SECRETARY OF LABOR,
SALEM-GRAVURE DIVISION OF WORLD COLOR PRESS, INC.,
GRAPHIC COMMUNICATIONS INTERNATIONAL UNION, LOCAL
Authorized Employee Representative.
OSHRC Docket No. 83- 0509
Before: BUCKLEY, Chairman; RADER and WALL,
BY THE COMMISSION:
This case is before the Commission on Chief Administrative Law Judge Paul A. Tenney's certification of interlocutory appeal.
Judge Tenney determined that Salem's plant contains trade secrets. The Secretary desires to reinspect Salem's plant with a consultant who is not a government employee, and thus not subject to sanctions for disclosure of trade secrets under the Trade Secrets Act, 18 U.S.C. § 1905. Judge Tenney ordered Salem to permit the Secretary's consultant to enter its plant subject to a protective order such as was approved in Owens-Illinois, Inc., 78 OSAHRC 105/C8, 6 BNA OSHC 2162, 2167-2168, 1978 CCH OSHD ¶ 23,218, pp. 28,072-28,073 (No. 77-648, 1978). Salem objects to entry by a consultant who is not subject to sanctions under the Trade Secrets Act, 18 U.S.C. § 1905, contending that the Commission's protective order by itself provides no real protection against disclosure of its trade secrets. Thus, we are directly faced with the issue of whether our protective orders provide meaningful protection against disclosure of trade secrets by nongovernment employees. Concomitantly, if our protective orders do not provide meaningful protection against disclosure of trade secrets, should we nonetheless seek to compel entry by imposition of sanctions against the employer? We answer both questions in the negative.
In April of 1983, the Secretary conducted an inspection of the company's Salem, Illinois workplace. On May 25, 1983, the Secretary issued a citation alleging that Salem violated 29 U.S.C. § 654(a)(1), section 5(a)(1) of the Occupational Safety and Health Act of 1970, 29 U.S.C. §§ 651-678 ("the Act"), by exposing certain employees working in its bindery department "to the hazard of undue repetitive motion trauma." Salem contested the citation. After the Secretary filed a complaint and Salem filed an answer, the Secretary requested permission to enter Salem's workplace "for the purpose of inspecting, measuring, testing, surveying, photographing or sampling [Salem's] Bindery Department with respect to determination of abatement measures available to reduce employee exposure to repetitive motion trauma." In response, Salem stated that it had no objection to the entry of "full-time government employees," but did object to the entry of "independent or private consultants, other than full-time government employees . . . to protect valuable trade secrets and other commercial or proprietary information of great value, in its workplace." The Secretary then moved for an order compelling entry from the judge. The Secretary stated that he was willing to have Dr. Armstrong, his outside consultant, sign a written oath promising not to disclose trade secret information obtained during his inspection of Salem's establishment, except to the Secretary or his representatives. In response, Salem moved for a protective order. It claimed that the trade secrets and commercial information observable at its plant could be adequately protected only by precluding disclosure to those "most likely to inadvertently or deliberately disclose it to or permit its utilization by [Salem's] competitors." Salem claims that such protection is possible only if entry into its bindery department is limited to counsel for the Secretary and full-time government employees, both of whom are subject to the criminal sanctions against disclosure of trade secrets that are contained in the Trade Secrets Act, 18 U.S.C. § 1905, which is quoted at length below.
