By Brent I. Clark, Meagan Newman, and Craig B. Simonsen

The Second Circuit Court, in a recent opinion, has upheld a ruling by the Occupational Safety and Health Review Commission (Commission) that different facilities/subsidiaries or affiliated companies with a common owner/parent corporation were not a “single employer” under the Occupational Safety and Health Act (OSH Act), thus repeat citations were not appropriate. The Commission overruled the administrative law judge (ALJ) who found against the company and upheld the repeat citations issued by Occupational Safety and Health Administration (OSHA).

The Court reached this conclusion by applying the Commission’s three-prong test that focused on whether there was a (1) common worksite, (2) whether the facilities had interrelated and integrated operations, and (3) whether they shared a common management. The Commission held that the respondent’s facilities shared some common features, such as top officers, but that the facilities operated with such independence, and in different cities, that they were not parts of a single employer under existing Commission precedent.

The Secretary of Labor, on appeal of the Commission’s decision, argued for a much more liberal test for determining a “single employer.”  Specifically, the Secretary argued for the 4 prong single employer test used by the National Labor Relations Board (NLRB) which does not include the common worksite criteria.  Hence, the Secretary argued that multiple facilities/companies can be treated as a single employer even if they do not share a common worksite and might even have facilities located across the country.   In rejecting this more liberal single employer test the Court relied upon the Secretary’s procedural error in not raising this argument before the Review Commission.  Hence, the Court ruled the Secretary waived the argument.   The Court’s decision makes clear that in future cases it would defer to the Secretary and adopt this more liberal single employer test.  Employer’s beware!

Applying the Commission’s existing single employer test, it was agreed that all the facilities shared a common president, chief executive officer, and chief financial officer. It was also agreed that the facilities did not share a common worksite. So, a key element under review was whether the entities had interrelated and integrated operations. The Court upheld the Commission’s conclusion that the parent company could exercise control over the facility but that, “in practice, local personnel supervised safety matters at the facility.”

The Second Circuit’s decision highlights the Secretary’s continued attempts to expand OSHA’s jurisdiction and impose more significant citations and penalties.  For corporations with subsidiary companies and affiliates, the Secretary continues to try to treat these separate, but related companies, as a single employer so it can issue repeat citations across these different companies/employers.  It is critical that such organizations take special care to maintain independence and separateness of related companies, especially in matters of labor relations and safety.  Command and control on such matters from the parent corporation creates the risk that OSHA will take the position that all entities are a single employer with the increased risk of increased citations and increased penalties as one company’s OSHA history is used against all related companies.  Unfortunately, the Secretary’s approach appears to penalize corporate parent’s for hiring sophisticated safety and health professionals who can then provide safety programs, auditing, and other high level safety and health support to subsidiary and related companies.  In this regard, the Secretary’s approach has the very real risk of chilling the substantial benefits that are achieved by sharing these resources among multiple related companies.   Corporations with subsidiary companies and affiliates need to carefully evaluate the risks and procedures they use to promote and enhance worker safety and health, and OSHA compliance in light of the Secretary’s effort to increase enforcement using the single employer theory.

This decision may also effect OSHA’s use, and further implementation, of enterprise-wide enforcement where it issues citations to all facilities operated by an “employer”, even when OSHA has not actually inspected those facilities.