DECISION AND ORDER
Before: ROGERS, Chairman; THOMPSON and ATTWOOD, Commissioners.
BY THE COMMISSION:
Sharon & Walter Construction, Inc. (“S&W II”) is a contractor that provides a variety of
construction services, such as roofing, masonry, and painting. At an S&W II worksite located in
Pittsfield, New Hampshire, two workers were installing a metal roof on a town maintenance
building without using fall protection, and one of the workers was injured when he fell off the
roof. Following an inspection of the worksite, the Occupational Safety and Health
Administration (“OSHA”) issued two citations to S&W II under the Occupational Safety and
Health Act of 1970 (“Act” or “OSH Act”), 29 U.S.C. §§ 651-678, one alleging a willful
violation of 29 C.F.R. § 1926.501(b)(11) and the other a repeat violation of 29 C.F.R.
§ 1926.503(a)(2). OSHA based the alleged repeat violation on previous violations of the same
or equivalent standard by Walter Jensen d/b/a S&W Construction (“S&W I”).
After a hearing, the late Administrative Law Judge Michael H. Schoenfeld affirmed the
merits and characterization of both citations and assessed the amended proposed penalties of
$7,000 for willful Citation 1, Item 1, and $3,750 for repeat Citation 2, Item 1.
For the reasons
that follow, we affirm the judge.
S&W II was incorporated in New Hampshire on July 12, 1995, by Walter Jensen, who is
the corporation’s president, director, and solitary shareholder. Jensen was previously the sole
proprietor of S&W I, which filed for bankruptcy on August 16, 1994, and ceased operations
approximately six weeks prior to the formation of S&W II. S&W I was also based in New
Hampshire and provided essentially the same construction services as S&W II.
OSHA inspected the Pittsfield worksite on April 20, 2000, the day of the accident, and
issued S&W II two citations—one alleging a willful violation of 29 C.F.R. § 1926.501(b)(11) for
its failure to provide fall protection for the two workers on the roof, and the other alleging a
repeat violation of 29 C.F.R. § 1926.503(a)(2) for its failure to provide the two workers with fall
protection training. In the repeat citation, OSHA noted that S&W I had been previously cited
twice for failing to provide fall protection training under § 1926.503(a)(2) or its equivalent
standard, and those citations became final orders on May 19, 1992, and May 13, 1998.
In affirming both of the violations at issue here, the judge rejected S&W II’s claim that
the two workers at the Pittsfield worksite were independent contractors rather than employees
and, therefore, S&W II was not responsible for their safety. The judge also rejected S&W II’s
contention that it cannot be charged with a repeat citation based on the previous violations of
S&W I. On review, S&W II challenges the judge’s findings on both of these issues, as well as
his decision to affirm the citation items and characterize the fall protection violation as willful.
I. Pending Motions
Before turning to the merits of S&W II’s claims on review, we first dispose of two
pending motions—the Secretary’s motion seeking an extension of time to file her brief before
the Commission and S&W II’s motion to strike the Secretary’s brief as late. For the following
reasons, we grant the Secretary’s motion and deny S&W II’s motion.
The Secretary’s brief to the Commission was due to be filed on December 31, 2001. See
Commission Rule 93(b)(1), 29 C.F.R. § 2200.93(b)(1) (briefs of other parties due 30 days after
the first brief is served); Commission Rule 4, 29 C.F.R. § 2200.4 (“Computation of time.”).
Under Commission Rule 93(c), a party must file a motion seeking an extension of time for filing
its brief no later than three days prior to the brief’s due date. 29 C.F.R. § 2200.93(c). Therefore,
the Secretary’s motion here was due by December 26, 2001. See Commission Rule 4(a), 29
C.F.R. § 2200.4(a) (when computing a time period less than 11 days, the intervening Saturdays
and Sundays shall be excluded). The Secretary, however, filed her motion one day late on
December 27, 2001, due in part to the illness of the Secretary’s Counsel. In its motion to strike
the Secretary’s brief—which she filed on January 4, 2002—S&W II does not argue that the
Secretary’s delay in filing her motion or the lateness of her brief prejudiced its case. Moreover,
S&W II failed to object to the Secretary’s motion within 10 days of its service on the company.
See Commission Rule 40(c), 29 C.F.R. § 2200.40(c) (ten-day period for filing a response to a
Under these circumstances, we find that the Secretary has shown good cause for
enlarging the time period for filing a motion for an extension of time. Commission Rule 5, 29
C.F.R. § 2200.5 (Commission may, for good cause shown, enlarge any time period prescribed by
its rules). Because S&W II has not alleged that it suffered prejudice or refuted the Secretary’s
showing of good cause, we grant the Secretary’s motion seeking an extension of time for filing
her brief and deny S&W II’s motion to strike.
II. Employment Status of Pittsfield Workers
The judge rejected S&W II’s contention that the two Pittsfield workers “were
independent contractors, and that it therefore had no employees exposed to the alleged
violation.” In determining whether the Secretary has established that a cited entity is the
employer of the particular workers at issue, the Commission relies upon the test set forth in
Nationwide Mutual Insurance Company v. Darden, 503 U.S. 318 (1992). See Allstate Painting
and Contracting Co., Inc., 21 BNA OSHC 1033, 1035, 2005 CCH OSHD ¶ 32,804, p. 52,506
(No. 97-1631, 2005) (consolidated) (noting that Commission relies on Darden test to determine
whether Secretary has met her burden to establish employment relationship). In Darden, the
Court focused primarily on the extent of “the hiring party’s right to control the manner and
means by which the product [was] accomplished.” Darden, 503 U.S. at 323. Factors relevant to
that inquiry include:
the skill required [for the job]; the source of the instrumentalities and tools; the
location of the work; the duration of the relationship between the parties; whether
the hiring party has the right to assign additional projects to the hired party; the
extent of the hired party’s discretion over when and how long to work, the
method of payment; the hired party’s role in hiring and paying assistants; whether
the work is part of the regular business of the hiring party; whether the hiring
party is in business; [and] the provision of employee benefits and the tax
treatment of the hired party.
Darden, 503 U.S. at 323-324 (citation omitted).
On review, S&W II argues that the injured worker (“worker A”) was an independent
contractor; it has abandoned any such claim as to the other worker (“worker B”). Thus, S&W II
does not dispute on review that it had at least one employee exposed to the cited conditions at
issue under the alleged violations. Moreover, in light of the extensive record evidence
establishing S&W II’s control over worker A, we agree with the judge that he was also an
employee of S&W II and reject the company’s claim that he was an independent contractor.
Indeed, Jensen set worker A’s hours and assigned him jobs each morning. Worker A was not
free to leave if he completed a job early, but had to return to S&W II headquarters for another
job assignment or to perform maintenance work. While working for S&W II, he testified, he did
not work for other employers and did not think he was free to solicit other employment.
Although he did various types of work for S&W II, he did not have separate contracts for
different work assignments; Jensen simply gave him assignments each morning. Except for the
liability policy he purchased at Jensen’s insistence, he incurred no expenses during his work for
S&W II. In fact, he brought no equipment to S&W II jobs other than a tool belt, was reimbursed
by Jensen when he had to purchase materials such as screws and nails, drove an S&W II vehicle
to worksites, and used an S&W II charge card to buy fuel for that vehicle. Worker A also
testified that, at Jensen’s direction, he hired worker B from a temporary agency to help him with
the Pittsfield roofing job. It is undisputed that worker A paid worker B a daily wage of $75 with
money Jensen provided worker A for that very purpose.
