The Occupational Safety and Health Act provides for increased penalties for employers who fail to rectify conditions following an Occupational Safety and Health Administration (OSHA) citation resulting in a similar incident. Such “repeat citations” are an essential element of the Occupational Safety and Health Act (OSH Act) enforcement scheme. As OSHA practitioners and environmental, health and safety professionals know, avoiding repeat citations is often a central issue when resolving an OSHA enforcement matter. OSHA policy instructs the agency to consider several factors when determining whether to characterize a citation as “repeat.” One of those factors involves a situation in which there has been a change in corporate structure or ownership between the initial and subsequent violations. In such instances, OSHA will evaluate whether there is “substantial continuity” between entities that warrants characterization of a citation as “repeat.” If, however, there is enough change in the corporate structure between the initial and subsequent violation, the citation will not be classified as “repeat.”  

To determine whether there is substantial continuity, the Occupational Safety and Health Review Commission (Commission) considers the totality of the circumstances based on three factors outlined in the Sharon & Walter case: (1) the nature of the business, including the continuity in the type of business, products/services offered, and customers served, as such continuity typically indicates that the nature of the activities associated with the business and the inherent safety and health considerations are likewise unchanged; (2) the jobs and working conditions, due to their close correlation with particular safety and health hazards; and (3) the continuity of the personnel, focusing particularly on the personnel who specifically control decisions related to safety and health, as the decisions these personnel make often relate directly to the extent to which the employer complies with the OSH Act's requirements. 

The substantial continuity test recently came under judicial review in Scalia v. Wynnewood Refining at the Tenth Circuit Court of Appeals. The case involved a 2012 boiler explosion that killed two employees. Following the explosion, OSHA issued numerous repeat citations to Wynnewood LLC. Before the incident, Wynnewood LLC was Wynnewood Inc., a subsidiary of Gary-Williams Energy Corporation. However, in December 2011, CVR Energy acquired all the stock in Gary-Williams and its subsidiaries, including Wynnewood Inc. Following the acquisition, Wynnewood Inc. became Wynnewood LLC, and the new executives from CVR Energy began changing safety policies and procedures. Although the executives controlling safety decisions at Wynnewood LLC were different from those at Wynnewood Inc., almost all the supervisors and employees of Wynnewood Inc. were retained as part of Wynnewood LLC. OSHA claimed that because Wynnewood Inc. had been cited under the same section of the OSH Act, Wynnewood LLC was subject to repeat violations. The Administrative Law Judge disagreed and re-characterized the violations as “serious” rather than “repeat.” On appeal, the Commission affirmed the decision of the administrative judge to downgrade the violations from “repeat” to “serious.”

The Commission found that because the executives controlling decisions related to safety and health at Wynnewood LLC were not the same as those at Wynnewood Inc., and substantial changes in safety policy were made under the new leadership, the substantial continuity test was not met. CVR Energy executives hired new safety personnel, provided access to funds for safety that were previously difficult to access, and reviewed, revised, and trained employees on new safety policies and procedures.

Based on these distinctions, the Tenth Circuit upheld the Commission’s decision and found that the Commission properly weighed and considered the three factors from the Sharon & Walter test. More specifically, the Tenth Circuit agreed that because the CVR Energy executives controlling safety-related decisions at Wynnewood LLC were not the same as those who previously controlled decisions at Wynnewood Inc., and the change in leadership resulted in marked changes to the safety policies and procedures at the refinery, the substantial continuity test was not met. 

The Tenth Circuit made clear that merely changing environmental, health and safety (EHS) personnel alone was not sufficient to establish adequate separation. The critical element was whether the change in decision-making personnel resulted in changes to the safety policies and procedures. Additionally, the key personnel at issue when evaluating the third factor (“continuity of personnel”) were the people who devise safety policies, not the supervisors who implement and enforce those policies. Because the CVR Energy executives were both different from the executives at Gary-Williams, and directly involved in making substantial changes to safety and health policy, the Tenth Circuit upheld the Commission’s decision to reduce the violations from “repeat” to “serious.”

The Wynnewood case likely will establish a higher bar for OSHA to issue repeat violations to successor entities, so long as the new entity employs new personnel in key safety roles and those people make substantial changes to EHS policies. Also, in emphasizing changes in personnel over changes in operations and work conditions (the first and second factors of the Sharon & Walter test), the decision underscores the importance of staffing and establishing top-down decision-makers. The Tenth Circuit made note of the Commission’s characterization of the change in safety policy from Wynnewood Inc. to Wynnewood LLC as a “safety culture shift.” Such a change could be a critical consideration in breaking the link between current and past citations.