Government Overreach Blocked and Victory for Employers

The California Court of Appeals ruled yesterday that a district attorney cannot pursue an action against an employer seeking to recover civil penalties under California’s unfair competition law. The court’s action blocks one form of government overreach and is a victory for employers. Under the Labor Code, certain workplace accidents must be referred by Cal-OSHA to the Bureau of Investigations (BOI). See Cal. Lab. Code § 6315. These accidents typically involve injury to five or more workers or the death of any worker. The BOI conducts an investigation into the potential for criminal charges and refers appropriate cases to the District Attorney for criminal prosecution. This referral process occurred following the explosion of a hot water heater at a manufacturing company in Southern California. The explosion killed two workers instantly. Cal-OSHA investigated the accident and found that the water heater was designed for residential use only and was unsafely used in the commercial application. The employer was cited by Cal-OSHA for serious and willful violations. The matter was also referred to BOI for investigation. The BOI then referred the matter to the Orange County District Attorney. The District Attorney filed a criminal action against the plant manager and a maintenance supervisor. But in an interesting and very aggressive twist, the District Attorney also filed a civil action against the employer seeking civil penalties under California’s unfair competition law (Bus. & Prof. Code § 17200 et seq). In the action, the District Attorney alleged that by failing to comply with safety standards, the employer had engaged in an unlawful, unfair and fraudulent business practice. The District Attorney sought civil penalties of $2,500 per day, per employee for a period of over 15 months. That works out to a total of $46,125,000 ($2500 x 450 days x 41 employees)! The Court of Appeal noted that this “massive” penalty would be an “extraordinary jump” from the amount of penalties that could be assessed against the company by Cal-OSHA in the administrative proceedings which were under $100,000. The court ruled that the District Attorney’s method of seeking civil penalties through the unfair business practice law and piling them on top of the existing Cal-OSHA penalties was not authorized by the Secretary of Labor when California’s safety plan was approved by the federal government. In a separate but related opinion the Court of Appeal ruled that the District Attorney lacked standing to pursue the civil penalties, essentially telling the District Attorney to focus on any criminal aspects of an accident and leave the civil penalties to Cal-OSHA. Thank you to the court. The opinion is a road block to a form of government overreach and a victory for employers. The case also highlights an entirely different point. Managers and supervisors who take short cuts with safety to save money open themselves up to extraordinary personal exposure. The manager and maintenance supervisor who decided to use the residential water heater in order to save money ended up agreeing to pay restitution to the deceased workers’ families in the amount of $450,000. I suspect the guilt they carry may be pretty hefty too. The opinions can be found by following these links.