Safety Perspectives From the Dallas Region: Understanding the New Two-Step OSHA Settlement Process

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Frank Davis: Greetings, and welcome back to another episode of Dallas OSHA, where John Surma, who I’m with today, my Houston Texas law partner, and I, will discuss some current developments and observations occurring in the Dallas region of OSHA. Today, by popular request, and driven largely by John’s creative mind, we’re going to have discussions about settlements, and setting up settlements, and how the local Dallas Solicitor’s office, and local Dallas OSHA offices, seem to set us up for settlement starting at the issuance of a citation. John?

John Surma: Good morning, and look forward to having this conversation with y’all and Frank, and talking about kind of a relatively newly implemented program by the Solicitor Labor’s office. That has, at least in my experience, and it’s somewhat limited because of the limited amount of time this program’s been, in fact, has resulted in some better than normally expected settlements.

Frank Davis: I’ve always kind of thought, I know you say newly implemented, but I’ve always kind of thought that there were certain cues when OSHA issues a citation that invites us to consider a reduced number of citation items, or even an invitation to change the citation based on how OSHA issues the citation.
One of the common examples that I think of, that’s always struck me as an opportunity for an early resolution through an informal settlement conference, or in early stages of litigation if you have to go to contests, is when OSHA groups certain items. So, a grouping citation for those who are uninitiated is a citation that alleges, for instance, item 1A might be one allegation of a violation of the lockout/tag out program. And citation item 1B might allege a very similar alleged violation of the lockout/tag out program. That’s just as an example.
It could be any standard that has multiple paragraphs and multiple requirements. But often when I see items that are grouped and closely related, that tends to communicate to me that OSHA would be happy to take one or the other, not necessarily both. It’s not that you have to agree to either one, but to me that’s an invitation to negotiation. John, have you ever seen that?

John Surma: Yeah. And actually, I’ve had a number of cases over the years where, for instance, they’ll refer to lockout/tag out/control of hazardous energy as one item, and then the second item is a machine guarding citation because if you had locked it out, then the employees wouldn’t have been injured; if you had it guarded, the employees wouldn’t have been injured. And so, it really is an alternative. And there’s this concept in the law called pleading in the alternative. And I kind of view when the issue group citations where you have parts, so part 1A, part 1B. And I say 1A, 1B, could be 2A could be whatever, whatever number, number letter. I always view those as kind of they’re pleading it in the alternative. They don’t necessarily know that they can make the first one stick, or the second one stick, but they figure that between the two of them they should be able to make one of them stick. That’s kind of how I look at it.

Frank Davis: No, that’s fair, because the way you’re assessing it though, you’re assessing it is that we’re going all the way to trial. It’s almost like a criminal pleading, right? Pleading lesser charges, right?

John Surma: Yes, or alternative charges.

Frank Davis: Sure. But to me, I’ve always seen that as kind of a jumping-off point in the early stages as a way to resolve it if the client is interested in going that way or at least exploring it. Have you ever had that situation come up?

John Surma: The situation where we’ve recommended the client based on the group citations to approach the settlement negotiation based on that?

Frank Davis: Right.

John Surma: Yeah, absolutely. Well, look, let me take a quick step back. You and I, I think, functionally think a lot alike, but I kind of look at everything that OSHA does is negotiable, with limited exceptions. I mean, if you’re going to try to enter parts of my client’s facilities that are not subject properly to the inspection, that’s not negotiable. But when it comes to citations, I always view that as just an opening offer or opening demand, and that opens the door to me negotiating with OSHA, or with the client and me with OSHA. And I view that as just the first in a series of negotiation steps towards and ultimate resolution of the citations.
The thing that’s a little bit different with the group citations is it often is a little bit of a tell that OSHA isn’t 100% confident that it has the evidence to support either of those items. And so in my mind, the way I read them, and it’s kind of the John Surma filter, is they’re a little unsure of themselves. Otherwise, they would do them as standalone citations, as separate citations. And so, it’s kind of opening the door to saying, “Hey, look, come at us with proof that we’ve got this wrong, and we’re probably going to make these go away. Or at least one of them go away.”

