Is It a Safe Bet to Challenge OSHA?

Will Kramer


February 1, 2014

osha2On an August morning in 2010, Henry Shpiruk, an Occupational Safety and Health Administration (OSHA) compliance officer, was likely expecting another typical day on the job. He showed up at a Florida construction site operated by Virginia Construction & Management Company (VCM) to conduct a run-of-the-mill safety inspection. As he approached the job site, he observed an employee working more than 16 feet off the ground with no fall protection. Shpiruk asked the employee to come down for his own safety and then inquired who was in charge. The employee pointed to Tony Booso, who was walking up to the two men as they spoke.

According to the official case file, “Booso began yelling at Shpiruk that OSHA was harassing him, and then turned to [the employee] and fired him... As Shpiruk attempted to [take a] photograph...Booso ‘shoulder-pushed’ Shpiruk in the chest.” When Shpiruk called his supervisor, the local OSHA area director, to report the events, Booso ended up on the phone with the area director and “immediately went into a verbal tirade.”

The result of Henry Shpiruk’s inspection was the issuance of 11 citations—10 “serious” and one “willful”—for violations of rather common-sense safety standards, carrying a total penalty of $38,400. But the drama didn’t stop there.

Apparently believing it got a raw deal, VCM’s management formally contested the citations and took the case all the way to a hearing before an administrative law judge with the Occupational Safety and Health Review Commission (OSHRC). According to the judge’s summary of the case, “[Booso] expressed disdain for OSHA’s standards and OSHA personnel throughout the proceeding. His last act of the hearing was threatening Shpiruk that he was going to ‘hunt’ him.”

The Fear of OSHA
Obviously, this is not how most risk management professionals would advise that a company handle an OSHA inspection. In fact, considering that the inspection began with a company representative physically assaulting the compliance officer, many observers may be surprised that the fines weren’t higher.

Across the United States, no matter a company’s industry or size, business owners share a common fear: that an all-powerful OSHA representative will knock on their door. Established in 1971, OSHA’s enforcement branch is empowered to inspect businesses without notice and levy fines for alleged violations of safety regulations. Apart from the direct financial consequences of paying fines and the costs of changing operations to meet OSHA’s expectations, more and more companies are using the public records of OSHA inspections to evaluate the safety attitudes of suppliers and other business partners.

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Additionally, since 2010, OSHA has practiced a policy of “regulation by shaming,” as described by OSHA chief David Michaels. Under this policy, the agency issues press releases describing an employer’s alleged violation of safety regulations. These allegations are often picked up by local media and reported as fact. The reputational risk of a negative OSHA inspection can have far-reaching consequences for any implicated company.

Conference or Contest?
In the decades since the agency’s creation, savvy employers have understood that they should almost never pay OSHA’s fines immediately. Instead, they should request an informal conference with the local OSHA area director. This can result in substantial reductions in the number and/or severity of citations as well as the associated monetary penalties through a negotiated settlement process.

However, relatively few employers take the next step: a formal contest of their citations before the OSHRC, the independent body that oversees the contest process between OSHA and employers. According to the OSHRC, nearly 90% of employers who have received citations from OSHA in recent years opted not to formally contest their cases. Based on an analysis of data on OSHA inspections and citations, this statistic should be surprising to anyone in the risk management field.

Law firm Arent Fox has one of the only practice groups in the United States with attorneys who focus solely on OSHA matters, and its experts are likewise perplexed by the low contest rate. According to Mark Dreux, head of Arent Fox’s OSHA Group and contributor to the influential blog Managing OSHA, employers can level the playing field by contesting citations. Moreover, said Dreux, “At the informal conference, OSHA claims privilege over its files and will not allow an employer to review them. The employer is at a huge factual disadvantage and simply does not know if the citations are based on misunderstandings from the interviews or on a new or aggressive interpretation of a standard.”

Based on an analysis of the more than 57,000 citations listed in OSHA’s public inspection databases in 2012, employers achieved an average penalty reduction of 49% by negotiating their citations with OSHA at informal conferences. Of the 33,765 citations of this type, 7% were deleted entirely. This is a victory as the complete elimination of a citation is typically an employer’s primary goal, since that effectively clears the employer’s record in the event of future inspections, which could otherwise result in costly repeat citations.

Employers whose citations were settled or decided during the formal contest process in 2012 appear to have done significantly better. Of the 23,562 citations in this category, which includes the vast majority of contests settled with the Department of Labor’s Solicitor’s Office without significant involvement from an OSHRC judge, the average reduction in penalty was 58%, with 17% of citations completely removed. For the few cases that proceeded all the way through the formal contest process to an administrative law hearing—39 cases in total, covering 169 citations—more than one-third of citations were dismissed.

Even in the VCM case involving the assault of an OSHA compliance officer and a threat to “hunt” him during the course of the hearing, the formal contest process resulted in a nearly 20% reduction in penalties. Despite the company’s blatant misconduct, the OSHRC judge determined that OSHA’s fines were too high on nine of the 11 citation items and eliminated one citation altogether.

