OCCUPATIONAL SAFETY AND HEALTH APPEALS BOARD
DEPARTMENT OF INDUSTRIAL RELATIONS
STATE OF CALIFORNIA
In the Matter of the Appeal of:
MILLER/THOMPSON J.D. STEEL HARRIS REBAR, A JOINT VENTURE
7952 Capwell Drive
7952 Capwell Drive
Oakland, CA 94621
Oakland, CA 94621
99-R1D4- 3121 through 3123
The Occupational Safety and Health Appeals Board (Board), acting pursuant to authority vested in it by the California Labor Code and having granted the petition for reconsideration filed in the above-entitled matter by Miller/Thompson J. D. Steel Harris Rebar, a Joint Venture (Employer), makes the following decision after reconsideration.
Between June 15 and November 30, 1999, a representative of the Division of Occupational Safety and Health (the Division) conducted an accident investigation at a place of employment maintained by Employer (hereinafter Employer or Joint Venture) located at 1105 Aladdin Avenue, San Leandro, California (the site).
On December 3, 1999, the Division issued to Employer citations alleging general violations of sections 5031(c) [Cit. 1, Item 1; periodic crane inspections]; 5033 [Cit. 1, Item 2; preventive maintenance program]; 5035(a) [Cit. 1, Item 3; repairing crane boom damage]; and serious violations of sections 5031(a) [Cit. 2; daily crane inspections]; and 5034(b)(2) [Cit 3; lowering load block to ground before adjustments] of the occupational safety and health standards and orders found in Title 8, California Code of Regulations.1 The Division proposed civil penalties totaling $5,710.
Employer filed timely appeals contesting the existence and classification of the violations and the reasonableness of both the abatement requirements and proposed penalties.
On February 1, 2001, this matter came on regularly for hearing before an Administrative Law Judge (ALJ) of the Board, in Oakland, California. Ron Medeiros, attorney, represented Employer. Christopher Grossgart, staff counsel, represented the Division.
On February 26, 2001, the ALJ issued a decision finding that Employer violated sections 5031(c), 5033 and 5034(b)(2), but did not violate sections 5035(a), 5031(a). The ALJ set aside the civil penalties on the ground that Employer was a joint venture that had disbanded after the date of the citations.
On March 27, 2001, the Board ordered reconsideration on its own motion to determine if the dissolution of a joint venture terminates the liability of the joint venture or its constituent business entities from civil penalties assessed against the joint venture.
The Division filed a response to the order of reconsideration on April 3, 2001. No response was received from Employer.
FINDINGS AND REASONS
DECISION AFTER RECONSIDERATION
Labor Code section 6300 states that:
The California Occupational Safety and Health Act of 1973 is hereby enacted for the purpose of assuring safe and healthful working conditions for all California working men and women by authorizing the enforcement of effective standards, assisting and encouraging employers to maintain safe and healthful working conditions, and by providing for research, information, education, training, and enforcement in the field of occupational safety and health.
The goal of the Occupational Safety and Health program in California remains preventive in nature, that is, to prevent an injury from ever taking place. The surest and quickest way to prevent an injury from occurring due to an existing hazard is to look to the employer of the exposed employee. Moran Constructors, Inc., OSHAB 74-381, Decision After Reconsideration (Jan. 28, 1975).
In establishing an employers duty to maintain a safe working environment, the relevant Labor Code provisions speak in the broadest possible terms and have been interpreted in the broadest terms even before the adoption of the Act. (See e.g., Carmona v. Division of Industrial Safety, (1975) 13 Cal.3d 303.)
The Act embodies remedial social legislation, which must be liberally construed with particular reference to the history and fundamental purposes of its statutes. (See e.g., S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341; United Air Lines, Inc. v. Occupational Safety and Health Appeals Board (1982) 32 Cal.3d 762.)
In this case, taking into consideration the Acts remedial purpose, we must decide in those cases where the employer was a joint venture whether the dissolution of the joint venture terminates the liability of the joint venture or its constituent business entities for civil penalties assessed against the joint venture.
The practice of setting aside penalties for an employer who goes out of business stems from the cases of Leftys Pizza Parlor, OSHAB 74-580, Decision After Reconsideration (Feb. 25, 1975) and Arcade Meats and Deli, OSHAB 76-320, Decision After Reconsideration (Apr. 7, 1978). These cases arose from the earliest days of the OSHA program. It was a time, we believe, when penalties proposed for alleged violations were often viewed more for their educational effects then for their deterrent effect on future violations.
In Leftys Pizza Parlor, supra, the Division issued several citations to the employer arising out of an injury accident. However, by the time of the appeal hearing, the co-owners had sold the pizza parlor to an independent third party. They had completely divested themselves of their former business and, at the time of the hearing, had no plans to continue making or selling pizza, either under the name Leftys or any other name.
The Appeals Board, citing an employers statutory duty to provide a safe and healthful place of employment consistent with Labor Code 6300, found that the monetary penalties proposed in connection with the citations were not designed to exact retribution from an employer who violates a safety order. Instead, the Appeals Board held that the civil penalties were designed to induce employers to contribute to achieving the goals of the [California Occupational Safety and Health] Act. (Leftys Pizza Parlor, supra)
Arcade Meats and Deli was a sole proprietorship that the owner sold one month after the Divisions inspection. (Arcade Meats and Deli, supra) By the time of his appeal hearing, the sole proprietor was employed in a market as a meat cutter. The Board set aside the proposed civil penalties. Citing Leftys Pizza Parlor, the Board held that the assessment of a civil penalty against an employer whose establishment is no longer in business did not promote the purpose of the Act.
