Safety Basics XI: OSHA Citations—From Costs to Compliance

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John Surma: Welcome back, everybody, for the 11th in our Safety Basics series podcast. This podcast I am presenting with my Dallas partner, Frank Davis. This is a podcast that is going to be talking about how to handle and handling OSHA citations.
Frank, welcome aboard. I look forward to another podcast with you. I hope you’re doing well today.

Frank Davis: Doing real good, John, thanks. Thanks for presenting this with me, talking about handling OSHA citations. It’s something that we talk about frequently in different venues and during different seminars, but we don’t focus on it quite as much as we will in today’s podcast.

John Surma: No, we don’t. We don’t. Let’s start off, let’s not waste any time. Let’s start off with talking about what all is at stake with an OSHA citation, because at least in my experience, Frank, the typical response when citations are issued, “Oh, this is a fine of X,” whatever X is, no matter how big or small. If it’s a small number it’s like, “Well, maybe we just pay it and move on.” If it’s a big number, the focus tends to be on, “That’s an awfully big number, we need to get that number reduced,” without thinking about the other ramifications of OSHA citations.
I think that’s really what you mean when you’re talking about what’s at stake with an OSHA citation. Would you explain to our audience what all is at stake?

Frank Davis: Right. Currently, the fine structure is up to $16,550 maximum for a serious citation. But frequently, OSHA issues the citation for an amount much lower. They’re able to justify a reduction for different reasons. It could be a good faith reason, it could be a size reduction, but there are reasons why OSHA might make the citation less expensive.
A lot of times, I find employers looking at citations and say, “Oh, OSHA is only charging us $7000, and they’ve agreed through an expedited informal settlement agreement to reduce it even further, from 7000 to 5000. That’s a pretty cheap way to solve it, to resolve the citation.”

John Surma: But is it, Frank?

Frank Davis: Right, yeah. Good setup. On its face, maybe it is. But there are other elements that need to be considered. It’s the classic iceberg, the tip of the iceberg is the OSHA penalty. The majority of the exposures are below the surface of the water that you don’t see.
For instance, the compliance costs. With every citation, typically comes an obligation to abate the alleged violation. For instance, one type of abatement, you might have a citation for a damaged extension cord and the abatement for that damaged extension cord would be simply to replace that extension cord.

John Surma: That’s cheap. That’s 25 bucks. That’s nothing.

Frank Davis: Right. The compliance isn’t overly burdensome.
But for instance, say OSHA alleges, and often alleges incorrectly, that your energy control procedures are invalid. For instance, say you have asserted that your energy control procedures are subject to an exception and that applies to a broad range of equipment across the plant, and maybe across multiple plants. Well, now OSHA has asked you to create an energy control procedure that you’ll have to implement at multiple locations on equipment that you hadn’t envisioned before. That can be an expensive process. That can be a cumbersome process. That is a process that generates continuing obligations, because once you’ve created those energy control procedures, then you’ve got an annual obligation to evaluate those procedures.
Any failure in ensuring that you’ve complied with that action could result in future citations, for instance for failure to abate if it’s not abated correctly. As you know, failure to abate citations can be as much currently as $16,550 per day for up to 30 days. That can be a business-crippling citation after 30 days.

John Surma: Yes, yes. Frank, the worst case I ever had for proposed abatement in terms of cost, just actual dollar cost to implement, was about one billion dollars. It was in conjunction with a nuclear power plant, so the scale of cost there is significant compared to a lot of other workplaces. What’s the most expensive abatement, in terms of dollar value, that you ever seen?

Frank Davis: I haven’t thought about that. But truthfully, that’s another good point. That the actual cost of correcting an alleged violation can be a whole lot more than even a maximum serious of $16,550. But I’ve had a lot of them that were much more expensive than the citation itself to abate.
Some of the other hidden costs associated with a citation go beyond just dealing with the citation itself though, because you can have the civil suit costs that are associated with a citation. For instance, if a citation is of great enough magnitude, then you’ll see plaintiffs’ lawyers using that citation as evidence that worker’s comp doesn’t apply, or maybe as evidence in a jury trial to show that the employer was negligent or grossly negligent such that it entitles the plaintiff to a greater reward.
Also, taking a citation of a significant magnitude can also result in making it difficult to go win contracts. It may make it difficult to get federal contracts or private contracts. A lot of times, people will go and companies will go and look at another company’s record as far as OSHA citations. Under the Multi-Employer Citation Policy, in fact, they’re required to do so to evaluate whether that’s a safe contractor. There are plenty of instances of companies not getting work because of their OSHA record.

John Surma: They don’t even have to affirmatively look for it. There are so many services out there now that essentially alert the customers of contractors, that that contractor has received citations without having to actually affirmatively dig into that contractor’s safety records. That it doesn’t even actually require somebody looking as part of the prequalification process. Didn’t mean to interrupt you there, Frank.