Following a hearing, at which Salem introduced evidence that its plant contains trade secrets, Judge Tenney found that Salem had proven that trade secrets were present in its bindery department. He also ordered Salem to permit the Secretary's expert to enter its plant on the condition that the protective measures outlined in Owens-Illinois, 6 BNA OSHC at 2167-68, 1978 CCH OSHD at 28,072-73, be followed. These measures, which we discuss below in greater detail, are: (1) the affording to the employer an opportunity to challenge the Secretary's choice of expert on the ground that he is closely aligned with a competitor of the employer; (2) the signing by the expert of a written oath that trade secrets will not be disclosed except to the Secretary's representatives or during litigation before the Commission; (3) the inclusion in the Secretary's contract with the expert of a nondisclosure provision identical to the oath and making the employer a third-party beneficiary of it; and (4) the application of the protective order to those acting on the Secretary's behalf. Judge Tenney also restricted the inspection to the areas of the bindery department described in the citation, and ordered that any notes or photographs taken by the outside consultant in the course of the discovery inspection be surrendered to the Secretary's counsel in order to be subject to the Trade Secrets Act.
At Salem's request, Judge Tenney certified his order for interlocutory appeal on two issues: first, whether a Commission decision involving Salem's parent company, World Color Press, Inc., 77 OSAHRC 202/B9, 6 BNA OSHC 1084, 1977-78 CCH OSHD ¶ 22,358 (No. 76-2005, 1977), appeal dismissed, 78-1010 (7th Cir. July 14, 1978), collaterally estopped the Secretary from using an outside expert; and second, under what circumstances the Secretary may use an outside expert to inspect a plant with trade secrets.
The Commission also asked the parties to discuss two
additional issues: whether the Secretary's expert is or could be made "an employee of
the United States" within the meaning of the Trade Secrets Act; and what means are
available to the Commission or any other party to enforce a protective order issued by the
If an outside expert were covered by the Trade Secrets Act [] and subject to the same threat of criminal prosecution that discourages disclosure of trade secrets by employees of the Department of Labor, our decision would be an easy one. Both parties agree, however, that Dr. Armstrong would not be covered by the Trade Secrets Act because he is not an "employee of the United States."
The Secretary states that he cannot hire outside experts as employees because he must pay outside experts at a daily rate in excess of that allowed by section 7(c)(2) of the Act; the pay of independent contractors, however, is not restricted by section 7(c)(2). Hence for economic reasons, the Secretary asserts he is unable to hire Dr. Armstrong as a federal employee.[]
Since the Secretary elects to hire an expert as a nonfederal employee, we must therefore consider to what extent the Commission can protect trade secrets through the enforcement of its protective orders. Section 15 of the Occupational Safety and Health Act, 29 U.S.C. § 664, grants the Commission authority to issue orders protecting the confidentiality of trade secrets. Section 15 states that:
All information reported to or otherwise obtained by the Secretary or his representative in connection with any inspection or proceeding under this Act which contains or which might reveal a trade secret referred to in section 1905 of title 18 of the United States Code shall be considered confidential for the purpose of that section except that such information may be disclosed to other officers or employees concerned with carrying out this Act or when relevant in any proceeding under this Act. In any such proceeding the Secretary, the Commission, or the court shall issue such orders as may be appropriate to protect the confidentiality of trade secrets.
Commission Rule 11, 29 C.F.R. § 2200.11, also provides for the protection of trade secrets.[] Thus, the Commission may issue protective orders establishing the conditions under which parties may have access to trade secrets.
In Owens-Illinois, the Commission observed that protective orders have been used by federal courts to deal with situations in which trade secrets were to be disclosed in discovery. However, there is a very significant difference between a protective order issued by a federal court, and an order issued by the Commission. If an independent expert in a federal court action violates a protective order issued under Fed.R.Civ.P. 26(c)(7),[] he may be cited for contempt. 18 U.S.C. § 401 empowers a federal court to punish by fine or imprisonment those it finds in contempt for disobeying its orders.[] The Commission, however, is not a federal court. If Salem's trade secrets were disclosed by the Secretary's outside expert in violation of Judge Tenney's protective order, the Commission could do nothing to the outside expert but debar him from appearing before the Commission.[] It has no authority to fine or imprison him for violating the order. Although Commission Rule 54 and Fed.R.Civ.P. 37 together provide that the Commission may vacate the citation if the Secretary violates a protective order, or may vacate the notice of contest if the employer violates the order, these sanctions are available only against the parties, and then only if the case is still pending before the Commission or an administrative law judge. They cannot be used to sanction an outside expert who discloses trade secrets.
