Chip Macdonald
As the saying goes, “All politics are local.” Well, on the local scene, a subcontractor’s legal relationship with his direct employer, general contractor, project manager and host employer may pose further contractual liabilities for all parties involved. As we all realize, these liabilities are often easily converted into either profit or loss on a multi-employer project. One indicator of a contractor’s success is the literal allocation of safety liability on the multi-employer jobsite, either through contract language or on-site practices. Ignoring these hidden liability traps during bidding and contract negotiation has landed many contractors in court without much of a clue as to why they’re there. When it comes to multi-employer projects, pay attention or pay up.
Public Law 91-596 (Occupational Safety and Health Act) was made effective by the 91st Congress on Dec. 29, 1970. The General Duty Clause (Section 5-a-1) of that act stipulates: “Each employer (1) shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.”
As a result of this prime-directive obligation, the contractual language of construction documents changed dramatically. All of the contractors involved in a project were now positioned in an adversarial game of “liability dodge-ball.” Further confusing the issue, two regulatory standards were passed: 1910.12(a) (Construction Work in General Industry) and 1926.16(a) (Rules of Construction).
General Industry’s standard 1910.12(a) states: “The standards prescribed in part 1926 of this chapter (CFR 29) are adopted as occupational safety and health standards under section 6 of the Act and shall apply, according to the provisions thereof, to every employment and place of employment of every employee engaged in construction work. Each employer shall protect the employment and places of employment of each of his employees engaged in construction work by complying with the appropriate standards prescribed in this paragraph.”
This General Industry section applies to the obligations of construction contractors (1926) occupied on an industrial (1910) work site. Here we notice that the inclusive intent of the standard implies that a worker’s on-site safety is the obligation of his direct employer who signs his paycheck. This employer shall, therefore, not assume any liability for the unsafe work practices or conditions caused by another contractor, regardless of their relationship. It does not, however, specifically exclude any further safety and health obligations by any other specified contracted parties.
Following this standard, OSHA implemented a separate construction standard, 1926.16(c), which states: “Thus, the prime contractor assumes the entire responsibility under the contract and the subcontractor assumes responsibility with respect to his portion of the work. With respect to subcontracted work, the prime contractor and any subcontractor or subcontractors shall be deemed to have joint responsibility.”
The contractual footing for a contractor now became rather unstable. The dockets of state and federal level courts became jammed with liability dispute cases based on the conflicting sections of the OSHAct, and the General Industry and Construction standards. OSHA next revised its Field Inspection Reference Manual for its compliance officers, stating that a citation may be issued under particular circumstances to any employer who fits the definition of “creating, controlling or correcting,” whether or not that employer’s employees were actually among those exposed to a hazard. On Dec. 10, 1999, OSHA’s Directorate of Compliance Programs issued a replacement directive to its National, Regional and Area Offices, entitled CPL 2-0.124: Multi-Employer Citation Policy. This was issued in order to clarify the agency’s policy of multi-employer citations by defining terms and relationships and directing actions by utilizing descriptive examples. It contains the identical language, standard relationships and citation policy as described in the FIRM. There next ensued a decade where various letters of interpretation were issued by the Construction Directorate narrowing specific parameters of the “controlling contractor” on the site.
It was determined that this party had “supervisory control over the worksite, including the power to correct safety violations itself or require others to correct them” with controls “established by contract or in the absence of … contractual provision, by the exercise of control in practice.”
This CPL held up against numerous federal and state court challenges for more than a decade, apparently enforcing this simple adage “You wouldn’t send the Boy Scouts into the wilderness without a leader.” The two significant items of jurisprudence were the site-specific requirements that establish the “correcting party” and “control in practice.” I have, over the years, personally consulted with various attorneys on multi-employer worksite liability cases, and these issues can often form the crux of any decision in an injured plaintiff’s case. The details incorporated in the multi-party contract’s language, as well as the individual daily job logs and meeting minutes, are extremely influential in legal decisions made on site-control issues.