S&W II disputes that it controlled the manner in which worker A performed roofing
work at the Pittsfield worksite and also contends that: (1) worker A signed a subcontractor
disclaimer form and told emergency room personnel that he was a subcontractor; (2) S&W II
paid him as if he were a subcontractor—it did not withhold federal income and social security
taxes and provided him with a 1099 form instead of a W-2 at the end of the year; and (3) S&W
II’s relationship with him was consistent with the relationships it maintained with other
subcontractors. These contentions do not support a finding that worker A was an independent
contractor. Given the specific evidence to the contrary recited above, S&W II’s assertion that it
lacked control over the manner in which worker A installed the roof lacks merit. See Allstate, 21
BNA at 1035, 2005 CCH at 52,506 (“although no single factor under Darden is determinative,
the primary focus is whether the putative employer controls the workers”). And even though
worker A signed a subcontractor disclaimer form, his testimony shows that he was only driven to
do so by Jensen’s threat to withhold his weekly pay. That he did not sign the form until four
days after S&W II hired him supports this determination.
We further find that S&W II’s failure to withhold federal income and social security
taxes was simply an attempt to hide worker A’s true status, not a bona fide reflection of an
authentic independent contractor relationship. In fact, S&W II issued checks to worker A in his
own name rather than in the company name listed on the liability policy Jensen required worker
A to obtain. Finally, testimony from two S&W II workers who Jensen claims served the
company as independent contractors shows that S&W II maintained a very different relationship
with them than it did with the Pittsfield workers. Indeed, unlike the two Pittsfield workers, these
workers testified that they used their own equipment, kept their own hours, and incurred a
potential for loss to their respective businesses.
For all of these reasons, we conclude that the two workers at the Pittsfield worksite were
both employees of S&W II.
III. Willful Citation 1, Item 1
Under this item, the Secretary alleged a violation of 29 C.F.R. § 1926.501(b)(11), which
requires the use of fall protection for employees on a steep roof with unprotected edges.
S&W II does not dispute that fall protection was required on the roof at the Pittsfield worksite
and that neither of the workers used such protection on two separate days before the accident and
the day of the accident.
In addition, Jensen admitted that he saw worker A on the roof without a
safety harness on the morning of the accident. Under these circumstances, we conclude that the
Secretary has established a violation of the cited provision. See Gary Concrete Prods., Inc., 15
BNA OSHC 1051, 1052, 1991-93 CCH OSHD ¶ 29,344, p. 39,449 (No. 86-1087, 1991) (noting
that Secretary’s burden includes establishing that standard applies, employer failed to comply
with standard’s requirements, and employer had actual or constructive knowledge of violative
condition); see also A.P. O’Horo Co. 14 BNA OSHC 2004, 2007, 1991 CCH OSHD ¶ 29,223,
pp. 39,128-29 (No. 85-369, 1991) (imputing actual knowledge of supervisory employee to
The judge affirmed this violation as willful. S&W II argues that the fall protection
violation should not be classified as willful because (1) it had a good faith belief that worker A
was an independent contractor, not its employee, and (2) Jensen made a good faith attempt to
comply with the standard by instructing worker A to put on a harness after observing him on the
roof without fall protection. We disagree.
“The hallmark of a willful violation is the employer’s state of mind at the time of the
violation—an ‘intentional, knowing, or voluntary disregard for the requirements of the Act or . .
. plain indifference to employee safety.’ ” Kaspar Wire Works, Inc., 18 BNA OSHC 2178,
2181, 2000 CCH OSHD ¶ 32,134, p. 48,406 (citation omitted), aff’d, 268 F.3d 1123 (D.C. Cir.
[I]t is not enough for the Secretary to show that an employer was aware of
conduct or conditions constituting the alleged violation; such evidence is already
necessary to establish any violation . . . . A willful violation is differentiated by
heightened awareness of the illegality of the conduct or conditions and by a state
of mind of conscious disregard or plain indifference . . . .
Hern Iron Works, Inc., 16 BNA OSHC 1206, 1214, 1993-95 CCH OSHD ¶ 30,046, pp. 41,256-57 (No. 89-433, 1993). “[A]n employer’s prior history of violations, its awareness of the
requirements of the standards, and its knowledge of the existence of violative conditions are all
relevant considerations in determining whether a violation is willful in nature.” MJP Constr.
Co., 19 BNA OSHC 1638, 1648, 2001 CCH OSHD ¶ 32,484, p. 50,307 (No. 98-0502, 2001),
aff’d without published opinion, 56 F. App’x 1 (D.C. Cir. 2003).
Here, Jensen’s two companies had collectively received a total of four prior citations for
violations of § 1926.501(b)(1l) or its equivalent standard. And the compliance officer who
conducted the May 1995 inspection testified that he personally explained the fall protection
standard to Jensen. Under these circumstances, we find that S&W II, through Jensen, had a
heightened awareness of the violative condition and the requirements of the cited standard. See
MJP Constr. Co., 19 BNA OSHC at 1648, 2001 CCH OSHD at p. 50,307 (finding supervisor
knew of standard’s requirements based in part on his experience with another employer at a prior
worksite). Despite this heightened awareness, Jensen knowingly allowed worker A to remain on
the roof without fall protection on the day of the accident. MVM Contracting Corp., 23 BNA
OSHC 1164, 1167, 2010 CCH OSHD ¶ 33,073 (No. 07-1350, 2010) (finding conscious
disregard based on superintendent’s failure to order workers out of unprotected trench despite
heightened awareness of standard’s requirements).
In addition, Jensen testified that he instructed worker A to use fall protection, which
worker A denied. We find that even if Jensen did issue such an instruction, it was patently
inadequate to establish the requisite good faith effort to comply with the cited standard that
would obviate willfulness. Caterpillar Inc., 17 BNA OSHC 1731, 1733, 1995-97 CCH OSHD
¶ 31,134, p. 43,483 (No. 93-373, 1996) (finding employer “not spared from a willfulness finding
by employing abatement procedures that were patently inadequate”), aff’d, 122 F.3d 437 (7th
Cir. 1997). Even assuming the veracity of Jensen’s statement, this single instruction was the
sum total of Jensen’s attempt to require the use of fall protection for this individual, who was
working on a steeply-sloped metal roof that the evidence shows was still slippery from the prior
day’s rainfall. Moreover, taking Jensen at his word, when worker A resisted using fall
protection, Jensen told him, “if you don’t put on your safety harness, you’re going to break your
neck” but “[i]t’s your life.” Then, according to Jensen, he simply walked away from worker A
upon observing that his instruction went unheeded. In these circumstances, we find that Jensen’s
conduct is evidence of a willful state of mind rather than a good faith attempt at compliance.
Aviation Constructors, Inc., 18 BNA OSHC 1917, 1922, 1999 CCH OSHD ¶ 31,933, p. 47,379
(No. 96-0593, 1999) (finding efforts to comply with the cited standard inadequate to negate
willfulness); Caterpillar, 17 BNA OSHC at 1733, 1995-97 CCH OSHD at p. 43,483.
