In the Legal Corner of the March 2015 PPSA Quarterly Report, Eric Hobbs discussed a troubling decision of the U.S. Supreme Court known as Perez v. Mortgage Bankers Association (March 9, 2015) and hinted at the quagmire it might create for the regulated communi-ty. Fast forward three months to June 2015 and the regulated community finds itself quickly settling into the quicksand.
Prior to Perez, in a case known as Paralyzed Veterans, the U.S. Court of Appeals for the District of Columbia (the D.C. Circuit) had struck what seemed to be a reasonable balance between the authority of a regulatory agency to re-interpret the law and the regulated community’s need to minimize uncertainty. Paralyzed Veterans generally held that once a regulatory agency had established its interpre-tation of an ambiguous rule that it adopted through a public rulemaking, the agency could not materially change that interpretation except through another public rulmaking. There was also a line of related cases, based on the Supreme Court’s decision in Auer v. Robbins, holding that courts generally must defer to an agency’s reasonable interpretation of an ambiguous rule that it adopted through a public rulemaking.
Perez overruled Paralyzed Veterans as an erroneous interpretation of the Administrative Procedure Act, which allows agencies to issue and modify "interpretative rules," but not "legislative rules," without a rulemaking. Read together, the double whammy principles of Perez and Auer generally appear to permit a government agency (e.g., OSHA) to unilaterally change its interpretation of an ambiguous rule adopted by the agency through a public rulemaking, without further rulemaking, whenever the agency determines a different interpreta-tion would better achieve the goals of the underlying statute (e.g., the OSH Act), and the agency’s new interpretation is reasonable. This generally would appear to be the case even where the change is material, the regulated community relied on the prior interpretation, and the prior interpretation was in effect for a long period of time.
In Perez, the Court suggested that there may be extraordinary situations where detrimental reliance on an agency’s prior interpretation of a rule is so substantial that the agency’s new interpretation may be unreasonable. The Court also suggested that changing agency inter-pretations of a rule would be entitled to less deference than a longstanding interpretation. However, these limitations appear to fall far short of the due process protections contemplated by the U.S.Constitution, and that is the crux of the problem.
It was thought to be fundamental that a statute or rule which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application, violates the first essential of due process of law. Connally v. General Constr. Co. Under a proper application of that principle, an OSHA rule must give an employer fair warning of the conduct it prohibits or requires, and it must provide a reasonably clear standard of culpability to circumscribe the discretion of the enforcing authority and its agents. Dravo Corp. v. OSHRC. Unfortunately, the courts have bought into the products of the dysfunctional rulemaking process. Instead of sending the rule back to the issuing agency and mandating that it be written so that men of common in-telligence need not guess at its meaning, the courts have established principles that give the agencies almost every incentive to draft ambiguous rules that sidestep difficult issues and allow them to be continuously reinterpreted to impose requirements well beyond those contemplated at the time of the rulemaking.
In his March 2015 article, Eric Hobbs referred to an OSHA initiativethat some might reasonably refer to as the OSHA Noise Standard debacle. For many years, following adverse court decisions, OSHA had interpreted its noise standard to allow the use of personal hear-ing protection (rather than engineering or administrative controls) to reduce ambient noise exposures of not more than 100 dB (8-hr TWA) to the OSHA PEL or the lower hearing conservation limit. In January 2010, OSHA announced plans to withdraw this interpreta-tion. OSHA’s apparent position was that a rulemaking was not required to implement this change, but OSHA needed to provide fair no-tice to the regulated community.
The firestorm response from the regulated community reflected a determination that the retroactive changes that would have been required by OSHA’s re-interpretation of the noise rule would have been incredibly disruptive to ongoing operations, that the required engineering controls would have cost billions of dollars, and that many businesses would have closed or relocated overseas. How-ever, it was a bi-partisan letter from the chair and ranking member of the responsible committee in the U.S. Senate that led the De-partment of Labor to conclude this misadventure needed to be brought to a close.
