Newsletter Winter 2014

Transcription

1 Newsletter Winter 2014

2 WHAT GENERAL COUNSEL AND OTHER CORPORATE LAWYERS NEED TO KNOW ABOUT OSHA AND MSHA COMPLIANCE IN 2014 By Chris Bacon, Greg Dillard and Alan Colley In many companies, health and safety matters have been traditionally treated as the exclusive province of health, safety, security and environment ( HSSE ) managers. With so much on their plate, general counsel and other in-house lawyers have sometimes only been tangentially involved in HSSE issues in their companies, usually becoming involved only when there has been a major catastrophe and the company finds itself on the front page of the newspaper. This can be a grave mistake. As many senior executives have come to recognize in recent years, HSSE issues can materially impact both operational fluidity and the company s bottom line. While general counsel do not need to be safety specialists, they do need to develop a minimum level of competency in safety laws and regulations in order to provide the appropriate legal support to their HSSE departments. Similarly, non-lawyer HSSE professionals need to understand the importance of seeking legal advice. I. Hot Safety Topics for 2014 All companies subject to enforcement by the Occupational Safety and Health Administration ( OSHA ) and the Mine Safety and Health Administration ( MSHA") should be aware that regulators have become increasingly assertive in recent years. These agencies have stepped up enforcement through increased penalties, targeting of specific industries, public disclosure, and referrals to federal prosecutors for criminal charges all with direct consequences for a company s bottom line. A. Penalties In the past several years, the dollar amount of penalties assessed by OSHA and MSHA has dramatically increased. This is especially noteworthy given the fact that statutory maximums have stayed the same, the number and frequency of inspections have not increased appreciably, and workplace injury rates have been on the decline for years. The higher level of penalties is explained, in large part, by the fact that regulators are imposing more serious citations for conduct that may have received only a warning or minimal penalty in years past. From 2006 to 2010, for example, the number of willful citations issued by OSHA increased by more than 200 percent. 1 From 2008, the last year of the Bush administration, to 2011, the average OSHA penalty increased by over 100 percent. 2 B. Industry-specific Targeting The rise in serious citations intersects with another significant development, the increased targeting of specific companies and industries. Some of these targeted efforts are directed at companies with a history of severe or repeated violations. OSHA s Severe Violator Enforcement Program and MSHA s Pattern of Violations Program, both established in 2010, were designed to take aim at recalcitrant employers with histories of willful or repeat violations. Other agency initiatives, such as OSHA s National Emphasis Program (NEP), focus on specific industries and

3 hazards. Under the NEP, OSHA focuses its outreach and inspection efforts on workplaces with certain identified hazards, typically for a multi-year period. C. Public Shaming Public disclosure, or in the words of Assistant Secretary of Occupational Safety and Health, Dr. David Michaels regulation by shaming, has become a more common part of the regulatory landscape. 3 OSHA and MSHA both make regular use of press releases to publicize major infractions and citations. Under MSHA s Pattern or Practice Violation Program, for example, a list of mines with a pattern of significant and substantial safety violations is published on MSHA s website. OSHA, too, is seeking to add public disclosure to its enforcement arsenal. It has proposed a new rule that would require companies with more than 250 employees to submit their injury/illness logs to OSHA on a quarterly basis. These reports would then be made available online to the general public. 4 These mandatory disclosures should give pause to publicly-listed companies, as well as those funded by private equity and hedge fund firms, whose shareholders, investors, and competitors have access to unfiltered information that is easily mischaracterized and misconstrued. Moreover, these disclosures are often based on unfounded allegations and insufficient evidence only after a company manages to clear its name through formal proceedings is its name removed from these public blacklists. By then, of course, the damage to the goodwill of a business is often already done. D. Criminal Enforcement Criminal prosecutions for safety violations are on the rise. There have been a number of prosecutions against companies and managers for intentional violations of safety regulations in recent years. In July 2012, for example, a federal grand jury indicted the owner of a Port Arthurbased chemical and environmental services company whose alleged willful failure to protect employees from exposure to hydrogen sulfide resulted in the deaths of two workers. The owner was ultimately convicted and sentenced to one year in prison. 5 Moreover, the government has aggressively prosecuted supervisors and employees for obstruction of justice or for destroying evidence during investigations. Following the Massey mine disaster in April 2010, for instance, prosecutors filed charges against a former mine superintendent for his alleged role in a conspiracy to "hamper, hinder, impede, and obstruct the lawful enforcement... of mine health and safety laws." 6 Specifically, prosecutors alleged that the superintendent had used code words to warn mine workers when regulators arrived for surprise inspections, altered mine safety records, and disabled critical methane monitoring equipment in the mine. Later, another mine executive reached a plea deal with prosecutors and was sentenced to more than three years in prison for his role in the conspiracy. 7 In April 2012, a midlevel engineer was arrested and charged with obstruction of justice for his alleged role in deleting sensitive text messages between him and his supervisor following the Deepwater Horizon incident. 8

