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'Throwing the Book' at Employers?: Secretary of Labor v. Arcadian Corp., OSHRC Docket No. 93-3270

Date: Nov 01, 1995


In the mid-1980's, the Occupational Safety and Health Administration (OSHA) instituted a new enforcement policy designed to create a greater impact by increasing the potential penalties an employer might face. This so-called "egregious violations" policy instructs OSHA inspectors to cite employers for multiple violations of the same standard where it determines that the employer has demonstrated 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). Application of the policy results in large penalties for what can appear to be minor infractions: multi-million dollar penalties for failure to record injuries on the OSHA Form 200, for example. In the original Arcadian decision concerning violations of the general duty clause, the Commission concluded that OSHA had overstepped its bounds in applying the egregious policy under the general duty clause. The Fifth Circuit Court of Appeals recently issued its opinion on the subject.

In a notably brief opinion, the Fifth Circuit Court of Appeals upheld the Occupational Safety and Health Review Commission (OSHRC) decision that the Occupational Safety and Health Administration (OSHA) cannot increase penalties under its egregious penalties policy simply by issuing a separate citation for each exposed employee under the Occupational Safety and Health Act's (OSH Act) general duty clause. Arcadian operated a fertilizer manufacturing facility in Lake Charles, Louisiana. An explosion in 1992 prompted an OSHA inspection of the facility, which resulted in citations alleging 87 separate violations of the general duty clause for failure to provide each employee a workplace free of recognized hazards, one for each employee at the plant. The proposed penalty was $50,000 per violation, for a total of $4,350,000.

Arcadian appealed the citations, arguing that OSHA had overstepped its authority in proposing a citation and penalty for each exposed employee, one the grounds that, if a violation existed, it was only a single violation, and could be remedied by a single course of action. The general duty clause, Arcadian argued, did not permit OSHA to increase the penalty arbitrarily based solely on the number of exposed employees, and OSHA's witness testified that the basis for the penalty proposal was simply a "multiplier," and admitted that Arcadian was required to correct the violation only once. The ALJ agreed with Arcadian, holding that the violation was Arcadian's failure to inspect and maintain the reactor properly, a single course of conduct that could support only one violation of the general duty clause.

The OSHRC agreed, holding that the OSH Act provided for "per violation," not "per employee," penalty assessments, and further that because the Commission's statutory role under the OSH Act was to assess penalties, it, not OSHA, is the final arbiter of the correct interpretation of the statute's penalty provisions. In an unusual procedural decision, the case was appealed to the Fifth Circuit Court of Appeals. The Commission remanded the case to the ALJ to provide OSHA an opportunity to amend its complaint, which OSHA declined, and the ALJ vacated the repeat items from the case, thus creating the final order that OSHA appealed.

The appellate court's standard of review followed long-standing principles: first, the court applied traditional principles of statutory construction to determine if the statute is ambiguous as to the issue on appeal. If the statute is ambiguous, the court then determines if the agency's interpretation is based on a "permissible construction of the statute." Here, the court never got to the second analysis, holding that Congress' intent in regard to the penalty policy was clear, and upheld the Commission's decision.

Under traditional principles of statutory construction, courts begin with the plain language of the statute at issue. The appropriate meanings of the words in the statute are based upon the context in which the words are used. Statutory provisions which might otherwise be ambiguous, even those with words susceptible of different meanings, are often interpreted by courts "when all but one of the meanings is ordinarily eliminated by context." Every word has to be given "operative effect," and a court must "look to the structure and language of the statute as a whole" to confirm its meaning.

Using these principles, the court analyzed the language of the general duty clause, which reads:

each employer shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or likely to cause death or serious physical harm to his employees.

In analyzing the language, the court looked at the context of the language. The purpose of the clause, said the court, is to allow OSHA to address those situations where a specific health or safety standard does not exist, a "catchall" provision.

The court also considered how OSHA enforces violations under the above-referenced provision. The court thought it important that, under the general duty clause, OSHA need not show that any particular employee is exposed, only that hazardous conditions exist and that employees may encounter them. The duty of the employer is to avoid the creation of hazardous conditions regardless of whether one or a thousand employees are exposed.

OSHA argued that the words, "each of," in the clause permits a general duty clause citation to be issued for each employee exposed. The court countered that the words convey the notion that the duty runs to all employees, regardless of the individual susceptibilities of a particular employee. OSHA further complained that limiting its ability to issue penalties would reduce its effectiveness in deterring violations of the law. The court rejected that premise as a basis for its decision, suggesting that OSHA's complaint would be better directed to the Congress, rather than the court. The court noted that in 1990, Congress increased the penalties for OSHA violations, thus "Congress is the appropriate government department to make such policy judgements."

Finally, the Court upheld the position that the Review Commission and not OSHA has the exclusive authority to assess penalties. The Commission is to consider four criteria, including the gravity of the violation. The Commission considers the number of employees exposed to the hazard in determining the gravity of the violation, and the Commission adjusts the penalties up or down as justice in the case demands. Considering all of the above, the Court concluded that OSHA cannot issue citations under the general duty clause simply by issuing a citation for each exposed employee. The penalty is assessed for each violative condition which presents a recognized hazard of serious injury or death in the workplace.

This article appeared in Compliance Magazine (November/December 1995) 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.