Howard Sokol is a Partner in our New York office
The Occupational Safety and Health Administration (OSHA) announced Wal-Mart Stores, Inc.'s corporate-wide settlement agreement with the U.S. Department of Labor ("settlement") on August 7, 2013. The announcement was made by David Michaels, assistant secretary of labor for OSHA. The settlement is the result of two separate OSHA inspections and enforcement procedures commencing in August 2011 at a Wal-Mart Superstore in Rochester, N.Y. The inspections resulted in the issuance of two separate citations containing more than two dozen violations ("citations") of the Occupational Safety and Health Act of 1970 (Act). The citations also carried penalties of $365,000.
As conditions of the settlement, Wal-Mart agreed to take affirmative measures to improve employee safety and health conditions not only in its Rochester store, but also in 2,857 other Wal-Mart and Sam's Club stores (together, "settlement entities") across the 28 states within federal OSHA jurisdiction. Under the terms of the settlement, Wal-Mart is required to improve training related to hazard communications, the use of trash compactors and the handling of dangerous cleaning chemicals. In return, and among other benefits and concessions by OSHA in light of the citations, Wal-Mart received nearly a 50 percent reduction of the total penalty and will pay $190,000. According to Secretary Michaels, the settlement "will help keep thousands of exposed Wal-Mart employees safe and healthy on the job ... . OSHA will use all the tools at [its] disposal to ensure that all employers follow the law." Wal-Mart, the world's largest retailer and a completely non-union operation in the United States, did not concede a violation of the Act at the Rochester location or anywhere else.
OSHA Rocks the Boat in Rochester
OSHA first visited Wal-Mart's Rochester store in early August of 2011, after receiving anonymous complaints from a Wal-Mart employee concerning dangerous conditions risking the health and safety of employees. After additional inspections of the premises, OSHA found a total of 26 violations of the Act. The vast majority of the many alleged violations in the citations were categorized as either "serious" or "repeat," and asserted a litany of alleged violations of the Act including, but not limited to:
- deficiencies and dangers concerning a lack of personal protective equipment
- existence of fall hazards
- absence of lockout/tagout procedures on a trash compactor
- unguarded machinery
- lack of training for employees on how to use personal protective equipment
- lack of information and training for employees on the handling and use of hazardous chemicals
- obstructed exit routes
According to OSHA's guidelines, a "serious" violation occurs when there is substantial probability that death or serious physical harm could result from a hazard about which the employer knew or should have known. A serious violation can carry a fine of up to $7,000. A "repeat" violation occurs when an employer has been found to have committed a substantially similar violation or a different violation creating a similar hazard — even at another location — within the past three years. Each repeat violation can result in a fine of up to $70,000. According to OSHA, within the three years preceding the citations (2008 and 2011), OSHA had cited Wal-Mart for similar violations or for different violations creating similar hazards at Wal-Mart stores and other facilities located in Alabama, Arkansas, Florida, Georgia, Illinois, Missouri, New York, North Dakota and Oklahoma. Importantly, a final order from the Department of Labor on a repeat violation makes OSHA's efforts considerably easier in future situations in finding a "willful" violation against the same employer, for the same violation or for causing a similar hazard. A violation of the Act is characterized "willful" when the employer "intentionally and knowingly" violates the act or where the employer is aware that a hazardous condition exists, knows that the condition violates a standard or other obligation of the Act and makes no reasonable effort to eliminate it. A willful violation, where a fatality occurs, can result in a fine of up to $500,000 and carry a jail term of up to six months.
Settlement Sets New Standard for OSHA Enforcement
Such corporate-wide settlements are rare but not unprecedented; OSHA had successfully obtained a corporate-wide settlement in 2012 against DeMoulas Super Markets. But the settlement includes the unprecedented requirement by OSHA that Wal-Mart, at its own expense, arrange for independent third-party monitors to inspect at least 80 percent of the settlement entities under federal OSHA jurisdiction every four months for the duration of the settlement's two-year term. The monitors, as specifically detailed in the settlement, are to audit and-report on those parts of the settlement that concern equipment and work procedures, including confirming that the trash compactor locking devices are functioning properly; reviewing relevant records, including those dealing with training; and have reign to conduct interviews with "relevant store personnel as "appropriate." The settlement also provides that "the  state plan states are encouraged to honor or agree to the terms of the [settlement]." Accordingly, the settlement has the potential to cover additional stores, beyond the nearly 2,900 explicitly included in the settlement. Finally, under the settlement, in addition to the significant reduction in total penalty, OSHA agreed to vacate, group and/or reclassify more than half of the total violations in the citations.
Wal-Mart — No Easy Settlement Target for OSHA
Wal-Mart remains locked in another ongoing well-publicized battle with OSHA. On Black Friday, 2008, an employee was trampled to death inside a Wal-Mart store in Valley Stream, N.Y., by a stampede of shoppers. Relying upon the "General Duty Clause" (GDC), Section (5)(a)(1) of the Act, OSHA proposed a $7,000 fine, the maximum allowed, for Wal-Mart's failure to provide a safe workplace to employees. The GDC, used by OSHA when no specific regulatory standard applies to the situation at hand, requires employers to provide their employees with a place of employment that is "free from recognized hazards that are causing or likely to cause death or serious physical harm to employees." According to OSHA, the risk of stampeding crowds looking for holiday bargains was a known hazard. There is no specific OSHA standard on crowd control, but after the Wal-Mart Black Friday incident, OSHA issued its "Crowd Management Safety Guidelines for Retailers."
In 2011, an OSHA administrative law judge (ALJ) upheld the violation and penalty and Wal-Mart appealed the ALJ's decision to a single judge within the Occupational Safety and Health Review Commission which ruled that Wal-Mart's "precautions to protect its employees were minimal and ineffective." Despite the relatively small fine, Wal-Mart appealed again, now to a three-member panel of the commission. According to Wal-Mart spokesperson Steve Restivo, justifying the more than $2 million already spent contesting the violation, the particular single item citation has "far-reaching implications which, if left unchallenged or otherwise upheld, could result in "unfairly harsh penalties and restrictions on future sales promotions."
Why the Wal-Mart Settlement Should Matter to Employers
The settlement further confirms OSHA's strategy and efficacy in using its considerable leverage to force large retailers with a physical presence across the United States to take significant steps to ensure that their safety and health policies comply with the Act's requirements. Large retail employers, especially those with a sizeable and multi-facility geographic footprint across the U.S., should take note of the settlement and be cognizant of its scope and breadth. In light of the settlement, department store and chain retailers, movie theaters and nightclubs, hospitality facilities (restaurants, hotels, resorts, etc.) and healthcare employers operating in multiple locations should now consider taking a fresh look at and doing a comprehensive review of their safety and health practices and overall level of compliance with the Act.
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