Finally, we agree with the judge that S&W II lacked a good faith belief that worker A
was an independent contractor. As the judge correctly found, Jensen is “not  an
unsophisticated businessman” and he “knew very well how to create a true independent
contractor relationship,” as evidenced by his dealings with the two other workers called as
witnesses below by S&W II. And we have no cause to disturb the judge’s demeanor-based
credibility finding that Jensen responded evasively to questions from the Secretary’s attorney at
the hearing regarding the basis for Jensen’s claim that worker A was an independent contractor.
Inland Steel Co., 12 BNA OSHC 1968, 1978, 1986-1987 CCH OSHD ¶ 27,647, p. 36,005 (No.
79-3286, 1986) (noting that Commission normally “accept[s] the administrative law judge’s
evaluation of the credibility of witnesses because it is the judge who has lived with the case,
heard the witnesses and observed their demeanor.”) Accordingly, we affirm this violation as
IV. Repeat Citation 2, Item 1
Under this item, the Secretary alleged a violation of 29 C.F.R. § 1926.503(a)(2), which
requires an employer to provide its employees with fall protection training.
S&W II does not
dispute that the requisite training was not provided, but maintains that no such training was
necessary because none of its “employees” performed roofing work. Indeed, Jensen admitted
that he provided no roof safety training to anyone during the year before or the year after the
citation here was issued. Based on our finding that both of the exposed workers were employees
of S&W II and not independent contractors, Jensen’s admission that he provided no training
supports affirming a violation. See Gary Concrete, 15 BNA OSHC at 1052, 1991-93 CCH at p.
39,449; A.P. O’Horo, 14 BNA OSHC at 2007, 1991 CCH OSHD at pp. 39,128-9. Moreover,
even though Jensen claimed that worker A had received fall protection training during his prior
employment with S&W II between 1996 and 1998, S&W II provided no evidence that such
training ever occurred. See 29 C.F.R. § 1926.503(b) (requiring documentation of training under
the cited provision). And worker B’s testimony—that he was never provided fall protection
training—is unrebutted and consistent with the compliance officer’s testimony that both workers
lacked sufficient knowledge to demonstrate that they had been trained in personal fall arrest
systems, guard rail systems, and safety net systems. Under these circumstances, we conclude
that the Secretary has established a violation of the cited provision.
In determining whether this violation is properly characterized as repeated under section
17(a) of the Act, the Commission is faced with an issue of first impression: whether a change in
an employer’s legal identity precludes attributing the violation history of its earlier
(“predecessor”) form to a new (“successor”) form.
For the reasons set forth below, we find that
although S&W I and S&W II have distinct legal identities, the Secretary’s application of a repeat
characterization here is permissible based on S&W II’s nexus with S&W I’s violation history.
Section 17(a) provides for enhanced penalties against “[a]ny employer who . . .
repeatedly violates the . . . Act.” 29 U.S.C. § 666(a). This phrase, however, is not defined in the
statute. Dun-Par Engineered Form Co. v. Marshall, 676 F.2d 1333, 1336-37 (10th Cir. 1982);
P. Gioioso & Sons Inc. v. Sec’y of Labor, 115 F.3d 100, 103 n.2 (1st Cir. 1997). Thus, the first
step in our analysis is to determine whether the language at issue has a plain meaning with
regard to the particular dispute before us, or whether it is ambiguous. Robinson v. Shell Oil Co.,
519 U.S. 337, 340 (1997). The “plainness or ambiguity of statutory language is determined by
reference to the language itself, the specific context in which that language is used, and the
broader context of the statute as a whole.” Id. at 341. Here, we find no language in the statute
that would compel restricting attribution of an employer’s violation history to the identical legal
entity, nor do we find anything that would preclude attribution of a predecessor’s citation history
to a successor. In these circumstances, we find that this language is ambiguous. Id. at 345
(finding statute ambiguous as to whether its protections cover former employees in the absence
of any temporal qualifier).
In resolving this ambiguity, we look to the context and purpose of the Act as a whole,
and the particular provision at issue. Id. at 346 (adopting interpretation of ambiguous term that
was “more consistent with the broader context of [the statute] and the primary purpose of [the
particular provision]”); see also Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 99-100
(1992) (interpreting OSH Act State-plan provision by “[l]ooking to ‘the provisions of the whole
law, and to its object and policy,’” and holding state regulation at issue was pre-empted “as in
conflict with the full purposes and objectives of the OSH Act”) (citations omitted)). The stated
purpose for the adoption of the Act was “to assure so far as possible every working man and
woman in the Nation safe and healthful working conditions and to preserve our human
resources.” 29 U.S.C. § 651(b); Gade, 505 U.S. at 96. And the statute’s broad preventive and
remedial intent has been specifically recognized by the Supreme Court. Whirlpool Corp. v.
Marshall, 445 U.S. 1, 10-11 (1990). Indeed, the Court held that the Act “is to be liberally
construed to effectuate the congressional purpose.” Whirlpool, 445 U.S. at 13. In addition, the
penalty provisions of the Act specifically reflect Congress’s intent to separate out certain
conduct as deserving of higher penalties. This enforcement framework creates a deterrent to an
employer that might otherwise ignore potential hazards before the Secretary inspects its
workplace and an enhanced deterrent against subsequent infractions “once alerted by a citation
and final order.” Dun-Par, 676 F.2d 1333, 1337. “The system of penalties contained in
[section] 17 allows for increased fines when the need arises to provide an employer with added
incentive” to comply with the requirements of the Act. George Hyman Const. Co. v.
Occupational Safety and Health Review Comm'n, 582 F.2d 834, 841 (4th Cir. 1978). The threat
of a repeat characterization, therefore, was designed to deter an employer from committing
violations primarily by creating the potential that a future violation’s penalty will be
significantly greater. Id.; Dun-Par, 676 F.2d at 1337.
Given these considerations, we conclude that the statutory language in section 17(a) is
most reasonably read to permit, in appropriate circumstances, the Secretary’s application of a
“repeat” characterization to cases where the cited employer has altered its legal identity from
that of the predecessor employer whose citation history forms the basis of that characterization.
Such an interpretation is not only consistent with the Act’s purpose, but also ensures the
effectiveness of its enforcement scheme. Whirlpool, 445 U.S. at 13. In contrast, were we to
restrict a repeat characterization to the legally identical employing entity, a construction
employer, for example, could successfully avoid a repeat characterization for future violations
by simply changing its legal identity for each new project. As the Commission has previously
recognized in a similar context, to allow the cessation of a cited employer’s operation to
immunize that employer from a prior citation and penalty “could ‘creat[e] an economic incentive
to avoid a penalty by going out of business and, perhaps, then reincorporating under a different
name.’” Joel Yandell, 18 BNA OSHC 1623, 1625 (No. 94-3080, 1999) (quoting Reich v.
OSHRC (Jacksonville Shipyards, Inc.), 102 F. 3d 1200, 1203 (11th Cir. 1997)); cf. Dessarrollos
Metropolitanos, Inc. v. OSHRC, 551 F.2d 874, 876 (1st Cir. 1977) (rejecting constitutional
challenge to Secretary’s repeat citation policy that limits fixed-establishment history to same
establishment, but permits attribution of such history to multiple establishments of employer
with floating work sites, noting that “[a] company with floating work sites will have little
incentive to ensure full compliance with safety standards at each new job site from the outset if it
has one almost free bite at the apple at each such site”). This same logic applies here. Thus, to
preserve the very purpose of a repeat characterization, the language of section 17(a) is most
reasonably interpreted to allow attribution of a predecessor’s citation history to a successor in
We now turn to consideration of the circumstances under which a predecessor’s citation
history may be attributed to a cited successor employer. Our analysis of this question is
informed by how, in cases arising under other federal employment statutes, courts have
determined the existence of such a link for the purpose of holding a successor entity liable for
the obligations of a predecessor. The Secretary asks that we resolve this inquiry by applying a
long-standing multi-factor test used by the National Labor Relations Board (“NLRB”) and the
courts to determine when, under the National Labor Relations Act (“NLRA”), a successor entity
must satisfy the obligations of a predecessor.
