Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-01461/USCOURTS-caDC-97-01461-0/pdf.json

Parties Involved:
Alexis M. Herman
Petitioner
IBP, Inc.
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 1, 1998 Decided June 2, 1998

No. 97-1389

IBP, Inc.,

Petitioner/Cross-Respondent

v.

Alexis M. Herman, Secretary of Labor,

and

United States Department of Labor,

Respondents/Cross-Petitioners

Consolidated with

No. 97-1461

On Petitions for Review of an Order of the

Occupational Safety and Health Review Commission

Charles M. Chadd argued the cause for petitioner/crossrespondent, with whom Jerome K. Bowman and John J.

Vecchione were on the briefs.

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Bruce Justh, Assistant Counsel for Appellate Litigation,

United States Department of Labor, argued the cause for

respondents/cross-petitioners, with whom Joseph M. Woodward, Associate Solicitor, and Ann S. Rosenthal, Counsel,

were on the brief. Terri P. DeLeon, Counsel, entered an

appearance.

Arthur G. Sapper argued the cause for amici curiae National Association of Manufacturers, et al., with whom Stephen C. Yohay was on the brief.

Before: Edwards, Chief Judge, Silberman and Ginsburg,

Circuit Judges.

Opinion for the Court filed by Circuit Judge Silberman.

Silberman, Circuit Judge: IBP, Inc. petitions for review of

the Occupational Safety and Health Review Commission's

order holding it responsible for the failure of another employer's employees to comply with certain safety procedures. We

grant the petition for review and vacate the Commission's

order.

I.

IBP, Inc. (the Company) operates a meat processing plant

in Madison, Nebraska. In 1990, it hired DCS Sanitation

Management, Inc., an independent contractor, to clean the

plant's machinery after the close of production each day. To

guard against the unintended activation of dangerous machinery, the Secretary of Labor has promulgated "lockout/tagout"

(lockout) regulations under the Occupational Safety and

Health Act. 29 C.F.R. s 1910.147 (1997). The regulations,

inter alia, require employers to implement and enforce procedures by which employees cut machines off from their power

sources before performing maintenance on them. DCS had

its own lockout policy pursuant to those regulations, and was

also bound by contract to comply with the Company's lockout

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policy. All of the Company's machines were capable of being

locked out, and DCS employees were trained in the proper

procedures.

Three Company employees, a product control manager and

two inspectors, remained in the plant during the sanitation

process. According to the contract, the Company could "tag"

areas that did not meet its sanitation standards and DCS

would have to reclean them. During the course of their

quality control inspections, Company employees often saw

DCS employees violating lockout procedures. One product

control manager reported that "[o]n numerous occasions, I

observed DCS employees ... reaching into tables [and] conveyors that were running, using fat augers as ladders to crawl

up to the upper floors, riding on tables that were moving,

[and] jumping across tables that were moving." Company

employees often motioned to DCS employees to stop dangerous conduct, but DCS employees did not always take kindly

to such suggestions. A Company employee testified that

[o]ne time, when a DCS hourly was retrieving pieces of

fat from the boneless loin paste table[,] I told him to stop

what he was doing. He turned to me and said, "I don't

work for you. You can't tell me what to do."

....

... Another time, I told a DCS hourly employee to

stop what he was doing and he turned to me and said, "I

don't have to." And the third time that comes vividly to

my mind, a DCS hourly employee was using the fat

auger at the east end of the ham line complex as a ladder

to get to the upper floor.

I hollered at him to stop what he was doing. He

continued up the auger, turned and shouted obscenities

at me.

Company employees reported the lockout violations they

observed to DCS supervisors and sometimes to Company

supervisors as well. On one occasion, a DCS employee who

was recleaning a tagged area stuck his hand into a moving

belt after his supervisor turned his back. The Company

quality control inspector told the DCS supervisor and later

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reported the incident to Company management. In response,

the Company's Safety Director recommended that DCS review lockout procedures with its employees. Similarly, after

one of the three occasions when a DCS employee actually

caught his hand in a moving belt, the Company's Plant

Manager sought assurance that DCS would follow the lockout

program. But no Company employee ever tried to discipline

DCS employees for violations. When DCS' operations manager was asked what oversight, if any, the Company had over

lockout, the manager responded: "We're there to enforce

[lockout as to] our own employees."

