OSHA MATH: CALCULATING THE FULL IMPACT OF THE 2016 PENALTY INCREASE

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje, PLLC.

Under the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015, OSHA penalties will undergo annual inflation adjustments beginning on January 15, 2017. A one-time “catch up adjustment”, however, must be announced by the agency by July 1, 2016. This “catch up adjustment” will take effect no later than August 1, 2016.  The purpose of this one-time “catch up adjustment” is to make inflation adjustments since the last increase in OSHA fines in 1990.

Many experts are predicting that the “catch up adjustment” could mean an 80% increase in OSHA penalties effective August 1. The following shows how such an increase would affect the current maximum penalties:

“Other then Serious” and “Serious” Violations:

  • $7,000 currently
  • $12,600 after August 1, 2016

“Willful” and “Repeat” Violations:

  • $70,000 currently
  • $126,000 after August 1, 2016

“Failure to Abate” Violations:

  • $7,000 per day currently
  • $12,600 per day after August 1, 2016

To fully appreciate the full importance of these increases, however, employers must also understand the means by which penalties can be assessed by OSHA.  A single OSHA inspection can result in multiple penalties based upon the number of violations and/or hazards discovered.  On October 29, 2009, for instance, BP Products of North America was assessed a record $81,340,000 in total penalties based upon only two inspections.

OSHA, moreover, generally combines separate violations of a single OSHA standard into one proposed penalty. Similarly, when a single hazard violates more than one OSHA standard, the violations may be grouped into one proposed penalty. There are instances, however, when violations will not be combined or grouped into one proposed penalty:

Multiple Establishments or Worksites:  Violations of an OSHA standard at more than one establishment or worksite of the same employer generally draw a separate penalty for each establishment or worksite.

Multiple Employee Exposures: For egregious violations, a penalty can be assessed for each employee exposed to a single hazard. CPL 02-00-080

Multiple Violations of OSHA Standard: For egregious violations, a penalty can be assessed for each violation of the same OSHA standard. CPL 02-00-080

For most OSHA inspections, therefore, the full impact of the penalty increases will be multiplied by the number of discovered violations and/or hazards. For egregious violators, the full impact of the penalty increases may be multiplied even further.  This much is certain; the number of OSHA inspections resulting in combined penalties exceeding six figures and seven figures will increase dramatically beginning this year.

Advertisements

ENTERPRISE-WIDE ABATEMENT RULING RAISES STAKES OF OSHA INSPECTIONS!

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje, PLLC.

A citation stemming from an OSHA inspection typically specifies (1) the hazards which must be abated by the employer, and (2) the deadline for abating the hazards.  For employers with multiple locations,  these abatement requirements have historically been limited to hazards at the location inspected by OSHA.  In recent years, however, OSHA has periodically sought to impose enterprise-wide abatement requirements even as to alleged hazards at locations not inspected by the agency.

Proposing broader abatement requirements for employers with multiple locations is not merely a remedial strategy of OSHA.  An employer subject to enterprise-wide abatement requirements is also vulnerable to future enterprise-wide inspections by the agency to  verify that the requirements are being followed.

A September 30, 2013 ruling by Administrative Law Judge William Coleman in Secretary of Labor v.  Delta Elevator Service Corp.  placed the legality of OSHA’s strategy in doubt. In rejecting OSHA’s request for enterprise-wide abatement,  Judge Coleman ruled that “while enterprise-wide abatement has occurred in [Occupational Safety & Health Review] Commission cases where the parties have agreed to such abatement in a voluntary settlement agreement … there is no Commission or other precedent holding that such abatement may be directed pursuant to the “other appropriate relief” clause in Section 10(c) of the [OSH] Act.”  He also noted: “… the requested relief in this case would require an order that (1) is not based on any work performed at a worksite where an inspection took place, and (2) is not the subject of any allegation contained in the citation …”

A December 23, 2015 OSHA news release, however, boasts of a new ruling which the agency now contends provides precedent for enterprise-wide abatement requirements.  In Secretary of Labor v. Central Transport, LLC,  Administrative Law Judge Carol A. Baumerich ruled that, under the “other appropriate relief” clause in Section 10(c) of the OSH Act, the “Commission has the authority … to  order  enterprise-wide relief in cases where appropriate.”

