What’s in a Name? Successor Liability and Cal/OSHA Citations

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Quick Hits

• Cal/OSHA bears the burden of proving it cited the correct employer entity, and citations may be dismissed entirely if it cannot independently establish that the named entity is the proper one.
• Successor liability in the workplace safety context turns on whether a new entity has “substantial continuity” with the predecessor’s operations, considering factors such as acquisition of assets, retention of the same workforce, and uninterrupted use of the same facilities and equipment.
• A corporation is a legally distinct person from its shareholders, and even where an individual’s name overlaps with a corporate employer’s name, Cal/OSHA must cite the correct legal entity or risk having the citation reversed on appeal.

The answer lies in the doctrine of “successor liability” and it is not as clear as one might think.

When Cal/OSHA issues a citation, one of the most fundamental requirements is that it names the correct employer. Getting it wrong can mean the difference between a valid citation and a complete dismissal.

What Is Successor Liability in the Workplace Safety Context?

The test for successor liability turns on whether the new entity has “a substantial continuity” with the operations of the predecessor, after considering the “totality of the circumstances.” This standard is articulated by the federal Occupational Safety and Health Administration (OSHA) in a January 11, 2017, letter of interpretation to the National Aeronautics and Space Administration’s (NASA) Kennedy Space Center relying on the Supreme Court of the United States’ decision in Fall River Dyeing and Finishing Corp. v. NLRB. While not necessarily binding on Cal/OSHA, it is persuasive authority on the California Occupational Safety and Health Appeals Board, especially where there are no decisions after reconsideration that directly contradict the federal interpretation. The analysis focuses on two key factors: (1) whether the new company has acquired substantial assets of the predecessor; and (2) whether it continued, without interruption or substantial change, the predecessor’s business operations.

The Division of Occupational Safety and Health Bears the Burden at Trial

Cal/OSHA carries the burden of proof and persuasion in demonstrating that it cited the proper entity. As demonstrated in Capco/Jovian Energy, a 2007 Appeals Board decision after reconsideration, this burden exists regardless of whether the cited entity failed to volunteer the correct information about its employer status.

In other words, Cal/OSHA cannot shift the blame to the employer for not correcting a misidentification. The division must independently establish that it cited the right entity.

Citing the proper entity is an element of a violation—not a matter of jurisdiction. This is important because many employers frequently stipulate to jurisdiction at the outset of the appeal. For example, in Cher Xuechuan Ma dba Paradise Island Spa, a 2015 decision after reconsideration, the Appeals Board referred to this issue as “a potential defense” to be “contested at hearing.”

Lessons From the Field

Several key decisions illustrate how these principles play out in practice.

In Alfredo Annino, Cal/OSHA cited “Alfredo Annino” as the employer, but evidence at the hearing revealed that the actual employing entity was “Alfredo Annino Construction, Inc.” After the hearing, the administrative law judge (ALJ) unilaterally amended the citation to add the corporate name, but the Appeals Board reversed, holding that the ALJ lacked authority to do so without notice to the parties. The Appeals Board emphasized that a corporation is a legal person with an existence separate from its shareholders, and the two entities had significant legal differences notwithstanding the fact that the individual named Alfredo Annino used his own name on the appeal and stationery.

Takeaway: A corporation is a legal person with an existence separate from its shareholders, even in the Cal/OSHA context.

In Capco/Jovian Energy, Cal/OSHA cited “Capco/Jovian Energy” after a fatal accident, but the record could not establish what that entity was—a joint venture, two separate companies, or a single company with a fictitious business name. The Appeals Board found that the division did not meet its burden, and the citations were dismissed and penalties set aside.

Takeaway: While an employer must be honest and forthright throughout the appeals process, the burden is on the division to prove it cited the correct entity, and the employer is not required to elaborate beyond what the division asks.

In the 2017 letter of interpretation to NASA, OSHA addressed successor liability with regard to hearing conservation. NASA had awarded a new contract to new contractors, but contracted employees retained their same work roles, duties, and work environments. Some of the new contractors claimed they were not “successor employers” because they had not purchased the business. OSHA disagreed, relying on Fall River Dyeing and Finishing Corp. v. NLRB. OSHA concluded that because the new contractor used the same facilities and equipment and employed the same workforce performing the same duties, there was no interruption or substantial change in business operations, and the new contractor qualified as a successor employer for purposes of the Occupational Safety and Health (OSH) Act.

Takeaway: A completely new employer could be liable for a prior employer’s workplace safety actions if it uses the same facilities and equipment, employs the same employees performing the same duties, and there is no interruption or substantial change in business operations.

Ogletree Deakins’ Workplace Safety and Health Practice Group will continue to monitor developments and will post updates on the California and Workplace Safety and Health blogs as additional information becomes available.

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