OSHA to company: ‘You can run, but you can’t hide’
December 6, 2010 by Fred HosierPosted in: construction safety, Falls, Injuries, new court decision, Special Report, What do you think?, Who Got Fined and Why?
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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.
Do you think OSHRC made the right decision? Let us know in the Comments Box below.
(Secretary of Labor v. Sharon & Walter Construction, Inc., OSHRC, No. 00-1402, 11/18/10.) A PDF of OSHRC’s decision is here.
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Tags: fall protection, OSHRC, repeat violation, roofing, Sharon & Walter Construction, worker fell
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December 6th, 2010 at 9:19 am
Yes. The owner was trying to hide behind a technicality.
December 7th, 2010 at 8:10 am
I think they nailed it. So you re-incorporated, with the same lack of safety procedures.
I hope OSHA hit’s him hard, so the companies that do it RIGHT can fall a little more under the radar.
December 7th, 2010 at 9:24 am
In this case, yes.
December 7th, 2010 at 9:40 am
Absolutely made the right decision!!!
December 7th, 2010 at 9:48 am
OSHRC absolutely made the right decision!!! This company knew better-they’d been fined before but evidently didn’t learn their lesson. And the fact that the company changed (in name only) is no excuse.
December 7th, 2010 at 10:19 am
#3 sealed his fate in my opinion. Nice try buddy, now go protect your workers!
December 7th, 2010 at 10:20 am
Yes, the decision in my opinion is the right one.
If a business owner picks and chooses which rules to obey or not, especially if it displays disregard for worker safety then the past should follow them.
December 7th, 2010 at 10:58 am
It has become somewhat common practice for companies to reorganize and change names for a variety of reasons not the least of which is to elude or avoid negative public scrutiny.
In this case the departure from the original name (unlike Smith Inc. vs Jones Inc.) is minimal with all the players remaining the same. So is it the “corporate entity” that is to blame or the individual owners who are responsible?
One of the reasons for of the corporation is to protect the owners from strict financial liability….but does failing to complete due diligence or negligence (fall protection) meet the standards for piercing the corporate veil and remove that protection - once the old corporation is dissolved and reformed…..?
If it were that easy to evade responsibility I suppose many more companies would be following suit in similar fashion….(Smith 2 Inc. etc)
In this case it appears that all is the same except the minor name change…..so it would appear logical that those responsible should (logically) not escape scrutiny.
So the question might be what precedent does this set for any future actions on corporations….is it a slippery slope…..what if only one or two conditions were the same such as a different CEO or trainer? Would it then be be subjective question of whether or not OSHA will pursue?
December 7th, 2010 at 4:11 pm
How can a company that wasn’t even in business before be a repeat offender the true repeat offender is W. Jensen
December 8th, 2010 at 11:37 am
Nailed it. Based upon some of the items we normally see in this alert, it is kind of refreshing to see a good decision being made…
December 8th, 2010 at 12:03 pm
If the company were an ‘S’ Corp, rather than a ‘C’ Corp (as evidenced by the incorporated tag) then the claim that it is the same company is clear to us. However, with a ‘C’ Corp, it seems to us that this is the ‘slippery slope’ that Mark B., describes in the comment above.
Perhaps Sharon needs to go replace Walter as the CEO - or kick her husband in the butt, one! (grin)
December 17th, 2010 at 2:42 pm
Looking at only the facts presented in this article, most fair minded people would make a snap judgment and agree with the OSHRC. However, as those same fair minded people also know, the report by OSHA or any one side of the debate is at best skewed, at worst… untrue. So without actually living one of the two parties sides, I think it is disingenuous to fully agree with the governments side. Further, the question actually posed in this case is, “Is a citation is issued to a company or an individual”. From the above stated information it appears obvious that Jensen made some irresponsible decisions concerning the safety of his employees. However, from the above stated facts, the cited corporation had never received a violation in the past. How can something be repeated without occurring at least once before? We can argue the merits, motives or even the character of an individual that appears to be slithering around the rules, but we have the ability to change the law should we choose. Right now, how about we follow the law?