To be sure, OSHA’s news release may be overstating the importance of an un-reviewed decision by one Administrative Law Judge.   After all, Judge Baumerich specifically noted that Judge Coleman’s earlier 2013 ruling was “not controlling” as to her ruling.  Still, the underlying message of the news release is plain – OSHA will continue to seek enterprise-wide abatements from employers with multiple locations.  Indeed, OSHA may be emboldened to make such requests more commonplace.  Employers with multiple locations must thus consider that the financial stakes of an inspection may have just been raised by OSHA.

DOS AND DONT’S FOR EMPLOYERS DURING AN OSHA OPENING CONFERENCE!

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje, PLLC.

It is to an employer’s strategic benefit to be proactive in protecting its interests during the opening conference of an OSHA inspection.

DO Be Selective as to the Employer’s Representative at the Opening Conference

The employer should be represented in the opening conference by a management representative who is not only familiar with the inspection process, but also the measures which must be taken to protect the employer during the opening conference.

DO Address Purpose of Inspection

An employer should not allow an OSHA Compliance Safety & Health Officer (CSHO) to bypass or rush any discussion about the legal or factual bases for the inspection, even when the CSHO is armed with a search warrant.

  • DO Ask About Applicable  Exemptions: If the CSHO does not inquire about applicable exemptions to OSHA’s inspection or record-keeping requirements, the employer should do so if there is even an arguable basis for claiming an exemption.
  • DO Ask About Purpose of Investigative Inspection: If the CSHO does not explain the purpose of an investigative inspection with sufficient clarity or detail, the employer should press the CSHO for further information as to the issues to be investigated.
  • DO Take Time to Review a Formal Employee Complaint: If the purpose of the inspection is to investigate one or more formal employee complaints, the employer should review the complaints thoroughly before proceeding with the inspection.  A defective formal employee complaint may be grounds for challenging the inspection.
  • DON’T Challenge Coverage:  Although questions about an employer’s business are routinely part of the opening conference, an employer should not expect coverage to be a basis for challenging the legitimacy of the inspection.  

DO Define Scope of Inspection

An employer should endeavor to reach an understanding with the CSHO as to the exact scope of the OSHA inspection.

  • DO Read Search Warrant: Even where the scope of an inspection is defined by a search warrant, the employer should read the content of the warrant and strive to reach a consensus with the CSHO regarding any ambiguities in such content.
  • DO Define Extent of  Programmed Inspection: Even for a programmed inspection, for which a wall-to wall inspection of the employer’s entire worksite is generally authorized, the employer should strive for an understanding of the areas to be inspected.
  • DO Define Areas Encompassed by Investigative Inspection:  The CSHO may seek to conduct a wall-to-wall inspection even where such breadth is not necessary to an investigation.  For such an inspection, it may be incumbent upon the employer to propose, and if appropriate, insist upon a more limited inspection of the areas encompassed by the investigation.

DO Press for a Plan for Walk-Around Inspection

An inspection plan can help avoid an overly broad inspection which unreasonably disrupts the employer’s operations.

  • DO Address Route: At the opening conference, the employer and the CSHO should determine a logical route for the walk-around inspection. Amongst the considerations in determining the route should be (1) minimization of disruption of the employer’s operations, (2) the defined scope of the inspection, (3) limitation of plain view of operations outside the defined scope of the inspection, and (4) avoidance of repeat views of work areas.
  • DO Address Methods of Collecting Evidence: Determining methods anticipated by the CSHO can assist the employer in making preparations for collecting its own evidence during the walk-around inspection.
  • DO Address Timing and Length: If the employer representative or employee representative is needed elsewhere during the walk-around inspection, this issue and possible solutions can be addressed during the opening conference.

DO Press for an Interview Schedule

An interview schedule can help minimize the disruption of the employer’s operations.  Whether the timing, length, location or manner of employee interviews will unreasonably disrupt an employer’s operations may be affected by such issues as (1) the demands of the operations for which the employee is responsible, and (2) the ability of the employee to be away from his/her work station for an interview.

