the particu-late matter (PM) emission stan-dard and such units are notrequired to meet the PM emis-sion limit (provided the boilerdoes not use a post-combustioncontrol technology (except a wetscrubber) to reduce PM or sulfurdioxide emissions).

• Tune-ups are required every fiveyears instead of every two yearsfor the following area sourceboilers: seasonal use units, limit-ed use units, oil-fired units withheat input capacity equal to orless than five MMBtu/hr and unitswith oxygen trim systems.

• New boilers must conduct theirfirst biennial or five-year tune-up

no later than 25 months or 61months, as applicable, after thestartup of the new or reconstruct-ed boilers.All of the different variations on

the rules can make determining yourspecific regulatory requirements andobligations difficult to ascertain.

On a final note, in addition to thenew Boiler MACT you should beaware that large internal combustionengines are also subject to their ownMACT rules:Reciprocation Internal Combus tionEngines (RICE) used for generatorsand fire pump engines may be subjectto the U.S. EPA RICE MACT. The RICEMACT regulations establish HAP emis-sion limitations for certain stationaryRICE. The U.S. EPA has also estab-lished New Source PerformanceStandards (NSPS) for RICE manufac-tured on or after June 2006. TheseMACT and NSPS requirements set spe-cific emission and operating limita-tions, performance testing and com-pliance standards for compressionignition (CI) and spark ignition (SI)RICE. Many previously unregulatedengines — including those designatedfor emergency use — are subject tothese regulations.

Contact Mostardi Platt (see botomof page 19) if you need assistance indetermining how these federal regu-lations may apply to your opera-tions. n

BOILER MACTCont. from page 19

because they assist individual inven-tors in reaping benefits from theirpatents that they would otherwisenot be able to assert on their own.The U.S. patent laws do not require apatentee to practice his claimedinvention before asserting the patent.Yet critics of PAEs argue that they area drain on the economy and taxinnovation. Because PAEs do notmake products, the revenues generat-ed by PAEs are typically not used tosupport further innovation. For exam-ple, in one report, PAEs weredescribed as generating $29 billion inrevenue from defendants andlicensees in 2011. Of that figure, only25% is directed to innovation. Andthere is some evidence to suggestthat the number of suits filed by PAEs

is increasing. According to one recentstudy, PAEs filed 62% of all patent lit-igation suits in 2012. That amounts to2,921 of 4,701 suits filed.www.patentlyo.com/patent/2013/03/chien-patent-trolls.html, citing datafrom RPX Corporation. Regardless ofwhich side to this argument you sup-port, one thing is certain- opponentsof PAEs have been successful in stir-ring the U.S. government into action.

The Executive Branch. ThePresident of the United States hasvoiced his opinion on this issue.“The folks that you’re talking about[PAEs] are a classic example; theydon’t actually produce anythingthemselves. They’re just trying toessentially leverage and hijack some-body else’s idea and see if they canextort some money out of them.” OnJune 4, 2013, the White House TaskForce on High Tech Patent Issuesissued five executive actions andseven legislative actions “designed to

protect innovators from frivolous liti-gation and ensure the highest-qualitypatents in our system.”

The Administration’s recommen-dations for Congress include the fol-lowing: 1) require applicants and pat-entees to disclose the “real party-in-interest” when sending demand let-ters or filing suit; 2) allow more dis-cretion to courts in awarding fees assanctions to prevailing parties inpatent suits; 3) expand the Patentand Trademark Office’s (“PTO”) tran-sitional program for business methodpatents; 4) protect off-the-shelf use ofproducts by consumers and business-es; and 5) require transparency ofdemand letters by making them pub-licly accessible to deter abusive suits.In addition, the executive actionsannounced by the Administration “tohelp bring about greater transparencyto the patent system and level theplaying field for innovators” include

LITIGATIONCont. from page 23

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Manufacturers & Technology

JOEL FREIMUTH

E veryone from your tech savvysalesperson to your latestMillennial hire is telling youthat your small or mid-sized manu-facturing company needs a Website,but, take it from me, they’re wrong.Those people mean well, they justdon’t know the whole situation.Your Website is taking money awayfrom your business. Building aWebsite is easy. There are templatesand plenty of people with a WebsiteDesign for Dummies book that arewilling to take a couple hundred orthousand bucks out of your pocketand give you a web presence. Butin addition to the money you spenton the Website, your Website maybe actively destroying your business.

According to expand2web.com,nearly one-third of visitors to yoursite think you lack essential featuresand functionality. Over 25 percent ofyour customers labelled your site“unimpressive.” Over one-third ofyour potential customers have decid-ed not to do business with you aftervisiting your Website and nearly 1 in10 of your customers are buying lessthan planned because of their experi-ence on your Website. And, chancesare your Website contains typos, bro-ken links, errors, or is even downalmost 30 percent of the time.

The typical potential customerwill spend less than five minutes onyour site if it doesn’t grab themimmediately. Users of manufacturingsites that meet or exceed expecta-tions will spend as much as 15 min-utes on your site. Amazon ran a testin which it slowed down its pageloading speed by 100 microseconds.Sales decreased by one percent. Amicrosecond is one one-millionth ofa second. Google ran a test inwhich it decreased a 10 result load-ing page by 0.4 seconds. Trafficdecreased by 20 percent. Recentresearch from Zona essentially con-cludes that all users will abandon aWebsite that takes longer than 6seconds to load any page. 57 per-

cent of users will abandon a pagethat doesn’t load in three seconds. Ittook you longer than six seconds toread that sentence.