See, e.g., Nat’l Labor Relations Bd. v. Burns, 406
U.S. 272, 280-281 (1972); John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 550-52 (1964).
As the Supreme Court observed, the focus of the NLRB test is on whether there is “substantial
continuity” between the two enterprises. Fall River Dyeing & Finishing Corp. v. Nat’l Labor
Relations Bd., 482 U.S. 27, 43 (1987). The factors the NLRB considers to determine
“substantial continuity” include: “whether the business of both employers is essentially the
same; whether the employees of the new company are doing the same jobs in the same working
conditions under the same supervisors; and whether the new entity has the same production
process, produces the same products, and basically has the same body of customers.” Fall River,
482 U.S. at 43. Though originating under the NLRA, this test has also been applied to
successor-related issues arising under a number of other federal employment statutes. See, e.g.,
EEOC v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086, 1094 (6th Cir. 1974) (applying
substantial continuity test to dispute under Title VII of the Civil Right Act of 1964 (“Title
VII”)); Prince v. Kids Ark Learning Ctr., LLC, No. 09-2365, 2010 WL 3767554 (8th Cir. Sept.
29, 2010) (same); Sec’y v. Mullins, 888 F.3d 1448 (D.C. Cir. 1989) (upholding application of the
substantial continuity test to discriminatory discharge case arising under the Mine Safety and
Health Act); Terco v. FMSHRC, 839 F.2d 236 (6th Cir. 1987) (same); Cobb v. Contract
Transport, Inc., 452 F.3d 543 (6th Cir. 2006) (applying substantial continuity multi-factor test
under Family and Medical Leave Act).
Based on our review of relevant caselaw, we agree with the Secretary that an application
of the substantial continuity test for the purposes of determining S&W II’s violation history
promotes the Act’s goals of ensuring workplace health and safety by preserving the deterrent
effect of a repeat characterization, and is appropriately adapted to a determination of the
requisite nexus between a successor and a predecessor’s violation history for purposes of
ascribing a repeat characterization under the OSH Act.
Dun-Par, 676 F.2d at 1337; see also
Hackensack Steel Corp., 20 BNA OSHC 1387, 1395, 2002 CCH OSHD ¶ 32,690, p. 51,560 (No.
97-0755, 2003) (noting that higher penalties induce future compliance with Act’s requirements).
Specifically, this test enables us to fully assess the nature and extent of the distinctions and
similarities between a successor and predecessor based on criteria that are well-suited to the
OSH Act and the facts of each case before us. Howard Johnson Co., Inc. v. Detroit Local Joint
Bd., Hotel and Rest. Employees, 417 U.S. 249, 263 n.9 (1974) (noting “successorship” cases
require an analysis based on “the facts of each case and the particular legal obligation which is at
issue[;] . . . [t]here is, and can be, no single definition of ‘successor’ which is applicable in every
legal context”). That assessment, in turn, provides a sound basis for determining if there is a
sufficient nexus between the predecessor’s history and the successor such that the one is
attributable to the other.
We view the substantial continuity test formulated by the NLRB as focusing on factors
that essentially fall into three categories. The first category—the nature of the business—is
appropriate for our purposes here because continuity in the type of business, products/services
offered and customers served indicates that there has been no substantive change in the
enterprise. Such continuity also typically indicates that the nature of the activities associated
with the business and the inherent safety and health considerations are likewise unchanged.
Applying these factors here, we find that the business of S&W II is essentially the same as that
of S&W I. S&W II does the same type of work as S&W I—roofing and other general
construction services—and began operation only six weeks after S&W I ceased operations.
After incorporating S&W II, Jensen served S&W I’s customers in the same geographic area, and
continued to occupy S&W I’s office and use its telephone number. In fact, a check drawn on an
account belonging to S&W I was used to pay a debt of S&W II. Further, S&W II continued
performance on a contract that S&W I had with one of its customers.
The second category of factors under the substantial continuity test—the jobs and
working conditions—is especially relevant under the Act because of its close correlation with
particular safety and health hazards. Here again, the employing entity remained essentially
unchanged. According to Jensen, both companies provided the same general construction
services, including carpentry, masonry, siding, and painting. The employees of both S&W I and
S&W II worked on construction sites, performing these same tasks. The hazards typical of these
tasks also remained the same, as did the tools Jensen purchased at the bankruptcy sale of S&W I
for S&W II’s use.
And most noteworthy, given the nature of the citation at issue, is the fact
that employees in both entities performed roofing work and faced the same attendant fall
The final category of factors relates to personnel. Continuity of the personnel who
specifically control decisions related to safety and health is certainly relevant in the context of
the Act because the decisions of such personnel relate directly to the extent to which the
employer complies with the statute’s requirements. Here, Jensen was in charge of both
companies and ran their operations on a daily basis. He was the sole owner and supervisor of
S&W I, and is the president, sole shareholder, and supervisor of S&W II. Accordingly, Jensen’s
control over decision-making in both companies, including that related to employee safety and
health, weighs heavily in favor of attributing S&W I’s citation history to S&W II. We also find,
however, that although S&W II retained, in some form, S&W I’s workforce, continuity of
nonsupervisory employees among the two companies is not significant here because those
employees are not responsible for OSH Act compliance and would not have supervised its
In addition, we note that the NLRB’s substantial continuity test includes consideration of
whether the same supervisors oversee the same employees. Fall River, 482 U.S. at 43. While
that factor is specifically relevant to issues that arise under the NLRA, we find it lacks such
The type and extent of workplace hazards depend more on the nature of the
work, equipment, and safety-related decisions made by managers and supervisors than on how
workers are paired with such supervisory personnel. Because we have already taken into
account Jensen’s control over the operations at issue here, his continuity of supervisory authority
over particular employees adds little to our analysis.
Considering the totality of the circumstances regarding these two companies, we find that
the nature and extent of their similarities are sufficient to support the Secretary’s conclusion that
the violation history of S&W I is attributable to S&W II. See Fall River, 482 U.S. at 43
(determining successor liability is “primarily factual in nature and is based upon the totality of
circumstances in a given situation”).
And the record shows that S&W II’s history includes two
final orders for violations of the same or equivalent standard at issue here. Walter Jensen, d/b/a
S&W Construction, 1998 CCH OSHD ¶ 31,571, 1998 WL 257207 (No. 95-1221, 1998)
Accordingly, we conclude that this violation is properly characterized as
CONCLUSIONS OF LAW
We conclude that S&W II willfully violated 29 C.F.R. § 1926.501(b)(11) and repeatedly
violated 29 C.F.R. § 1926.503(a)(2).
We affirm Willful Citation 1, Item 1 and assess a penalty of $7,000, and affirm Repeat
Citation 2, Item 1, and assess a penalty of $3,750.
