Egregious Violations Policy: S. A. Healy Co. v. The Occupational Health and Safety Administration, 17 OSHC (BNA) 1737, Sept. 18, 1996

Date: Jan 01, 1997

In 1988, a methane gas explosion in a tunnel under a Milwaukee street killed three workers. As is often the case, the resulting OSHA inspection led to a long series of court cases, culminating in one in which OSHA cited the S.A. Healy Company (Healy) under the so-called egregious violations policy. If OSHA deems the employer's actions "egregious," it issues separate citations and penalties for each instance of a violation observed in the course of its inspection. In the Healy case, OSHA cited the company for 68 willful violations of various standards, 49 of which related to standards which apply when explosive gases are present, and assessed the maximum penalty in effect at the time of the incident of $10,000 per violation. This case was the subject of a previous Court Docket in ______, __.

In addition to the civil penalties, Healy had been prosecuted and convicted under the criminal provisions of the OSHA Act, resulting in penalties of $750,000 based on the willful acts in violation of OSHA standards which led to the death of three of its employees. Healy appealed the civil penalties under the egregious policy to the Seventh Circuit Court of Appeals, which in its initial decision concluded that, having prosecuted the Company under the criminal provisions of the OSH Act, OSHA was barred from pursuing penalties under the egregious violations policy because of the punitive nature of such penalties which are intended to provide and have a deterrent effect on employers. OSHA appealed to the U.S. Supreme Court, which had issued a decision calling into question the Court of Appeals earlier decision. The Supreme Court remanded the case to the appellate court for reconsideration in light of the new case. On review, the Court of Appeals reversed itself, saying that the new guidance from the Supreme Court required it to analyze the underlying penalty to see if it was a civil or criminal penalty. If so, the egregious penalties are not barred by the double jeopardy clause of the U.S. Constitution.

A brief recap of the legal procedure in the case is helpful to understand the decision. The civil penalty proceeding was temporarily suspended while the criminal case was pursued. Then, after completion of the criminal prosecution, OSHA argued that the company was "estopped" from arguing that it had not committed the alleged violative acts, and was therefore liable for the penalties assessed. Healy countered that it agreed with OSHA that the criminal case prevented it from asserting that it did not violate the OSH Act, but argued that because the egregious penalty policy was punitive in nature, OSHA was foreclosed from using that device under the double jeopardy clause.

Under the Fifth Amendment, no person may "be subject for the same offence to be twice put in jeopardy of life or limb." The clause protects persons from being punished for the same offense twice; even more, it prohibits prosecution a second time. The question posed in the Healy case was whether egregious penalties are punitive, and, if so, are there any limitations on their use.

The Court of Appeals followed a rule taken from an earlier case that concluded a defendant, once punished in a criminal proceeding, could not be subjected to "an additional civil sanction to the extent that the second sanction cannot fairly be characterized as remedial." In other words, if the purpose of the civil fine in the second proceeding is to punish, it's not allowed under the double jeopardy clause of the Constitution. The Supreme Court's intervening decision rejected this reasoning, concluding that the first question was whether Congress intended the penalties to be civil or criminal. If Congress described the penalties as civil, only clear proof that the intended penalty was really criminal - that it was intended to punish and not merely deter future violations - would bring the protection of the double jeopardy clause into play.

The Court then reviewed the statutory provisions in section 17 of the OSH Act to determine what Congress intended when it provided for the penalties. In paragraphs (a) through (d) and (i), Congress provided that employers could be assessed a "civil penalty" for violations described in those sections. Clearly, said the Court, Congress designated the penalties contemplated as civil, and in the absence of a "powerful reason to disregard this designation," the penalties will be considered civil in nature. Moreover, the penalties are assessed by the Executive Branch - OSHA - rather than imposed by the judiciary after a trial. In addition, the Court noted that other courts of appeals had characterized OSHA penalties as civil.

The Court noted that the provisions provided only for financial penalties - no possibility of imprisonment could result even from willful violations, unless a fatality occurred. In that event, a separate provision, paragraph (e), mandated "punishment" by a larger fine and up to six months in jail. Because the elements of a willful violation make up a part of the elements of the crime as defined in paragraph (e), a willful violation is what is known as a "lesser included offense" in the law. The Court then considered whether this relationship between the crime and the civil violation was sufficient to make individual penalties criminal in nature. Since the Court concluded they were not, the individual penalties were not barred by the double jeopardy clause.

This new decision misses one important point. The egregious policy is reserved for those cases where the employer is deemed to demonstrate one or more of the following characteristics: (1) persistently high rates of illness/injury or fatalities; (2) extensive history of prior violations; (3) intentional disregard of health & safety responsibilities; or (4) bad faith (a plain indifference to standards or requirements). Once that standard is met, OSHA intentionally issues separate citations and penalties for each instance of a violation. The questions arises, as the Court of Appeals asked, but did not answer, whether OSHA simply intended to run up the total fine. The Occupational Safety and Health Review Commission (OSHRC) has not had a chance to decide whether the egregious penalty policy is inherently punitive, and therefore, should not be permitted under the civil penalty enforcement scheme of the OSH Act. If so, any egregious penalty coupled with prosecution under the criminal provision would be barred by the double jeopardy clause. Whether the Commission will accept this reasoning in a future case, and whether it would be upheld on certain appeal by OSHA will depend in large part on the individual facts in the test case.

This article appeared in Compliance Magazine (January 1997) and it is reprinted with permission of Compliance Magazine. Copyright © 2001 by IHS Publishing Group. All rights reserved.

For further information about this article, please contact David G. Sarvadi at 202-434-4249 or by e-mail at sarvadi@khlaw.com.