OSHRC Oversight
What is it about the formal contest process for OSHA citations that allows employers to do relatively well, despite the pervasive myth that “you can’t beat OSHA”? Although few employers take advantage of it, the design of the contest process itself is unique within the American regulatory system, allowing for much better outcomes than might be expected.

Within most federal agencies, administrative law judges are selected to decide cases that pit the government against businesses and individuals on administrative matters. Although numerous controls are put in place to ensure that these hearings are fair and not biased in favor of the government, administrative law judges are generally employed by the very agency they are charged with overseeing.

Moreover, because the administrative law process typically takes place within the agency in question, the agency usually has the power to overturn the decision of an administrative law judge if it decides to do so. This is not the case with the OSHRC.

Unlike most other administrative law bodies in the United States, the OSHRC is a completely independent agency. It was established alongside OSHA during an era when American lawmakers were especially concerned about the potential for governmental overreach. “The Review Commission is a federal administrative court that was established to ensure that all parties involved in OSHA disputes are afforded a fair and just adjudication,” explained OSHRC Chief Judge Covette Rooney.

Not only do its judges have greater structural separation from the agency they oversee, but they also can make decisions that have policy implications for how OSHA operates. As a result, OSHA and the OSHRC occasionally face each other in federal court over their disagreements in the interpretation of the Occupational Safety and Health Act. The only other administrative body with the same basic design is the Federal Mine Safety & Health Review Commission, which oversees OSHA’s sister agency, the Mine Safety and Health Administration.

The independence of the OSHRC helps keep OSHA honest, which is the primary goal of any effective oversight body. In one 2012 case, Secretary of Labor v. Straight Ahead Construction, with $8,400 in contested fines, the OSHRC judge found that the OSHA compliance officer “began to second-guess himself” after returning to his office without issuing citations to an employer and being instructed by his supervisor to return to the inspection site. Only then was an apparently inaccurate citation issued. In Secretary of Labor v. John R. Jurgenson Company, with $9,000 in contested fines, the judge wrote that the employer’s PowerPoint training presentation “belie[s] the Secretary’s contention” that employees were not trained on the proper procedures for their work. In Secretary of Labor v. Loren Cook Company, with $490,000 in contested fines, the judge determined that the standard cited by OSHA simply “does not apply.”

In each of these cases, the employer walked away from the hearing without a single citation or fine. Employers who are well-versed in the OSHRC’s rulings may study these and other cases to learn what standards OSHA must operate under.

OSHA’s Incentive to Settle
Formally contesting OSHA citations offers significant benefits to any employer who doubts the accuracy of the allegations. “Once an employer contests the citations, he or she will receive a copy of the OSHA inspection file and redacted copies of employee statements,” said Dreux. “The employer can then evaluate the strengths and weaknesses of OSHA’s case and select the strategy designed to eliminate citations or reduce penalties. Like any court, the OSHRC encourages full discovery of the facts and documents, which levels the playing field and results in employers winning many issues involved in contested citations.”

For the poker players out there, this essentially allows the employer to see OSHA’s entire hand before the game begins. This is in stark contrast to the employer’s position at an informal conference, in which he or she has no idea what’s in OSHA’s hand and whether the proposed citations are little more than a bluff.

Additionally, due to high case loads and the cost to the government of a formal hearing, there are incentives for OSHA to settle relatively early in the contest process. According to the OSHRC, nearly 97% of formal contest cases closed in 2012 were settled prior to a hearing. The penalty reductions found in the analysis are in line with the results of “Discounting Death: OSHA’s Failure to Punish Safety Violations That Kill Workers,” a 2008 report prepared by the majority staff of the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP). “The data indicates that OSHA routinely buckles under the threat of litigation, reducing penalties in settlement more than they would absent a contest,” the report states.

Implications for Risk Managers
None of this is to say that employers should contest every citation issued by OSHA simply as a matter of policy. Sometimes, OSHA is right. But, considering the sometimes-irrational fear with which many companies regard OSHA, it is important for employers to understand that there is a fair process to contest any citation. OSHA is not all-powerful. If an employer who assaulted and threatened an OSHA inspector can get a fair hearing, then anyone can.

When an employer truly believes it is adequately protecting the health and safety of its workers, and that OSHA is therefore wrong to issue citations, that employer should feel confident  enough to formally contest its case before the OSHRC. OSHA compliance officers are just as capable of making mistakes as the rest of us. Because their mistakes can be accompanied by thousands of dollars in fines, negative media coverage and a damaged reputation, however, risk managers from all industries would do well to learn more about the formal contest process for OSHA citations and the inner workings of the OSHRC.
Will Kramer, CSP, CPCU, ARM-E, ARM-P, is an independent risk management consultant and freelance writer.