Thomasina V. Rogers
Horace A. Thompson III
Cynthia L. Attwood
Dated: November 18, 2010 Commissioner
SECRETARY OF LABOR,
Docket No. 00-1402
Sharon and Walter Construction
Carol J. Swetow, Esquire
Ralph R. Minichiello, Esquire
U.S. Department of Labor
For the Complainant
Charles A. Rusell, Esquire
Concord, New Hampshire
For the Respondent
BEFORE: MICHAEL H. SCHOENFELD
Administrative Law Judge
DECISION AND ORDER
Background, Procedural History and Jurisdiction
This proceeding is before the Occupational
Safety and Health Review Commission (“the Commission”) pursuant to section 10(c ) of the
Occupational Safety and Health Act of 1970, 29 U.S.C. 651 et seq. (“the Act”). At all times
relevant to this proceeding, Respondent Sharon and Walter Construction Corporation (“S&W
Corporation”) operated a general contracting business, which performed roofing, siding,
carpentry, masonry, snow plowing and painting. In its Answer, S&W Corporation admits that it
is an employer engaged in a business affecting commerce, and I so find. Accordingly, I hold that
the Commission has jurisdiction over the subject matter and the parties within the meaning of
section 3(5) of the Act.
This case arose as a result of an accident
which occurred at one of S&W Corporation’s work sites at a building located on Clark Street in
Pittsfield, New Hampshire. On April 20, 2001, an employee of S&W Corporation fell off the
metal pitched roof of the building. Neither Robert H. Bell III, the employee, nor Paul Noyes,
another worker who was assisting Bell on the roof, were protected by any means of fall
Following the resulting OSHA inspection,
the Secretary issued one citation for a willful violation of 29 C.F.R. §1926.501(b)(1), and one
citation for a repeat violation of 29 C.F.R. §1926.503(a)(2) to S&W Corporation.
for the repeat violation is based on a prior final order entered against Walter Jensen, d/b/a S&W
Construction, (“S&W”) and Walter Jensen, individually. This case thus presents an issue not yet
determined by the Commission, that is, whether, and under what circumstances, a prior final
order may be imputed against an alleged successor corporation for the purpose of classifying a
later violation as repeat. The hearing in the instant case was conducted from April 10, 2001 to
April 12, 2001. No affected employees sought to assert party status. Both parties have submitted
Whether the Exposed Workmen were Employees of S&W Corporation
As a preliminary matter, I reject S&W
Corporation’s contention that Bell and Noyes were independent contractors, and that it therefore
had no employees exposed to the alleged violation.
To determine whether an employer-employee relationship exists for the purposes of the Act, it is
necessary to look to the general principles of agency law. See Nationwide Mutual Ins. Co. v.
Darden, 503 U.S. 318 (1992). A fundamental inquiry on this issue is whether the putative
employer retained the right to control the manner and means by which the job was performed.
Under First Circuit precedent, the assumption of entrepreneurial risk or reward by a putative
employee is a prominent factor in this inquiry. Labor Relations Div. of Constr. Indus. of Mass. v
Teamsters Local 379, 156 F.3d 13 (1st. Cir, 1998).
The evidence demonstrates that Bell and
Noyes incurred no entrepreneurial risk or reward through their work for S&W Corporation.
Their salaries were fixed and constant, (Bell received $150 a day, and Noyes received $75.00 a
day), and if they finished an assignment early, they were not free to leave and still receive their
pay. (Tr.150-151, 157, 242-243). Other than the liability insurance policy Bell obtained at the
direction of Walter Jensen, S&W Corporation’s owner and president, Bell incurred no other
work related expenses. Bell testified that he never had his own business and, other than his own
tool belt, he did not supply any of the materials or tools for the work he performed for S&W
Corporation. If there were items he had to purchase, such as screws or nails, Jensen reimbursed
him, and Jensen also paid for the gas in the S&W Corporation van Bell drove. (Tr. 31-32, 145-146, 151-152, 166-167). Similarly, Noyes provided no materials or tools for the job, and
incurred no work related expenses. (Tr. 244).
A number of other facts show that Jensen
controlled the manner in which Bell and Noyes performed their work. Bell told Stephen Rook,
the investigating OSHA compliance officer, (“CO”), that he was under the direction and control
of Jensen throughout the entire day. (Tr. 127). Bell was required to report to the shop every
morning at 6:30 a.m. to receive his daily assignment, which could include sweeping, cleaning
equipment, or operating a snow plow, in addition to roofing work. Once Bell finished a job, he
was required to return to the shop, where Jensen would give him another job or task. (Tr. 158-159, 165-167, 368-369). Both Bell and Noyes believed that they could be fired or could quit at
anytime. (Tr. 156, 165, 244). Of significance, after Bell’s accident, Jensen put Noyes to work at
a different job site. (Tr. 242-244). If, as S&W Corporation asserts, Noyes were a subcontractor
Bell retained to assist with the roofing work at the subject site, Jensen would not have had the
authority to send Noyes to a different job following Bell’s accident.
It is also probative that, when Bell returned
to work for S&W Corporation, he did not sign the S&W Corporation’s “sub-contractor’s
disclaimer form,” (which identifies Bell as a “self-employed individual”), until March 17, 2000,
even though he commenced work on March 13, 2000. (Tr. 155, Ex. R-13, p.5). While this may
appear inconsequential because of the apparently insignificant time period between the two
dates, the fact that S&W Corporation employed Bell and put him to work without having the
signed disclaimer form is inconsistent with S&W Corporation’s argument that an independent
contractor relationship was formed. It also lends credence to Bell’s assertion that he signed the
form only because he was told he would otherwise not get paid. (Tr. 151).
Contrary to S&W Corporation’s assertion,
the facts that Bell signed the disclaimer form, purchased a general liability insurance policy at
Jensen’s insistence, and was treated as an independent contractor for tax purposes, do not
necessarily signify that an independent contractor relationship was created. A business
association containing most, if not all, of the indicia of an employer/employee relationship is not
transformed into an independent contractor relationship simply by these expedients. Rather, the
substance of the relationship is controlling over the form. See Loomis Cabinet Co., 15 BNA
OSHC 1635, 1637-1638 (No. 88-2012, 1992). Further, S&W Corporation appeared to ignore the
fabricated form of the relationship as it issued salary checks to “Robert Bell” rather than to
“BOB Construction,” a name devised by the insurance broker who sold Bell his liability policy
and in which name the liability policy was issued. (Tr. 154-155). Finally, it is undisputed that
Noyes never signed such a disclaimer form and purchased no liability policy.
In support of its contention, S&W
Corporation notes that Bell himself defined the terms of his employment when, following the
accident, he told the emergency room personnel that he was an independent contractor. Bell
does not deny that he made this statement. He did, however, explain that when he told the
emergency room personnel that he worked for S&W Corporation, they “got back” to him and
told him that S&W Corporation was not “covering” him. Bell also explained that he believed he
was supposed to say he was an independent contractor. (Tr. 197). I observed Bell’s demeanor on
the stand and found him to be a credible witness on this issue. I also found his explanation
understandable. In any event, his statement is not dispositive, especially when compared with
the weight of evidence supporting a finding that Bell was an employee.
S&W Corporation also notes that, during
Bell’s first term of employment with the company, from 1996 to 1998, Bell’s liability carrier
paid for the costs of damage incurred from a fire which occurred at a job site Bell was involved
with in 1998. (Tr. 187-189, 362-363).