In 1993, a DCS employee was killed when he removed

debris from a running loin saddle machine. The Secretary of

Labor cited both the Company and DCS for willfully failing to

enforce the lockout policy against DCS employees. Her claim

against the Company was that it could have controlled whether DCS employees complied with lockout procedures, by

suspending its contract with DCS if necessary. She stipulated to several key facts: that the hazard was the failure of

DCS hourly employees to follow lockout procedures, that no

Company employees created this hazard, that no Company

employees were exposed to it, and that DCS operated as an

independent contractor.

The ALJ vacated the citation against the Company, holding

that

[t]he sole indicia of control proven by the Secretary was

IBP's right to rescind its contract with DCS based on

DCS' safety violations. The Commission has never

found an employer/employee relationship, for purposes of

establishing liability under the Act[,] based solely on a

contracting entity's right to rescind its contract with an

independent contractor. This judge believes it would be

inappropriate to so extend liability under the Act.

IBP, Inc., OSHRC Docket No. 93-3059 (Apr. 7, 1995). The

Secretary sought review before the Occupational Safety and

Health Review Commission, which reversed the ALJ and

reinstated the citations. IBP, Inc., 17 O.S.H. Cas. (BNA)

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2073 (1997). In its decision, the Commission emphasized that

no employer/employee relationship is necessary to establish

liability under the Occupational Safety and Health Act. Under the Commission's "multi-employer doctrine," an employer

may be liable for hazards under its control even if none of its

own employees is exposed to the danger. The Commission,

like the Secretary, thought that the Company's right to cancel

its contract with DCS gave it control over the hazard.1 It

thus held the Company liable, but it did refuse to find the

violation willful.

Commissioner Montoya vigorously dissented, arguing that

the majority's decision "created a form of contractual indemnity that significantly expands the Commission's case law on

multi-employer liability." Id. at 2077 (dissenting opinion). In

her view, the Company's authority to cancel the DCS contract

could not establish "control" in any realistic sense of the

term. Prior Commission decisions had spoken of control

primarily in the context of the employer's ability to abate

physical hazards like defective machinery. She thought the

majority's reach to the Company particularly inexplicable

since DCS had been found liable in a separate proceeding and

was under a judicially enforceable order to enforce the lockout policy at the Madison plant. DCS Sanitation Management, Inc. v. OSHRC, 82 F.3d 812 (8th Cir. 1996).

II.

Petitioner argues that it cannot be held responsible for

DCS' employees. According to the Company, OSHA duties

are confined to the employment relationship and the multiemployer doctrine exceeds the Secretary's authority under

both the Occupational Safety and Health Act and its own

regulations. But even if the multi-employer doctrine is legiti-

__________

1 In finding control, the Commission relied on the Company's

ownership of the plant as well as its authority under the contract.

The Secretary does not defend the Commission's decision on the

property ground--which is understandable, since the Company's

ownership of the property does not add anything to its contractual

rights.

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mate, the Company contends that the Commission erred in

this case by concluding that the Company's authority to

cancel the DCS contract gave it "control" over the behavior of

DCS employees. The Secretary, on the other hand, asks us

not only to deny the petition, but also to reverse the Commission's conclusion that the Company did not act willfully. She

defends the multi-employer doctrine by asserting that both

the Act and implementing regulations are ambiguous and that

we must defer to her interpretation permitting liability outside the employment relationship. Although she does not

elaborate much on the point, she also insists that the Company had control of lockout enforcement.

Both parties, as well as amici curiae, devote considerable

effort to debating the legitimacy of the Secretary's multiemployer doctrine. The doctrine had its inception in the

construction industry, where numerous contractors and subcontractors mingle throughout a single work site. Craft

jurisdictional rules typically prevent specialists of one craft

from performing work in another craft--so a plumber, for

example, cannot remove exposed wiring even if his own

employees must step over it to lay pipe. To address this

problem, the Secretary of Labor began bringing enforcement

actions against the employer responsible for a particular

hazard, regardless of whether the employer's own employees

were exposed to the danger. The Secretary's theoretical

justification for this approach was based on her reading of 29

U.S.C. s 654(a) (1994), which sets out two obligations for

employers:

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;

(2) shall comply with occupational safety and health standards promulgated under this chapter.

The Secretary has repeatedly argued that subsection (a)(1)

creates a general duty running only to an employer's own

employees, while (a)(2) creates a specific duty to comply with

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standards for the good of all employees on a common work

site--the employer's own as well as anyone else's--that could

be endangered by a violation. See Anthony Crane Rental v.

