The excalating costs of safety’s legal aspects

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By Gary Auman, Legal counsel for NFBA

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AumanLast issue, in the first of a series of articles, I discussed the current status of fall protection as it applies to post-frame contractors. The article addressed many of the more practical aspects of safety focused on fall protection. After preparing the article, I began to contemplate the ways in which post-frame contractors maintain safe jobsites. As I considered this question I had to conclude that perhaps the speed with which we try to get jobs done in post-frame construction negates our considerations regarding employee safety and compliance with state and federal regulations. This second article in our series addresses legal aspects of workplace safety.

These legal aspects apply directly to the cost of running a business. It has been proven time and time again that on-the-job injuries affect profit margins and builder reputation. Accidents cost you money. You may convince yourself that on-the-job injuries are a “cost of doing business” or that these injuries have no associated costs but you will be deceiving yourself. As new regulations and safety standards are issued, more people look to shift responsibility and liability for on-the-job injuries to others on the jobsite. The same rings true regarding the agencies that enforce safety and health regulations. Federal Occupational Safety & Health Administration compliance officers will go to great pains to cite as many employers on a construction project as possible to get their point across. While this article cannot cover all areas in which potential liability exists, I will highlight the areas that are especially vulnerable.

Two aspects of safety need to be considered when we talk about safety’s legal aspects and effects. The first area is compliance with federal and state regulations that govern or require that you provide a safe workplace for your employees. Failure to comply in this area exposes an employer to regulatory fines and penalties. The second area encompasses the financial impact associated with injuries that occur on the job whether or not you have a “safe workplace.” The state and regulatory component of this topic is OSHA. OSHA regulations apply in all 50 states in some form. In some states OSHA is a part of the state government; in others, it is administered under the federal code of regulations. OSHA’s mission is to ensure anyone who works in the United States who falls under its protective authority is provided a safe place to work. OSHA’s goal is the same as that of every employer: to return workers home at the end of the day in the same condition in which they arrived at work to begin their shift.

To accomplish this task, OSHA has the authority under the Occupational Safety and Health Act to promulgate its standards designed to cover all aspects of the workplace. Any state with its own OSHA programs goes through a qualification process. One requirement a state-administered program must meet is its safety standards must be as strict as federal OSHA standards. Most of these states simply adopt federal standards as their own.

The construction industry is among the three major areas OSHA addresses. Safety standards for the construction industry are found in Title 29 of the Code of Federal Regulations Section 1926 and all of its subparts. If you are an employer with just one employee, you are covered by OSHA even if your business is not incorporated. There are few exemptions to OSHA coverage and they impact a small number of post-frame contractors. Even if you are a sole proprietor and you incorporate your business to protect your personal assets, you are covered by OSHA. You are an employee of your corporation and OSHA is authorized to ensure your safety. If an OSHA compliance officer visits a jobsite on which you are working (and even if there are no other employees of the corporation), OSHA is charged to enforce all standards that apply to the work you are doing. OSHA would be within its jurisdiction to issue citations, fines and penalties for your safety violation. No matter how small a contractor you are, if you are incorporated and working for the corporation or if you are a sole proprietor, unincorporated and employ at least one person, you are covered by OSHA.

OSHA fines and penalties can be very high. An OSHA violation characterized as either “other than serious” or “serious” carries a penalty ranging between $0 and $7,000. If OSHA deems you have repeated a violation for which you were cited in the past, the penalty ranges between $0 and $70,000. If OSHA determines you are willfully violating the safety standards that govern your workplace and apply to the safety of your employees, you can be cited for a willful violation between $7,000 and $70,000 for each violation.

With new emphasis being placed on OSHA and on certain areas of safety regulations, particularly fall protection, OSHA fines and penalties are reaching new levels. I recently dealt with several cases in which small contractors with fewer than 25 employees were cited for the maximum $7,000 penalty for a serious violation because the contractor permitted one employee to be exposed to a fall hazard. OSHA’s position was that, because of the nature of the citation, no credit was going to be given to the employer because of its size, history or good-faith efforts to comply with the safety standards.