Documentation is the key to competency and proving competency is the way out most litigation. Regardless of the outcome of appeal, this important CPL at least provided a platform upon which either a prime or subcontractor may judge the extent and weight of his contractual liability for providing a safe and healthy type and place of work. It reinforced an informal agreement that already existed on most construction sites I’ve ever seen: The guy who hired you is always responsible for you, but the guy who hired him is, too. I’ve always recommend that employers and their designated representatives (competent and qualified persons) carefully read the precise language of any bid proposal or subsequent construction contract for the “net intent” that the contract language implies.
If you don’t fully understand it, ask for attorneys from all parties to explain it clearly and concisely. If they can’t do that, you might reconsider signing your name. It is this liability value upon which the issuance of an OSHA violation may be applied to any party under the multi-employer contract. And let’s face it - should a civil or criminal trial ensue after a workplace injury, the guilt or innocence of any party in the suit will balance sharply on the obligatory terms of the contract, as well as the way in which work was practiced. The potential probability and severity of an OSHA penalty are often interpreted from the employer’s knowledge and practice of his responsibilities under the law and his “good faith” actions to reasonably comply. The factual case data in every hearing under judicial OSHRC review is closed and unavailable until the commission has finally settled the hearing and issued a majority decision. If the decision is not overturned beyond that date, the details of every OSHRC case become available under the Freedom of Information Act (FIA) to any attorney providing legal services for any defendant or plaintiff with a substantially related case. Compliance or noncompliance, factored by the degree of penalty, can certainly stand in evidence for any following civil or criminal case.
Things Change
In the big picture, it did not take OSHA’s Review Commission very long to fold over on itself. It finally came to pass with a decision issued on April 26, 2007, in what amounted to a classic test case: Secretary of Labor (Complainant) v. Summit Contractors Inc. (Respondent), OSHRC Docket No 03-1622.The original OSHA violation was issued to All Phase Construction, a subcontractor to Summit Contractors. They were cited as noncompliance with C.F.R. 1926.451(g)(l)(vii), indicating that one or more employees were not “protected from falling by the use of personal fall arrest systems or guardrail systems meeting the requirements of paragraph (g)(4) of this section.”
Although Summit did not create the conditions leading to the violation, under CPL 2-0.124 it was alleged that the respondent, as the project’s general contractor for project supervision, failed to either provide or require their subcontractor (All Phase Construction) to provide adequate fall protection. Summit had no direct employees, other than site supervisors, either occupying the site or exposed to hazards on the Little Rock, Ark., construction project at the time of the violation. Summit did not deny knowledge of either the existence of noncompliant acts and conditions on the part of their subcontractor or OSHA’s issuance of a fall protection violation to their subcontractor. Summit contested their citation and appeared before the Occupational Safety and Health Review Commission’s (OSHRC) Administrative Law Judge (ALJ), Mr. Ken S. Welsch. It was Summit’s attorney’s argument that OSHA’s CPL 2-0.124 was, in fact, unenforceable under 1910.12(a), and therefore their client could not be held responsible solely by contractual relationship with their subcontractor. Mr. Welsch decided to support the ruling and deny Summit’s petition for release under these rules. He found them, likewise, in violation of 1926.451(g)(1)(vii) under CPL 2-0.124. His final decision did not affect OSHA’s ability to cite the subcontractor (All Phase Construction) for a scaffold standard violation.
OSHA has followed the ANSI A10.33 (Safety and Health Program Requirements for Multi-Employer Projects) for over 20 years as a template for “best practices” adjudication. It assigns direct and overall safety and health responsibilities for the scope of work to be performed to the general contractor (project constructor). ANSI recommends subcontractor assessment guidelines for the general contractor to follow, such as preferring actual worksite audits over self-reported injury rates, performance evaluations throughout each phase of construction to determine actual compliance to the site-specific Safety and Health Program.
However, despite this extensive history of ANSI reference, the ALJ’s ruling was subsequently overturned by the OSHRC’s Chairman Railton and Commissioner Thompson, who determined that 1910.12(a) legally prohibited OSHA from invoking CPL 2-0124 to cite a non-exposing employer for violation to a subpart of 1926. The vote passed, 2 to 1, with only commissioner Rogers dissenting. She claimed, “Where a general contractor exercises control over such a place of employment … it is reasonable to read the regulation as imposing on that controlling general contractor a duty to comply with the specific construction standard which applies to that place of employment.”