DO Memorialize in Writing List of Requested Records and Programs

A search warrant or subpoena may provide a specific list of documents to be produced in conjunction with the inspection. In the absence of a search warrant or subpoena, the employer should, to avoid misunderstandings or conflicting memories, (1) request that the CSHO provide a written list describing the specific documents to be reviewed, or (2) provide a written list to the CSHO, based upon documents verbally requested  by the CSHO, with a request for confirmation that the list is accurate and complete.

DO Address Trade Secrets       

As previously noted in the August 23, 2015 post entitled “How Trade Secrets Can be Protected in an OSHA Inspection“,  the CSHO should not be trusted to question the employer regarding trade secrets at the opening conference.  The employer must be prepared to identify with particularity (1) the trade secrets which it wishes to protect, and (2) the procedures which it requires to protect such trade secrets.

DO Conduct a Management Walk-Around Inspection During the Opening Conference 

While the opening conference is ongoing, other management employees should be conducting a quick walk-around inspection of the work site to (1) identify and correct any workplace hazards, (2) clean up any spills or debris in the employee work areas, (3) ensure that all employees are wearing personal protective equipment, and (4) ensure that no employees are in violation of safety and health policies.  To be sure, the CSHO may learn of this quick walk-around inspection during employee interviews. Avoiding first-hand viewing of hazards may be preferable to such second-hand reporting.

WHAT DOES AN EMPLOYER NEED TO KNOW ABOUT AN OSHA OPENING CONFERENCE?

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje, PLLC.

The opening conference of an OSHA inspection typically takes place in an office or conference room and can address several matters, the most important of which are (1) the nature of the employer’s business, (2) the nature of the employer’s workforce, (3) the purpose of the inspection, (4) any legal bars to the inspection, (5) the scope of the inspection, (6) the timing, length and manner of the inspection, (7) the documents to be reviewed and their location, (8) the employer’s trade secrets, if any, and (9) the benefits of prompt abatement of hazards discovered during the inspection.

What is the Nature of the Employer’s Business?

There are at least two reasons for OSHA to inquire about the nature of an employer’s business:  (1) OSHA may ask questions to determine whether the employer’s business is covered by the OSH Act; and (2) the nature of the employer’s business may determine the OSHA standards applicable to the employer.

What is the Nature of the Employer’s Workforce?

Since only employees are protected by the OSH Act, OSHA may inquire whether there are any independent contractors working on-site.

What is the Purpose of the Inspection?

OSHA should inform the employer as to the purpose of the requested inspection.  The purpose may be a programmed  inspection scheduled by the agency based upon certain selection criteria.  The purpose may also be investigative in nature as to (1) an employee fatality, inpatient hospitalization, amputation, or eye loss, (2) a formal employee complaint, (3) an informal complaint, (4) a referral, (5) hazards directly observed by OSHA at or near the employer’s workplace, or (6) hazards identified during a previous inspection.  If the purpose of the inspection is to investigate a formal employee complaint, the employer is entitled to know the content of the complaint, but not the identity of the complainant.

Are There any Legal Bars to an  Inspection?

One question which can be addressed at the opening conference is whether there are any grounds for challenging the inspection.  These grounds include (1) an applicable exemption to the inspection, (2) a defective formal complaint, or (3) a defective search warrant.  The opening conference can also determine whether a different employer should properly be the target of the inspection.

What is the Permissible Scope of Inspection?

The inspection of an employer’s entire worksite is generally authorized as to a programmed inspection and may be authorized by a search warrant.   For other inspections, the opening conference provides an opportunity to review a floor plan or map of the worksite to determine which areas will be included in the inspection.

What Will be the Timing, Length and Manner of Inspection?    

The opening conference also provides OSHA and the employer the opportunity to discuss the logistics of the inspection and how to proceed with minimal disruption to the employer’s operation.

What Documents Are to be Reviewed and Where are they Located?

At the opening conference, OSHA and the employer will generally discuss the documents to be reviewed as part of the inspection and their current location.  Where applicable, OSHA and the employer should try to determine whether any exemptions apply to the retention of injury and illness records.  See If the documents are located at a different location, arrangements will need to be made at the opening conference for their review.

Are There any Trade Secrets to Protect?