In June of 2015, liberated from the constraints of Paralyzed Veterans by the Supreme Court’s decision in Perez, OSHA issued three enforcement guidance memoranda announcing three retroactive interpretations of OSHA Process Safety Management (PSM) Standard. The three memoranda address: (1) the scope of the "retail exemption" from coverage of the standard; (2) whether and how much of a mixture containing a "highly hazardous chemical" (HHC) is counted in determining whether a threshold quantity of the HHC is present for purposes of triggering PSM coverage; and (3) whether the covered process was designed in accordance with "recognized and generally accepted good engineering practices" (REGAGAP).
OSHA’s PSM Standard is the most complex and paper-intensive OSHA safety standard ever adopted by the agency. The effect of the first two memoranda was to significantly increase the number of processes and facilities subject to the PSM Standard on a ret-roactive basis, with no prior notice or opportunity for public input, and no phase-in period. Many of the newly-covered facilities had no prior experience with the OSHA PSM standard. It is likely that many employers designed their processes to operate with dilute concentrations of the HHCs so that, under the prior OSHA interpretation, the processes would not be subject to the PSM Standard.
OSHA’s RAGAGEP memorandum indicates that compliance with a national consensus safety standard would be viewed as a safe harbor for compliance with RAGAGEP with respect to the safety issues addressed by the national consensus standard. If OSHA had stopped there, the regulated community would have limited concerns with OSHA’s efforts to address this issue on a generic basis for purposes of administrative convenience. Unfortunately, the memorandum also appears to say that, if the employer does not comply with the applicable national consensus standard, the employer will be required to demonstrate that the engineering practices it implemented are at least as effective as the applicable national consensus standards. The practical effect of the third memorandum was to significantly increase the engineering design and operating requirements applicable to processes subject to the PSM Standard on a retroactive basis, with no prior notice or opportunity for public input, and no phase-in period. What is partic-ularly egregious about the third memorandum is that the initial PSM proposal would have incorporated all applicable national con-sensus safety standards into the PSM Standard. We filed comments in the initial rulemaking objecting to that approach on several grounds: (1) that OSHA had not identified those thousands of standards; (2) that none of those standards had been developed through the required OSHA rulemaking process; (3) that there was insufficient time to identify all of those standards and subject them to public comment through the OSHA rulemaking process; (4) that those standards were constantly being updated and it would be unlawful to incorporate the latest edition of each standard because they would not have been through an OSHA rulemak-ing; and (5) that national consensus standards were not adopted for purposes of use as mandatory government standards. In an extraordinary moment, shortly after we filed a third set of comments objecting to OSHA’s approach on this issue, Joanne Slattery, OSHA’s Project Officer for the OSHA PSM Standard, telephoned me and said "OSHA is putting up the white flag" on this issue. OSHA subsequently adopted the RAGAGEP approach. Given that history, the RAGAGEP memorandum appears to contradict OSHA’s resolution of this issue during the rulemaking.
All three of OSHA’s June 2015 PSM memoranda have been challenged in pending court proceedings. It is unclear how those cas-es will be resolved. Fundamental due process cries out for immediate relief for the regulated community rather than court decisions advising employers that they will have to wait for OSHA citation contests to challenge OSHA’s positions on these issues. It seems unconscionable to require employers to wait until they have been cited for alleged violations of the PSM Standard to challenge OSHA’s re-interpretations of the rule, to which the courts give deference, despite years of employer reliance on the prior interpreta-tions. Faced with this Hobbsian choice, employers may be forced to forego good faith challenges to OSHA re-interpretations of OSHA rules to avoid the risk of exposure to willful citations. In these circumstances, it is quite understandable that the regulated community would seek relief from Congress, which apparently delegated its legislative powers to the Federal regulatory agencies without adequate controls on their use.
One can only imagine how OSHA might interpret, and re-interpret, and further re-interpret, a rule prohibiting "any practice, policy or procedure that, in any way and to any degree, may be perceived as tending to discourage the reporting of a work-related injury or illness."