The Occupational Safety and Health Act allows OSHA to issue higher fines when a company has been cited previously for a similar penalty. A recent case defines when the agency can and can’t use that tactic.
Two employees of Sharon & Walter Construction, Inc., (S&W II) were installing a roof on a building without fall protection. One worker fell off the roof and was injured.
OSHA issued two citations, one willful and one repeat.
OSHA based the repeat violation on previous violations of the fall protection standard by Walter Jensen d/b/a S&W Construction (S&W I).
S&W II appealed the categorization of the fine as repeat, saying that S&W I was a separate company.
S&W I, owned by Jensen, had filed for bankruptcy and ceased operations. About six weeks later, S&W II was incorporated by Jensen. Both were based in New Hampshire and provided the same construction services, including roof installation.
S&W II contended that it can’t be charged with a repeat citation based on previous violations of S&W I.
Recently, the Occupational Safety and Health Review Commission (OSHRC) took up the case. It noted that this would be “an issue of first impression.” In other words, OSHRC had never decided a case before in which the question was whether a company that had changed its legal identity could be held responsible for the safety violations of a predecessor.
OSHRC noted that under other federal employment statutes, courts have used a multi-factor test from the National Labor Relations Board to determine whether a successor company must satisfy the obligations of a predecessor. The test takes three factors into account:
- Whether there is continuity in the nature of the businesses. OSHRC found that the business of S&W II was the same (construction, primarily roofing) as S&W I.
- Whether there is continuity in jobs and working conditions. OSHRC found this also remained unchanged.
- Whether there is continuity in personnel who specifically control business decisions, in this case, those related to safety and health. Walter Jensen made those decisions for both companies.
Given those findings, OSHRC found the similarities between the two companies were sufficiently similar to support OSHA’s repeat citation.
Bottom line: Going out of business and reincorporating as a new entity won’t protect companies from repeat OSHA fines.
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(Secretary of Labor v. Sharon & Walter Construction, Inc., OSHRC, No. 00-1402, 11/18/10.) A PDF of OSHRC’s decision is here.