In many cases a single safety violation can result in multiple OSHA standard violations. As a contractor you can be exposed to significant fines for not providing necessary fall protection for your employees. Allowing an employee to work on a top plate or crawl up trusses to nail on purlins without fall protection can result in several OSHA citations for the same occurrence. Of course, there also would be an OSHA citation for failure to provide fall protection to your employees. There might also be citations for failure to train your employees on the use of personal fall protective equipment and recognition of hazardous situations and how to avoid them. There also could be a citation for failure to provide your employees with personal fall protection equipment. Each one of these violations, if cited as serious, could result in a separate fine of up to $7,000 in addition to the fine assessed for the initial fall protection violation.

For years, post-frame contractors believed they had immunity against fallout from OSHA inspections because our business primarily dealt with rural America. Contractors felt their jobsites were off the beaten track normally covered by OSHA compliance officers. This is changing — more rapidly in some geographical location than others — but changing nonetheless. I recently discussed a matter with a contractor who was cited by OSHA (and faced extensive fines). He believed he was turned in by a competing contractor. He could think of no other reason an OSHA compliance officer would come to his jobsite. The post-frame industry is increasingly conducting business in commercial, light industrial and residential applications. The areas in which these types of buildings are located are much more visible and are more likely to be inspected by OSHA compliance officers.

Many contractors are finding that when they attempt to negotiate a settlement with OSHA for citations issued for one job, part of the settlement the area director is attempting to extract from the contractor is a commitment that the contractor provide weekly updates of all job locations on which the contractor is working for at least the next 12 months. These updates give OSHA a road map to the contractor’s job locations. Finally, because of the increased emphasis on fall protection issues, OSHA compliance officers are going farther afield to find and address fall-protection violations.

Our legal responsibilities for safety compliance have increased and will continue to increase and we are becoming more visible to regulatory officials. Bear in mind, you do not have to have an accident or an injury to be subject to an OSHA inspection. In many situations an OSHA compliance officer drives by a worksite and observes an employee engaging in an unsafe act. At that point, the inspection begins.

In addition, you are not exempt from your legal responsibilities just because you have a small crew or you attempt to avoid exposure by making all of your employees subcontractors. As long as you are incorporated, you are working for the corporation and the corporation is going to be governed by OSHA. Several years ago OSHA created a multi-employer worksite doctrine. This doctrine was challenged and the Court of Appeals upheld its constitutionality about 2 years ago. Under the multi-employer worksite policy, OSHA categorizes any construction employer into one of these categories: controlling employer, creating employer, exposing employer or correcting employer. One employer can fit into more than one category.

The controlling employer is the only category I am going to address at this time. The controlling employer is deemed to be the employer who controls the overall worksite. The controlling employer may have several subcontractors working for it under individual contracts. If the controlling employer is on the site and has any control over the subcontractor, the controlling employer (you) are responsible for the safety of the subcontractor’s employees. If the employees you have working for you as “subcontractors” are either sole proprietors or employees of a corporation such as yours, you can be cited for their safety violations. Citations issued against you can be as significant from a cost standpoint as if they were issued against you with those same people as your employees. The multi-employer worksite policy indicates the controlling employer has a legal responsibility for any hazard exposure to the employees of any subcontractors controlled by the controlling employer. Even if you contemplate using such a defense in the event you are inspected and cited by OSHA, do not forget that even without the controlling employer policy, you still may have to show that these people are truly subcontractors.

Various federal and state agencies have guidelines, criteria or tests applied to determine the nature of someone who is trying to be considered a subcontractor in any construction situation. You may have a one-page document you call a “subcontract” or “agreement” signed by the person you are deeming to be a subcontractor; within that agreement this person may agree they are not your employee and they will provide their own workers’ compensation coverage, etc. Even with these signatures in place, OSHA may not consider this person as a subcontractor. The fact a person agrees he or she is independent of your control and attempts to establish a classification of subcontractor is not the real test. The real test is the way they function on a day-to-day basis on the jobsite.

In the next issue I will discuss additional legal and safety issues. This topic can have a significant impact on your bottom line and deserves your serious consideration.

Auman, of Dunlevey Mahan & Furry, is legal counsel for the National Frame Building Association.

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