There is, however, no support in the record for S&W
Corporation’s assertion that Bell’s carrier investigated the fire and made a determination that
Bell was indeed an independent contractor. The evidence revealed only that there was a claim,
and that it was paid through a liability policy Bell obtained only because Jensen directed him to
do so. (Tr. 198-188).This is insufficient to support a legal conclusion that Bell was an
independent contractor at the time. In any case, while events which occurred during an earlier
term of employment may be some evidence of the nature of a later relationship, they are not
dispositive here, especially since the second term occurred almost two years after the first, and
S&W Corporation submitted no evidence to show that Bell, rather than Jensen, controlled the
manner and means by which Bell performed his work during this earlier term of employment.
Indeed, S&W Corporation admits that Bell was initially hired in 1996 as an employee and not an
independent contractor. (Tr. 331-332). It is true that Bell signed a disclaimer form two years into
his first term of employment, but, other than Jensen’s assertion that Bell did not perform roofing
work until he signed the form, there is no evidence that the terms of their working relationship
changed in any way after he signed the form. In fact, Bell testified that there was no change.
(Tr.183, 332, Ex. R-13).
In an effort to rebut the evidence showing
that Bell and Noyes were employees, S&W Corporation called to the stand Rodney Sargent and
Justin Murphy, two witnesses who identified themselves as independent contractors and who
have performed work for S&W Corporation. Sargent testified that he has worked on hundreds of
jobs for Jensen and was paid a flat rate of $300 per day, plus $200 per day for each subcontractor
he hired. Sargent also testified that he used his own tools and other equipment, but conceded that
when he was missing a tool or piece of equipment, he borrowed it from Jensen. (Tr. 511-512,
515-517). Sargent further testified that he kept his own hours and paid his own taxes and
insurance premiums, when he did work for S&W Corporation. (Tr. 519). Murphy testified that
he performed contracting work for 15 or more clients, including S&W Corporation, since he
started his own business in the area in June, 2000, and that he, too, owned his own tools and
equipment. (Tr. 536-538, 541-542). Murphy also testified that his fees varied; sometimes he was
paid by the square foot, sometimes he was paid by the day, and sometimes he was paid a flat
rate for the whole job. (Tr. 538). Even if paid by the day, however, he earned the same amount
regardless of what time he left the job. (Tr. 542-543).
S&W Corporation argues that the terms of
its business relationships with Sargent and Murphy were representative of the manner in which it
retained all of its laborers and roofing workers, including Bell and Noyes. I am not persuaded by
this argument. However one wishes to classify the relationships that S&W Corporation
maintained with Sargent and Murphy, it is clear that the terms of those relationships were not
the same, nor even similar to the employment relationship S&W Corporation had with Bell and
Noyes. Unlike Bell and Noyes, Sargent and Murphy used their own equipment, kept their own
hours, and incurred a potential for a loss. Additionally, through the course of his inspection, CO
Rook discovered evidence showing that S&W Corporation hired other employees under terms
similar to those under which Bell and Noyes were employed, indicating that Sargent and
Murphy’s terms were not in fact representative of S&W Corporation’s work force. (Tr. 97-101).
S&W Corporation further contends that the
testimony of Sargent and Murphy, along with testimony from Darren Brown, the police officer
who investigated the accident and who also performed contracting work in the area, represent
common industry practice in the area. (Tr. 284-285, 299, Resp. Brief, pp. 3-4). S&W
Corporation may very well be correct that these three witnesses performed their contracting
work in accordance with common industry practice in the area. It does not necessarily follow,
however, that Bell and Noyes were therefore independent contractors. Indeed, the testimony
elicited from Sargent and Murphy served to emphasize the differences between the two types of
business relationships, and confirms that Bell and Noyes were employees, rather than
independent contractors. S&W Corporation’s contention is accordingly rejected.
The Alleged Willful Violation - 29 C.F.R. § 1926.501(b)(11)
Citation 1, Item 1 alleges a willful violation
of 29 C.F.R.§ 1926.501(b)(11). The cited standard requires the use of guardrail systems with
toeboards, safety net systems, or personal fall arrest systems where employees are on a steep
roof with unprotected sides and edges of 6 feet (1.8 m) or more above a lower level. For
purposes of the standard, a “steep roof” is a roof with “a slope greater than 4 in 12 (vertical to
horizontal).” 29 C.F.R. §1926.500(b). During the OSHA investigation, CO Rook took
measurements of the roof and determined that the slope of the roof was 5.5 in 12, vertical to
horizontal, showing that the roof had a “steep slope” as that term is defined in the standard. (Tr.
32-33). S&W Corporation submitted no proof to contradict this evidence. The parties stipulated
that Bell was working on a roof with unprotected sides on April 20, 2000, that he was not
protected from falling by a guardrail system, a safety net or a personal fall arrest system, and that
the roof was more than 6 feet above the lower level. (Ex. ALJ 1). Also, the Secretary asserts,
and S&W Corporation does not dispute, that Noyes was on the roof with Bell on that day
without the appropriate fall protection, and that that neither worker used fall protection while on
the roof on the Monday or Tuesday before the accident. (Tr.172). The evidence thus
demonstrates that the standard applies, that its terms were violated, and that S&W Corporation
employees were exposed to the hazard of a fall. This hazard was exacerbated by the fact that the
metal roof was slippery from the prior day’s rainfall. (Tr. 173-174).
The evidence also demonstrates that S&W
Corporation had actual knowledge of the violation. Jensen admitted that he saw Bell and Noyes
on the roof without fall protection on the morning of the accident. (Tr. 338-339). Jensen was also
present at the site on the Monday and Tuesday before the accident and saw Bell on the roof on
both days without fall protection. (Tr. 172, 337). Jensen’s actual knowledge may be imputed to
S&W Corporation, as he was the president and owner, and managed S&W Corporation on a
daily basis (Tr. 318-320). The Secretary thus established a prima facie violation of the
S&W Corporation argues that the failure of
Bell and Noyes to use safety harnesses amounted to unpreventable employee misconduct. S&W
Corporation has not meet its burden of proving this defense.
First, there was no evidence that
S&W Corporation had any rule regarding the use of fall protection when necessary. Second,
there was no evidence that S&W Corporation communicated fall protection requirements to its
employees, and, as is discussed below, Jensen admitted that he had not trained any of his
employees in the use of fall protection for the previous two years. (Tr. 399). Third, S&W
Corporation did not prove that it took reasonable steps to discover violations or to enforce the
asserted requirement to use fall protection.
In fact, the only effort Jensen arguably made
to abate the hazard on the day of the accident is disputed. Jensen claims that he told Bell to use a
personal fall arrest harness on the morning of the accident. Bell does not deny that the two had a
conversation that morning, but denies that Jensen said anything about a harness or safety
protection, even after Bell purportedly said that the roof was slippery and that he did not trust it.
(Tr. 176-177, 338-339, 376).
Neither witness appeared to speak with complete veracity. It is
unnecessary, however to make a credibility finding on this issue. Even if Jensen’s version were
true, it is clear that an insufficient effort to abate the hazard was made. Jensen did not threaten
discipline, indicate that he would dock Bell’s pay, threaten not to use Bell in the future if he did
not use a safety harness on the roof, or even attempt to determine if any safety harnesses were
available on site. (Tr. 342). Indeed, the more reliable evidence demonstrates that there was no
safety harness or other means of fall protection on site, or in the S&W truck, and this fact was
confirmed by the police officer who arrived at the scene shortly after the accident. (Tr. 175, 250,
283, 287-289). This citation item is affirmed.
