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Employers see some success in negotiating down OSHA fines

Admission of guilt helps set the right tone

Employers see some success in negotiating down OSHA fines

Employers that face significant penalties for federal workplace safety violations often win reductions in proposed fines during informal talks with regulators, but settling citations is not as easy as it once was.

Companies that are cited by the U.S. Occupational Safety and Health Administration have 15 business days from receipt to comply, request a conference with OSHA's area director or file a notice to contest the findings before the Occupational Safety and Health Review Commission.

OSHA routinely agrees to reduce civil fines during informal settlement talks in exchange for companies agreeing to immediately correct hazards, according to a June report by the Washington-based Center for Progressive Reform, which blamed the practice on budgetary constraints and limits on the agency's authority, such as its inability under federal law to order employers to immediately fix dangerous conditions (see box).

“It's a matter of resources, but it's also a matter of policy,” said Tom McGarity, professor of law at the University of Texas' School of Law in Austin and report co-author. “At the ground level, enforcement doesn't always happen as you might expect.”

In practice, securing a significant fine reduction during the informal conference process has gotten much more difficult since a 2010 OSHA memorandum changed the agency's penalty policies, including requiring the approval of regional administrators for any reduction above 30%, legal experts say.

“When I was head of OSHA, I said 'area directors, you decide what you think is best on settlement … what do you have to do to make sure they have a safe worksite,' ” said Edwin Foulke, an Atlanta-based partner at Fisher & Phillips L.L.P. and a former assistant secretary of labor for Occupational Safety and Health. “Now they are kind of limited in what they can and cannot do.”

OSHA area directors may agree to reduce the fine, but generally will not withdraw all citations or downgrade willful or repeat citations with the highest penalties, he said.

“We used to all experience the walk in, handshake, a little bit of cash and get the egregious citation dismissed,” Matthew Deffebach, a Houston-based partner at Haynes & Boone L.L.P., said during the American Society of Safety Engineers' conference in Atlanta last month. “That doesn't happen anymore.”

Kristine Pounds, manager of safety operations at Atlanta-based Home Depot Inc., has overseen negotiations that significantly reduced OSHA fines and sees her job in the informal process as helping OSHA better understand the company's programs, processes and procedures.

It also helps, she said, for employers to admit when they are wrong.

“I've had a lot of success not going in adversarially, but going in as a partner,” she said.

It is critically important for employers to maintain a cordial relationship during the informal process, with an eye toward potential litigation, Mr. Deffebach said.

“Sometimes there's that real desire to go in there, pounding on the table, telling OSHA they've got it wrong and being adversarial at that informal process,” he said. “If your relationship has been one that's been copacetic with the agency … their attitude is much better and it helps us in the litigation.”

For employers with multiple sites, it is critical to reinforce to employees how important it is to immediately forward citations to the health and safety team, Ms. Pounds said.

She also has compliance officers send her the citations rather than each facility.

That helped in a recent case where the citation was sent to the store instead of her, allowing her to get the case reopened despite missing the deadline to contest it, Ms. Pounds said.

OSHA's changing penalty structure will likely come into play in decisions on whether to contest fines and citations when it takes effect Aug. 1, because the maximum fines will increase roughly 78%, which could encourage more employers to fight back.

“You're going to have a lot more people contesting — there's no doubt about that,” Mr. Foulke said. “I don't think that necessarily helps safety. Lots of citations, higher penalties — that doesn't get you to zero.”

In addition, significant enforcement cases with a penalty of more than $100,000 are assigned to a mandatory settlement conference, per commission rules. But given that one willful or repeat citation has a maximum fine of $124,471, the commission is reviewing it and stakeholders predict the penalty threshold will be raised.

“Quite practically speaking, (OSHA doesn't) have the resources to litigate all these cases,” said Margaret Seminario, director of safety and health at the AFL-CIO in Washington.

Even with its budgetary and legal limitations, OSHA can still ensure penalties have the desired deterrent effect by taking reductions off the table when noncompliance economically benefits the employer.

“There are certain times the cases shouldn't be settled, for instance, when they are incredibly egregious or someone's died on the job,” said Katherine Tracy, Center for Progressive Reform policy analyst and report co-author. “That just stands out to me as particularly troubling.”

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