04-19-99 -- Going out of business will no longer protect a former employer from a citation for infringing OSHA rules if the violation occurred before the business shut down. In handing down this decision last month, the Occupational Safety and Health Review Commission reversed a ruling it had rendered less than a year ago.

The most recent case, [Secretary of Labor v. Yandell], arose from an accident that led to the death of three workers. Joel Yandell was engaged to build a cellular communications tower. Prior to the accident, Mr. Yandell had been operating a base-mounted drum hoist to lower the three employees from an elevated position on the tower, even though he and his workers knew that the hoist was not designed for personnel lifting. When the hoist failed, the men fell between 150 and 400 feet to their deaths. Immediately after the accident, Mr. Yandell stopped operating his tower erecting company and has not employed anyone since the day of the accident.

A bit later, after investigating the fatal mishap, OSHA issued Mr. Yandell two citations and assessed $238,000 in total penalties based on his illegal use of the base-mounted drum hoist as a personnel lift. However, when he contested the citations, an administrative law judge vacated them on the grounds that Mr. Yandell was no longer an employer amd therefore no longer under the authority of the U.S. Department of Labor.

In reaching this decision, the judge looked to a precedent established a few months earlier in another case presented before the Occupational Health and Review Commission, [Secretary of Labor v. Ralph Taynton, dba Service Specialty Co.]. In the Taynton case, the commission dismissed a citation on the grounds that OSHA (personified by the secretary of labor) had "no jurisdiction to issue it" to an individual who had gone out of business.

However, after the administrative law judge ruled to drop the citations against Mr. Yandell, the commission successfully reinstated them and, in so doing, reversed its own former precedent, stating that there was “a potential for mischief that the commission [previously] underestimated."

Although the commission acknowledged that most employers would not -- and probably could not -- go out of business solely to escape an OSHA penalty, it concurred with another decision issued by the U.S. Court of Appeals for the Eleventh Circuit in which the ruling judge stated that "letting the cessation of business by an employer render a civil penalty proceeding moot might greatly diminish the effectiveness of money penalties as a deterrence . . . More importantly, employers who are going out of business for ordinary commercial reasons would have little incentive to comply with safety regulations to the end if monetary penalties could be evaded once the business quit altogether." The commission also stated that "an economic incentive could be created to avoid a penalty by going out of business and then, perhaps, reincorporating under a different name."

In reinstating the citations against Mr. Yandell, the commission rendered a decision which shall apply in future cases. "In order to determine whether the secretary of labor [i.e., OSHA] has statutory jurisdiction to initiate a civil enforcement action, the critical time is when the violation is alleged to have taken place." Therefore, a citation can be issued to an individual or entity that was an "employer" at the time the OSH Act was allegedly violated, even if the individual or entity is no longer engaged in business and no longer has employees at the time the citation is issued.