Frank Davis: Yeah. No, you’re right. You’re absolutely right. That’s the deeper look at it.
Then on top of that, you have the negative media relations, the communities looking at employers that they feel are unsafe. Associated with that, of course you have the outflow for opportunities for unions to organize based on your safety record. That’s a real common place for unions to organize is around an employer’s safety record.

John Surma: Frank, I wanted to shift gears just a little bit. An employer receives a citation, and they receive the citation packet. There’s the cover letter. There’s maybe the expedited informal settlement agreement, maybe not, depending upon the citation. There’s the notice relating to the informal conference. Then there’s the citations themselves. Can you explain to our audience the steps that you take in terms of analyzing an OSHA citation, or in this case really an OSHA citation packet?

Frank Davis: Right. As soon as an employer receives a citation packet, the clock begins to toll. Under federal plans and under state plans, there’s a limited amount of time for an employer to take an action. Under the federal rules, that’s 15 working days. States can be similar, some states have slightly different rules. If you’re in a state plan state, I would look at those state plans specifically.

John Surma: Check your local rules, yes.

Frank Davis: Check your local rules, thank you. Yeah, I was trying to think of the way we were supposed to phrase it, but that’s the way to do it.
Once I receive a citation, you look at a lot of different issues. Obviously, you look at which standard is alleged to have been violated. Look at whether OSHA has grouped those citations. In other words, it might say, “Citation one, item 1A. Citation one, item 1B.” Frequently, when I see that they’ve grouped, that suggests to me that OSHA may just take one of those in a settlement. If you rush to just pay the fine and don’t try to negotiate with OSHA, you get both items instead of just one item.
You look at the classifications. The classifications go from other than serious, to serious, to willful and repeat. Of course, the lower you get the classification, the better it is in terms of exposure to future alleged violations. You get the proposed penalties. OSHA is almost always willing to negotiate the proposed penalty amount. Although in most cases, that doesn’t address the bottom part of the iceberg that we talked about at the beginning.
They talk about abatement. When the abatement documentation is due, when you have to certify. One of the things that you look at there is whether you have enough time to complete the abatement based on the recommendation. If not, then that’s something else that you would want to consider either negotiating or challenging, and we’ll talk about that in just a minute.
There’s also the alleged violation description. A lot of times, you can get that alleged violation description changed. They always write the alleged violation descriptions in a way to make the employer responsible. It’s hard to get them to change that, but they can sometimes. If you’re especially worried about civil lawsuit liability, that something to look at getting changed.
Then, my last thought on this is sometimes it references multi-employer status. I always evaluate whether they applied the multi-employer citation policy correctly. Of course, we’ve talked about multi-employer citation policy on multiple other podcasts, if you want to reference back to those.

John Surma: Frank, once you receive the citation and you look at that packet, and you look for those points, who do you typically recommend employers evaluate the citations, the packet, the penalties, et cetera, in determining what their steps forward are?

Frank Davis: I think about it mostly at three levels. One, what is the likelihood of getting a repeat, based on the standard that OSHA cited? Because repeats can be up to 10 times the cost of a serious citation, so currently around $165,000 per repeat is the maximum penalty. You get too many of those and that can really be devastating obviously. You look at the standard and see if it’s something that would be easy to repeat.
A good example of a standard that’s real easy to repeat is just the basic guarding standard, failed to put a guard in place. There are other places to classify that type of violation, but if you take the basic 1910.212 Paragraph A1, that’s a real easy one to repeat. It just didn’t provide the proper guarding or have the proper guarding in place, and that’s a real easy one to repeat in the future. If you’ve got more than one machine in your plant or more than one plant, you’re susceptible to a repeat citation for five years under federal OSHA. I’d really look at whether we could change that standard that was cited to try to prevent a repeat citation for the future.
Then I look at how the citation will impact the business and operation. Sometimes a citation, to abate a citation might make it so you can’t do production in the way you’ve been doing production. If that’s the case, that’s a very serious problem that might have to be addressed in a different way.
Then lastly, you look and see if the abatement that’s required under the cited standard is going to create liability in another way, some other type of third-party liability. Those are my three critical assessment points when I’m looking and advising clients on what the next steps should be.

John Surma: Yeah. No, I share … Those are the three points that I really emphasize with clients. The second one that you mentioned is the one that I tend to focus on most, is how is this going to impact your business going forward if we alter or if we’re obligated to alter to do business. Are you going to continue to be able to do business? A lot of times, that’s pretty simple, straightforward. Throwing that extension cord out, no big deal. We throw that out, we get a replacement for $25, $30, we rock on. But when you’re talking about changing processes, changing equipment, changing training, et cetera, et cetera, sometimes that does have some really profound impacts on the business. It’s something that needs to be addressed.
Frank, I view that there’s three options available to employers when they receive a citation. Although, I always recommend we take one of those paths. The three options that I see are you do nothing; you just write check, pay it, do the abatement, move on with life. Or accept the expedited informal settlement agreement and pay it, and abate it, and move on with life. Two is the informal contest. Three is to go straight to contest.

Frank Davis: I think you said informal contest, but it’s informal conference. If I misheard you, I do apologize.

