LIFE SCIENCE PRODUCTS COMPANY, a corporation; VIRGIL A. HUNDTOFTE and W. P. MOORE, Individually and as Co-partners doing business as LIFE SCIENCE PRODUCTS COMPANY

OSHRC Docket No. 14910

Occupational Safety and Health Review Commission

November 11, 1977

[*1]

Before CLEARY, Chairman; and BARNAKO, Commissioner.

COUNSEL:

Baruch A. Fellner, Office of the Solicitor, USDOL

Marshall H. Harris, Regional Solicitor, U.S. Department of Labor

Rufus G. Coldwell, Jr., for the employer

Edward W. Taylor, for the intervenor

OPINION:

DECISION

BY THE COMMISSION:

The issue before the Commission is whether respondents Moore and Hundtofte are "employers" within the meaning of the Occupational Safety and Health Act of 1970, 29 U.S.C. 651 et seq. [hereinafter "the Act"], and may therefore be found personally liable for violating the Act. Administrative Law Judge William E. Brennan determined that they were employers. He affirmed the four citations issued to them and assessed the $16,500 proposed penalty. n1 The Commission members are divided on whether the Judge erred in his disposition. In light, however, of the absence of a third member since April 28, 1977, and the statutory purpose of expeditious adjudication, n2 the present members agree to resolve their impasse by affirming the Judge's order n3 but accord his decision the precredential value of an unreviewed Judge's decision. n4 Their individual views are separately stated below.

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n1 The Judge also affirmed the citations and assessed the proposed penalty against Life Science Products Company. No exception has been taken to that part of of his decision. Accordingly, that portion is affirmed without review. State, Inc., 76 OSAHRC 134/F7, 4 BNA OSHC 1806, 1976-77 CCH OSHD para. 21,209 (No. 5740, 1976).

n2 Atlas Roofing Co. v. O.S.H.R.C., 97 S.Ct. 1261, 1272 (1977).

n3 The members have previously cast votes, not in accordance with their own views, for the purpose of resolving an impasse. See e.g., United States Steel Corporation, 5 BNA OSHC    , 1977-78 CCH OSHD para.     (No. 15500, 1977); Cedar Construction Co., 77 OSAHRC 63/A2, 5 BNA OSHC 1311, 1313, 1977-78 CCH OSHD para. 21,772 (No. 10929, 1977); Reynolds Metals Co., 3 BNA OSHC 1749, 1975-76 CCH OSHD para. 20,214 (No. 4385, 1975) (Moran, Commissioner, concurring). The federal courts have approved this approach to the resolution of impasses. See e.g., Public Service Commission v. F.P.C., 543 F.2d 757, 777 (D.C. Cir. 1974); Greater Boston Television Corp. v. F.C.C., 444 F.2d 841, 861 (D.C. Cir. 1970), cert. denied, 403 U.S. 923 (1971); cf. Screws v. United States, 325 U.S. 91, 113, 134 (1945) (Rutledge, J., concurring) (court); Women Strike for Peace v. Hickel, 420 F.2d 597, 606 (D.C. Cir. 1969) (Wright, J., concurring) (same). And because two members of the Commission are participating (thereby constituting a quorum), and have cast votes to affirm the Judge's decision, it is unnecessary to consider whether the Commission should follow Shaw Construction, Inc. v. O.S.H.R.C., 534 F.2d 1183 (5th Cir. 1976), holding that a Judge's decision may not be affirmed by an equally divided Commission. Compare Neil v. Biggers, 409 U.S. 188 (1972) (affirmance by equally divided Supreme Court).

n4 Dick Corporation, No. 14456 (November 4, 1977) (slip op. at 2) (discussion of effect of Judge's decision).

[*3]

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Accordingly, the Judge's decision is affirmed.

SEPARATE OPINION

CLEARY, Chairman:

This case presents to the Commission the following important questions of first impression: are there circumstances under which citations may be affirmed and civil penalties assessed against persons who are officers and directors of a corporate employer; and, if so, are the appropriate circumstances present in this case? n1

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n1 I note that in Vincent Rizzo d/b/a Vincent Rizzo Construction Co. or Masoncraft, Inc., 75 OSAHRC 20/A2, 3 BNA OSHC 1841, 1975-76 CCH OSHD para. 20,236 (No. 4224, 1975) the Commission did not have occasion to resolve this question. The Administrative Law Judge's discussion of the point is therefore not precedent which we need consider as binding upon us. Leone Construction Co., 76 OSAHRC 12/E6, 3 BNA OSHC 1979, 1975-76 CCH OSHD para. 20,387 (No. 4090, 1976).

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On August 18, 1975, the Secretary of Labor issued four citations [*4] to Life Science Products Company, a corporation, and its officers and directors, William P. Moore and Virgil A. Hundtofte. The citations alleged that respondents had committed two willful and two serious violations of section 5(a) of the Occupational Safety and Health Act of 1970, 29 U.S.C. 651 et seq. [hereinafter referred to as "the Act"]. A notification of proposed penalties totalling $16,500 accompanied the citations. n2

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n2 Citation No. 1 alleged that contrary to section 5(a)(2) of the Act, respondents failed to comply with 29 CFR 1910.141(g)(2) in that employees were allowed to consume food and beverages in a work area exposed to toxic substances. Citation No. 2 alleged a failure to comply with the requirement of 29 CFR 1910.141(g)(4) that employees not be allowed to store food in a work area exposed to toxic substances. Each citation alleged that the violation of section 5(a)(2) was "serious" within the meaning of section 17(k) of the Act, and was accompanied by a proposed penalty of $750.

Citation No. 3 alleged that respondents had violated section 5(a)(1) of the Act by failing to provide feasible engineering control measures to prevent employee exposure to toxic substances. Citation No. 4 alleged that respondents had violated section 5(a)(2) of the Act by, contrary to 29 CFR 1910.132(a), not providing to employees and requiring that employees use and maintain in a sanitary and reliable condition, personal protective equipment such as impervious gloves, impervious boots, impervious coveralls, chemical goggles, proper respirators and head protection, in order to protect employees from toxic materials. Each citation alleged that the violation was "willful" within the meaning of section 17(a) of the Act, and was accompanied by a proposed penalty of $7,500. The toxic substances mentioned in the citations were "HCP" and "Kepone."

[*5]

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After respondents filed a notice of contest, and the Secretary filed a complaint restating and supplementing the allegations in the citations, respondents Moore and Hundtofte filed a motion to dismiss the complaint against them on the ground that they were not "employers" within the meaning of the Act, and that Life Science was the employer. The Secretary opposed the motion, putting forth two legal theories supporting his view of the case, one based on state law and the other on federal law. Administrative Law Judge William E. Brennan denied the motion and held, on the basis of state law, that respondents Moore and Hundtofte could be found individually liable. Respondents thereupon filed an amended answer in which Life Science admitted all allegations and conceded liability, but in which respondents Moore and Hundtofte, although they admitted the substantive allegations against them, denied that they could be held individually liable for any violations.

After a conference in which the parties clarified both the facts and the issues, Judge Brennan issued his decision, affirming the citation and proposed [*6] penalties in their entirety against all respondents. n3 Commissioner Barnako thereafter granted the respondents' petition for discretionary review and invited submissions on the issues it raised. n4 After a full review of the record and consideration of the principles that should govern our decision here, I find for reasons other than those assigned by Judge Brennan that the Judge's order should be affirmed.

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n3 Adoption of only the Secretary's first theory of the case would require that the affirmance of the citations and assessment of penalties be qualified by a finding and conclusion that respondents Moore and Hundtofte were not individually liable for the period before the corporate dissolution. See RPM Erectors, Inc., 74 OSAHRC 62/D14, 2 BNA OSHC 1187, 1974-75 CCH OSHD para. 18,568 (No. 1114, 1974). Judge Brennan recognized the importance of the point at the pre-hearing conference, but appears to have overlooked it in his decision. Adoption of the Secretary's second theory would require that the citation be affirmed in its entirety, without limitation as to time or persons.

n4 Former Commissioner Moran also ordered that review be directed, but did not specify any issues for decision. See Francisco Tower Service., 76 OSAHRC 11/A2, 3 BNA OSHC 1952, 1975-76 CCH OSHD para. 20,147 (No. 4845, 1976).