As previously noted in the August 23, 2015 post entitled “How Trade Secrets Can be Protected in an OSHA Inspection“,  the OSH Act provides for the protection of trade secrets which are within the scope of an OSHA inspection.  The opening conference is the opportunity for OSHA and the employer to reach an understanding as to how the employer’s trade secrets will be protected.  Still, it is incumbent upon the employer to identify the trade secrets and the areas at the worksite which contain or which might reveal these trade secrets.

What Happens if Easily Fixable Hazards are Discovered During the Inspection?   

At the conclusion of the opening conference, the employer should have an understanding from OSHA as to the benefits under the agency’s Administrative Penalty Policy of (1) correcting hazards identified during the inspection, and (2) correcting hazards within 24 hours of the inspection.

GENERAL DOS AND DON’TS FOR EMPLOYERS DURING AN OSHA INSPECTION!

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje, PLLC. 

A smart approach by the employer to an OSHA inspection can help mitigate the risks of costly citations and penalties. Although specific recommendations will be provided in later posts regarding each of the five components of an OSHA inspection (opening conference, records and programs review, walk-around inspection, employee interviews and closing conference), the following dos and don’ts apply generally to all components of the inspection.

DO Show Respect for Employee Health & Safety

Statements that the employer takes employee health and safety seriously certainly carry weight.  Still, it is important for an employer to avoid actions or inactions during an inspection which may betray a more callous attitude.  Amongst the types of statements which should be avoided by an employer are the following:

  • These OSHA Standards are Onerous.” Although many OSHA standards are indeed onerous, the inspection is neither the time nor the place to argue this point.
  • We are Safe by Industry Standards.” Even reasonable industry standards carry little weight with OSHA if they are contradicted by OSHA standards.  OSHA may see an employer which operates by industry standards rather than OSHA standards as an opportunity to set an example.
  • We are Safe, but the Paperwork is Overkill.” OSHA paperwork is indeed unduly burdensome, but the agency is a government bureaucracy not a private business.  This argument will get the employer nowhere.
  • We are First and Foremost a Business.” Although every employer understands the realities of capitalism, the CSHO is concerned only with employee health and safety.  A CSHO will be unimpressed by employer statements regarding the (1) the slim profitability or recent unprofitability of its operations; (2) customer demands; (3) ownership demands; (4) the costs of compliance with the OSH Act; or (5) the jobs which will be lost if the employer strictly complied with the OSH Act.

DO Show Respect for the Inspection Process

OSHA views the inspection as an essential tool to police employee health and safety. An OSHA inspection is neither the time nor the place to attack the process by which the OSH Act is enforced.  A disrespectful attitude toward the inspection can be viewed as indifference toward employee health and safety.  An employer should avoid statements to the effect that:

  • This Inspection is an Annoyance.”  At no time during an inspection should an employer indicate to OSHA that the inspection is a waste of time or a mere annoyance.
  • “How Quickly Can this Inspection be Wrapped Up.”  Although concluding an inspection within a reasonable time period is a worthwhile goal, the employer should not unreasonably rush the CSHO or indicate that it has more pressing matters to attend to.  The CSHO will likely not respond favorably to impatience.

DO Regard the CSHO as a Respected Adversary, Not a Friend

The CSHO is not at the worksite to help the employer, the CSHO is there to look for OSH  Act violations and issue citations and penalties.  Some helpful hints in communicating with the CSHO include the following:

  • DO Be Courteous and Professional. Antagonism toward the CSHO will gain the employer nothing.
  • DON’T Leave the CSHO Alone.  The CSHO will seize any advantage allowed by the employer.  The whereabouts of the CSHO should be monitored and controlled by the employer at all times during the inspection.
  • Where Applicable, DON’T Assume the CSHO is only Interested in a Limited Inspection. Programmed inspections will generally encompass an employer’s entire worksite.  Even where the basis for an inspection is limited in scope, the CSHO is looking for potential hazards in plain sight which may provide the basis of (1) a citation, or (2) an expanded inspection.
  • DON’T Try to Help, Educate or Impress the CSHO. The employer should answer questions posed by the CSHO regarding its operations and safety and health practices, but should not otherwise try to help, educate or impress the CSHO by volunteering information or providing a demonstration of an operation or procedure.  To do so, risks: (1) providing the CSHO with additional questions to ask; (2) a citation for an unwittingly admitted or demonstrated OSH Act violation; and (3) a basis for expanding the scope of a limited inspection.
  • DON’T Presume CSHO Will Fulfill Obligations to Provide Information.  There is information to which an employer is entitled as part of an OSHA inspection which should be communicated and respected by the CSHO.  The employer should not presume, however, the CSHO will fulfill this obligation.  It may be necessary for the employer to be assertive by inquiring regarding information to which it is legally entitled.
  • DON’T Presume CSHO Will Fulfill Promises. A CSHO will not necessarily abide by promises made to the employer during the inspection.  The employer should thus not presume that a CSHO will fulfill a promise to (1) provide copies of evidence collected during the inspection, (2) waive a citation for a hazard corrected during the inspection, or (3) regard any conversation as being “off-the-record.”

