Why it matters

Employers may face civil fines under California’s false advertising and unfair competition laws even where violations of the federal Occupational Health and Safety Act (OSH Act) have occurred, the California Supreme Court recently ruled, holding the federal statute does not pre-empt the state laws. After an electric water heater intended for residential use was installed at Solus Industrial Innovations and exploded, killing two employees, the company was cited for five OSH Act violations. The district attorney of Orange County followed up with a lawsuit alleging violations of the false advertising and unfair competition statutes. Solus moved to dismiss, arguing that OSH Act pre-empted the state law claims. But in a unanimous opinion, the state’s highest court disagreed, reversing dismissal of the DA’s suit after concluding there was no implied or express pre-emption of the state law claims.

Detailed discussion

Solus Industrial Innovations operates a facility in Orange County that manufactures plastics. In 2007, the company installed at the facility an electric water heater that was designed for residential use. Two years later, it exploded and killed two employees.

The California Division of Occupational Safety and Health (Cal/OSHA) investigated and charged Solus in an administrative proceeding with five violations of state occupational safety and health regulations. Cal/OSHA also forwarded its investigation results to the district attorney of Orange County.

In 2012, the DA filed criminal charges against Solus’ plant manager and maintenance supervisor as well as a civil action against the company. The complaint alleged four causes of action all based on the same worker health and safety standards placed at issue in the administrative proceeding, seeking civil penalties under the state’s unfair competition law (UCL) and false advertising law (FAL).

Solus demurred on the ground that the causes of action were pre-empted by the federal OSH Act. A trial court disagreed, but an appellate panel reversed, concluding that the UCL and FAL claims were pre-empted by the federal statute.

But in a unanimous opinion, the California Supreme Court reversed. When there is a state plan for workplace safety and health violations approved by the federal Secretary of Labor, the federal act does not pre-empt UCL or FAL claims, the court decided.

The court began with a detailed analysis of the relevant federal and state laws. Under the federal OSH Act, the federal Secretary of Labor shall adopt standards for occupational safety and health, but federal law does not pre-empt state authority when there is no federal standard or there is a state plan for occupational safety and health that has been approved at the federal level, the court explained.

OSH Act was meant to supply a nationwide floor of protection for workers, and states may supply their own standards, the court said. Even where federal standards exist, a state may assume responsibility for developing and enforcing state standards, with the approval of the federal Secretary of Labor.

California’s Division of Occupational Safety and Health submitted a Cal/OSHA plan that was approved in 1973. There was no dispute that violations of the Cal/OSHA standards approved by the federal Secretary of Labor were the basis for the district attorney’s UCL and FAL claims, the court said.

Turning to the question of pre-emption, the court noted that in enacting the federal OSH Act, Congress entered a field that traditionally had been occupied by the states. As a result, the statute does not employ broad language pre-empting all state regulation, laws or remedies with regard to occupational safety and health.

Instead, the statute appears to have pre-empted a “narrow” field, the court found, given that no federal standard previously existed and that states are permitted to assume responsibility for development and enforcement provided they gain approval for the plan. Overall, the federal OSH Act “contemplates a cooperative system of workplace safety regulation, not an exclusively federal one,” the court wrote.

The UCL and FAL claims do not fall within this narrow field of pre-emption, as they are a means of enforcing the law claimed to have been violated, the court said, providing a remedy for economic damage suffered as a result of violations of a wide array of other laws.

“Furthermore, to the extent these claims may be considered an enforcement mechanism with respect to the state plan’s substantive standards, these claims merely supplement enforcement of state standards,” the court wrote. “Federal OSHA’s provisions related to the enforcement of state plans are concerned with ensuring enforcement that is at least as effective as the federal standards; nothing in the federal act suggests a concern with enforcement that exceeds federal requirements.”

Under the circumstances, “there is no ‘clear and manifest evidence’ of a congressional intent to displace state authority over unfair competition and consumer claims that are premised on Cal/OSHA standards,” the court said. “In the absence of a clear and manifest congressional purpose to preempt claims such as the UCL and FAL claims asserted in this action, such claims are encompassed in the presumption against preemption that arises upon a state’s assumption of responsibility under the federal OSH Act to regulate worker safety and health.”

The court reversed the judgment of the appellate panel and remanded the case to the trial court for further proceedings.

To read the opinion in Solus Industrial Innovations, LLC v. Superior Court of Orange County, click here.