[*7]

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I.

Life Science Products Company is a Virginia corporation with its principal office and place of business in Hopewell, Virginia. There it engaged about thirty workers to manufacture from the compound "HCP" a pesticide known by its trade name as "Kepone". n5 On July 24, 1974, Kepone manufacturing operations were terminated at the insistence of Virginia health authorities.

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n5 Common generic names for Kepone and HCP are decachlorooctahydro-1,3,4-metheno-2H-cyclobuta(cd)pentalen-2-one, and hexachlorocylcopentadiene, respectively.

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HCP is a toxic liquid with a very strong pungent odor; upon contact with skin it burns quickly and severely. Its vapors and fumes can cause severe eye burns and respiratory irritation. n6 Life Science's "Operating Manual" and "Safety Manual for Handling Raw Materials" contain descriptions to this effect, as well as warnings against skin contact and inhalation, and precautions to be taken against exposure. n7 [*8] Kepone also is a toxic substance. n8 A label supplied by the Allied Chemical Corporation that was placed on almost every 220 pound container of Kepone stated that the compound may be fatal if swallowed, inhaled or absorbed through the skin, and warned "Do Not Get In Eyes, On Skin Or On Clothing", "Do Not Breathe Vapor or Dust", and "Do Not Contaminate Food or Foodstuffs." n9 Similar warnings were also contained in a manual describing the Kepone manufacturing process of Allied Chemical in 1966. n10

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n6 I would take official notice that HCP was entered as a toxic substance in the 1973 edition of the Toxic Substances List, prepared by the National Institute of Occupational Safety and Health (NIOSH) of the Department of Health, Education and Welfare pursuant to section 20(a)(6) of the Act. On the propriety of taking official notice of the Toxic Substances List, see Hydrate Battery Corp., 75 OSAHRC 39/C11, 2 BNA OSHC 1719, 1974-75 CCH OSHD para. 19,429 (No. 2311, 1975) (dissenting opinion).

n7 The Safety Manual for Handling Raw Materials states the following about HCP:

2. HCP

A. Description

Very strong odorous liquid, causes severe eye and skin irritation. Burns skin very quickly and severely. Exposure to vapor and fumes causes eye irritation. Do Not Breathe Fumes.

B. Safety Equipment

1) Long cuff rubber gloves

2) Tall rubber boots

3) A chemical type respirator must be worn

4) Face shield and goggles

The Operating Manual states:

"HCP is a pollutant. 'DO NOT SPILL EVER - NOT EVEN ONE CUPFUL.'"

CHEMICAL

REACTION

FIRST AID

HCP

Severe eye vapor

Water wash &

burns

fresh air

Skin irritation

Odor contamination

Respiratory irritation

n8 The parties are agreed that Kepone appears in the 1974 edition of the Toxic Substances List as compound PC 85750. There it is stated to be lethal to fifty percent of a population of laboratory rats in doses, orally administered, of 114 milligrams for each kilogram of body weight.

I would take official notice that Kepone also appears in the 1973 edition as entry number 15050, in the 1972 edition as entry number 3845, and at page 135 of the 1971 edition. In the latter two editions, the primary generic name was mispelled. The compound's identity can be confirmed, however, because the 1972 entry carries the same Chemical Abstract Registry Number (CAS) as the 1973 entry. Kepone also appears in the 1976 edition, renamed the "Registry of Toxic Effects of Chemical Substances", as PCB 85750, and is listed as a carcinogen.

n9 The full text of the label is as follows:

NET WEIGHT 220 POUNDS

DECACHLOROOCTAHYDRO-1,3,4-metheno-2H-CYCLOBUTA [CD] PENTALEN-2-ONE     %

For Manufacturing Use Only

WARNING - Keep out of reach of children

May Be Fatal If Swallowed, Inhaled Or Absorbed Through Skin.

Do Not Get In Eyes, On Skin Or On Clothing. Wear clean, heavy, synthetic rubber gloves. Wash thoroughly with soap and water after handling and before eating or smoking. During commercial operations, also wear clean waterproof or freshly laundered clothing (coveralls, cap, etc.) and use clean clothing daily. In case of contact, immediately remove all contaminated clothing and wash skin thoroughly with soap and water; for eyes, flush with water for at least 15 minutes and get medical attention. Wash clothing before re-use.

Do Not Breathe Vapor or Dust. During commercial operations or prolonged or repeated exposure, wear an approved respirator. Do not handle indoors unless adequate mechanical exhaust ventilation is provided.

Do Not Contaminate Food or Foodstuffs.

FIRST AID TREATMENT

If swallowed, induce vomiting by giving a tablespoon of salt in a glass of warm water. Repeat until vomit fluid is clear. Have patient lie down and keep warm. CALL A PHYSICIAN IMMEDIATELY.

Note To Physicians: In case of poisoning, administer barbiturates as for anticonvulsive therapy. Observe patient carefully since prolonged treatment may be needed.

DO NOT REUSE THIS CONTAINER

9408

ZH2005A

ALLIED CHEMICAL CORPORATION, MORRISTOWN, NEW JERSEY, U.S.A.

n10 Pertinent portions of the manual read as follows:

Kepone Production - Semiworks, Hopewell, Virginia, March 7 - May 8, 1966, Allied Chemical

* * *

7. Kepone Production - Safety Instructions

7.01 the raw materials and desired product of this process are very toxic or reactive materials which must be handled carefully and kept from the skin, eyes, respiratory system, and mouth. Neoprene gloves, rubber shoes, and face shield must be worn when handling these chemicals and adequate ventilation maintained to remove vapors and dust. * * *

7.02 Safety information on individual materials follows:

(1) HCP (Hexachlorocyclopentadiene) . . . has a very pungent odor. It appears to be readily absorbed through the skin, so prolonged or repeated contact should be avoided. Its vapors should also be avoided.

Precautions: Persons handling this material should use a face shield, Neoprene gloves, a long-sleeved shirt buttoned at the neck and rubber shoes. Leather shoes must not be decontaminated and must be discarded. Other contaminated clothing can be reused if it is thoroughly laundered, then aired for several days. Wearing contaminated clothing can give very painful burns.

* * *

(5) Kepone is a registered trade name for a chlorinated ketone which is used as an insecticide.

* * *

Precautions: This is a toxic material which should be kept from the skin and away from the mouth. Any material spilled should be immediately vacuumed up. Operators should change work clothes daily and should shower before changing to street clothes.

Treatment. In case of skin contact, wash with plenty of soap and water for 15 minutes. If swallowed, induce vomiting . . . . Have patient lie down and keep warm. CALL A PHYSICIAN IMMEDIATELY.

[*9]

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Workers at the Life Science plant were exposed to levels of HCP and Kepone that were causing or likely to cause them serious physical harm or death. Contrary to section 5(a)(1) of the Act, feasible engineering control measures were not taken to control these exposures. Contrary to 29 CFR 1910.132(a), workers were not provided and required to use and maintain personal protective equipment, such as impervious gloves, impervious boots, impervious coveralls, chemical goggles, head protection and proper respirators, that would offer protection from HCP and Kepone. And contrary to 29 CFR 1910.141(g)(2) and (4), employees were allowed to consume food and beverages and store food in a work area exposed to such levels of Kepone and HCP that a substantial probability of serious physical harm or death, as contemplated by section 17(k) of the Act, resulted.

Respondents William P. Moore and Virgil A. Hundtofte were, from the inception of the corporation, its only officers, serving as president and secretary-treasurer, respectively. With their spouses, they constituted the corporation's board of directors. [*10] Both respondents had not only direct responsibility for the working conditions affecting the safety and health of the approximately 30 plant employees, but were in fact responsible for the conditions in the plant that violated the Act. n11 Respondents Moore and Hundtofte admit, as does Life Science, that they willfully n12 failed to use engineering control measures to protect employees against the recognized life and health threatening effects of Kepone and HCP exposure, they willfully failed to provide employees necessary personal protective equipment, and they knew or had reason to know that employees were eating and storing food and beverages in an area exposed to HCP and Kepone. Moreover, Messrs. Moore and Hundtofte acknowledge that they knew of the statements and warnings quoted in note 10 supra, regarding the toxicity of and proper precautions to be taken against exposure to HCP and Kepone.

