The United States Attorney's Office and the Occupational Safety and Health Administration (OSHA) recently announced that a federal grand jury indicted two corporate entities, as well as two corporate officers, for alleged criminal violations of OSHA regulations. The indictment resulted from an accident that resulted in the deaths of five workers at a Colorado plant.

According to the United States Department of Justice (DOJ), in October 2007, a welder entered a large drain water pipe called a penstock to conduct repairs while other employees sprayed an epoxy liner onto the inside of the penstock. The employees who were spraying epoxy liner had taken into the penstock with them methyl ethyl ketone (MEK), a common industrial solvent, to clean their application equipment. According to the DOJ, a fire erupted inside the penstock after an ignition source ignited vapors emanating from the MEK. The fire blocked the five employees from the only exit to the penstock, and the employees died of asphyxiation. In March 2008, OSHA proposed approximately $1 million in penalties for the accident ($845,100 against the corporation that employed the epoxy sprayers and $189,000 against the corporation that employed the welder).

On August 27, 2009, a federal grand jury charged the corporations with violations of OSHA regulations causing the death of the five employees. According to the indictment, the penstock was a permit-required confined space subject to OSHA's general industry confined space regulation and all of the defendants knew of the serious safety hazards to which the employees who worked inside the penstock were exposed. The alleged violations carry with them fines of $500,000 per count. The grand jury also indicted the President and Vice President of one of the corporations involved, both of whom were members of the corporation's Board of Directors. If convicted, both executives could face up to six months in prison and a fine of $250,000 per count, according to an announcement by the DOJ.

Criminal Penalties for OSHA Violations

The Occupational Safety and Health Act (OSH Act) provides for criminal penalties under certain circumstances. Section 17(e) of the OSH Act (Section 17(e)) states:

Any employer who willfully violates any standard, rule, or order promulgated pursuant to section 6 of this Act, or any regulations prescribed pursuant to this Act, and that violation caused death to any employee, shall, upon conviction, be punished by a fine of not more than $10,000 or by imprisonment for not more than six months, or by both; except that if the conviction is for a violation committed after a first conviction of such person, punishment shall be by a fine of not more than $20,000 or by imprisonment for not more than one year, or by both.

Section 17(e) applies to "employers." Courts have interpreted the term "employer" to include corporate officials and managers who exercise sufficient control over operations to be deemed employers. Courts have refused to permit the prosecution of supervisory employees, such as ordinary lead persons, who do not exercise sufficient control to be deemed an "employer."

To obtain a conviction under Section 17(e), the prosecutor must demonstrate that: (1) the employer willfully violated a specific OSHA standard, rule, order, or regulation; and (2) that the employer's violation caused the death of an employee.

Ramifications for Employers

As we reported in our July 2009 article titled "Increase in OSHA Regulatory Activity Expected," under the new Administration, OSHA has announced a number of new safety initiatives suggesting an uptick in regulatory actions and a more aggressive approach to enforcement activity. In April 2009, OSHA's Acting Assistant Secretary announced that he would be reviewing whether OSHA was referring to the DOJ all of its potential criminal cases for prosecution and how OSHA could best work with the DOJ in prosecuting such cases. The August 2009 criminal indictments in the penstock case are a clear indication that OSHA does intend to review and refer to the DOJ certain cases for criminal prosecution.

The August 2009 criminal indictments are being prosecuted under current law. With other OSHA initiatives on the horizon, the potential for scrutiny by OSHA and criminal prosecution is expected to increase in years to come. Employers may wish to take action now to conduct training, enforce safety requirements, or, if need be, create new safety policies and procedures that comply with the OSH Act. Understanding the increased risk of significant civil and criminal liability and taking proactive steps now to provide a safe workplace for employees should help reduce the potential for criminal and civil liability.