Frank Davis: Yeah, I think that’s a good way to describe it, too. And I certainly didn’t mean to suggest that if the OSHA issue is just a simple citation without grouping it, that’s a time to concede that they’ve gotten it right.

John Surma: Yeah, I didn’t need to imply that either. That wasn’t how I took it. Once citations ended up in my hand, everything’s in negotiation.

Frank Davis: Sure. Yeah. No, well, of course. And that’s why they call it a proposed citation, right?

John Surma: Yep, absolutely. Absolutely.

Frank Davis: It’s just some of their proposals, as you’ve just pointed out, are softer than others. So, what’s the recent change you’ve seen with the Solicitor’s office we should all be aware of?

John Surma: Yeah. So, this applies to the Dallas region. And I don’t know if you’ve seen it elsewhere. The only place I’ve seen it thus far has been the Dallas region. And what happens now is, when you contest the citations, whether you’ve had the informal conference or not, the solicitor of labor basically seeks a 45-day extension for filing to get the litigation process going, and expects the parties, once that motion is granted, to engage in continued negotiation without the Solicitor Labor’s office involved. So, basically, if you’ve had the informal conference, it’s time for round two of informal conferencing, albeit these tend to be just phone calls and emails, and even less formal communications than the informal conference is.
And typically, what happens, or at least what I’ve seen thus far, is OSHA has offered some really outstanding settlement proposals once we get into that second period of negotiations, where at the informal conference, or in whatever pre-contest negotiations have taken place, maybe they’re giving a 20% penalty reduction, maybe they’re reclassifying one or two citations to major, major penalty reductions, 60, 70% penalty reductions, withdrawing citations, changing citations to other than serious. I mean, some really, really dramatic moves once end up in that second negotiation period.
And I mean, you and I have talked about this, and I think we have our different views on this, but I think they’re more or less the same, Solicitor Labor’s…

Frank Davis: Different than same, I like it.

John Surma: Well, they’re articulated, that is just a little bit contradictory. They’re articulated differently, but I think ultimately it gets down to the same couple of core principles. Ostensibly, and the guys under which I’ve been told this is being done is to alleviate the workload that Solicitor Labor’s office is handling because they’re underwater. I have discussed with you my theory that this may have something to do with a topic of one of our more recent podcasts, the decision relative to Judge Sim Lake, and Judge Lake’s entering injunctive relief against things like OSHRC that are not Article III courts. And so basically this is a way that OSHA can salvage this citation process and not end up in this wasteland of we don’t have an adjudicated body that can handle these citations anymore.

Frank Davis: Yeah, I think that’s probably a fair guess for the adjustment here in Texas, although I do a fair amount of work in New York, and they’ve had a similar program in New York where they’ll kick it back to the area directors for several years now. If I’m thinking back to it, I’m thinking that that first started happening to me up there a lot about the time that the review commission went down to just two members where they no longer had a quorum. So, I’m wondering if it’s a combination of events, because without a quorum, the review commission’s not able to issue decisions. And in fact, they’ve been with just one commissioner for, I’m sorry, I said two, but with just one commissioner. It’s two at the National Labor Relations Board, John, so I apologize, I’m mixing up my boards. But they’ve been down to one commissioner at the Review Commission now for…

John Surma: A couple of years now, hasn’t it?

Frank Davis: Yeah, for a long time. And during that whole time is when I’ve been getting kicked back out to the ADs in New York. So, maybe it just occurred to this region that they should be doing the same.