We thus conclude that the Commission lacks the
authority to impose sufficient sanctions against a nonfederal expert who violates our
protective order. The Commission's decision in Owens-Illinois relied in part on the
prospect that a private lawsuit against the outside expert would deter disclosure, for it
required that the contract between the Secretary and outside expert contain a third-party
beneficiary clause. Unlike the other sanctions contemplated by Owens-Illinois, this
sanction does not depend on or require Commission action. We share the implicit view of
the Commissioners in Owens-Illinois, however, that the third-party beneficiary clause
alone does not provide sufficient protection. The contempt sanction of a court is a swift
and sure step that can be aimed directly at deterring breaches of confidentiality. By
contrast, a third-party beneficiary clause of a contract gives the party whose trade
secrets were disclosed only the prospect that after a long lawsuit, he might recover
damages of uncertain amount from a private person of possibly modest financial means.
Although the prospect of such a lawsuit would be some deterrent to the outside expert, we
do not consider that deterrent to be sufficient. An employer who has suffered large
damages from the disclosure of a trade secret may be unable to recover fair compensation.
We therefore conclude that the protective order contemplated by Owens-Illinois confers insufficient protection for trade secrets. [] To the extent that Owens-Illinois held otherwise, it is overruled.[] The question remains of what relief we should afford the parties. Section 7(c)(2) of the Act authorizes the Secretary to "employ experts and consultants" while section 15, which requires us to issue protective orders for trade secrets, does not empower us to directly enforce such orders so we cannot fairly impose sanctions against an employer for his unwillingness to risk the irreparable loss of his trade secrets when that risk of loss is due to the unenforceability of our own protective orders against third party consultants. On the other hand, we are reluctant to return to Reynolds Metals Co., 78 OSAHRC 51/Fl, 3 8NA OSHC 1749, 1975-76 CCH OSHD ¶ 20,214 (No. 4385, 1975), and generally exclude outside experts from workplaces where trade secrets could be observed. Rather than adopt a hard and fast rule, we prefer to strike a balance between the employer's need for confidentiality and the Secretary's need for discovery. We have concluded that if the Secretary wants to use a nonfederal employee expert to conduct a discovery inspection, and if the employer establishes the existence of trade secrets and declines to abide by the Commission's order compelling entry for fear of losing his trade secrets, we will stay Commission proceedings to allow the Secretary to obtain an inspection warrant or other appropriate order in a federal district court that authorizes the inspection he desires and contains nondisclosure provisions that would bring the nonfederal expert under the court's contempt authority.[]
In our opinion a warrant or other appropriate order is the only way to protect the interests of both parties. On the one hand, the Secretary has asserted entry by an outside expert is needed to determine the measures necessary to reduce employee exposure to repetitive motion trauma which the Secretary must prove to establish Salem's violation of section 5(a)(1) of the Act. On the other hand, Salem has demonstrated that it has an actual expectation of privacy with respect to certain portions of its workplace that contain trade secrets. This is an expectation that is protected by law, as evidenced by the Trade Secrets Act, section 15 of the Occupational Safety and Health Act, and a host of other state and federal enactments.