The Secretary has classified this violation as
willful. A violation is willful if committed with intentional disregard for the requirements of the
Act or with plain indifference to employee safety. A focal point for this determination centers on
the employer’s state of mind at the time of the violation. A heightened awareness of the illegality
of the conduct, coupled with a failure to correct or eliminate a known hazard, will establish the
requisite scienter for the imputation of a willful violation. Branham Sign Co., 18 BNA OSHC
2132, 2134 (No. 98-753, 2000).
The required “heightened awareness” is
amply demonstrated in this case. In May of 1995, S&W, then an unincorporated business owned
and run by Jensen, was inspected by OSHA at two different job sites. These inspections resulted
in the issuance of two citations which alleged violations of 29 C.F.R. §1926.501(b)(11). (Tr.
312-317, Ex. C-14, Ex.C-13, Ex. C-5).
These citations were affirmed on April 6, 1998, and the
Commission judge who heard and decided the case made a finding of fact that Jensen,
personally, was apprised of the standard’s requirements during a closing conference following
the earlier of the two OSHA inspections. (Ex. C-5). The evidence also demonstrates that, in
1996, almost one year after S &W Corporation was incorporated, it was cited for a violation of
29 C.F.R. §1926.451(a)(4), for failing to provide standard guardrails and toeboards at the open
sides and ends of platforms located more than 10 feet above the ground. (Tr. 318, Ex. C-11).
Despite this heightened awareness, Jensen allowed Bell and Noyes to perform work on the metal
roof at the subject site without fall protection for three days. Further, even if believed, Jensen’s
alleged direction to Bell to use a harness is, without any further action to assure its use,
insufficient to change the classification of this violation.
S&W Corporation contends that Jensen did
not act willfully because he, in good faith, believed that Bell was an independent contractor. If
Jensen were under this impression in good faith, S&W Corporation’s contention might have
more merit. Jensen is not, however, an unsophisticated businessman. He has been in the roofing
business since at least 1969, and, in the mid-1990's, he owned several other businesses, including
a limited liability company, a taxi cab company, a roofing company and a realty company. (Tr.
313, 352-353). He has a history of prior OSHA citations, a number of which occurred during the
latter part of the existence of S&W, shortly before Jensen commenced bankruptcy proceedings.
(Tr. 353). Further, the fact that Jensen required Bell to sign the disclaimer form in 1998, while
S&W was in the midst of litigating an OSHA citation, raises a reasonable inference that Jensen
was motivated, at least in part, to avoid OSHA liability. In addition, the testimony of Sargent and
Murphy make it clear that Jensen knew very well how to create a true independent contractor
relationship, when necessary. Based on these factors, as well as the evasive manner Jensen
responded to the Secretary’s questioning on this issue during trial, I find that Jensen did not have
a good faith belief that Bell and Noyes were anything but employees of S&W Corporation on the
day of the accident.
This citation is properly classified as willful.
The Secretary proposed a penalty of $7,000
for this citation item. (Tr. 45). In arriving at that figure, CO Rook took into consideration the
gravity of the violation and the probability and severity of injury. The violation was given a
high severity, based on the serious nature of permanent disability or death which would occur if
a worker were to fall off the roof, and a greater probability due to the on-site circumstances,
that is, that the roof was metal and was slick from the prior day’s rainfall. The gravity-based
penalty was initially $70,000, but S&W Corporation received an 80 percent adjustment for size,
and a 10 percent adjustment for history. No adjustment was made for good faith due to the
willful classification. I find that CO Rook’s gravity and severity analysis was appropriate. The
reduction for size was also appropriate, given that there was no evidence relating to the actual
size of Jensen’s company, beyond Bell, Noyes, and the admitted other four employees. (Tr. 318).
The 10 percent reduction based on history was also appropriate. The proposed penalty of $7,000
The Alleged Repeat Violation -29 C.F.R. §1926.503(a)(2)
Citation 2, Item 1 alleges a repeat violation
of 29 C.F.R. §1926.503(a)(2).
CO Rook proposed this item because, on questioning Bell and
Noyes, it became apparent that neither had knowledge of fall protection techniques, usage and
assembly, and because Jensen said that he did not train his subcontractors. (Tr. 47-48). In this
regard, Jensen testified that none of his employees performed roofing work, and that, therefore,
he has trained no employees in roofing safety within the last two years. (Tr. 399). As set out
above, however, the evidence demonstrates that two workers who performed roofing work for
Jensen were in fact employees and not independent contractors. Consequently, at least as to Bell
and Noyes, Jensen had a duty to provide appropriate fall safety training.
Bell testified that he never attended any
safety meetings while working for S&W Corporation, that he never attended any classes for
working safely on the roof, and that he was never taught how to install or maintain a guard rail
system. He also testified that he was not trained in the use of harnesses or perimeter nets and that
he was never advised of OSHA’s fall protection standards by anyone at S&W Corporation. (Tr
146-147, 150-151, 180-181, 194-195). Jensen, on the other hand, testified that Bell attended
regular safety meetings in 1996 and that, during this first term of employment, Bell had installed
guardrails and was observed wearing personal fall arrest body harness systems. (Tr. 358). Jensen
also testified that S&W Corporation had conducted safety meetings every Friday and every
morning, at least as of September, 1996, and that he had spoken personally to everybody about
staging and the use of harnesses. Jensen said that he sometimes saw Bell in the office with
another employee, Mike Foyer, when they were discussing safety, and that Scott Haggart, a fire
fighter, paramedic and police officer Jensen hired for the purpose of creating an OSHA
compliant company, was at times also present during these meetings. (Tr. 223, 358, 398).
S&W Corporation offered no affirmative proof, however, that Bell was ever trained in the use of
OSHA-compliant fall protection systems. Furthermore, even if S&W Corporation’s argument,
that Bell nonetheless knew how to use such systems during his first term of employment were
true, there is no proof that Bell was retrained following the January, 1998 amendment of the
standard relating to acceptable fall arrest systems.
In any event, it is undisputed that no fall
protection training was provided at any time to Noyes. (Tr. 256-258, 268).
I find that the standard applies, its terms
were violated, and that Bell and Noyes were both exposed to the cited hazard. In addition,
because S&W Corporation had a duty to train these employees, and because Jensen was well
aware of the requirements of the standard due to earlier citations involving this and a related
standard, I find that S&W Corporation had knowledge of the violation. This citation item is
This violation has been classified as repeat.
A violation is repeated if at the time it occurred, the same employer had a Commission final
order against it for a substantially similar violation. Potlach Corp., 7 BNA OSHC 1061, 1064
(No. 16183, 1979). It is not disputed that a violation of 29 CFR §1926.503(a)(2) was found
against S&W as well as Walter Jensen, individually, on April 6, 1998, and that it became a final
order on May 13, 1998. (Tr. 50, Ex. C-5)
At issue is whether, for the purposes of classifying a
violation as repeat, a final order against a sole proprietorship and its owner, individually, may be
imputed to a subsequently-formed corporation. The Secretary contends that S&W Corporation is
so closely identified with S&W that the prior final order issued against the latter may be imputed
to the former.