Where Applicable, DO Manage the Scope of a Limited Inspection

Even where the basis for an inspection is limited in scope, the CSHO will not regard it as a priority to keep the scope of the inspection limited.  It is up to the employer to ensure that a limited scope is followed by the CSHO.

DO Assert Employer Rights

The CSHO will not regard it as a priority to observe the employer’s rights during an OSHA inspection.  It is up to the employer  to ensure that the CSHO observes these rights.  Employer rights during an OSHA inspection are addressed in greater detail in the following posts of this blog: (1) How Can Trade Secrets Be Protected in an OSHA Inspection? and (2)  What Does an Employer Generally Need to Know About the OSHA Inspection Process?

  • Search Warrant Which Provides for an Unreasonably Disruptive Inspection. If  the timing, manner and method of inspection authorized by a search warrant would result in an unreasonable disruption of the employer’s operations, the employer should confer with the CSHO about alternative timing, means or methods.  Barring this option, the employer, in consultation with legal counsel, may wish to explore the possibility of a motion to quash the warrant.
  • Search Warrant Which Does Not Adequately Protect Trade Secrets.  If a proposed method of inspection authorized by a search warrant would not ensure the confidentiality of the employer’s trade secrets, the employer should confer with the CSHO about alternative means or methods of inspection.  Barring this option, the employer, in conjunction with legal counsel, may wish to explore the possibility of a motion to quash the warrant.

DON’T Try to Manipulate the Inspection Process

The CSHO has been trained to recognize and get around efforts by an employer to manipulate and obstruct, rather than simply control, the inspection. An employer’s efforts to conceal hazards can also be revealed during interviews of non-management employees.  Efforts to manipulate an inspection are risky and can backfire and put the employer in a worse position.

DON’T Lie

Providing OSHA with untruthful information risks more citations and penalties, not to mention potential criminal prosecution if the employer makes a false statement, representation or certification in a document required by OSHA. 29 U.S.C. 666(g)

DON’T Discriminate, Threaten or Intimidate   

The employer should not threaten or intimidate any employee during an inspection to be silent or untruthful regarding work hazards.  The risk that the employee will reveal the employer’s conduct during an interview simply outweighs any benefits. Similarly, the employer should not discriminate or retaliate against any employee who has provided information to OSHA during an inspection. Such an action can form the basis of an independent claim under the OSH Act. 29 US.C. 660(c)

DON’T Self Incriminate

All  information provided by a management representative during an inspection may be used later by OSHA against the employer. Amongst the damaging admissions which should avoided during an inspection are the following:

  • Knowledge of a workplace hazard before the inspection.
  • Knowledge of others regarding a workplace hazard.
  • Knowledge that a hazard violated the OSH Act.
  • Knowledge that the hazard presented a risk of death or serious physical harm.

DON’T Trust that the Information Collected by the CSHO is Accurate or Unbiased

The CSHO conducting the inspection may be inexperienced, unprepared or even biased. The information obtained during the walk-around inspection and employee interviews may inaccurately show violations of the OSH Act, where no violations actually exist.

DO Conduct a Simultaneous Inspection

An OSHA inspection provides an employer an opportunity to conduct its own inspection of the workplace to (1) correct previously unknown hazards, and (2) gather alternative evidence in the event the evidence gathered by the CSHO is inaccurate.  Although the results of the employer’s inspection will not be privileged from a subpoena, the alternative is to trust the information obtained by the CSHO. As set forth above, this is not always a wise option.