Obtaining a warrant or other order should not be difficult here. Salem did not argue that probable cause did not exist for the original inspection. Indeed it consented to that inspection. As a result of the initial inspection there is "specific evidence of an existing violation," Marshall v. Barlow's, Inc., 436 U.S. 307, 321 (1978), to establish probable cause for the warrant. See Hutton v. Plum Creek Lumber Co., 608 F.2d 1283, 1287 (9th Cir. 1979); In re Establishment Inspection of Marsan Corp., 7 BNA OSHC 1557, 1979 CCH OSHD ¶ 23,856 (N.D.Ind. June 21, 1979); Robert K. Bell Enterprises, Inc., 84 OSAHRC __/__, 12 BNA OSHC 1149, 1984-85 CCH OSHD ¶ 27,139 (No. 78-4332, 1984), aff'd on other grounds, No. 85-1547 (10th Cir. Feb. 19, 1986). In addition, because the inspection is for a very specific purpose, the warrant can be very limited in scope. See Rockford Drop Forge Co. v. Donovan, 672 F.2d 626 (7th Cir. 1982); Donovan v. Burlington Northern, Inc., 521 F. Supp. 99 (D.C. Mont. 1981); In re Establishment Inspection of ASARCO, 508 F. Supp. 350 (N.D.Tex. 1981); see Sarasota Concrete Co., 81 OSAHRC 48/A2, 9 BNA OSHC 1608, 1981 CCH OSHD ¶ 25,360 (No. 78- 5264, 1981), aff'd, 693 F.2d 1061 (11th Cir. 1982).
Accordingly, the March 5, 1984 order permitting entry of the Secretary's expert at Salem's plant is vacated and the case is remanded to the judge. If the judge is notified by the Secretary within 15 days of the date of this decision that he intends to apply for a warrant or an order, the judge is authorized to stay proceedings in the case until the Secretary informs him that the court has ruled on the matter.
The Secretary shall inform the judge within 15 days whether he intends to apply for a search warrant or other judicial order to compel entry into Salem's plant. If the Secretary decides to apply for a warrant or other order, we expect that he and Salem will be able to reach agreement on the provision to be put in the application that will protect Salem's trade secrets. Cf. Brock v. Nabisco Brands, Inc., 12 BNA OSHC 1753, 1986 CCH OSHD ¶ 27,549 (W.D.N.Y. Feb. 28, 1986)(guarantee of trade secret confidentiality incorporated in ex parte warrant). If no agreement is reached, we suggest that the Secretary provide Salem with 3 working days notice of the time and place that he will apply for the warrant or order, so Salem may have an opportunity to appear and present its concerns about its trade secrets to the court. This will enable the court to include in the warrant or order provisions that protect against unauthorized disclosure of trade secrets. See Exxon Corp. v. Donovan, 2 Government Disclosure Service (Prentice Hall) ¶ 81,383 at p. 82,023 (D.D.C. Sept. 28, 1981) (court would not object to signing consent order to restrain disclosure by outside consultants).[]
FOR THE COMMISSION
Ray H. Darling, Jr.
DATE: September 3, 1986
[] The Trade Secrets Act provides:
Whoever, being an officer or employee of the United States or of any department or agency thereof, or agent of the Department of Justice as defined in the Antitrust Civil Process Act (15 U.S.C. 1311-1314), publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information coming to him in the course of his employment or official duties or by reason of any examination or investigation made by, or return, report or record made to or filed with, such department or agency or officer or employee thereof, which information concerns or relates to the trade secrets, processes, operations, style of work, or apparatus or to the identity, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, firm, partnership, corporation, or association; or permits any income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law; shall be fined not more than $1,000, or imprisoned not more than one year, or both; and shall be removed from office or employment.
[] It is not clear whether an outside expert can be made a federal employee through a contractual provision. In any event, even if this could be done, we question whether the Trade Secrets Act would apply once the expert left federal service. From the wording of the Trade Secrets Act, it appears that it applies to acts committed only as long as one is an "employee of the United States." There is no indication in the language of the Trade Secrets Act that it applies forever to those who once were "employee[s] of the United States." The Trade Secrets Act requires the imposition of a sanction that presupposes current employment: it states that a violator "shall be removed from office or employment." It also does not refer to former government employees. By contrast, 18 U.S.C. § 207, a criminal provision of the Ethics in Government Act of 1978, is directed at persons whose employment with the government has ceased. In light of the strict construction given criminal statutes, we think it unlikely that the Trade Secrets Act would apply to conduct that occurred after federal employment has ceased.