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n11 The distinction between these two types of "responsibility" was made clearly by the parties and Judge Brennan during a pre-hearing conference:

MR. COLDWELL [attorney for respondents]: . . . It is the position of the Respondents that the record shows the following[:] . . . that Mr. Hundtofte and Mr. Moore were officers of the corporation engaged in the daily activities of the corporation and the two persons and only two persons having direct responsibility for the working conditions affecting the safety and health of its employees. . . .

* * *

MR. HARRIS [attorney for complainant]: You use the phrase direct responsibility. Do you concede for the purpose of the record that these two individuals were the persons effectively in charge of the corporate affairs during this relevant period?

MR. COLDWELL: Yes.

MR. HARRIS: And that the violations of the Occupational Safety and Health Act admitted by the corporation is now apparent on the record were in fact caused by these individuals?

MR. COLDWELL: I am going to answer that rather strangely. I am not going to admit that because I have already admitted it.

MR. HARRIS. You feel that that is the status of the record now and that is an admission?

MR. COLDWELL: Yes.

MR. HARRIS: So that --

MR. COLDWELL: Can I go off the record for just one minute?

JUDGE BRENNAN: All right.

(Discussion had off the record.)

JUDGE BRENNAN: Back on the record.

MR. HARRIS: Now, I understand your agreement to be, Mr. Coldwell, that Mr. Hundtofte and Mr. Moore were the only persons actively involved in the conduct of the corporate affairs during this relevant period.

MR. COLDWELL: This is correct.

MR. HARRIS: And that these individuals are and were the only individuals responsible for the violations of the Occupational Safety and Health Act committed by the corporate during this period.

JUDGE BRENNAN: As opposed to any other living human --

MR. HARRIS: As opposed to any other individuals.

MR. COLDWELL: The answer to that is yes. It is their ultimate responsibility even though they may have had some supervisor or something who was actually doing some part of the work. It is their responsibility. They are the persons and the only persons who are responsible for the conditions that existed at the plant that constituted violations.

MR. HARRIS: I am not talking really about ultimate responsibility. I am talking about the fact that they in fact were actively engaged in management of corporate affairs during this period and were in fact not ultimately responsible, but were in fact responsible for the activities committed by the corporation which constituted violations of the Occupational Safety and Health Act.

JUDGE BRENNAN. As a factual matter.

MR. HARRIS: As a factual matter without getting into any further details.

MR. COLDWELL: The answer is yes in that it has been admitted in the pleadings and previously, the same thing.

n12 The complaint described the willful violations as follows:

The violations . . . are willful . . . in that [they] were intentional and knowing, as distinguished from inadvertent and the Respondents were conscious that their actions or omissions constituted violations of the Act, or, in the alternative, even though Respondents may not have been consciously violating the Act, they were aware that hazardous conditions existed and made no reasonable effort to eliminate the conditions.

[*11]

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II.

The issues presented by the parties on review are nearly identical to those presented to Judge Brennan. The Secretary argues that under Virginia law, n13 the corporate existence of Life Science ended, when on June 1, 1975, it was dissolved by operation of law for failure to pay franchise taxes and to file its annual report to the Virginia State Corporation Commission. Va. Code 13.1-91. The directors of Life Science thereupon became trustees in dissolution, who, it is urged, were obliged to wind up the affairs of Life Science and would incur personal liability as partners if the business of the dissolved corporation were continued. The Secretary argues, and Judge Brennan held, that the subsequent order of reinstatement issued by the State Corporation Commission on August 13, 1975, while it deemed the corporate existence to have continued from the date of dissolution, had, in the words of Va. Code 13.1-92, "no effect on any question of personal liability of the directors, officers or agents in respect of the period between dissolution and reinstatement." Judge Brennan therefore held that because [*12] respondents Moore and Hundtofte had continued business operations from June 1, 1975 to July 24, 1975 (that is, the period between dissolution and the cessation of business operations) they had incurred personal liability for violations of the Act then committed. Respondents argue that under Virginia law, personal liability is not incurred by directors who continue the business of the dissolved corporation, except under circumstances not present here.

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n13 Before Judge Brennan, the complainant relied on United States v. United States Vanadium Corp., 230 F.2d 646 (10th Cir.), cert. denied, 351 U.S. 939 (1956) for the proposition that state law controls the question of whether Life Science had lost its corporate existence. See also United States v. P.F. Collier & Son Corp., 208 F.2d 936 (7th Cir. 1953). But neither decision seems to have considered the possibility that federal law or policy could perpetuate the existence of a corporation dissolved under state law if reference to state law would frustrate the purpose of a federal statute. The reasoning of the Vanadium and Collier courts was questioned, and the Supreme Court cases relied upon in Collier were distinguished, by the Fifth Circuit in Alamo Fence Co. v. United States, 240 F.2d 179, 181 n.5, 183 (5th Cir. 1957). See also United States v. Brakes, Inc., 157 F. Supp. 916, 918 (S.D.N.Y. 1958). Indeed, the question was expressly stated to have been left open by the Supreme Court in Melrose Distributors, Inc. v. United States, 359 U.S. 271 (1959). The Ninth Circuit, however, has held that, although the matter is one of federal law, because nearly all corporations are creatures of state law, the existence and status of corporations should be determined by reference to state law, unless the application of that law would conflict with federal policy. United States v. Polizzi, 500 F.2d 856, 907 (9th Cir. 1974). Because I consider it unnecessary in this case to apply state law, I need not inquire whether reference to the Virginia laws regarding corporate existence, especially those regarding dissolution, reinstatement, or personal liability, would on balance frustrate the remedial purposes of this legislation. I would, however, also express my disagreement with the Secretary's assertion, and Judge Brennan's holding, that the choice of law principle enunciated by the Supreme Court in Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) points to the application here of state law on corporate dissolution. The Erie decision interpreted only the Rules of Decision Act, 28 U.S.C. 1652 (1970), and discussed only the constitutional limitations on the application of federal law by federal courts sitting in diversity cases. The Commission, however, does not sit in diversity cases and therefore the constitutional basis of Erie is inapposite. The Rules of Decision Act is applicable only to the "courts of the United States", and it does not appear that agencies such as the Commission come within that term. Moreover, the policy underlying Erie's holding, that "[t]he laws of the several states "included their decisional law or "common law", was the avoidance of forum-shopping and unequal justice. See Hanna v. Plumer, 380 U.S. 460 (1965). These problems do not appear under OSHA. Finally, the Rules of Decision Act is inapplicable "where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide. . . ." It remains to be ascertained, however, whether Congress intended that the meaning of the term "corporation" as used in section 3(4) of the Act, is to be gleaned solely by reference to state law. Certainly, principles of national uniformity and practical administration by federal authorities suggests that exclusive reference was not intended. Cf. Brennan v. Gilles & Cotting, Inc., 504 F.2d 1255, 1261 (4th Cir. 1974); United States v. Standard Oil Company of California, 332 U.S. 301 (1974). It is nevertheless true that it is generally state law that provides business organizations with what is considered to be corporate status. Thus, it would appear reasonable to hold that Congress generally intended that in interpreting the term "corporation", we consider state law, except on those occasions when to do so would be inconsistent with the primary purposes of the Act. See DeSylva v. Ballentine, 351 U.S. 570 (1956) (state family law applied only within "permissible variations"). Cf. McClure v. Borne Chemical Co., 292 F.2d 824, 834-835 (3d Cir. 1961); Fahs v. Martin, 224 F.2d 387, 392 (5th Cir. 1955). The correctness of the Commission's interpretation of "employer," however, is a question of Federal law. Clarkson Construction Co. v. O.S.H.R.C., 531 F.2d 451 (10th Cir. 1976). Cf. Textile Workers Union v. Lincoln Mills, 353 U.S. 448 (1957).

