The art of the deal: Know how OSHA reaches settlements
OSHA has cut deals with employers and industry associations ever since the agency’s beginning. Deals with employers include:
- Informal settlement agreement (hearing at Area Office);
- Expedited informal settlement agreement (deal through the mail); and,
- Formal agreements established by lawyers et al and approved by the Occupational Safety and Health Review Commission (OSHRC).
In FY 2015, 65 percent of inspections with a citation resulted in informal or expedited settlements. An average penalty reduction totaled 41.3 percent. About 7.4 percent of cases went to the OSHRC.1
About one-third of cited employers don’t take OSHA’s deal. They just correct and pay. Will more of this group deal with OSHA in the future?
OSHA’s maximum penalties jumped 78 percent in August 2016. An approximate 40 percent “savings” that keeps thousands of dollars in an employer’s pocket may entice more employers to jump at OSHA’s informal or expedited deals.
OSHRC deals should increase over the next few years. Per the OSHRC, DOL leverages litigation resources “in favor of high-impact strategic cases.” Sometimes millions of dollars are on the table. Some companies are “nudged” into formal settlements. President Trump appointed a new a new chairman of the OSHRC in August 2017. The OSHRC may be more favorable to employers, enticing more formal settlements.
Big deals happen at the OSHRC level. Consider these two deals:
- July 2017, Cal/OSHA and Chevron (Richmond refinery)2 In addition to paying the original (January 2013) penalty of $782,700 plus an additional $227,300, among other things, Chevron will invest approximately $20 million dollars to upgrade process safety equipment and procedures that exceed current and upcoming workplace safety requirements for refineries. In exchange, OSHA will withdraw nine of the 17 violations and amend five of the eight remaining violations.
- June 2016, Ashley Furniture3: Ashley agreed to $1.75 million penalty, substantially upgrade machine safeguards, conduct third-party and internal corporate monitoring, and do other things, such as hire and retain a vice president of health and safety. In exchange, OSHA will amend, group or vacate about 40 citations.
Per the OSHRC, there are approximately 2,500 formal settlements annually. Some impact hundreds of locations through corporate-wide settlements; others may impact a single location. Because these settlements may establish new case law, among other things, nearly every workplace may feel the ripple effect.
Among the other things, consider if Chevron implements best practices beyond current or pending law; does it put pressure on similar employers to keep pace? Ashley Furniture now has a VP of health and safety. Titles are noticed, and hopefully will be adopted more frequently, within and beyond Ashley’s industry.
What’s in the deal?
Everything is in play at the OSHRC level. Issues that lack OSHA standards, such as safety and health management programs/systems, organizational communication, workplace violence, ergonomics, and heat stress are enforceable. Standards such as LOTO, confined space, machine guarding, and PSM and other typical OSHA standards may be pushed to their best practice limits (see Chevron example).
Appoint an OHS VP. Hire more OHS pros. Retain certified OHS pros. Lessen the workload on OHS (remove environmental responsibilities, for example). Align OHS program with ANSI Z10. Retain an OHS consultant and essentially do whatever the consultant says. Everything is on the table. It’s all about what each side negotiates in the deal.
There are about eight million worksites in the U.S. OSHA is a small agency with limited resources with stagnant, and even sometimes regressing, standards that cover only a fraction of hazards and risks workers face today. If OSHA knows its market, how does it use its leverage and maximize its options? Negotiating penalty dollars is one way of preventing more injuries and illnesses.
What’s often lost in this issue is that these deals are voluntary and cooperative with OSHA. If an employer doesn’t want to deal, all they must do is promptly correct violations and pay initial penalty.
Make the deal?
At the informal and expedited levels, OHS pros often suggest the best deal for the employer. Deals at the OSHRC level are mostly driven by company or outside lawyers. Regardless of any deal, both the OHS pro and lawyers must always work together. If your workplace has yet to face an OSHA deal, keep track of deals that other workplaces make.