John Surma: I think the lack of a quorum for OSHRC has been an issue that the solicitors of labor have considered, and I think it has impacted places like New York where cases have been kicked back. My experience in New York over the last few years has not involved being kicked back. My experience has been, in New York, it’s kind of been handled the same way it’s been handled everywhere else federal OSHA has a footprint. I think what the Supreme Court did at the end of the last term relative to Jarkesi and Loper Bright, some of those other decisions relating to administrative bodies has had a real profound impact, both from the standpoint of, you have the immediacy of those decisions, and whether it’s OSHRC, or the Solicitor of labor, or a combination where they’re looking at those and trying to figure out strategies to deal with a future challenge, or whether it’s some of what the district and circuit courts have done relative to injunctive relief like Judge Lake’s injunction here in Texas or elsewhere.
I think they’re now looking at situations where Article III courts have ruled that those courts are unconstitutional, or have ruled that those courts can’t proceed for whatever reason, whether it’s a constitutional challenge or something else. And therefore, now we’re like, “Okay, look, this is getting serious. We really have to come up with a strategy.” And I think that’s prompted this. And I mean, it’s not all good, and it’s really, in my impression, it’s not all good because I think what you’re also starting to see now is what in criminal cases you’d refer to as overcharging.

Frank Davis: Yeah, no, I think that’s right. And I think that was going to be my focus, but you’ve sort of changed my focus talking about these opportunities for earlier resolution. That’s always been my frustration with some of these citations. It seems like they were written, so they were a little overblown. In some cases, that actually shut down opportunities to go out and try to resolve it early on, because the clients were so put off receiving a willful citation for an event that clearly wasn’t willful. And I raised that because I know that you recently saw one of those come across your desk as well.

John Surma: It was a general duty clause, willful citation, full penalty. There’s evidence that both of the alleged violations of the general duty clause did not exist. I mean, you can argue with respect to one part of it wasn’t perfectly executed, but the allegation is that something that the employer, in eliminating hazards, recognized hazards in the workplace, should have done. They did it. And again, we can quibble over whether or not it was properly executed, or executed as well as could have been executed. And in discussing this with the client, we were racking our brains over, this citation came after an inspection that was super, super, super casual. I mean, I know you’ve handled tons of inspections where willful violations, willful citations have been issued, as I have, in every case that I’ve ever dealt with where willful citations are issued.
There’s typically multiple levels of document requests. There’s typically multiple levels of interviews requested. They’re typically relatively aggressive in terms of the timeline. I mean, not unreasonable always, but sometimes they’ll pay some out a little bit, but they’re typically moving this along. This one, I don’t think we had any documents to produce other than our 300 logs, or the OSHA records. The interviews took place months after the incident. They did two or three interviews of employees, they did one manager, very, very soft touch. The manager interview was super soft touch, didn’t go into any details that I thought went to the issue of employer knowledge. I mean, certainly to establish the willful, you’d have to establish employer knowledge. And I don’t even know that this person was at the level that you would impute that level of knowledge to the company. And this citation comes down as a willful. And it’s like, “What in the world?” I mean, first of all, a general duty clause willful. To a certain extent, that’s an oxymoron.

Frank Davis: Just for people who haven’t thought about a general duty clause, what they have to establish is it’s a higher burden for a general duty clause anyway. The first thing they have to establish is, while an OSHA standard doesn’t cover it, it’s something so well recognized in the industry that the employer should have known that it was covered. And to get the willful, it’s that not only did the employer recognize it, but they just disregarded the clearly recognized obligation. And to me, that’s frustrating. I didn’t know that aspect of this case. To me, that’s frustrating, because if OSHA hasn’t bothered to write a standard about it, then how in the world can they say that the employer should have realized that standard, and should have adhered to this heightened level? They could have even resulted in a willful. That’s kind of a frustrating outcome.

John Surma: Incredibly frustrating. But in analyzing this, and look, the other cases that I’ve handled under this new program, rather than two or three higher penalty serious citations, there were six or seven, or eight citations, more or less all getting at the same issues. And so, arguably, they were overcharging as well, and maybe the area directors were more tuned into what Solicitor Labor’s office was going to be doing. And so maybe they were charging a little bit heavy there.
But this one, the only thing that I can figure is that if we have this two-step settlement process, you show up with a serious citation, you go into negotiate, very few clients are really all that terribly concerned about the penalties, especially on a single serious. I mean, $16,500 isn’t nothing, but in the grand scheme of things, that’s the small issue. The bigger issue is the ramification having the citation as a serious has to the business. And so they’re looking to reclassify.
So, from the first process, we’re not satisfied with reclassification, then we go to the second process. And in order for them to move it all, they have to vacate the citation, or they have to reduce the penalty next to nothing. I mean, the only thing I can figure out, the only reason I can figure out for issuing this as a willful, is to give them wiggle room on negotiations in this two-step process. Even that one is a little bit challenging to me from the standpoint of explaining how we ended up here. But that’s the only reasonable explanation I have for this.