[*13]

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The Secretary also argues that under principles of federal law, respondents Moore and Hundtofte could be held liable under the Act for the period before the corporate dissolution, and regardless of the dissolution, after it. He argues that cases such as United States v. Park, 421 U.S. 658 (1975), and United States v. Dotterweich, 320 U.S. 277 (1943), dealing with criminal actions under section 301(k) of the Federal Food, Drug and Cosmetics Act, 21 U.S.C. 331(k), and state court decisions dealing with workmen's compensation acts and child labor laws, Heal v. Oliver, 438 S.W.2d 313 (Ark. 1969); Overland Cotton Mill Co. v. People, 32 Colo. 263, 75 P. 924 (1904) (criminal prosecution), support his position. A decision of a District court in United States v. Pinkston-Hollar, Inc., 76-33-CR6 (D.Kan., August 16, 1976), unofficially reported, 4 BNA OSHC 1697, 1976-77 CCH OSHD para. 21,202, a criminal prosecution arising under section 17(e) of the Act, is also relied upon.

Respondent argues that there are no cases holding officers or directors liable under the Act, and that the thrust [*14] of the Act is to impose obligations and duties upon the "employer." Thus, respondent argues, "[w]here a corporation is the employer, there is absolutely no basis whatsoever, either in the Act or cases decided under it, to hold liable any officers or directors." Respondent cites among other cases, Skidmore v. Travelers Insurance Co., 356 F. Supp. 670 (E.D.La. 1973), aff'd per curiam, 483 F.2d 67 (5th Cir. 1973), and cases following it. Russell v. Barley, 494 F.2d 334 (6th Cir. 1974); and Jeter v. St. Regis Paper Co., 507 F.2d 973 (5th Cir. 1975).

III.

Both parties are somewhat wide of the mark. Although cases dealing with other remedial statutes and criminal actions under them may be instructive, they are not controlling here. See Sugar Cane Growers Cooperative of Florida, 76 OSAHRC 62/E4, 4 BNA OSHC 1320, 1321, 1976-77 CCH OSHD para. 20,795 (No. 7673, 1976). Skidmore and similar cases such as Russell v. Barley, were, for one thing, primarily concerned with the question of whether the private remedy of compensatory relief may be implied under the Act. They did not arise in the enforcement of public rights under the Act, and therefore do not authoritatively [*15] settle the matter in the context presented here.

Careful analysis also indicates that we need not resolve the question of whether the corporate veil of Life Science should be "pierced", (Compare Advance Specialty Co., 76 OSAHRC 35/D4, 3 BNA OSHC 2072, 2075-2076, 1975-76 CCH OSHD para. 20,490 (No. 2279, 1976) (lead opinion)) for the corporate form does not protect a corporation's agents, whether they be officers or supervisors, from liability for acts they perform on behalf of the corporation. n14 Yet, even if the Commission were to adopt under OSHA the general rule of agency law that an agent is at least as liable for his actions as any other person, n15 the question before us would not change, for no person, either real or corporate, n16 is liable under section 5(a) of the Act unless he is an "employer." n17

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n14 See 1 W. Fletcher, Cyclopedia of the Law of Private Corporations 41.3, at 192-193 (rev. perm. ed. 1974):

In some cases the "fiction" [of the corporate entity] seems to have been set up and then "disregarded," both unnecessarily. Rights and liabilities may exist, even criminal liability, through or beyond a corporation, which may be enforced without need to disregard it or by regarding it as an agency. Thus, a defense to crime that the act done was by or to a corporation and was not as charged, is of no avail to exculpate an accused from his offense. In case of a tort, the responsible superior may be charged because he is in law the tortfeasor, acting through another; but if he is not the superior and has not acted, he is not liable. But the existence of a corporation should not be allowed to shield an individual who is in control from the consequences of tortious acts maliciously ordered or directed by him to be done and perpetrated through the corporate entity. [Footnotes omitted.]

* * *

See also, id. at vol. 3, 1117 (rev. perm. ed. 1975):

The principles governing the liability of agents to third persons, as set forth in leading textbooks on the law of agency, apply equally well where third persons attempt to hold officers or agents personally liable on corporate contracts executed by them. Hence, reference should be made thereto for a more extended discussion of the law applicable to this subject. [Footnote omitted.]

The statement at 41.3, that rights and liabilities may be enforced by regarding the corporation as an agency can be understood once it is recognized that the theoretical roots of much of the corporate veil piercing doctrines applied by state courts are also found in agency principles. Thus, the "mere instrumentality" or "conduit" cases can be seen as decisions in which a shareholder is found to be a principal, and the corporation his agent for whose actions the shareholder is liable under the doctrine of respondent superior. See Walkovsky v. Carlton, 18 N.Y.2d 414, 276 N.Y.S.2d 585, 223 N.E.2d 6, 8 (1966) (per Fuld, J.). For a case noting the distinction between liability as a corporate agent and liability under veil-piercing principles applied under state law, see Zubik v. Zubik, 384 F.2d 267 (3d Cir. 1967), cert. denied, 390 U.S. 988 (1968).

n15 The usual rule is that, although the dereliction of a principal may not be enforced against his agent, and therefore a corporate officer is not liable merely by reason of his position for acts of the corporation, 3 C.J.S. Agency 361, 19 C.J.S. Corporations 842, an agent such as a corporate officer is liable in the same manner as any other person for torts or crimes he commits in the service of his principal. 3 C.J.S. Agency 379; Restatement (Second) of Agency 343, 359A (1957) [hereinafter cited as "Restatement"]. Thus, he is liable for torts in which he has participated or which he has authorized or directed. 19 C.J.S. Corporations 845; Restatement 344; 3 W. Fletcher, Cyclopedia of the Law of Private Corporations 1135 (rev. perm. ed. 1975) [hereinafter cited as "Fletcher"]. See e.g., Davis H. Elliot Co., Inc. v. Caribbean Utilities Co., Ltd., 513 F.2d 1176 (6th Cir. 1975) (Kentucky law); Solo Cup Co. v. Paper Machinery Corp., 359 F.2d 754 (7th Cir. 1966) (Wisconsin law), Martin v. Wood, 400 F.2d 310, 313 (3d Cir. 1968) (Pennsylvania law). The agent may not be held liable, however, if the party bringing the action against him has previously agreed, implicitly or explicitly that the agent would not incur personal liability on account of his actions. See Restatement 320, Comments a and b. Thus, as to contracts, an authorized agent for a disclosed principal is generally not personally liable on the contract to the other contracting party, but is liable if he does not disclose that he is acting for a principal. 3 C.J.S. Agency 365, 369; Restatement 320-322; Fletcher 1118, 1120. On some occasions, the federal courts have had occasion to apply these general principles as a matter of federal law. See e.g., Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 693-694 & nn. 15, 16 (1949); Zubik v. Zubik, 384 F.2d 267, 275 (3d Cir. 1967) (admiralty law), cert. denied, 390 U.S. 988 (1968); Jeanty v. McKey & Poague, Inc., 496 F.2d 1119 (7th Cir. 1974) (action for damages under Title VII of 1968 Civil Rights Act).

n16 There is, of course, no doubt that all respondents are persons within the meaning of the Act. Section 3(4) of the Act reads as follows:

For the purposes of this Act --

* * *

(4) The term "person" means one or more individuals, partnerships, associations, corporations, business trusts, legal representatives, or any organized group of persons.

n17 Section 3(5) reads in pertinent part as follows:

For the purposes of this Act --

* * *

(5) The term "employer" means a person engaged in a business affecting commerce who has employees . . . .

[*16]

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That Life Science is an "employer", does not mean that the respondents Moore and Hundtofte may not also be considered employers. There is no reason why an employee cannot, at least for purposes of this Act, be considered to have more than a single employer; a person, whether by virtue of his control over the physical conditions of the worksite or over the employees of another employer, may be considered to be a joint employer. Clarkson Construction Co. v. O.S.H.R.C., 531 F.2d 451 (10th Cir. 1976) (control over employee); Brennan v. Gilles & Cotting, Inc., 504 F.2d 1255, 1262 (4th Cir. 1974) (control over site); see Anning-Johnson Co. v. O.S.H.R.C., 516 F.2d 1081, 1091 n.21 (7th Cir. 1975) (same). Cf. Beaver v. Jacuzzi Brothers, Inc., 454 F.2d 284 (8th Cir. 1972) (state workmen's compensation act) (control over employee).

