Beware the hidden costs of OSHA citations

Most employers are familiar with California's Occupational Safety and Health Administration ("Cal-OSHA") citations and penalties. The amount of the penalties has increased substantially over the past few years. As of Jan. 1, 2019, $13,047 is the maximum penalty per violation for a regulatory violation; $13,047 is the maximum per violation for a general violation; $25,000 is the maximum per violation for serious violations; and $130,464 is the maximum per violation for willful and repeated violations. Additionally, employers can be subjected to potential criminal penalties and increased exposure for worker's compensation claims.

Criminal penalties can be pursued under two statutes. First, under the California Corporate Criminal Liability Act of 1989, commonly referred to as "Be a Manager, Go To Jail" Act, a corporation, limited liability company or person who is a manager who (1) has actual knowledge of a serious concealed danger subject to regulatory authority, and (2) fails to correct the hazard or inform Cal-OSHA and affected employees of the hazard is guilty of a public offense. Failure to comply with the notice statute is punishable by up to three years in state prison, a fine of $25,000, or both for a manager, and a fine not to exceed $1 million for corporate and limited liability company violators.

Second, any employer or employee having direction and control of the place of employment who willfully violates any Cal-OSHA regulation, which causes the death or permanent prolonged impairment of an employee is punishable by up to three years in state prison and a fine not to exceed $250,000, or both. Fines against corporate or limited liability company defendants may not exceed $1,500,000. Knowing or negligent violations are punishable by imprisonment up to one year and a fine up to $15,000.

In terms of workers' compensation, insurance carriers are generally obligated to furnish medical care, wage replacement benefits, vocational rehabilitation, and death benefits to employees who sustain an industrial injury. But if an employee's injury is caused by the serious and willful misconduct of the employer, the employee is entitled to a supplemental award. An employer, rather than an insurer, is liable for this penalty payment, since California prohibits insurance from covering liability for serious and willful misconduct.

Under California Labor Code Section 4553, "'serious and willful misconduct' is an act deliberately done for the express purpose of injuring another, or intentionally performed whether with knowledge that serious injury is a probable result or with a positive, active, wanton, reckless and absolute disregard of its possibly damaging consequences." Ferguson v. Workers' Comp. Appeals Bd., No. A063246. (Cal. App. 1st Dist. April 13, 1995). The mere failure to perform a statutory duty is not, alone, willful misconduct. It amounts only to simple negligence.

To prove the employer is guilty of serious and willful misconduct, the employee must show the employer: (1) knew of the dangerous condition; (2) knew the probable consequence of its continuance would involve serious injury to the employee; and (3) deliberately failed to take corrective action.

An employer may also be found to have engaged in serious and willful misconduct when the employer violated a safety order promulgated by the Department of Industrial Relations. Under California Labor Code Section 4553.1, the Appeals Board must find: (1) the specific manner in which the safety order was violated; (2) the violation of the safety order proximately caused the injury, and the specific manner in which the violation constituted the proximate cause; and (3) the safety order, and the conditions making the safety order applicable, were known to, and violated by, a particular named person, either the employer or a representative, or that the condition making the safety order applicable was obvious and created a probability of serious injury, and that the failure of the employer or a representative to correct the condition constituted a reckless disregard for the probable consequences.

A decision from a Cal-OSHA administrative law judge is not binding on the Workers' Compensation Appeals Board regarding whether the employer engaged in serious and willful misconduct. But, while not binding, a judge may be influenced by any finding in the Cal-OSHA proceeding.

If an employee is injured as a result of serious and willful misconduct by the employer, he or she is entitled to a 50 percent increase in the amount of compensation otherwise recoverable, together with costs and expenses not to exceed $250. The 50 percent increase is to be calculated based on the entire award, not just compensation indemnity.