This applies most importantly toYOU: the one who just spent thou-sands of dollars re-designing yourWebsite. TAKE. IT. DOWN. You canlisten to a Millenial, or you can takeit down and stop hemorrhaging thebusiness. Of course, however, thereis a third option. You could build aWebsite correctly. To build a Websitecorrectly, though, is time consumingand expensive.

To determine if a Website isworth it, let’s look at some key sta-tistics. Development of a manufac-turing Website will range from$2,000 to over $100,000. Ourresearch shows that most industrialWebsites cost between $15,000 and$35,000, depending on the function-ality. We always recommend budget-ing towards the higher side. It cantake anywhere from three weeks toa year to build a complete, function-al Website. Small to mid-sized manu-facturers generally take 3-6 months

to start at ground zero and get to awell-designed site that increases rev-enue. Both price and time increaseif extensive direct purchasing capa-bilities are desired. If we were toassume building your particularWebsite would have an estimatedbudget of $25,000 and an estimateddeadline of four and one-halfmonths, we can now begin to deter-mine if the investment is worth-while. We will do this in two steps.First, we will illustrate some of thebenefits of a good Website. Second,we will touch on the various stepsof the process of constructing agood Website.

According to Thomasnet, 90 per-cent of industrial buyers researchand evaluate purchases online.Customers look to a potential ven-dor’s Website to accomplish fourgoals: 1) gather information; 2)determine if the potential vendor iscredible; 3) evaluate the effective-ness of the Website; and, 4) placeorders or manage the sales process.The web, according to RSH Web

Take down your Website — immediately!

Joel Freimuth is CEO of Blue Pearl Consulting. He can be reached at 312-857-6591, jfreimuth@bluepearlconsulting.com. IMA member BluePearl Consulting is located at 980 N. Michigan Ave., Ste. 1110, Chicago. Visit their Website at www.bluepearlconsulting.com.

see WEBSITE page 27

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The Illinois Manufacturer is underwritten by Constellation — An Exelon Company

the following: 1) making “real party-in-interest” the new default for pro-ceedings before the PTO; 2) address-ing overly broad patent claims withnew training for patent examiners;and 3) empowering end users byeducating them as to their rightsbefore settling or litigating.

The Legislative Branch.Numerous bills have been introducedrecently into Congress in an effort todeter abusive patent litigation.

The Patent Transparency andImprovements Act (S.1720) wasintroduced on November 18, 2013by Senate Judiciary Chairman PatrickLeahy (D-Vt.) and Senator Mike Lee(R-Utah). “When small businesses inVermont and across the country arethreatened with lawsuits for offeringWi-Fi to their customers or usingdocument scanners in their offices,we can all agree the system is notbeing used as intended,” Leahy saidin a statement. The Leahy billincludes the following provisions: • Transparency in Patent

Ownership. Any patentee thatfiles an action in court would berequired to disclose any personthat has a financial interest in thecontroversy or a party to the pro-ceedings, or that has an interestthat could be affected by the out-come of the proceedings.

• Stay of Customer Actions.Courts would be allowed to staylitigations where both a customerand manufacturer have beensued for patent infringement.

• Bad Faith Demand Letters. Thebill would empower the FederalTrade Commission to view thesending of demand letters in badfaith as an “unfair or deceptiveact or practice.” The Innovations Act (H.R. 3309),

sponsored by House Judiciary chair-man Bob Goodlatte (R-Va.), passedthe House of Representatives onDecember 5, 2013 by a vote of 325 to91. Its major provisions are as follows:• New pleading requirements

would require the identificationin pleadings of details such aseach patent claim allegedlyinfringed, each apparatus accused

of infringement, the principalbusiness of the party alleginginfringement; and any other com-plaint filed asserting infringementof the same patent.

• Cost shifting would requirecourts to award prevailing partiesreasonable attorneys’ fees andother expenses, unless “the posi-tion and conduct of the nonpre-vailing party or parties were rea-sonably justified in law and factor that special circumstances(such as severe economic hard-ship to a named inventor) makean award unjust.”

• Willfulness and notice: Pre-law-suit notification of infringementwould require identification ofthe asserted patent and theaccused apparatus or instrumen-tality, an explanation, if possible,of how the apparatus or instru-mentality infringes the patentclaims, and identification of theultimate parent entity of the partyasserting the patent.

• Transparency in PatentOwnership: This provisionwould require a plaintiff upon fil-ing to provide an initial disclo-sure to the PTO, the court, andeach adverse party identifyingany assignee, any entity with aright to sublicense or enforce thepatent, or any entity known tohave a financial interest in thepatent or the plaintiff.

• Stay of Customer Actions wouldrequire a court to grant a motion tostay a lawsuit against a customer/end user accused of patent infringe-ment under certain conditions.

• Bad Faith Demand Letters: Thesending of evasive demand lettersalleging patent infringement toend users would constitute anabuse of the patent system.As this bill now goes to the

Senate, it is expected that there willbe a number of changes, thus mak-ing it unlikely that to pass in its c