The argument is made that because the Act applies only to employers, corporate officers and directors cannot under any circumstances be found to have duties under the Act. This proves too much, however, and treats the matter too simply. n18 I note that the [*17] provision for criminal violations in section 17(e) of the Act is also limited to "employers", but it has been held that certain corporate officials may, under appropriate circumstances, fall within that section. United States v. Pinkston-Hollar, Inc., supra. n19 In McCown v. Heidler, 527 F.2d 204 (10th Cir. 1975), a court concluded the top officers and directors of a corporate land developer may be held individually liable under an anti-land fraud statute applicable only to "developers" because the statutory purpose could not be effected if only the corporation were found liable. n20

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n18 Respondents attach great significance to the inclusion of the phrase "agent of the employer" in the definition of "employer" in section 2(2) of the Labor Management Relations Act of 1947, 29 U.S.C. 152(2), and the phrase "any person acting as an agent of an employer, directly or indirectly" in the definition of "employer" in section 3(d) of the Fair Labor Standard Act, 29 U.S.C. 203(d), and the absence of any similar phrase under OSHA. I think that the significance of the matter is exaggerated by respondents. The inclusion of such phrases under the noted statute indicates a congressional intent to subject to liability in every case every agent of an employer. Their absence under OSHA is far more likely to represent a rejection of such a rigid rule than an attempt to foreclose by silence the possibility that in some appropriate case an employer's agents may be found liable by the administrative agencies entrusted with the enforcement of the Act. See, in addition to McCown v. Heidler, 527 F.2d 204 (10th Cir. 1975), the following cases in which agents are viewed even in the absence of a special statutory provision, as sharing legal liability ordinarily borne only by their principals: Guziak v. F.T.C., 361 F.2d 700 (8th Cir. 1966), cert. denied, 385 U.S. 1007 (1967) (sole stockholder and director); Thiret v. F.T.C., 512 F.2d 126 (10th Cir. 1975); United States v. Johnson, 541 F.2d 710 (8th Cir. 1976) (civil penalties assessed against top officer for violation of cease and desist order); Benrus Watch Co., Inc. v. F.T.C., 352 F.2d 313, 324-325 (8th Cir. 1965), cert. denied, 384 U.S. 939 (1966); Clinton Watch Co. v. F.T.C., 291 F.2d 838 (7th Cir. 1961), cert. denied, 368 U.S. 952 (1962). Consumers Sales Corp. v. F.T.C., 198 F.2d 404 (2d Cir. 1952); Steelco Stainless Steel, Inc. v. F.T.C., 187 F.2d 693, 697 (7th Cir. 1951); Goodman v. F.T.C., 244 F.2d 584, 593-594 (9th Cir. 1957).

Thus, for the reasons noted in the text, we may conclude that as a general rule agents are not to be viewed under OSHA as sharing liability with their principals, but that in an appropriate exceptional case, they may be.

n19 The court limited its holding to "responsible corporate officials who have the power to prevent or correct violations of the . . . Act . . . ." Compare Sherman v. United States, 282 U.S. 25 (1930) (Holmes, J.) in which officers of a common carrier who had no hand in or knowledge of alleged violations committed by others were held not to fall within a statute directed only to common carriers. While the reasoning of the Court appears broad, and suggests an inconsistency with Pinkston-Hollar, the Court was careful to point out the lack of involvement of the defendants in the illegal acts and confined its opinion to the facts of the case. 282 U.S. at 29.

n20 In McCown, the court did not apply state law veil-piercing principles based on fraud, but noted that prevention of fraud was the purpose of the statute before it and found liability of corporate officers and directors on the ground that it served that purpose. See United States v. J.B. Williams, Inc., 498 F.2d 414, 436-437 (2d Cir. 1974); Sebastopol Meat Co. v. Secretary of Agriculture, 440 F.2d 983 (9th Cir. 1971); Capitol Telephone Co. v. F.C.C., 498 F.2d 734, 738 (D.C. Cir. 1974).

[*18]

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In considering the scope of the term "employer", the Commission is not confined by the restrictive concepts of the common law. Consistent with Brennan v. Gilles & Cotting, Inc., supra, we have considered the legislative purpose to be controlling. As we stated in Gordon Construction Co., 4 BNA OSHC 1581, 1582, 1976-77 CCH OSHD para. 20,968 (No. 7390, 1976): n21

The question of whether an employment relationship exists is answered by considering all the facts in light of the Act's purpose. The common law definition of "employer" as determined by the so-called "control test" is a term of tort law evolved for the purpose of determining a superior's liability for the acts of his subordinates. Brennan v. Gilles & Cotting, Inc., 504 F.2d 1255, 1261 (4th Cir. 1974). The scope of the common law definition of "employer" is related to the tort doctrine of respondeat superior and does not take into account the purpose of the Act. It is, therefore, not suitable for determining liability under the Act. Frohlick Crane Service, Inc. v. O.S.H.R.C., 521 F.2d 628, 631 (10th Cir. 1975); [*19] Brennan v. Gilles & Cotting, Inc., supra. Instead, we must define employment relationships on a case by case basis, considering both the economic realities of the situation and the remedial purposes intended by Congress. Brennan v. Gilles & Cotting, Inc., supra; Dayton Tire & Rubber Co., [75 OSAHRC 31/C3,] 1974-75 CCH OSHD para. 19,246, 2 BNA OSHC 1528 (No. 2719, 1975), [aff'd per curiam, No. 75-1316 (D.C. Cir., June 10, 1976), unofficially reported, 4 BNA OSHC 1497].

Nevertheless, the ability to direct workers or influence their working conditions has been considered a significant badge of an employment relationship because it indicates whether the person alleged to be an "employer" has the power to abate the violative conditions. n22 See e.g. Dayton Tire & Rubber Co., supra (lead opinion). See also Clarkson Construction Co. v. O.S.H.R.C., supra, 531 F.2d at 458, quoting James E. Roberts Co. and Soule Steel Co., 74 OSAHRC 21/B6, 1 BNA OSHC 1684, 1686, 1973-74 CCH OSHD para. 17,659 (Nos. 103 & 118, 1974) (concurring and dissenting opinion). And I note that to prevent frustration of the statutory purpose, the ability to [*20] abate or to otherwise protect or control employees or their working conditions may form a basis for finding an employment relationship n23 within the contemplation of this Act, even if other usual indicia of an employment relationship (a contract of employment, direct payment for services, etc.) are absent. Clarkson Constr. Co. v. O.S.H.R.C., supra; see Brennan v. Gilles & Cotting, Inc., supra. n24

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n21 In Gordon, we surveyed our previous cases and stated that other indicia of an employment relationship are whether the alleged employer is considered by the workers to be their employer, and whether the alleged employer pays the workers their wages. 4 OSHC at 1582. There is no indication in this case that these factors apply to respondents Moore and Hundtofte.

n22 The swift abatement of violative conditions is vital to the Act. See Brennan v. Winters Battery Mfg. Co., 531 F.2d 317, 321-323 (6th Cir. 1975), cert. denied, 425 U.S. 991 (1976); Brennan v. O.S.H.R.C. and Kesler & Sons Constr. Co., 513 F.2d 553 (10th Cir. 1975); Dunlop v. Haybuster Mfg. Co., 524 F.2d 222 (8th Cir. 1975). The Act is therefore designed to permit the swift issuance of abatement orders to protect employees endangered by violative working conditions. See Atlas Roofing Co. v. O.S.H.R.C., 97 S.Ct. 1261, 1264 (1977); In re Restland Memorial Park, 540 F.2d 626 (3d Cir. 1976).