[] Commission Rule 11 provides:
Protection of trade secrets and other confidential information.
Upon application by any person, in a proceeding where trade secrets or other matters may be divulged the confidentiality of which is protected by 18 U.S.C. 1905, the Judge shall issue such orders as may be appropriate to protect the confidentiality of such matters.
See also Fed.R.Civ.P. 26(c)(7)(protective orders for trade secrets), note 5 infra.
[] Rule 26(c)(7) provides:
Upon motion by a party or by the person from whom discovery is sought, and for good cause shown, the court in which the action is pending or alternatively, on matters relating to a deposition, the court in the district where the deposition is to be taken may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including . . . (7) that a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way;
[] 18 U.S.C. § 401 states:
§ 401. Power of court
A court of the United States shall have power to punish by fine or imprisonment, at its discretion, such contempt of its authority, and none other, as--
(1) Misbehavior of any person in its presence or so near thereto as to obstruct the administration of justice;
(2) Misbehavior of any of its officers in their official transactions;
(3) Disobedience or resistance to its lawful writ, process, order, rule, decree, or command.
[] At least one court of appeals has found that an
agency's ability to debar an expert is "not a light penalty in view of the fact that
EPA contracts often involve millions of dollars." Bunker-Hill Co. v. EPA, 658 F.2d
1280, 1284 (9th Cir. 1981). Without disagreeing with the court's reasoning, it has been
our experience that the need for experts in OSHA inspections is not so frequent and on
such a large scale that the prospect of debarment is a reliable deterrent.
[] The Secretary contends that an Owens-Illinois protective order would provide adequate protection to the employers. However in a proceeding before an Administrative Law Judge in E.I. du Pont de Nemours & Co., OSHRC Docket No. 80-4785 (ALJ, Dec. 15, 1982), proceeding terminated by Commission order, 86 OSAHRC ____, (May 23, 1986), when it was alleged that a protective order prohibiting the disclosure of confidential medical information had been violated, the Secretary took the position that the Commission had no jurisdiction to enforce a protective order after the entry of a final order on the underlying citation.
[] Salem's argument that the Secretary is collaterally estopped from using an outside expert plays no part in our decision to overrule Owens-Illinois in part. The doctrine of collateral estoppel has no application where there has been an intervening change in legal principles that renders a prior determination erroneous. Commissioner v. Sunnen, 333 U.S. 591, 599 (1948). World Color Press, the case relied on by Salem, followed Commission precedent established in Reynolds Metal Co., 78 OSAHRC 51/F1, 3 BNA OSHC 1749, 1975-76 CCH OSHD ¶ 20,214 (No. 4385 1975), which restricted the Secretary to the use of federal employees in trade secret inspections unless a good cause showing was made that the presence of an outside expert was necessary. Before this present litigation was brought, World Color Press was overruled in Owens-Illinois, which placed no such restriction on the use of outside experts by the Secretary.
[] In the typical case involving an inspection by a nonfederal expert, the administrative law judge would be required to hold a hearing if the Secretary disagreed with the employer's claim that its trade secrets would be jeopardized. If the Secretary does not disagree with employer's claim, or the judge finds that trade secrets are present, the judge would stay the proceedings to allow the Secretary to obtain a warrant or an order in district court.
[] Although the Exxon case arose in the context
of a Freedom of Information Act proceeding, it addresses most of the issues that we have
wrestled with here. In that case the court declined to enter a declaratory judgement
because it would unnecessarily restrict the administrative process. However, the court
held that it did have jurisdiction to enter restraining orders prohibiting the
government's outside consultants from disclosing information to third parties until after
the agency rendered its final administrative decision. Indeed, the court encouraged the
parties to submit a consent order "to specifically restrain power of the Court as
protection for their interests in this matter with respect to disclosure by these