Although this was a brave, insightful commentary, the majority ruled and the case decision was overturned. Overturning the ALJ’s decision effectively obviated the agency’s mandate that the “controlling contractor” shall monitor its subcontractor’s safe work procedures or be held liable for supervisory neglect and be cited and fined accordingly. The prime contractor must, however, always be responsible for their own employees’ safety on the job under the OSHAct. This leaves the subcontractors on site to rely upon their own capacity to govern their workers’ safety and health without the checks and balances formerly afforded by a prime contractor. As a result, these construction sites may soon resemble Dodge City before Batt Masterson became sheriff. Most of the imposed hazard controls will be unverified by an oversight party sharing an equal responsibility under the law.
Many large construction projects have “umbrella” liability insurance policies regarding the entire scope of work and all employees on site. In such circumstances, insurance underwriters quickly flag any employers who have generated a relatively high Experience Modification Rate (EMR) based on the SIC code classification. If an employer’s EMR is 1.0, then employees for this contractor are just as likely to have an accident working for them as any other contractor in the same business. EMR of 1.25 means they’re 25 percent more likely to have an accident. EMR of 0.75 means they’re 25 percent less likely to have an accident. The EMR is generated by averaging accident claims from the past three years. The EMR is located in the front end of the workers compensation premium formula, which tends to have a greater magnification factor on the final cost than figures toward the end of the formula, such as number of hours worked out of a potential 2,000 per year. Prior to OSHRC’s challenge to CPL 2-0.124, most diligent “Controlling Employers” came to understand that taking up-front action to pre-qualify contractors who bid on their work tended to eliminate or reduce their site liabilities once construction began.
Accident rates both affect and are affected by insurance policies and practices. A prime contractor’s pre-qualification program may include items such as: reviewing their OSHA record or violations; reviewing their corporate safety and health programs for OSHA compliance and coordination with their own; requiring for a line-item for workplace safety in the bid form; rejecting any contractor’s bid with an EMR over 1.0; giving preference, regardless of their bid, to those contractors with the lowest EMRs (preferred bidder’s list). Under that ongoing compliance directive, controlling, exposing, creating and correcting employers all realized their continuing need to audit their ever-changing worksites for new existing and potential hazards every shift. In such cases, a primary duty of the employer’s designated competent person would be to inspect for and log every employer’s worksite acts and conditions within his project’s limit lines for potential hazards. The incentives of increased profits from few accidents may give way instead to increased profits created by the unchecked risk-taking behaviors construction workers are so well known for.
It is painfully obvious to anyone who has spent any time in construction that when the cat’s away, the mice will play. If the prime contractor has no legal, obligatory interest in overall site safety, then I have ten bucks that says their subcontractors will feel free and act accordingly. Most will not elect to spend valuable time and resources to protect workers who probably will not be injured in any case. They will inevitably take shortcuts around safe work procedures, saving substantial material, labor and equipment costs while risking the lives and health of their employees without any foreseeable penalty. After all, it’s only human nature to seek a profitable level of incompetence when no one’s looking. Unfortunately, my consulting files are full of such cases.
A Dangerous Decision
The Occupational Safety and Health Review Commission with jurisdiction over this matter has decided the final outcome of this case. I have faithfully described the sequential events and their resulting policies to the best of my ability. But now I would like to offer my own opinion about the situation.Given the hazardous nature of a multi-employer construction site, Mr. Welsch’s decision was an intelligent one. Simply put, it was the OSHRC’s decision to override the Administrative Law Judge that was an act of regulatory cowardice. That word does not intimidate me. For elected officials to ignore the safety of the common working men and women who elected them due to political and economic forces cannot be considered anything but cowardly.