Reich, 70 F.3d 1298, 1305-06 (D.C. Cir. 1995). But, as the

Company and amici point out in this case, the Act defines the

term "occupational safety and health standard" as one "reasonably necessary or appropriate to provide safe or healthful

employment and places of employment." 29 U.S.C. s 652(8)

(1994) (emphasis added). And it defines "employer" as "a

person engaged in a business affecting commerce who has

employees." 29 U.S.C. s 652(5) (1994) (emphasis added).

The Secretary's view has always been that because of the

Act's broad "remedial" purpose, these references to the employment relationship were not intended to be restrictive or

interpreted in the common law sense. But cf. Nationwide

Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-25 (1992) (rejecting the argument that the word "employee" in a statute

should be interpreted with an eye to the mischief to be

corrected in favor of the "well-established principle" that

Congress is presumed to use "employee" in the common-law,

master-servant sense). Yet she does not take her interpretation to its next logical step and argue that anyone who

happens to appear on a work site is covered so long as he is

an employee of someone. She interprets her own regulations,

which say that "[i]n the event a standard protects on its face

a class of persons larger than employees, the standard shall

be applicable under this part only to employees and their

employment and places of employment," 29 C.F.R.

s 1910.5(d) (1997), as distinguishing between workers on the

job and mere passers-by.

The Company and amici object to any form of the multiemployer doctrine, but they particularly object to it outside

the construction context, where they say there are no craft

jurisdictional rules to justify it. The Commission has sanctioned non-construction multi-employer liability in only one

other instance. Harvey Workover, Inc., 7 O.S.H. Cas. (BNA)

1687 (1979).2 There, the cited employer was engaged in

__________

2 Although the Secretary describes non-construction multiemployer liability as well-established, the cases that she cites to

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offshore drilling and hired a welder to repair a damaged

water jet line on its barge. Harvey Workover failed to check

the atmosphere inside a sealed compartment on the barge,

and the welder, as well as three of Harvey Workover's own

employees, fell unconscious from oxygen deficiency after entering it. Finding Harvey Workover liable, the Commission

said: "We no longer find the distinction between construction

sites and other worksites valid. The safety of all employees

can best be achieved if each employer at multi-employer

worksites has the duties to (1) abate hazardous conditions

under its control and (2) prevent its employees from creating

hazards." Id. at 1689. Thus, although that case could have

been decided on the basis of Harvey Workover's duty to its

own employees who entered the sealed compartment, it instead significantly extended the multi-employer principle.

Since the lockout violations in the Company's case took place

in a non-construction setting, the Commission relied on Harvey Workover to hold the Company liable.

We see tension between the Secretary's multi-employer

theory and the language of the statute and regulations, and

we have expressed doubt about its validity before.3 Anthony

__________

support this proposition are not on point. See Red Lobster Inns of

Am., Inc. 8 O.S.H. Cas. (BNA) 1762 (1980) (although the employer

was not in the construction industry, the violation occurred on a

construction site); Rockwell Int'l Corp., 17 O.S.H. Cas. (BNA) 1801

(1996) (addressing multi-employer defense available under

s 654(a)(1) rather than multi-employer liability under s 654(a)(2)).

3 The doctrine has somewhat of a checkered history. The first

time the Secretary cited an employer for exposing only another

employer's employees to danger, the Commission rejected the

citation as beyond his authority under the Act. Brennan v. Gilles

& Cotting, Inc., 504 F.2d 1255 (4th Cir. 1974). There, the Secretary

tried to hold a general contractor responsible when two employees

of its subcontractor were killed in a scaffolding collapse. The

Commission vacated the citation because the general contractor was

not the "employer" of the deceased employees. On review, the

Fourth Circuit reached the same result on regulatory grounds.

Focusing on 29 C.F.R. s 1910.5, the court held that the word

"employees" was ambiguous and the Commission's interpretation

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Crane Rental, 70 F.3d at 1306-07. But it is once again

unnecessary to decide that issue, because even under the

expansive Harvey Workover rule, the Secretary has to establish petitioner's control--and we agree essentially with Commissioner Montoya that the Secretary did not make that

showing.