n23 Note, however, that under section 5(a)(2), the affected employees need not necessarily be employed by the cited employer. See e.g., Jackson Construction Co., 77 OSAHRC 137/C14, 5 BNA OSHC 1608, 1977-78 CCH OSHD para. 21,981 (No. 13843, 1977); Huber, Hunt, Nichols & Blount Bros., 76 OSAHRC 71/A12, 4 BNA OSHC 1406, 1976-77 CCH OSHD para. 20,837 (No. 6007, 1976). See generally, Brennan v. O.S.H.R.C. and Underhill Constr. Corp., 513 F.2d 1032 (2d Cir. 1975); Anning-Johnson Co., 76 OSAHRC 54/A2, 4 BNA OSHC 1193, 1975-76 CCH OSHD para. 20,690 (Nos. 3694 & 4409, 1976); Grossman Steel & Aluminum Corp., 76 OSAHRC 54/D9, 4 BNA OSHC 1185, 1975-76 CCH OSHD para. 20,691 (No. 12775, 1976).

n24 Consider the Commission's previous decisions allocating abatement responsibilities on multiple employer construction sites -- a subject which all but one of the above cases concern. In the early days of the Act, the Commission was reluctant to find that an employment relationship existed between general contractors and employees of subcontractors. See e.g., Gilles & Cotting, Inc., 73 OSAHRC 44/E13, 1 BNA OSHC 1388, 1973-74 CCH OSHD para. 16,763 (No. 504, 1973), rev'd and remanded, 504 F.2d 1255 (4th Cir. 1974). Against the objection that employment relationships under the Act must be determined on the basis of the purpose of the legislation and with reference to the degree of control that a general contractor exercises, a divided Commission refused to "create" an employment relationship "where it does not exist in fact." Compare Gilles & Cotting, Inc., 1 OSHC at 1389, with J.E. Roupp & Co. and Denver Dry Wall Co., 74 OSAHRC 20/C1, 1 BNA OSHC 1680, 1681, 1973-74 CCH OSHD para. 17,660 (Nos. 146 & 147) (concurring and dissenting opinion). This failure to imply an employment relationship between the general contractor and employees of his subcontractors left many construction sites without a central authority responsible for the abatement of safety hazards. Employees were not accorded the protection intended by Congress and the remedial purposes of the Act were frustrated when, for example, a subcontractor creating a hazard was no longer at the site and could not be located, and other subcontractors were unable to abate the hazard.

[*21]

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It is, however, my view that the Commission should generally not consider an agent with broad authority over employees or their working conditions to be an employer jointly with his principal. In cases bordering on this one, it has been enough to serve the statutory purpose to impute to the principal the knowledge and actions of his agents. See generally, the administrative and judicial opinions in Ocean Electric Co., 75 OSAHRC 6/C14, 3 BNA OSHC 1705, 1975-76 CCH OSHD para. 20,167 (No. 5811, 1975), aff'd, No. 76-1060 (4th Cir., August 2, 1977). Whether by direct supervision or other means, the principal usually retains such control over the actions of his agents, generally a foreman or other supervisor, that the authority exercised by the agent is relatively small, and the ability of the principal to conform to the requirements of the law is relatively high. Thus, the purposes of the Act are adequately served when, in the area of health and safety, an agent recognizes that he is accountable for his actions to his principal, and the principal recognizes his own accountability for the actions [*22] of his agent.

In this case, however, this accountability was not present. Although the business of Life Science required the handling of large amounts of HCP and Kepone, a system of checks on the conduct of its agents did not exist. The persons possessing the highest executive authority within Life Science were themselves participants in the illegal acts, willfully or knowingly exposing employees to health hazards. The same persons, with their spouses, erected and controlled the corporate structure. The corporation accordingly lacked any independent means to conform the actions of these officers and directors to the requirements of the Act, and was unable to protect its employees from their derelictions. The results were not merely technical or temporary violations of the Act, but violative conditions of high gravity and seriousness. Under these circumstances, it would be inadequate to look only to the corporate principal Life Science. We must also look directly to the executive officers and directors whose direction and influence over employees and their working conditions were as great as the titular employer. If they could not be held directly accountable for their actions [*23] in this case, the primary statutory relief -- the protection of the lives and health of the working men and women of the Nation -- would be frustrated. Cf. N.L.R.B. v. Jones & Laughlin Steel Corp., 301 U.S. 1, 48-49 (1937). I therefore conclude that Messrs. Moore and Hundtofte are properly considered "employers" in this unusual case. n25

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n25 In reaching a contrary conclusion, Commissioner Barnako relies heavily on United States v. Sexton Cove Estates, Inc., 526 F.2d 1293, 1300-1301 (5th Cir. 1976). I have eschewed such reliance for two reasons. First, I respectfully suggest that the case was wrongly decided, for the statute applied there is expressly directed to "[e]very person" as well as "every corporation". The corporate officer in Sexton Cove was a "person" who violated the River and Harbors Act. The Court suggests that a person's status as a corporate officer gives him a shield against liability for his own acts that another person would not have. This is contrary to general agency principles. Second, and more to the point. I note that the Sexton Cove court explicitly left open the possibility that under certain circumstances, which were not present there, officers could indeed be found personally liable. See id. at 1301 & nn. 20-22, noting the possibility of "piercing the corporate veil" and citing, among other cases, McCown v. Heidler, supra. Also, I am unpersuaded by my colleague's attempt to distinguish McCown v. Heidler. The McCown court focussed on the purposes behind the Interstate Land Sales Disclosure Act, and concluded that they would be frustrated in the case of defunct corporations if corporate officers could not be held personally liable. Considerations of fraud and defunctness, however, while highly relevant under an anti-fraud statute are less so under OSHA.

Also, I am troubled by my colleague's assertion that "[t]he Skidmore case . . . directly addresses the issue with which we are concerned here, and concludes that the executive officers of a corporation are employees of that corporation, not employers in their own right." The Skidmore court neither confronted the issue here nor drew this conclusion. Skidmore simply holds that executive officers have no duties under the Act because the Act applied only to employers. The Skidmore court did not hold that officers may not be liable if they are "employers", for the plaintiff in Skidmore never argued, and therefore the court never discussed, whether the executive officers could be considered "employers". Rather the plaintiff sought to imply an additional duty against corporate officers.

[*24]

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Accordingly, I would order that the citations be affirmed and the proposed penalties be assessed with respect to the respondents Moore and Hundtofte, and Life Science.

BARNAKO, Commissioner:

As Chairman Cleary has observed, officers and directors of a corporate employer are normally not themselves considered employers under the Act. The question before us is whether the unique circumstances present in this case should lead us to conclude that Hundtofte and Moore were employers, and therefore individually subject to civil penalties for violations of the Act. n1 I would reverse the judge and find that Hundtofte and Moore were not employers. I think that neither Virginia statutory law nor federal case law suggests a contrary conclusion.

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n1 I am aware of the extensive publicity surrounding the manufacture of Kepone by Life Science, and of the serious damage to the health of a number of employees. It may be that Hundtofte and Moore were negligent, or even grossly negligent. That is not, however, the question before us.

[*25]

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The Secretary makes two basic arguments on review. First, he contends that the judge properly decided that Moore and Hundtofte were employers under Section 3(4) and (5) n2 of the Act because Life Science Products Company (Life Science), the corporation of which they were directors and officers, had been dissolved. Second, the Secretary argues that Moore and Hundtofte were employers under the Act before, during and after the corporation was dissolved and regardless of such dissolution.

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n2 Section 3(4) of the Act reads:

The term 'person' means one or more individuals, partnerships, associations, corporations, business trusts, legal representatives, or any organized group of persons.

Section 3(5) of the Act reads:

The term 'employer' means a person engaged in a business affecting commerce who has employees, but does not include the United States or any State or political subdivision of a State.