John Surma: No, I may have slipped. I wanted to shift gears because, in 99% of cases, I recommend folks go to the informal conference. Once you get the citations, if you decide to go to the informal conference, what does that process look like? Would you explain that for our audience?

Frank Davis: Right. Well, the informal conference … Any time before you ultimately get to trial in an OSHA case, you can always settle it. Even during trial, you can settle a case.
But the informal conference is the very first opportunity that you have to sit down and negotiate a post-citation settlement with OSHA. In that informal conference, again, it’s got to be done within that 15-working-day timeframe, and it’s got to be resolved within that 15-working-day timeframe. Because if you get past that without a resolution or without contesting, you’re stuck with the citation as issued.
During that time, the company representatives, and the company can be represented by a lawyer, but the company goes and meets with OSHA representatives, usually from the local area office, either the area director or an assistant area director, to attempt to try to settle the citation. During that conference, you can discuss the alleged violations; you can discuss how they were classified; you can discuss penalties. You can talk about abatement and the abatement dates. If successful, you will enter into an informal settlement agreement with the local area office. Once OSHA has changed the citation to the way you’ve agreed to have it changed, my favorite is when they withdraw during those informal conferences. But if they don’t withdraw, and they change the citation, then it gives the employer an opportunity to do their abatement, and pay the penalty, and move on and try not to repeat the same event in the future.
If unsuccessful, that leads to the next point that you suggested, John.

John Surma: Yes. That next option is contest. If I said informal contest, there’s really no such thing. It’s strictly a contest. Could you explain to our clients what a contest is about, and what you’re actually contesting?

Frank Davis: Yeah. Whenever you go to contest, you can challenge any part of the citation. Typically, I challenge every part of the citation. You can challenge the violation that is issued, the standard they issued it under, the classification, the penalty, and the abatement. All the same things that are subject to the discussion at the informal conference are things that can be challenged through contest. Whenever I file my notices of contest, I tend to challenge all aspects, like I said. Because if you don’t challenge all aspects, then it’s deemed that that part of the citation is finalized.
For instance, if the notice of contest said we’d like to challenge the penalties, then the remainder of the citation would be deemed admitted after the 15 worked days.

John Surma: Yes. I do the same thing that you do. I actually call out everything that we’re citing. I go into a laundry list of things that we’re, I say citing, contesting, and I go into the laundry list of all the various and sundry things that we are contesting.
Frank, from the standpoint of the contest process, if it’s a company, does an attorney have to be involved in representing the company?

Frank Davis: No, it doesn’t. A company representative is able to take it through contest. But it is a very formalized legal procedure before a federal judge, called an administrative law judge, a type of federal judge called an administrative law judge. There are procedures, and deadlines, and it has all the components of a typical lawsuit. Typically, every case I’m involved with, they’ve hired a lawyer. How about you?

John Surma: Yeah, this is true. This is true. Just for clarity’s sake, there are state plans where the company has to be represented by counsel. In some of those state plans, it has to be an attorney that’s licensed in that state, or at least somebody who’s been admitted pro hac vice into that state.
Who is OSHA represented by? Are they represented by lawyers, or is it just the area director handling this?

Frank Davis: Yeah. Thank you for the clarification. I was obviously talking about federal OSHA, which is where I primarily practice. The federal OSHA is represented by the Office of the Solicitors and their lawyers that work at the Department of Labor. A lot of times in state plans, you have the state plan OSHA agency represented by the attorney general of that state.

John Surma: Sure, sure. You already indicated it, and I already indicated it, but settlement negotiations continue like they do in most litigation throughout the process. Albeit, with different lawyers assigned to handle the case on behalf of the agency, whether it’s the state OSHA or federal OSHA. Some of them are more or less likely to engage in active settlement negotiations. Like any other litigation, it’s settlement negotiations up to the courthouse steps. Once the trial begins, there’s even continued settlement negotiations. At least, that’s been my experience. I assume that’s been yours as well?

Frank Davis: It’s very common to have even the judges follow up and say, “Hey, have you guys tried to settle this?” That’s part of a pre-trial order. There’s a midpoint check-in where they make the same inquiry. Then the final pre-trial hearing, they make that same inquiry. There’s always reminders out there of the opportunity to reach a settlement. As we talked about in one of our other podcasts not so long ago, we talked about the different strategies that OSHA will use to try to set us up for settlement. If y’all haven’t listened to that podcast, I’d invite you to go listen to that one at your convenience.

John Surma: Yeah. Well, the Solicitor of Labor’s Office has some strategies, at least in the Dallas region, that was also part of a podcast.

Frank Davis: That’s actually what I was talking about specifically. Yeah, good for you for straightening me out.

John Surma: That’s okay, that’s okay. Well, Frank, I think we’ve reached the end of the road and end of our time with this podcast topic. I appreciate you presenting in this, our 11th in this series. This isn’t the last time you’re going to hear from Frank in our Safety Basics series, we got one more episode with Frank as our learned professor.
Frank, thank you so much for joining us.

Frank Davis: Thanks for hosting me, John. Good talking to you.

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