Both the Company and the Secretary frame our review of

this issue as a "substantial evidence" question, surely because

the Occupational Safety and Health Act's judicial review

provision provides that "[t]he findings of the Commission with

respect to questions of fact, if supported by substantial

evidence on the record considered as a whole, shall be conclu-

__________

reasonable. (Insofar as the court deferred to the Commission's

interpretation of the regulation rather than the Secretary's, its

opinion has been overruled by Martin v. OSHRC, 499 U.S. 144

(1991).) The Second Circuit was far more receptive to the Secretary's theory. In Brennan v. OSHRC, 513 F.2d 1032 (2d Cir. 1975),

the Secretary cited a subcontractor for failing to install perimeter

guards and allowing material stored on upper floors to hang over

the edge. The Commission refused to sanction the liability because

none of the subcontractor's own employees was exposed to the

danger. The court, vacating the order, appeared to hold not only

that multi-employer liability was permissible, but that the Act

actually required it. Id. at 1038. After Brennan v. OSHRC, the

Commission changed its position and began endorsing the Secretary's efforts to impose multi-employer liability. Most circuits have

accepted multi-employer liability, at least in the construction context. See Teal v. DuPont de Nemours & Co., 728 F.2d 799 (6th Cir.

1984); Beatty Equip. Leasing, Inc. v. Secretary of Labor, 577 F.2d

534 (9th Cir. 1978); Marshall v. Knutson Constr. Co., 566 F.2d 596

(8th Cir. 1977). The Seventh Circuit has implicitly accepted multiemployer liability under s 654(a)(2), but has also held that a "multiemployer defense" exists under s 654(a)(1). Thus the employer is

not liable under the general duty clause when its own employees

are exposed to hazards beyond its reasonable control. AnningJohnson Co. v. OSHRC, 516 F.2d 1081 (7th Cir. 1975). Only the

Fifth Circuit has squarely rejected multi-employer liability, holding

that the s 654(a)(2) duty to comply with OSHA standards runs from

an employer only to his own employees. Melerine v. Avondale

Shipyards, Inc., 659 F.2d 706 (5th Cir. 1981).

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sive." 29 U.S.C. s 660(a) (1994). This provision, however,

neither restricts our review to questions of fact nor precludes

arbitrary and capricious review of Commission decisions.

While that section governs factfinding, Congress did not

intend to relieve the Commission of the reasoned decisionmaking requirement of the Administrative Procedure Act.

S.G. Loewendick & Sons, Inc. v. Reich, 70 F.3d 1291, 1294

(D.C. Cir. 1995); see also 5 U.S.C. s 706(2)(A) (1994). And

whether it is legitimate for the Commission to conclude that

the Company's ability to cancel the contract gives it "control"

over the hazard is more naturally and appropriately tested in

terms of reasonableness than in terms of evidentiary weight.

See Bangor Hydro-Electric Co. v. FERC, 78 F.3d 659, 663 n.3

(D.C. Cir. 1996). Of course, using reasonableness as the

analytic framework is a matter of conceptual ease rather than

substantive difference, for the substantial evidence standard

is no more than a specific application of arbitrary and capricious review. Association of Data Processing Serv. Orgs. v.

Board of Governors of the Fed. Reserve Sys., 745 F.2d 677,

681-86 (D.C. Cir. 1984). To be sure, we have said that the

statute's use of substantial evidence as the standard of review

for informal rulemaking (which does not have a testimonial

record) is so anomalous that Congress must have intended a

somewhat more searching review than we would perform

under the normal APA arbitrary and capricious standard.

AFL-CIO v. Marshall, 617 F.2d 636, 648-52 (D.C. Cir. 1979);

Industrial Union Dep't v. Hodgson, 499 F.2d 467, 472-76

(D.C. Cir. 1974); see also AFL-CIO v. OSHA, 965 F.2d 962,

970 (11th Cir. 1992). But we have never given that OSHA

judicial review standard any special significance in an adjudication. See Loewendick & Sons, 70 F.3d at 1294; Anthony

Crane Rental, 70 F.3d at 1302.

The clause at issue in the DCS contract provided:

IBP may terminate this Agreement without penally [sic]

upon not less than one week's notice to Contractor if

Contractor violates IBP's Contractor Safety Policy (a

copy of which is attached to this Agreement), or if

Contractor is cited for a repeat violation by OSHA or the

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State equivalent agency, or if Contractor's operations

result in a death or amputation injury.