WHAT DOES AN EMPLOYER GENERALLY NEED TO KNOW ABOUT THE OSHA INSPECTION PROCESS?

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje, PLLC.

Inspections of employer’s premises are the primary means by which OSHA enforces the OSH Act. OSHA inspections are generally conducted by an OSHA Compliance Safety & Health Officer (“CSHO”).

What Components Comprise the Inspection?

An OSHA inspection generally consists of five components:

The Opening Conference: The opening conference provides the opportunity to (1) learn the basis for the inspection; (2) address preliminary matters relevant to the inspection; and (3) determine the scope of the inspection.

Program and Record Review: The CSHO reviews written programs and records required to be created and/or maintained by the OSH Act.

Walk-Around Inspection:  The CSHO, an employer representative and employee representative (if any) tour the worksite and observe the operations. The CSHO may collect physical evidence my taking photographs, video and audio recordings, samples, tests and measurements.

Employee Interviews: The CSHO privately interviews management and non-management employees regarding the employer’s operations.

Closing Conference:  The closing conference provides the opportunity to discuss (1) apparent violations and other issues discovered during the inspection; (2) timetables for abating hazards; and (3) the rights and procedures in the event of citations and penalties.

Who can Participate in the Inspection?

CSHO: The CSHO generally conducts the inspection on behalf  of OSHA, but may be accompanied by other OSHA representatives. There are generally three types of CSHOs: (1) Safety Engineers, (2) Safety Compliance Officers; and (3) Industrial Hygienists.

Employee Representative:  If there is an employee representative at the employer, the representative is entitled to participate in the inspection. An employee representative may be any of the following:

  • A representative for purposes of collective bargaining.
  •  An employee member of a safety and health committee.
  • An individual employee who has been designated as the employee representative for OSHA inspections.

Non-Management Employees: Non-management employees participate in the inspection by providing information during private interviews.

Management Representative(s): One or more management representatives can participate in the OSHA inspection as (1) the employer’s representatives, or (2) employees to be interviewed by the CSHO.  Management representatives generally cannot be present during the interviews of non-management employees.

Employer’s Legal Counsel: Legal counsel for the employer can generally participate in parts of the OSHA inspection, but does not have the right to participate in the walk-around inspection or the interviews of non-management employees.

When Does the Inspection Begin?

A CSHO typically arrives at an employer’s worksite early in the morning. A CSHO will generally pursue an inspection immediately, especially if allowed by a search warrant.

Work Hours: An OSHA inspection is generally conducted during work hours so the CSHO may observe the work operations.

Non-Working Hours:  In some instances, a CSHO may conduct non-management employee interviews during non-working hours away from the employer’s workplace.

How Long Does the Inspection Last?

There is no time limit on an OSHA inspection. An OSHA inspection can span hours, days or weeks depending upon the nature and size of an employer’s operations.

What General Rights Does an Employer Have During the Inspection?

Other than rights as to who can participate in an OSHA inspection, an employer has several important rights during the inspection.

Basis of Inspection: The employer has a right to know the basis of the inspection.  For formal employee complaints, this right includes the specific content of the complaint, but not the identity of the complainant.

Protection of Trade Secrets: The OSH Act specifically provides for the protection of an employer’s trade secrets that are within the scope of the inspection. An earlier article in this blog addresses the protection of trade secrets in greater detail.

Avoidance of Unreasonable Disruption: An OSHA inspection may only be conducted at “reasonable times, within reasonable limits and in a reasonable manner.” 29 U.S.C 657(a).  The timing, manner or length of an inspection should thus not unreasonably disrupt the employer’s operations. Mere inconvenience is not synonymous with unreasonable disruption.  OSHA oversteps its authority only if a component of the inspection would have a material impact on the employer’s operations.

Enforcement of Safety and Security Rules:  OSHA is not immune from an employer’s safety and security rules.  The employer should be able to enforce the same safety and security rules for the CSHO that are enforced for other visitors to the employer’s premises.

Can the Inspection be Terminated by the Employer?

The consequences of a termination of an inspection by an employer depend upon whether or not the inspection is being conducted pursuant to a search warrant or subpoena.

