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BOSTON -- The outcome of an injured worker's lawsuit could set a precedent of governmental liability for negligent workplace inspections by employees of the Occupational Safety and Health Administration.

Employers are concerned that such a precedent may force OSHA to conduct more rigorous inspections.

The government suggests in court papers, though, that the result may be fewer worksite inspections.

Employers are monitoring the activities of the 1st U.S. Circuit Court of Appeals, which decided on its own to hear Irving vs. U.S. en banc using briefs filed earlier this month.

Gail Merchant Irving, now 40, of Somerset, N.H., is seeking $1 million in damages under the Federal Tort Claims Act to compensate her for the pain and suffering and related injuries she sustained in a serious 1979 accident at a shoe manufacturing plant. Her hair and scalp were sucked into an unguarded rotating drive shaft of a machine, and her neck was broken in the accident, which nearly was fatal.

Workers compensation benefits are not an issue in the case, though Ms. Irving received benefits after the accident but no longer is receiving them, said her lawyer, Paul R. Cox, with Burns, Bryant, Hinchey, Cox & Rockefeller P.A. in Dover, N.H.

A June 8 decision by the 1st Circuit to have the full, 10-judge panel hear the case supersedes a ruling issued April 8 by a three-judge panel of the appeals court.

In that April decision, withdrawn when the court decided to hear the case en banc, judges voted 2-to-1 to uphold the New Hampshire federal district court's $1 million award against the U.S. government, resulting from allegedly negligent inspections by two OSHA compliance officers in 1975 and 1978.

Essentially, both inspectors failed to cite the now-defunct shoe manufacturer in Somerset for the unguarded drive shaft -- a "flagrant and serious" violation of OSHA rules -- that caused the "gruesome" accident, the court said. After the accident, OSHA inspectors found additional safety violations related to that machine, according to court papers.

When Ms. Irving, then 21, bent to pick up a glove, her hair became entangled in the machine. Her serious head injuries left her temporarily paralyzed and with permanent nerve damage, though extensive physical therapy has helped her recovery.

Although predictions vary, observers agree that the outcome of the case may significantly affect the employer-OSHA relationship, which some consider strained.

"The business community is awfully concerned today about the efficacy of both the OSHA act and the way it is administered," said Eric J. Oxfeld, president of UWC Inc., a Washington-based business advocacy and research organization. "Employers believe OSHA is far too bureaucratic, and that the statute is enforced in a way that is already far too rigid and focused too much on mindless and rigid compliance with legalistic requirements, with too little concern about cooperation to detect and correct hazards."

"The whole issue (governmental liability) moves us further away from developing a stronger safety culture among three groups: employers, employees and government," said Lance J. Ewing, chairman of the Risk & Insurance Management Society Inc.'s External Affairs Team and loss control administrator for the Philadelphia public schools. He said RIMS' representatives want to discuss issues in the case with OSHA's head, Charles Jeffress, at a meeting planned for next month.

Ms. Irving's lawsuit, which she filed about 18 years ago, has been the subject of protracted litigation. During the interim, she married a shoe factory co-worker who came to her aid the day of the accident. In addition, she has worked full-time in a federal government office for at least the past 10 years.

The 1st Circuit's 2-to-1 April decision -- since withdrawn -- marked the fourth time that the appeals court considered issues in the case. From 1981 to 1995, the federal district court ruled for the government three times, and each time, the appeals court vacated the ruling and sent the case back for further proceedings.

Fueling the U.S. government's persistence is the fact that OSHA has never been found liable for the actions of its inspectors, according to U.S. attorneys' statements in court papers. A finding of liability would have a "prohibitive social cost" attached to it because of the "enormous" potential liability from millions of workers in OSHA-inspected work sites, they said in their latest brief. In addition, OSHA's need to respond to lawsuits would create a "substantial" drain on agency resources and may even lead to OSHA inspecting fewer work sites, they added.

"It's a very, very limited window of liability," countered Mr. Cox, the plaintiff's attorney. It stems from the fact that both OSHA inspectors were engaged in official "wall to wall" reviews of the entire shoe manufacturing plant and both missed citing the unguarded machine, he said. Given the government's resistance, it may take a ruling by the U.S. Supreme Court to resolve the case, he said.

The latest round of briefs for the en banc review focuses on two key legal issues.

The first is a provision in the Federal Tort Claims Act that exempts from liability a federal agency or employee engaged in a "discretionary function or duty." U.S. attorneys say the exemption should apply, while Ms. Irving's attorney disagrees because OSHA inspectors had decided to do a wall-to-wall inspection prior to visiting the shoe factory.

The other key issue is an FTCA requirement that the plaintiff has to be able to allege a state law tort that can apply to parties other than the government. In this case, Ms. Irving's attorney relies on New Hampshire's "Good Samaritan" doctrine, which requires that anyone must use at least ordinary care when intervening. He argues that the OSHA inspectors used less-than-ordinary care in their inspections of the shoe factory prior to the accident.

The U.S. government should be liable under the FTCA because the negligent inspections by OSHA inspectors did not meet the standard of ordinary care, Ms. Irving's attorney said.

However, U.S. attorneys argue that doctrine does not impose liability in this case, because the inspections did not increase the risk of harm and the shoe manufacturer should not have relied on OSHA's inspections to cover all violations. In addition, they point out that insurers are no longer subject to liability for loss control inspections conducted by their employees.

Business representatives generally support the idea of government immunity for OSHA inspectors.

"The public policy concern. . .in making the federal government responsible for damages because of the failure or alleged failure of an OSHA safety inspection is that it will take OSHA in exactly the wrong direction from effective enforcement," warned Mr. Oxfeld.

It would tend to make inspections more rigid and legalistic, rather than reinforcing the ability of OSHA to try and develop more cooperative efforts with employers, he added.

As RIMS' Mr. Ewing sees it: "I think it would be both impractical and arduous to have an OSHA compliance officer inspect every single piece of equipment in a factory, down to the last nut and bolt. As a taxpayer, I don't think that is a good use of time or dollars, and as an employer, I'm not sure that I want to baby-sit an OSHA compliance officer going through my factory who has to look at every single piece of equipment."

If the U.S. government loses, the case will create a precedent for an injured worker to sue the federal government after a workplace accident, Mr. Oxfeld said.

"It will open the floodgates of plaintiffs' attorneys running to injured employees," Mr. Ewing said. In addition, it may encourage "a laissez-faire attitude" among some employers, who may justify their attitude by saying that an injured employee can go sue OSHA, he added.

A labor spokesman disagrees and emphasizes that OSHA's liability would be limited to similar situations.

"We think this is a situation where an agency conducting a wall-to-wall inspection should be found liable," said Bill Kojola, an industrial hygienist with the Occupational Safety & Health Department of the AFL-CIO. "Failure to find the hazard and notify the employer contributed to the tragic accident."