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Pursuant to Section 13.1-91 n3 of the [*26] Code of Virginia of 1950, Life Science was dissolved by operation of law on June 1, 1975 for its failure to comply with the requirements of that statute. Under the terms of the statute, therefore, and as of June 1, 1975 the properties and affairs of Life Science automatically passed to its directors (which of course included Moore and Hundtofte) as trustees in dissolution. The statute required Moore and Hundtofte to take a number of steps leading to the liquidation of the corporation. Instead, business as usual prevailed at Life Science. This was so because the corporate officers did not know that the automatic dissolution of their corporation had occurred. Normal business activities continued until July 24, 1975 when operations of the Life Science plant were terminated by order of the Virginia Department of Health. Subsequently, however, when Hundtofte and Moore learned that the corporation was dissolved, they immediately applied for its reinstatement. A certificate of reinstatement was issued to Life Science by the state corporation commission on August 13, 1975.

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n3 The text of section 13.1-91 reads:

Automatic dissolution. - If any domestic corporation shall fail on two successive annual dates to file the annual report required by this Act or to pay the annual registration fee or franchise tax required by law, the Commission shall mail notice to it of impending dissolution. Whether or not such notice be mailed, if the corporation fails before the first day of June after the second such annual date to file the annual report or to pay the annual registration fees or franchise taxes, together with a penalty of five per centum of the registration fees and franchises taxes and interest at the rate of six per centum per annum on the total amount of any registration fees and franchise taxes assessed, such corporation shall be thereupon automatically dissolved as of the first day of June and its properties and affairs shall pass automatically to its directors as trustees in dissolution. Thereupon, the trustees shall proceed to collect the assets of the corporations, sell, convey and dispose of such of its properties as are not to be distributed in kind to its stockholders, pay, satisfy and discharge its liabilities and obligations and do all other acts required to liquidate its business and affairs, and, after paying or adequately providing for the payment of all its obligations, distribute the remainder of its assets, either in cash or in kind, among its stockholders according to their respective rights and interests.

[*27]

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Virginia Statute 13.1-92 n4 provides that upon entry by the state corporation commission of an order of reinstatement ". . . the corporate existence shall be deemed to have continued from the date of dissolution . . ." of the corporation. It also provides, however, ". . . that reinstatement shall have no effect on any question of personal liability of the directors, officers or agents in respect of the period between dissolution and reinstatement." The interpretation of that last quoted clause is in dispute between the parties.

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n4 The text of section 13.1-92 reads:

Reinstatement. - A corporation that has been dissolved pursuant to 13.1-91 may apply to the Commission for reinstatement within five years hereafter and the Commission shall enter an order reinstating the corporate existence upon receiving an annual report together with payment of a reinstatement fee of one hundred dollars plus all registration fees, penalties and franchise taxes that were due before the dissolution and that would have become due thereafter if dissolution had not occurred, together with interest to the date of the application. The application for reinstatement may be by letter signed by an officer or director of the dissolved corporation and the Commission shall assess the amounts that would have become due together with interest to the date of the application. Upon the entry by the Commission of an order of reinstatement, the corporate existence shall be deemed to have continued from the date of dissolution except that reinstatement shall have no effect on any question of personal liability of the directors, officers of agents in respect of the period between dissolution and reinstatement. If the name of a corporation that has been dissolved has been assumed or reserved or registered by any other person or corporation the reinstated corporation shall not engage in business until it has amended its articles of incorporation to change its name.

[*28]

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I do not think the legislature of the state of Virginia meant by those terms to assign personal liability to corporate officers, who did not even know that the charter of their corporation had been dissolved by operation of law, merely for continuing to run that operation in the same fashion as it had been run prior to its dissolution. The statute is primarily intended to provide administrative convenience to corporations. The comment to section 13.1-92 states.

This section takes the place of the cumbersome machinery provided by sections 13-77 through 13-82 (the earlier version of the statute). It applies only to corporations that have lost their charters automatically, because all other dissolved corporations will have been fully liquidated before dissolution.

The new section will benefit corporations that have failed to pay the tax through negligence because it will eliminate formalities. The three-year limit contained in Section 13-77 is omitted. If the persons in charge of the corporation would rather pay back taxes than create a new corporation, permission to reinstate the old corporation [*29] does not conflict with any public or private interest. n5

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n5 Section 13.1-132 provides that House Document No. 5, 1956 Session, General Assembly of Virginia, should be examined in case of doubt or conflict in construing the corporation statute which includes sections 13.1-91 and 13.1-92. The quoted matter appears on page 77 of House Document No. 5.

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The Secretary argues, however, that the notice of dissolution sent to the dissolved corporation by the Virginia State Corporation Commission indicates that Hundtofte and Moore would be personally liable for the regular business activities of the dissolved corporation. n6

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n6 The pertinent part of the notice provides that "any person who does transact business in the name of the above-named corporation may find himself personally liable on the contracts he purports to make in its name."

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I do not agree that [*30] the footnoted reference supports the Secretary's contention. The quotation could certainly be read to apply only to the officers of a dissolved corporation that, unlike the situation here, is never subsequently reinstated. Further, the purpose of the notice might only be to warn corporate officials against engaging in the fraudulent practice of contracting with other parties and then attempting to disclaim liability for such contracts by hiding behind their dissolved corporation.

I therefore conclude that section 13.1-92 was not intended to create liabilities for the officers, directors or agents of corporations in circumstances such as these. Since that section states that reinstatement is deemed to continue from the date of dissolution, the question is whether Moore and Hundtofte were individually liable for their acts during the June 1, 1975 to August 13, 1975 dissolution period on the same basis as if the automatic dissolution of the corporation had never occurred.

The Secretary contends that Hundtofte and Moore fall within the definition of the term employer under the Act regardless of the existence of the dissolution period and that they should be considered employers along [*31] with the corporation. He argues that in determining whether one is an employer, the Commission should be guided by the Act's remedial purpose of providing safe and healthful working conditions for employees. He contends that corporate officers and directors who have direct responsibility for working conditions should be included as employers to provide the desirable broad coverage that the Act should be accorded.

The Secretary also argues that if there were no corporation involved here, there would be no question whether the cited individuals were employers. He then asserts that the fact a business has been organized in corporate form has not prevented courts from regarding corporate agents as employers, citing a 1969 state of Arkansas civil case n7 and a 1904 state of Colorado criminal case n8 as examples.

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n7 Neal v. Oliver, 438 S.W.2d 313 (Ark. 1969).

n8 Overland Cotton Mill Co. v. People, 32 Colo. 263, 75 P. 924 (1904).

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Finally, the Secretary argues that the United States District Court in Kansas has [*32] rejected a contention that corporate officers may not, as a matter of law, be deemed employers under the Act. That court held that whether a corporate vice president, as well as a corporation, was an employer under the Act was a question of fact for the jury to determine. United States v. Pinkston-Hollar, Inc. and Robert Pinkston, No. 76-33-CR6 (D. Kan. Aug. 16, 1976), unofficially reported, 4 BNA OSHC 1697, 1699, 1976-77 CCH OSHD para. 21,202 (1976).

Hundtofte and Moore argue that imposition of personal liability is not dictated by the Act and that if Congress had intended to include corporate officers and directors within the term employer, it would have written a broader definition of the term as the Congress has done in the Fair Labor Standards Act n9 and the National Labor Relations Act. n10 The corporate officials cite Skidmore v. Travelers Insurance Company, 356 F.Supp 670 (E.D. La. 1973), aff'd, 483 F.2d 67 (5th Cir. 1973), where the court referred to officers of a corporation as the employees of that corporation and not as employers in their own right.

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n9 The definition of employer in the Fair Labor Standards Act reads:

. . . 'Employer' includes any person acting directly or indirectly in the interest of an employer in relation to an employee, but shall not include the United States or any labor organization (other than when acting as an employer), or anyone acting in the capacity of officer or agent of such labor organization. . . . 29 U.S.C. 203(d).

n10 The definition of employer in the National Labor Relations Act reads:

The term 'employer' includes any person acting as an agent of an employer, directly or indirectly, but shall not include the United States or any wholly owned government corporation. . . 29 U.S.C. 152(2).

[*33]

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The case law holdings fall on both sides of this issue. The Secretary has cited cases tending to support his position on the matter n11 while the corporate official have done the same. The cases cited by the Secretary are neither dispositive nor persuasive. With one exception n12 they either construe different federal statutes or represent isolated state court holdings.

