United States: Employers Face Increased Risk Of OSHA Violations

Insights from the Solicitor of Labor's 2023 Enforcement Report

The Department of Labor recently published the Solicitor of Labor's (SOL) 2023 Enforcement Report, which provides insight into the Department's initiatives and enforcement priorities for 2024. This year's Enforcement Report shows that the Department and, specifically, the Occupational Safety and Health Administration (OSHA) will increasingly consider use of broader enforcement measures to hold employers (and individuals) accountable for workplace safety violations. This article outlines these potential measures and the pitfalls that employers should be wary of.

Historically, employers that violated workplace safety rules could expect to pay a fine for each violation. In 2024, the maximum penalties for OSHA violations increased by approximately 3.2%, from $15,625 to $16,131 per violation for serious and other-than-serious violations and from $156,259 to $161,323 for willful or repeated violations. However, the Enforcement Report outlines other approaches that OSHA can be expected to utilize to obtain relief beyond a mere fine—the use of corporate-wide compliance agreements and criminal and judicial enforcement coordination. The Report detailed one case in which it persuaded an administrative law judge to pierce the corporate veil, where the corporate form was allegedly being used to "stymie" the purpose of the OSH Act to hold the owner, who had vowed never to pay, individually liable for $1.5 million in penalties.

Use of Enhanced Compliance Agreements

The Report also describes OSHA's efforts in appropriate cases to seek enhanced commitments from employers to take a wide variety of steps to improve safety and avoid citations. Such steps can include agreements to form safety advisory groups with employee representation; enhance hazard identification and control programs; develop audit programs; create new employee training programs; hire safety professionals; establish 24-hour hotlines to receive safety complaints; establish tracking systems to ensure complaints are addressed; and attend quarterly meetings with OSHA to discuss progress toward systemic improvements.

Criminal and Judicial Enforcement Coordination

Although most employers are familiar with the civil penalties associated with alleged violations of the OSH Act, many are unaware of the prospect of criminal liability. Such liability may arise when an employee is killed as the result of an employer's willful violation of an OSHA standard or because an employer has lied to an OSHA inspector. OSHA and the SOL have announced that they will more aggressively employ criminal and other referrals as part of their enforcement scheme to better ensure workplace safety. For example, the Enforcement Report highlighted a case where, in May 2023, a roofing company and its owner entered into a settlement agreement with OSHA, to resolve numerous willful citations for failing to ensure employees used fall protection that the Agency issued in 2021 following a fatal fall of a worker from a roof. Moreover, in July 2023, the U.S. Attorney for the Southern District of New York charged the owner for willfully violating OSHA standards following a criminal referral from OSHA and SOL stemming from the alleged violations. If found liable for knowingly and willfully violating OSHA standards, the owner could face a maximum sentence of six months in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.

In another case in 2023, OSHA utilized the courts to ensure compliance. When a citation violation becomes final, the employer must both pay any penalty and correct the condition that constituted the violation. Failure to abate the violation can result in additional, daily penalties. In the case referenced, the employer failed to comply with the orders and abate his safety violations. OSHA and the SOL petitioned a U.S. Court of Appeals for enforcement, but the employer ignored those orders, too. OSHA and the SOL petitioned to have the owner held in contempt. When the owner failed to appear at a hearing, he was taken into custody. He was released only when he agreed to cease and desist all business operations until a compliance plan was entered.

Overall, these two cases are illustrative of OSHA's increased willingness to invoke judicial process to ensure compliance with its rules, particularly for repeat or recalcitrant offenders.

Piercing the Corporate Veil

Finally, in May 2023, after a series of inspections that resulted in 14 willful, 2 repeat, and 4 serious workplace safety violations, OSHA convinced an administrative law judge that the corporate veil should be pierced to hold the owner of a corporation individually liable for over $1.5 million in penalties. The administrative law judge that issued the order expansively concluded that because "the OSH Act places little importance on the organizational nature of an employer, it is appropriate to pierce the corporate veil to achieve the purpose of the OSH Act."

While piercing the corporate veil is an extraordinary step, the ALJ held that it was merited in this instance because, in addition to the purpose of the Act outlined above and the owner's failure to observe corporate formalities,¹ the owner's conduct demonstrated he had no intention of complying with OSHA's requirements or paying the related penalties. For example, the owner repeatedly ignored citations, threatened to dissolve the corporation or change the name to avoid debt collection, and even told an OSHA Compliance Officer that "you can suck a** I'm not paying any penalties." This, according to the ALJ, showed fraudulent intent.²

Although the examples proffered in the Report may be extraordinary, they reflect a new, more aggressive mentality toward safety infractions. Consequently, employers can expect that if OSHA becomes aware that the employer will attempt to evade corporate responsibility or seek ways to circumvent worker safety, OSHA can be expected to look for ways to frustrate that effort, including opportunities to pierce the corporate protections to render the corporate officers involved personally liable. This means that employers have an additional incentive to properly comply with corporate formalities.

The fact that these four cases were illustrated in the 2023 Enforcement Report is a strong indicator that OSHA intends to continue using these creative enforcement mechanisms. Consequently, employers should exercise additional caution to ensure that they are complying with workplace safety standards in the year ahead.

Footnotes

1. The factors for piercing the corporate veil vary across jurisdictions but typically start with a fact-intensive inquiry into whether corporate formalities were observed. This may include an examination of routine business practices, corporate accounts, corporate filings, tax filings, applications to the state workers' compensation board, personal and real property ownership, billing invoices, and payroll records. In this case, the ALJ determined that, because the owner used certain names interchangeably across applications, invoices, and advertising, there was a disregard of the corporate form. This, coupled with the use of personal property for routine business activities, was enough to convince the ALJ that the corporate veil afforded no protection to the owner.

2. Significantly, the ALJ noted that while the defendant's actions were enough to demonstrate fraud, such a showing was not necessary to pierce the corporate veil because "manipulation of the corporate form to circumvent a federal regulatory scheme is sufficiently blameworthy to constitute fraudulent intent."

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