Attempting to follow the rationale of Leftys, supra, and Arcade Meats and Deli, supra, the Board extended penalty relief to joint ventures in the case of Shea-Kiewit-Kenny, OSHAB 94-2183, Decision after Reconsideration, (Sept. 15, 1999).
The Board ruling in Shea-Kiewit-Kenny was vacated, however, in Sacramento County Superior Court case number 99CS01719 wherein the court ordered that: The rulings issued by the Occupational Safety and Health Appeals Board concerning the propriety of imposing monetary penalties against the Real Party in Interest, (Shea-Kiewit-Kenny), after it ceased to have employees or a place of employment are hereby vacated, and shall be of no further effect in this action or a precedent for any other proceeding.
While we do not address the merits of Leftys and Arcade Meats and Deli in this decision, we cannot think of any sound legal principle that would call for the elimination of penalties just because an employer was a joint venture and terminated the joint venture.
Generally, a joint venture is a recognized entity consisting of two or more entities created jointly to carry out a specific business enterprise for profit and is generally limited in scope and/or duration. Much like a partnership, its members are co-owners of the enterprise who share profits and losses. Due to its similarity with partnerships, the rights and liabilities of joint ventures are largely controlled by the rules applicable to partnerships. (Weiner v. Fleischman (1991) 54 Cal.3d 476, 482) Since partners are jointly and severally liable to third parties for all debts and obligations of the partnership (e.g. Corporations Code section 16306), joint venturers are similarly jointly and severally liable for all debts and obligations of the joint venture.
More specifically, the Board has long recognized the liability of joint ventures, as employers, for violations affecting workers in their service (employees). (See, e.g., Gentry-Rados, a Joint Venture, OSHAB 75-190, Decision After Reconsideration (Mar. 15, 1976); Rados-Shea-Kordick, OSHAB 80-1263, Decision After Reconsideration (May 30, 1985).) The Board has also recognized that a joint venture and the individual contractors who join forces to form a joint venture are separate and distinct legal entities. (See A & H Underground Construction, Inc. OSHAB 81-487, Decision After Reconsideration (May 2, 1986).)
While we are unprepared at this time to state that closure of a business can never be considered as a factor in determining whether or not penalties may be mitigated, that factor standing alone does not justify mitigation of penalties. It is just one of several factors which the Board will consider in determining if penalty relief is warranted.
In those cases where it is appropriate to consider closure of a business as a factor justifying penalty relief, another factor that must be considered is whether or not the principles of the business continue to operate any business that employs workers. (See e.g., Linsey Fashion, OSHAB 96-2695, Decision After Reconsideration (April 18, 2001).)
In this case there is no evidence that either member of the joint venture has ceased its own business operations. Indeed, it seems likely that the closure of the joint venture was due to the job being finished. Because of the on-going nature of a construction business which is not limited to a particular project, and further, the licensing requirements for principals operating a construction business creating a hurdle for new construction businesses, it is more likely than not that both employers that made up the joint venture in this case will remain in business and continue to employ workers.
We are not persuaded that reduction or elimination of penalties against any employer, and specifically the joint venture Employer in this case who ceased business operations, promotes the purposes of the Act.
Federal courts have recognized the effect of OSHAs civil penalties.
Because of the large number of workplaces which OSHA must regulate, relying solely on workplace inspections is an impractical means of enforcement. We accept that OSHA must rely on the threat of money penalties to compel compliance by employers. (Reich v. OSHRC, (11th Cir. 1997) 102 F.3d 1200, at p. 1203.)
Thus, the threat of civil penalties serves as a pocket-book deterrence against violations of occupational safety and health standards. (Atlas Roofing Co. v. OSHRC, (5th Cir. 1975) 518 F.2d 990, at p. 1001). To allow an employers cessation of business to render a civil penalty proceeding moot might greatly diminish the effectiveness of money penalties as deterrence. (Reich v. OSHRC, supra, at p. 1203.)
If the Board were to vacate the civil penalties in this case, any potential deterrent effect that the penalties might otherwise have had on the entities that made up the joint venture would be completely lost. By itself, cessation of a joint venture neither renders the separate entities any less liable for the joint ventures past acts nor any less subject to the Act.
A joint venture is generally formed for a single transaction or single series of transactions. As such, a group of employers could create a joint venture for purposes of performing a contract and ignore the requirements of Title 8 by consciously determining to disband after being cited for safety violations. Even if there were no conscious decision to disband after being cited for safety and health violations, in many cases, the project could be simply completed and the joint venture dissolved before the date that the appeal is heard by the Board. The system of sanctions under the Act cannot be based upon business decisions nor the will of the employer to become subject to the Act.
We see no deterrent effect in a system that allows Employers to evade penalties simply by disbanding after being cited for health and safety violations. We further do not see how mitigating penalties for joint venture business closures furthers the Acts goals of assuring safe and healthful working conditions for all California working men and women by authorizing the enforcement of effective standards.
The decision of the ALJ setting aside the proposed penalties is reversed. That part of the decision finding violations of the cited regulations is affirmed. In this case we do not find the existence of any factors that dictate that penalty reduction is warranted.
DECISION AFTER RECONSIDERATION
The Board affirms in part and reverses in part the ALJs decision. Violations of sections 5031(c), 5033 and 5034(b)(2) are found to exist and civil penalties of $4,820 are assessed.
MARCY V. SAUNDERS, Member
GERALD P. OHARA, Member
OCCUPATIONAL SAFETY AND HEALTH APPEALS BOARD
FILED ON: September 26, 2001
1 Unless otherwise specified all references are to sections of Title 8, California Code of Regulations.