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n11 People v. Knapp, 206 N.Y. 373, 99 N.E. 841 (1922); United States v. Dotterweich, 320 U.S. 277 (1943); United States v. Park, 421 U.S. 658 (1975); Todd Shipyards Corporation v. Lomm, 190 So. 2d 125 (La. App. 1966); Southeastern Construction Co. v. Robbins, 248 Ala. 367, 27 So. 2d 705 (1946). See also the cases cited in footnotes 7 and 8 of this opinion.

n12 The exception is the Pinkston-Hollar case, which involves a criminal prosecution under the Act. I do not find that case persuasive. The judge stated, without supporting analysis, that a determination of whether the vice-president of a corporation was an employer was a question of fact for the jury. In actuality, however, the question involves interpreting the term employer in Section 3(5) of the Act and cannot be considered solely a question of fact.

[*34]

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On the other hand, the Skidmore case, cited by Hundtofte and Moore, is persuasive. In that case, the suing employee contended that he had a right to recover civil damages against the executive officers of his corporate employer for their alleged failure to comply with the Occupational Safety and Health Act. The court rejected Skidmore's contention and granted a motion made by the company to dismiss the case, stating:

. . . this suit seeks to assert the individual liability of executive officers. The Act in terms applies only to 'employers'. Nothing in it purports to impose any duty on employees of an employer, executive or otherwise. . . The statute provides that the duty of an 'employer' shall be to provide safe job sites by furnishing places of employment free from recognized hazards that might cause death or serious harm to employees (footnote omitted). Neither statutory provision nor legislative history has been cited to support the chimerical proposition that Congress intended either to create a duty on other employees of the same employer (even though they are executives) or to give [*35] injured workers a private civil remedy against such other employees, albeit executives. 356 F. Supp. at 670-672.

The Skidmore case, therefore, directly addresses the issue with which we are concerned here, and concludes that the executive officers of a corporation are employees of that corporation, not employers in their own right.

The rationale of another federal case lends further support to my determination not to find the corporate officials personally liable here. The district court in United States v. Sexton Cove Estates, Inc., 389 F. Supp. 602 (S.D. Fla. 1975), aff'd, 526 F.2d 1293, 1300-1301 (5th Cir. 1976), had ordered the former president of a land development corporation, as well as the corporation, to pay the costs involved in the restoration of ten canals dredged without a permit from the Army Corps of Engineers. The Fifth Circuit reversed, reasoning:

A corporate officer may not be held civilly liable for a corporate violation of the Rivers and Harbors Act unless either the Act itself authorizes such liability, or there are sufficient allegations and proof to permit the negation of the corporate form. The enforcement section of the statute, 33 U.S.C.A. [*36] 406, n13 does not provide that an officer of a corporation which violates Section 403 is personally liable on any subsequent civil judgment obtained against the corporation. And there were neither any allegations in the complaint nor proof at trial to warrant 'piercing the corporate veil.' (footnotes omitted.)

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n13 Section 406 of the River and Harbors Act provides, in pertinent part:

Every person and every corporation that shall violate any of the provisions of (section) 403 . . . of this title . . . shall be deemed guilty of a misdemeanor, and on conviction thereof shall be punished by a fine not exceeding $2,500 nor less than $500, or by imprisonment (in the case of a natural person) not exceeding one year, or by both such punishments, in the discretion of the court. And further, the removal of any structures or parts of structures erected in violation of the provisions of the said (section) may be enforced by the injunction of any district court exercising jurisdiction in any district in which such structures may exist, and proper proceedings to this end may be instituted under the direction of the Attorney General of the United States.

[*37]

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Like the Rivers and Harbors Act which was at issue in Sexton Cove, Section 3(4) and (5) of the Occupational Safety and Health Act does not explicitly place personal liability upon corporate officials. Although the court in Sexton Cove stated that its holding may have been different if the government had proceeded criminally against the corporate president, n14 it also set fourth various federal statutes that explicitly make it possible to assess criminal liabilities against corporate officials. n15 And, as Hundtofte and Moore have pointed out, the Fair Labor Standards Act and the National Labor Relations Act plainly define employer to include corporate officials. Obviously, when Congress intends to impose liability on officers or agents of a corporation, it knows how to do so.

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n14 The court cited United States v. Park, 421 U.S. 658, 670 (1975).

n15 The court listed these statutes: 1) In 15 U.S.C.A. 24 the corporate violation of antitrust law penal provisions is deemed to be also that of the individual directors and officers; 2) By 15 U.S.C.A. 78u(c) any person who fails to answer any lawful inquiry or to produce documents that are within his power to produce in response to a Securities and Exchange Commission subpoena is guilty of a misdemeanor; 3) Under the Securities Act of 1933, 15 U.S.C.A. 77(k), the purchaser of securities who relies on a registration statement which contains untrue facts or some material omission may sue the signatories of the statement and/or the directors of the issuer at the time of the filing, and 4) The Interstate Land Sales Full Disclosure Act, 15 U.S.C.A. 1709, permits the purchaser of a lot who relies on a property report which contains untrue facts or some material omission to sue the developer or agent.

[*38]

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As Chairman Cleary points out, however, the terms "developer" and "agent" in the Interstate Land Sales Full Disclosure Act have been liberally construed by the U.S. Court of Appeals for the Fourth Circuit in McCown v. Heidler, 527 F.2d 204 (1975) to include corporate officials as well. The plaintiff class of land purchasers there was allowed to sue the officers and members of the boards of directors of two land development companies. Although that act permits such actions against developers and selling agents n16 of a corporate developer, the trial court had dismissed the land purchasers' claims after finding that the corporate officials were neither developers nor agents. The appeals court reversed the ruling after reasoning that:

The 'developer' of a land sale plan is usually a corporate entity which, in a fraudulent scheme as here alleged, ends up defunct and offers no reserve for recovery to those persons defrauded; so, too, the end selling agent, when the development collapses financially, is often long gone or cannot respond pecuniarily. Indeed, the actual selling agent may well be a creditor [*39] of the developer and an indirect victim of the fraud himself. The basic protection of the Act, to be meaningful, must be leveled against the fraudulent planners and profit makers for otherwise the Act would be pragmatically barren. 527 F.2d 204, 207.

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n16 The definitions of developer and agent found in the Interstate Land Sales Full Disclosure Act at section 1701 read:

(4) 'developer' means any person who, directly or indirectly, sells or leases, or offers to sell or lease, or advertises for sale or lease any lots in a subdivision;

(5) 'agent' means any person who represents, or acts for or on behalf of, a developer in selling or leasing, or offering to sell or lease, any lot or lots in a subdivision; but shall not include any attorney at law whose representation of another person consists solely of rendering legal services.

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That case, however, is readily distinguishable from this one. The McCown court viewed fraud in the sale of real estate as a national problem that frequently left defrauded land purchasers [*40] without an effective remedy under the land sales statute in the face of defunct corporations and impecunious or fleet-footed sales agents. Only by broadly interpreting the term developer could the court offer defrauded purchasers a measure of relief under that act. A comparable situation does not exist under the Occupational Safety and Health Act. There is no proof, nor even an allegation, that corporations generally throughout the United States are becoming defunct in order to avoid their responsibilities under the Act. The fact that the particular corporation involved in this case is bankrupt and out-of-business does not provide a meaningful point of similarity between this and the McCown case. The Secretary does not allege that Life Science became defunct to avoid its obligations under the Act.

Finally, Chairman Cleary also points out that just because Life Science is an employer does not mean that Hundtofte and Moore cannot also be considered employers. The Chairman cites cases where the ability to protect or control employees forms a basis for finding that an employment relationship exists even though other usual indicia of the employer-employee relationship are absent. [*41] Those cases are inapposite, however, because they do not address the issue at hand of whether corporate officers may be found personally liable for violating the Act. Instead, those cases involve whether a particular corporation exercised sufficient physical or economic control over certain workers so as to be considered their employer.

Accordingly, I would reverse the judge and vacate the citations as to Hundtofte and Moore because the corporate officials were not employers under the Act.