The Commission has not yet addressed the
issue of whether, and under what circumstances, a violation found against one company may be
imputed to a successor company for classification purposes. As the Secretary points out,
however, two different legal theories - successor liability and the alter ego doctrines - lend
support to the conclusion that, in this case, it is appropriate to charge S&W Corporation with the
history of the prior final order.
In this regard, developing federal case law inquires into
whether, on the facts of the particular case, a corporate form should be disregarded to avoid
frustrating the purpose of a federal law. Brotherhood of Locomotive Engrs v Springfield
Terminal Ry Co,. 210 F.3d 18 (1st Cir. 2000).
It is important to clarify that the issue is not
whether to impute a new liability where none existed, but what classification is appropriate for
an affirmed violation. Nonetheless, the doctrine of successor liability is instructive to the extent
it holds that, in certain circumstances, a successor corporation should be held accountable for the
actions of a predecessor company. The Supreme Court addressed this doctrine in an NLRB case
involving a claim of unfair labor practices. Fall River Dyeing & Finishing Corp v. NLRB, 107
U.S. 2225 (1987). See also NLRB v Burns Int’l Sec. Serv. Corp., 406 U.S. 272 (1972). In Fall
River, the Court upheld the NLRB’s determination that there was substantial continuity between
the predecessor and successor corporations, where the functions of the employees and the
business of the employer did not change, the employees continued to work under the direction of
the same supervisors, and the successor corporation had purchased most of its predecessor’s real
property, machinery and equipment, even though the continuing company terminated production
of one major type of product. Id. In affirming the NLRB’s application of the successor employer
test, the Court noted that the doctrine requires an inquiry into a totality of the circumstances. Id
at 2237. There is also persuasive authority that the doctrine of successorship applies in OSHA
cases. See H.M.S. Direct Mail Serv., 752 F. Supp. 573 (W.D.N.Y. 1990), where the court
determined that the doctrine applies in an action pursuant to section 11(c) of the Act for
wrongful discharge of an employee who had asserted his rights under OSHA. Id
The following facts are pertinent to this
inquiry. Walter Jensen was the sole owner of S&W, which he was in charge of running. He is
also the president and sole shareholder of S&W Corporation, which he is also in charge of
running. (Tr. 312-317, 320). S&W Corporation is in the same business as S&W, and, in fact,
continued performance on a parking lot sweeping contract S&W had had with Bradley’s since
1993. (Tr. 312-314, 319-329, 349-350).
Following S&W’s dissolution in 1995, Jensen
purchased some of its assets during a bankruptcy sale, including four trucks, ladders, staging,
staging planks, wooden brackets, skill saws, a bench saw, and various hand tools. (Tr. 321-322,
S&W Corporation began operating only six weeks after S&W ceased
operations. Further, S&W Corporation has the same office address and telephone number as did
S&W, and operates in the same georgaphical area. (Tr. 323, 352, 412-413 448-449).
There is also some evidence that S&W
Corporation retained, in one form or another, S&W’s work force. CO Rook testified that he
observed the same employees at an S&W Corporation job site he inspected in 1996, as he had at
an S&W job site he inspected in 1995, and, while they were not identified by name, OSHA Area
Director David May testified that a comparison of the records from 1995 inspections of S&W
and later inspections of S&W Corporation indicate a continuity of work force. (Tr. 66, 448).
Jensen testified that there may have been one or two S&W Corporation employees who had
worked for S&W, but he was careful to indicate that he was referring only to those workers he
defined as “employees.” Jensen did testify that 30 past employees are now independent
contractors, and S&W Corporation’s post-hearing brief admits that Jensen regularly does
business with these subcontractors. (Tr. 352, 400-401, S&W Corporation’s brief, p.7).
Furthermore, both Murphy and Sargent testified to having performed work for Jensen both
before and after the incorporation of S&W Corporation. (Tr. 510-512, 534). These factors, along
with those listed above, support the conclusion that there is substantial continuity between S&W
and S&W Corporation such that it is appropriate to use the prior final order as a basis for finding
S&W Corporation in repeated violation of the same standard.
The Secretary’s alternative argument, that
S&W Corporation is the alter ego of S&W, is similarly persuasive. According to First Circuit
precedent, the alter ego doctrine says that “in certain situations one employer entity will be
regarded as a continuation of a predecessor, and the two will be treated interchangeably for
purposes of applying labor laws.” NLRB v. Hosptial San Rafael Corp., 42 F.3d 45 (1st Cir.
1994), (“San Rafael”). Thus, obligations of one business entity may be enforced against another.
See CEK Indus. Mechanical Contractors v. NLRB, 921 F.3d 350 (1st Cir. 1990). On this issue,
the NLRB and the courts consider the similarity between the old and new companies in
management, business purpose, operation, equipment, customers, and supervision, as well as
ownership. San Rafael, supra. While the Commission has not applied the alter ego doctrine
under the precise facts of this case, it has found that, where two ongoing companies share a
common work site and have interrelated and integrated operations, and have other indicia of
mutual identity, the purposes of the Act are best served if the two companies are treated as one.
Advance Specialty Co.,3 BNA OSHC 2072 (No. 2279, 1976).
The facts of this case demonstrate that S&W
Corporation has the same management, business purposes, ownership, supervision and
operation as did S&W. S&W Corporation also acquired some of S&W’s machinery, and
assumed performance on the parking lot sweeping contract. Additionally, there is evidence that
Jensen himself treated the two business entities as interchangeable. Despite the dissolution of
S&W, Jensen used checks from an S&W account to pay OSHA fines incurred by S&W
Corporation, and on March 10, 1999, four years after S&W’s dissolution, Jensen’s application
with the State of New Hampshire for a trade name identified S&W, not S&W Corporation, as the
business concern, and gives April, 1969 - the date S&W was formed - as the formation date. (Tr.
This citation item is affirmed as a “repeat”
violation. The Secretary has proposed a penalty of $3,750.00 for this item. In proposing this
penalty, the Secretary took into account the factors set forth in section 17 of the Act, including
the fact that the prior final order on which the repeat violation was based was itself a repeat
violation. (Tr. 49-53, Ex. C-5). The Secretary’s analysis was appropriate. Accordingly, the
proposed penalty is assessed.
FINDINGS OF FACT
All findings of fact necessary for a
determination of all relevant issues have been made above. Fed. R. Civ. P. 52(a). All proposed
findings of fact and conclusions of law inconsistent with this decision are hereby denied.
CONCLUSIONS OF LAW
1. Respondent was, at all times pertienent
hereto, an employer within the meaning of section 3(5) of the Occupational Safety and Health
Act of 1970, 29 U.S.C. §§651-678 (1970).
2. The Occupational Safety and Health
Review Commission has jurisdiction over the parties and the subject matter of this case.
3. Respondent was in violation of 29 C.F.R.
§1926.501(b)(1), as alleged in Citation 1, Item 1. This violation was willful, and a penalty of
$7,000 is appropriate therefore.
4. Respondent was in violation of 29 C.F.R.
§1926(a)(2), as alleged in Citation 2, Item 1. This violation was repeat, and a penalty of $3,750
is appropriate therefore.
1. Citation 1, Item 1 is AFFIRMED. A penalty of $7,000 is assessed.
2. Citation 2, Item 1, is AFFIRMED. A penalty of $3,750 is assessed.
MICHAEL H. SCHOENFELD
Administrative Law Judge Washington, DC
Dated: August 6, 2001