On February 8, 2018, the California Supreme Court issued a long-awaited opinion in the Solus Industrial Innovations, LLC case. The opinion is available here. In that case, the employer was a plastics manufacturer in Orange County. In 2007, it installed an electric water heater designed for residential use in its facility. Two years later, the water heater exploded, killing two employees. Cal/OSHA investigated the fatalities, determined the explosion was caused by “manipulation and misuse” of the water heater, and cited the employer for five violations of occupational safety and health regulations.
Because of the fatalities, Cal/OSHA forwarded its investigation results to the District Attorney of Orange County (“DA”). The DA brought criminal charges against the employer’s plant manager and maintenance supervisor and also filed a civil action against the employer, which included a claim under the Business and Professions Code for unlawful, unfair, and fraudulent business practices based upon the Employer’s failure to comply with workplace safety standards. Based upon the alleged unlawful business practices, the DA requested civil penalties in the amount of up to $2,500 per day, per employee for the period from November 29, 2007, through March 19, 2009 (the time period from when the heater was installed and when it exploded).
In a motion seeking to have the case dismissed, the employer argued that the DA’s claims were preempted by the Federal Occupational Safety and Health Act (“OSH Act”). The Court of Appeal agreed with the employer but the California Supreme Court reversed its decision, allowing the DA’s case to continue. The Supreme Court stated that where there are federal standards on an issue relating to occupational safety and health, a state may assume responsibility for developing and enforcing state standards by submitting to the Secretary of Labor a plan to preempt federal standards, which California has done. Thus, the Supreme Court said once the state plan is adopted and approved, state law has the effect of broadly preempting parallel federal law. The Supreme Court further reasoned because the unfair competition claims are based on the Cal/OSHA standards set forth in the state-approved plan, the unfair competition law also preempts federal standards.
The Supreme Court further held that the fact that unfair competition claims and penalties could result in large multi-million dollar monetary awards against employers, far exceeding available Cal/OSHA penalties, is not inconsistent with federal law.
COUNSEL TO MANAGEMENT:
This case leaves employers open to liability on multiple fronts for penalties based upon violations of workplace safety standards. In Solus’s case, in addition to the penalties imposed by Cal/OSHA and criminal charges for some in management, it is now facing the very real possibility of owing millions of dollars should the DA prevail on its unfair competition claims. At a penalty rate of $2,500.00 per day per employee as outlined in this case, it is easy to see how penalties can quickly stack up to exceed millions of dollars and force the employer to settle with the DA. While Solus’s case is an extreme example given the facts involved, employers cited for lesser issues could still find themselves facing potential civil action by the DA in light of the civil penalties available. If you are facing a Cal/OSHA investigation or have been cited by Cal/OSHA, please contact the experts at The Saqui Law Group for assistance.