Excerpted from Missouri Employment Law Letter, written by attorneys at the law firm Armstrong Teasdale LLP

In an attempt to preserve government resources, the Occupational Safety and Health Administration (OSHA) has been taking the conservative approach of resolving many cases through settlement rather than litigation. But those settlements, while tempting to cost-conscious employers, are usually too good to be true. This article examines some potential problems with rushing into a settlement with OSHA and provides some ideas for protecting your long-term interests.

Legal landscape

The Occupational Safety and Health Act (OSH Act) contains caps on the penalty that can be assessed for each alleged violation by an employer being cited for the first time. In that scenario, the statutory maximum for each serious or other-than-serious violation is $7,000.

At the other end of the scale, the potential penalty range increases to a maximum of $70,000 per alleged violation for employers that "willfully or repeatedly" violate the OSH Act. Furthermore, if you willfully violate the Act and your violations cause an employee's death, you're subject to criminal penalties, including up to $10,000 in fines and up to six months' imprisonment. The substantial increase in the penalty range for repeat and willful citations provides a major incentive to avoid being cited repeatedly.

OSHA's tempting offer

These days, OSHA commonly cites employers for alleged violations of the OSH Act and then offers an informal settlement agreement to resolve the case and avoid litigation. For example, your company might be cited for two serious citations, each with a proposed penalty of $1,500. At the same time it issues the citation or during an informal settlement conference a few days later, OSHA will present you with an informal settlement agreement under which your total penalty is reduced from $3,000 to $1,500. The fact that OSHA is immediately willing to cut its fines in half should tell you something.

In connection with a typical informal settlement agreement, you may be required to provide your regional OSHA office with OSHA 300 logs for the next three years. And the two "serious" citations would be deemed affirmed by the Occupational Safety and Health Review Commission (OSHRC) and not subject to review by any court or agency. You might be tempted to take the offer because it doesn't seem to make good business sense to litigate a case involving a penalty of only $1,500. But there's more to it than just the amended penalty.

There are a number of reasons OSHA's typical proposal isn't in your company's best interests. First, OSHA won't go away forever. The informal settlement agreement might make the inspectors go away in the short term, but once it has established a violation of the law through an informal settlement agreement, the agency may return to inspect your facility and issue repeat or willful citations, using the settlement agreement as proof of a violation.

The informal settlement agreement drafted by OSHA doesn't contain the language necessary to protect your company. Rather, it contains language favorable to OSHA. The agreement establishes and affirms your violation of the law and deprives you of the right to have it reviewed by a court or agency. Once that occurs, you have violated the OSH Act, and the potential for repeat and willful citations (and up to $70,000 in fines) now comes into play. Signing an informal settlement agreement means "pleading guilty" to an amended citation and sets you up for future willful and repeat citations.

Second, the act of considering an informal settlement agreement presents a time crunch. You have only 15 workdays to contest an OSHA citation. The clock begins ticking once you receive the citation.

Sometimes, in conjunction with offering an informal settlement agreement, OSHA will schedule an informal conference in an attempt to settle the case. Fifteen workdays typically doesn't allow you enough time to analyze an informal settlement agreement, schedule and attend a conference, and still negotiate a favorable resolution before the deadline. Likewise, it doesn't give OSHA enough time to focus on your case and adequately consider your position. Oftentimes, the result is that you either miss the deadline or sign the agreement in haste to avoid the deadline. Either way, you have waived the right to defend yourself, and your violation of the law has been established.

Third, an informal settlement agreement may require you to send OSHA 300 logs to your regional OSHA office when the OSH Act imposes no similar requirement. All the Act requires is that you maintain the log at your workplace and allow OSHA to view your records on request. Typically, OSHA would have to undertake the effort of inspecting your facility to view the logs. If you send the agency your records, however, you open yourself up to the possibility of an inspection when OSHA might otherwise leave you alone.

Responding to an OSHA citation

The best way to avoid the pitfalls of an informal settlement agreement is to contest the citation. To do that, you must notify OSHA of your intention to challenge the citation within 15 working days. Failing to contest the charge within 15 days means the citation and fine are deemed a final order not subject to review by a court or agency. In other words, by not contesting a citation, you have waived your right to defend yourself, and you're admitting to a violation of the law, which sets you up for repeat or willful citations down the road.

Contesting a citation has a number of advantages. First and most important, you're in a better position to negotiate a contested settlement agreement (as opposed to an informal settlement agreement) in which you or your lawyer can insert favorable language to protect your company from the possibility of repeat and willful citations.

OSHRC recently dealt with the issue of an employer being cited for a repeat violation. Arapahoe had been cited previously for an other-than-serious violation. The U.S. Department of Labor sought to establish a repeat violation based on the previous citation, but there was no final order against Arapahoe establishing a violation of the law. The facts alleged in the earlier citation were contested and resolved through a formal settlement agreement, and no hearing to establish their accuracy was held. As a result, OSHRC held that "it would be inappropriate to classify this violation as repeated."

If Arapahoe had chosen to sign an informal settlement agreement rather than contesting the previous citation, the repeat citation probably would have been affirmed. By contesting a citation, you avoid an automatic finding that you've violated the law, and you preserve your right to litigate the issues if that route proves most advantageous. Secretary of Labor v. Arapahoe Utilities & Infrastructure Inc., 20 (OSHC 1781, OSHRC Docket No. 03-1194).

Second, the "deal" offered by OSHA in the informal settlement agreement (i.e., a 50% reduction in the total penalty) typically doesn't disappear when you contest a citation. Normally, OSHA is willing to offer the same deal after you challenge a citation, and you or your counsel can virtually always negotiate an even more favorable resolution because the pressure of the 15-day deadline for deciding to contest is gone. By contesting a citation, you buy yourself some additional time and create ample opportunity to negotiate the best deal possible.

Third, by avoiding a settlement agreement, you preserve your right not to send your OSHA 300 logs to the regional office. That may allow you to get out of repeated OSHA inspections. And finally, most of the smaller cases are placed on the EZ Trial docket, which is an abbreviated proceeding designed to allow a more cost-effective contest. All formal proceedings are suspended, which typically means you invest less time and expense in resolving the charge.

Bottom line

Employers are typically cost-conscious, and OSHA caters to that mindset. But what the agency doesn't tell you is that signing an informal settlement agreement often has serious consequences. Contesting a citation may give you (or your lawyer) the time and leverage you need to adequately defend your company's interests in an OSHA proceeding. Furthermore, it may save you the hassle and expense of dealing with repeat and willful citations in the future.

Copyright © 2005 M. Lee Smith Publishers LLC. This article is an excerpt from MISSOURI EMPLOYMENT LAW LETTER. Missouri Employment Law Letter is intended for general information purposes only and does not constitute legal advice. The reader should consult qualified legal counsel to determine how laws apply to specific situations.