4 II. What Should General Counsel Do? Companies benefit when legal counsel work closely with their company s HSSE department. While in-house lawyers may not have the HSSE manager s technical knowledge, their legal experience can be valuable because HSSE managers often fail to recognize the legal effects of decisions that they make when conducting internal reviews, investigating accidents or nearmisses, or talking with governmental investigators. The in-house lawyer who has developed a basic level of knowledge on safety law is going to be far more effective and credible when communicating with HSSE personnel. A team-oriented response that includes HSSE and legal is desirable when dealing with safety issues. A. Enhance Understanding of the Regulatory Environment In-house counsel can and should adapt to these developments in a number of ways. While corporate counsel do not need to develop the same level of technical expertise as HSSE personnel, general counsel should develop an enhanced understanding of industry and agencyspecific trends in order to fully appreciate the regulatory environment. In this regard, a proactive approach to front-end compliance yields dividends in avoiding back-end citations, negative publicity, and in some cases prolonged litigation. This proactive approach centers on two fundamental questions: what to look for and where to look. In answering the first question, general counsel should focus their attention on identifying areas of emphasis for the particular regulatory bodies that govern their industry. For example, companies subject to OSHA provisions should locate a list of frequently issued OSHA citations and identify possible problem areas. 9 This information, along with instructions on compliance, should be distributed or otherwise communicated to supervisors and managers. Active national emphasis programs should also be monitored. For 2014, OSHA s list of national emphasis programs includes 10 : Chemical facilities Silica Combustible dust Hazardous machinery Hexavalent chromium Isocyanates Lead Nursing and residential care facilities Primary metal industries Shipbreaking Trenching and excavation In addition to compiling information on areas of regulatory emphasis, general counsel would be wise to keep an eye on the horizon by taking note of impending requirements and develop compliance measures in advance. In the OSHA realm, several significant rules and regulations have been proposed, have recently taken effect, or are set to take effect in Chief among these rules and regulations are new regulations on silica exposure and combustible dust, proposed Hazard Communication ( HazCom ) regulations, and injury and illness prevention

5 initiatives. In addition, OSHA has devoted a considerable amount of attention to the treatment of temporary workers in health and safety programs. In terms of where to look, agency websites are a valuable source. Mine operators, for example, can take advantage of a specially-designed monthly monitoring tool available on the MSHA website to determine how close they may be to receiving a pattern or practice violator notice. Recent press releases, information on national areas of emphasis, and frequently cited violations are also available on the OSHA and MSHA websites. Industry and trade groups are another good source. B. Be prepared to comply Beyond developing greater literacy in health and safety compliance, in-house lawyers can carefully examine HSSE practices and protocols for conducting internal audits and investigations. Counsel should take advantage of the opportunity to coordinate with HSSE, so that the company can improve from its self-learnings and avoid legal liability. It is key to understand the distinctions between audits and investigations because corporate counsel focus on different points of concern for each. Internal audits are often a valuable and necessary tool for corporations that wish to improve safety and become industry or segment leaders. Although audits can be beneficial learning tools in this respect, they are not without legal risk. Be mindful that assessing against aspirational best practices, as opposed to minimum regulatory standards or current company guidelines, can lead to internal findings of deviations that could be used against the company by regulators or plaintiffs attorneys. And although regulators commonly state that they will not use a company s internal audits against the company, audit reports are regularly requested in the course of planned inspections and after accidents. 11 Because these internal safety audits are often not privileged, they must be carefully constructed and implemented to prevent them from being discoverable by both regulators and plaintiffs. 12 C. Be prepared to respond There are many issues that must be addressed when responding to an OSHA or MSHA inspection, an investigation prompted by an accident, or even a near-miss situation. Having well-established plans in place helps mitigate the costs and risks of these scenarios. In particular, issues like evidence preservation that were once the primary domain of HSSE or were handled with a simple litigation hold notice have blossomed into significant undertakings for general counsel. A recent decision in the Eastern District of Louisiana illustrates a general counsel s responsibilities in this regard: A party's discovery obligations do not end with the implementation of a litigation hold to the contrary, that's only the beginning. Counsel must oversee compliance with the litigation hold, monitoring the party's efforts to retain and produce the relevant documents. 13 To adequately comply, the court held that counsel must (1) issue a litigation hold at the outset of litigation or whenever litigation is reasonably anticipated; (2) clearly communicate the preservation duty to key players ; and (3) instruct all employees to produce electronic copies of their relevant active files and separate relevant backup tapes from others. 14

6 Some key preservation considerations include whether and how to collect texts and photographs from the personal phones of employees and contractors, how to store physical evidence, and how to preserve electronic control systems data that are not routinely stored on disks or back-up drives. Beyond preservation, counsel must establish and supervise a clear chain-of-custody procedure for accident-related evidence. Corporate counsel should also require that their companies include contingency provisions for what to do when a regulator comes on site, what instructions to give employees during regulatory interviews, and what to provide regulators when they make requests. III. Conclusion In 2014, general counsel and the companies they represent should pay close attention to developments within OSHA and MSHA and prepare themselves, in many cases, for heightened scrutiny. For many corporate counsel, this could necessitate a change in priorities. Once areas of emphasis for health and safety compliance are identified, general counsel can take advantage of available resources to focus their efforts by developing new compliance programs or improving existing ones allowing them to take a lead role in protecting employees and their company s bottom line. ENDNOTES See The 2010 enforcement summary is the most recent available to date. See See Id. See See See See OSHA s Top 10 Most Frequently Cited Standards list is available online at OSHA's Active National & Special Emphasis Program Index is available online at See Final Policy Concerning the Occupational Safety and Health Administration s Treatment of Voluntary Safety and Health Self-Audits, 65 Fed. Reg (2000). OSHA s PSM Standard, 29 CFR (o); EPA s RMP Standard, 40 CFR Yelton v. PHI, Inc., 279 F.R.D. 377, 387 (E.D. La. 2011) (internal citations and quotations omitted). Id. Gregory C. Dillard is a partner with Vinson & Elkins LLP in Houston, Texas. Christopher V. Bacon is a counsel with Vinson & Elkins LLP in Houston, Texas. Alan E. Colley is an associate with Vinson & Elkins LLP in Houston, Texas.