The Commission thought this provision important because the

Company could have used it to pressure DCS to enforce

lockout precautions. Thus the Commission's theory is something like "control, once removed." The root hazard is, as the

Secretary stipulated before the ALJ, "the failure of DCS

employees to follow lockout/tagout," with the secondary, implicit hazard being "DCS' failure to supervise its own employees."

In her brief and at oral argument, the Secretary has simply

stated in a conclusory way that substantial evidence supports

the finding of control. But the problem is not that the

evidence did not add up to "control," it is that the Commission has redefined control in an irrational way to meet the

evidence. To reason that petitioner's general control over

DCS, because of its ability to terminate the contract, subsumes the power to discipline individual DCS employees is to

take the meaning of "control" to an unacceptably high level of

abstraction. The Company pointed out the safety violations

to DCS supervisors and management, which is the most it

could be expected to do. Cf. Red Lobster Inns of Am., Inc., 8

O.S.H. Cas. (BNA) 1762 (1980) (holding employer with "general supervisory authority" over a work site liable for failing

to correct a hazard, but this employer also did not even warn

subcontractors of the danger). To require it to cancel its

contract with DCS, potentially bringing plant operations to a

halt, is to employ a howitzer to hit a small target. It is

unclear what the Secretary hoped to accomplish by her

approach, since, as Commissioner Montoya emphasized, DCS,

the employer who could easily control its own employees'

disciplinary infractions, had already been held liable for the

same violation. The majority's decision, moreover, seems to

reduce general contractors' incentive to advance workplace

safety--rather than cracking down on safety through contract

termination, they would respond to it simply by eliminating

any reference to safety in subcontracts.

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Nor is there substantial evidence--under a normal understanding of "control"--to support the proposition that the

Company otherwise assumed the authority to enforce the

lockout program against DCS employees. The Secretary

notes that the Company reserved the right, in its "sole

discretion," to rescind any DCS employee's "IBP employee

ID card," an action that would effectively bar that employee

from the Madison plant. But this clause does not suggest

that the Company reserved the right to discipline DCS

employees. It could just as easily mean--and likely did--

that the Company wanted the authority to bar DCS employees when it thought that they posed a threat to the Company's own employees or facility. Moreover, the other provisions in the contract cut against the Secretary's position. It

stated that the "Contractor shall furnish the sole supervision

and control of such labor as is necessary to perform this

Agreement." (Emphasis added.) It also required DCS to

assume the responsibility for complying with OSHA standards and the Company's own lockout policy. Indeed, the

contract reflects the Company's disavowal of micromanagement.

The Company's lockout policy, which required the Company's managerial employees to enforce compliance "by all

personnel (management, hourly, and contractor)," using disciplinary action where warranted, gives slightly more support

to the Commission's conclusion. But, when compared with

the testimony of the Company and DCS employees, it is

hardly "substantial." Witnesses from both the Company and

DCS explained that they thought DCS retained sole disciplinary authority. A Company safety director said that, under

the lockout policy, the Company could discipline "DCS the

company"--by contract suspension--but had no authority

over DCS employees. The Secretary herself stipulated that

Company personnel believed they had no authority to suspend DCS employees from work. DCS management employees operated under the same understanding, testifying that

they were there to enforce safety rules as to their own

employees and that it was their responsibility to correct

safety problems. Moreover, the Company did not assume

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responsibility for safety control by sending three employees

to perform quality control during the sanitation process. Any

doubts about the Company's de facto relationship with DCS

are clarified by the way DCS employees rudely rebuffed the

Company's attempts to warn them--responses like "you can't

tell me what to do" hardly suggest that anyone perceived the

Company as the one in control.

Finally, the Secretary tries to find support in the language

of a 1991 settlement agreement she entered with the Company. Before the Company hired DCS to work at its plant, it

received an OSHA citation for a Company employee's failure

to lock out the same loin saddle machine at issue in this case.

The Company and the Secretary settled the citation, and a

provision of the agreement required the Company to "instruct

employees working on the loin saddle table that product may

not be retrieved from under said table except pursuant to the

lockout policy." Even assuming this clause is applicable here,

the Company satisfied it by providing DCS with a copy of its

lockout policy, notifying DCS supervisors when it observed

violations, and meeting with DCS management about the

importance of lockout safety. The agreement requires no

more.

* * *

The Company's petition for review is granted, the Commission's order vacated, and the citation dismissed.

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