Search Warrant or Subpoena: The termination of an inspection being conducted within the terms of a search warrant or subpoena risks a contempt finding by the court that issued the search warrant or subpoena.

No Search Warrant or Subpoena: The termination of an inspection will likely prompt OSHA to return with a search warrant or subpoena.

 

HOW CAN TRADE SECRETS BE PROTECTED IN AN OSHA INSPECTION?

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje, PLLC.

For many private employers, the secrecy of proprietary information may be the only edge which allows them to remain competitive in a crowded marketplace. For each of these employers, the risk of an intrusive OSHA inspection, which can entail photographs, videos, and interviews regarding sensitive internal operations, is the loss of the secrecy which provides this competitive edge. The greatest protection which can be afforded such proprietary information – immunization from inspection – is simply not available under the Occupational Safety & Health Act (“OSH Act”). OSHA only has a statutory obligation to protect the confidentiality of information learned during an inspection “which contains or which might reveal a trade secret” belonging to the employer. 29 U.S.C. § 664.

Even as to this limited statutory protection, OSHA is not always forthcoming about its obligations or the rights of the employer. After all, the primary goal of an OSHA inspection is to assess the safety of the employer’s working conditions; the protection of trade secrets is secondary to this primary goal. During an OSHA inspection, it is thus generally incumbent upon an employer to take the lead in the protection of its trade secrets.

The most important time for an employer to be proactive in the protection of trade secrets is during the opening conference of the OSHA inspection. The opening conference precedes the components of an inspection where evidence will be gathered by the agency regarding the employer’s internal operations. Four goals can be achieved by the employer during the opening conference.

First, the employer must determine which trade secrets, if any, will be impacted by the anticipated inspection. If the anticipated inspection is limited to certain work areas, protection of certain trade secrets may be accomplished by limiting the scope of the inspection to such work areas, and by eliminating any opportunity for OSHA to view such work areas. Greater protection can be afforded to trade secrets by excluding them from the inspection than by entrusting OSHA to safeguard their secrecy.

Second, the employer must identify to OSHA all of the trade secrets which will be encompassed by the anticipated scope of the inspection. In this regard, the employer should be prepared to justify the value of each trade secret and the steps taken beforehand to safeguard the secrecy of each trade secret. Of course, any discussion of trade secrets should be limited to employees who are already privy to such information.

Third, the employer should identify to OSHA specific work areas, information or inquiries which might reveal a trade secret. The Compliance Safety & Health Officer should not be presumed to have the technical or specialized knowledge to understand what actions on his/her part may be tantamount to an indirect disclosure of a trade secret to an unauthorized employee or third party.

Fourth, the employer should endeavor to reach an agreement with OSHA as to how its trade secrets will be specifically protected. To the extent possible, an agreement should allow the employer to control the sensitive evidence obtained by OSHA to ensure that all such evidence has appropriate written labels regarding their secrecy. OSHA may not be as amenable to protections raised for the first time after an inspection has been completed as it will be for an inspection which has not net yet begun or been agreed to by the employer. Indeed, if a reasonable agreement cannot be reached, the employer should consider, with the advice of legal counsel, whether the inspection should be limited to areas or devices which do not encompass the employer’s trade secrets. For some employers, even the risk of challenging a search warrant may be outweighed by the risk of losing trade secrets.

Even assuming all of its goals are achieved in the opening conference, an employer should not simply trust OSHA to conduct its inspection consistent with such goals. Indeed, the employer should expect OSHA to forget, ignore or even defy such goals. Throughout the inspection, therefore, the employer must continue to be diligent about protecting its trade secrets. If OSHA is unwilling or unable to abide by its agreement to protect the employer’s trade secrets, the employer should consider, with the advice of legal counsel, whether the inspection should be terminated, at least as to areas which encompass the trade secrets.

The most common means by which third parties gain access to OSHA files is through Freedom of Information Act requests or compulsory process in conjunction with litigation. Although OSHA is prohibited from disclosing an employer’s trade secrets under such circumstances, only information identified as such will be protected. If the employer has not been diligent about protecting its trade secrets, it should not expect OSHA to be a worthy gate-keeper as to such information.