Frank Davis: I think that that is an explanation. Another explanation is we do have a new enforcement program manager for the last couple of years. And maybe they’re getting some push from that level to be more aggressive in the citations they issue. We’ve talked about that in the past as well, because enforcement programs is an RA, or regional administrator, level position, or deputy RA administrative position. And I think they answered directly to Washington, D.C. So that could have been some direct push from Washington, D.C.
The item that I thought our listeners might be most interested in is the type of flexibility though you’ve seen in settlement agreements through the new approach going back to the AD. For my part, I’ve had the same experience. And in several cases, the majority of cases, have resulted in a complete reversal of what we were first experiencing with the informal conference. So at the informal conference, we go and we’re talking to typically an assistant area director. We get the standard pushback, “I can’t change anything about the citation, but I can give you a 30% discount.” We say, “Well, no, that’s not really what we’re looking for.” Because as you just pointed out, John, the penalties frequently are not the most important thing to the client once they get you or me involved.
But what does become important is either reclassifying the alleged violation, or having it withdrawn altogether. And candidly, going back to the area director on some of these cases, I’ve had several of them just withdrawn. I’ve had several citations just completely withdrawn, which it’s an exciting and very pleasant outcome. But what makes me wonder about that is, a lot of times, as you know, it’s the assistant area director that’s supervising the compliance officer that recommends a citation. The assistant area director then issues a citation, and then that assistant area director is the one who sits in on the informal conference, and you’re asking them to reverse themselves. And they often don’t seem very excited about that.
In the old days, when I was a young man, would frequently go before the area director directly after the citation issued. If I’m seeing less of that, I’m seeing more of the first level going through the double AD. And now I’m seeing that we get to the area director after we’ve filed the notice, and after we’ve been contacted by the Solicitor’s office. And the Solicitor’s office says, “Hey, would you like to continue negotiating with the area director?” And we say, “I guess, if it’ll make a difference.” And it has. Is that kind of what you’re seeing?

John Surma: So no, that’s not what I… So-

Frank Davis: Glad we were able to go through all that. Well, that’s what I’m seeing. So it’s good talking to you. See you later. I’ll continue.

John Surma: So, what I’m seeing is, the negotiations continue with whoever it was you were negotiating with at the informal conference. So, if it’s the area director, assistant area director, whoever. And then once you get into the contest period, that second negotiation period, what’s typically happened in the cases I’ve handled is, there’s some back and forth in terms of, depending on the case, depending upon how heated the informal conference was, that dictates how the communications take place afterwards. But typically, there’s a little bit of back and forth, and then boom, you have a written settlement offer. And, in the written settlement offers, every single one of them has resulted in withdrawal of multiple citations. Every single one of them has resulted in reclassification of multiple citations. And I think only one of them has resulted in any of the original serious citations remaining classified as serious. It’s been very effective, and it’s been very positive for our clients to go through this the second time. It’s a little bit maddening that it takes going through the effort a second time to get that point.

Frank Davis: With the same manager. Well, all I can figure there is that maybe they’re getting some feedback from the Solicitor’s office, and the solicitors are saying there’s no case here.

John Surma: That’s my assumption.

Frank Davis: So, the takeaway that we should have started with is, while the informal conference is a good place to see if you get that offer, just because you don’t get this offer you want at the informal conference doesn’t necessarily mean that you’re not going to be able to reach a resolution with that area office. There might be a post-contest resolution to reach after further negotiations with that area office.

John Surma: Absolutely. I think that’s absolutely right. And Frank, it’s been wonderful presenting with you. Hope you have a wonderful weekend, and I look forward to podcasting with you again.

Frank Davis: All right. It was my pleasure. Great talking to you, John. And thanks to everybody for listening.

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