It’s common knowledge on both sides of the aisle that certain lobbyists and special interest groups in Washington have made concerted policy moves to effect anti-labor changes in Congress. These parties have succeeded in reducing the percentage of funding available for area offices to conduct on-site inspections, even while OSHA’s budget has been increased annually. They have also reduced the capability of area offices to hire the necessary amount of COSH inspectors to adequately cover the large gross land areas they’ve been assigned to inspect and protect. The European Union, Canada and even Mexico have developed a more protective safety administration than the United States. I am not a lawyer, but I am authorized by the Department of Labor to train American workers in their workplace rights and the minimum laws of the land that govern their safety at work on a daily basis. I can show my trainees many examples of legislative cowardice when it comes to Occupational Safety and Health Administration standards. These are specific points of issue in Parts 1910 and 1926 of CFR 29 where, in my opinion, the Department of Labor has failed, by either omission or commission, to draw clear lines of authority or clarify decision-making criteria for those they hold responsible for compliance to their standards. As of April 2007, I can now offer them yet another example of similar administrative cowardice.
I can certainly understand the contributory legal issues that may have influenced this decision. As an OSHA/MSHA instructor and consultant, I also realize that one of the foremost opportunities for saving lives of construction workers has been ultimately sacrificed with the sanctioned permission of the OSHRC. I pose to my readers the following list of statements to make my case for regulatory cowardice:
- The construction industry possesses an unprecedented death rate and total with no real plateau in sight.
- By their very nature, during the course of any project, the majority of construction sites are occupied by multiple employers.
- The four root causes (falls, struck-by, caught-in/between, and electrocution) of most serious and/or fatal accidents on a construction site may be attributed directly or indirectly to the fact that construction sites and their hazards are in a continuous state of change.
- The more capability for hazard awareness and mitigation by multiple employers on an ever-changing construction site during any shift, the fewer workers who will become injured, ill or die.
- The overall authority on any construction site is the general (or prime) contractor, the employer who ultimately controls the project’s purse strings, manpower allocations and schedule.
- If our congressional representatives actually want to reduce injuries and fatalities in construction, then passing a labor law which ensure there is a party at the top of every contract pyramid who is ultimately responsible to “observe, act, and verify” safety issues on the part of all workers on site will accomplish this goal in a most effective and timely manner.
I do not believe that rescinding CPL 2-0.124 will further the functions of the OSHRC but will actually tend to promote serious erosion to the very foundation of the OSHAct. When enforced, this particular directive was the foremost tool for case officers to determine the real threat to workers on any site where multiple employers engaged in hazardous parallel tasks on site, with or without inter-party contracts. This enforcement tool was the first meaningful method for the agency mandated to prevent injuries and save lives on construction sites to get everyone involved on the same page. It just made sense to (1) separate all employees by their employers; (2) segregate all employers in obligatory tiers by following the money flow in their contracts; (3) clearly inform all contractors of their safety and health obligations to those below them in the pyramid; and (4) cite any employer who has not provided every employee contracted below him a type and place of employment free from all recognized hazards all of the time. Those who have contract stations above anyone else in the flow chart ultimately profit on the labor of all those working below them.
It is OSHA’s policy not to consider an OSHRC decision as a binding mandate if there is an appeal pending in a Federal Court. Currently there is an appeal on the Docket of the 8th Circuit Court of Appeals. In the meantime, the CPL 2-0.124 is still effective, although cases decided upon it may be later overturned. OSHA may be less likely to apply this directive until the matter is clearly resolved. There is also a reintroduced version of H.R.2004 on the agenda, which may also overturn the ALJ’s decision on Department of Labor v. Summit. A legislative upset could possibly amend the OSHAct, seriously affecting the minimum protection afforded by the Act to every worker in the United States since 1970. I do not believe that the OSHAct requires any amendments as it now stands. Before April 2007, Congress considered the prime contractor positioned at the pyramid’s apex, not only as the one making the majority of the available profits, but also as the one accepting responsibility for the lives and safety of all those who worked underneath the prime contractor to generate that profit. If this April 2007 decision stands, all of the profit for the prime contractor remains secure with none of the site safety responsibility and the cost of compliance, which inevitably equals 8 percent to 12 percent of most profit margins. As roofing contractors, you know when the wind picks up, you’d best hold onto your hat. Well, it’s getting windy. Keep you eyes open for the Circuit Court’s upcoming decision. Your workers’ job safety and your subcontracted liability may depend directly on the result.
