BILL ANALYSIS                                                                                                                                                                                                    




                                                                  AB 2774
                                                                  Page A
          Date of Hearing:   May 5, 2010

                     ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
                                Sandre Swanson, Chair
               AB 2774 (Labor Committee) - As Amended:  April 14, 2010
           
          SUBJECT  :   Occupational safety and health.

           SUMMARY  :   Codifies a definition for "serious physical harm" in  
          the statute governing occupational safety and health.   
          Specifically,  this bill  :

          1 Defines "serious physical harm" as any injury or illness,  
            specific or cumulative, occurring in the place of employment  
            or in connection with any employment, which is the consequence  
            of a condition, practice, means, method, operation or process  
            that meets any of the following:

             a)   Requires inpatient hospitalization for a period in  
               excess of 24 hours for other than medical observation.

             b)   Causes an employee to suffer the loss of any member of  
               the body.

             c)   Causes an employee to suffer any serious degree of  
               permanent disfigurement.

             d)   Could reasonably lead to impairment of a part of the  
               body by substantially reducing its efficiency on or off the  
               job for more than 24 hours.

          2)Specifies that a single condition, practice, means, method,  
            operation or process can be properly classified as resulting  
            in "serious physical harm."

           EXISTING LAW  :

          1 Provides that a "serious violation" of occupational safety and  
            health law shall be deemed to exist in a place of employment  
            if there is a substantial probability that death or "serious  
            physical harm" could result from a violation.

          2)Does not contain a statutory definition for "serious physical  
            harm."










                                                                  AB 2774
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           FISCAL EFFECT  :   Unknown

           COMMENTS  :   This bill attempts to address an issue of  
          significant concern that has been raised by, among others,  
          worker advocates, the Division of Occupational Safety and Health  
          (DOSH), and the federal Occupational Safety and Health  
          Administration (OSHA): how "serious violations" are defined and  
          cited under California law.







           General Background on Types of Citations and Penalties Under  
          California Law  

          Under California law, an employer may be issued a citation by  
          DOSH for an alleged violation of the law which affects the  
          safety or health of employees.  Citations may be issued for the  
          following reasons:

                 A "regulatory violation" - cited when an employer fails  
               to comply with record keeping, posting or permit  
               requirements.
                 A "general violation" - cited when an accident or  
               occupational illness resulting from violation of a standard  
               would probably not cause death or serious physical harm,  
               but would have a direct or immediate relationship to the  
               safety or health of employees.
                 A "serious violation" - cited where there is substantial  
               probability that death or "serious physical harm" could  
               result from a condition which exists - or from practices,  
               operations or processes at the workplace.
                 A "willful violation" - where evidence shows that the  
               employer committed an intentional and knowing violation-as  
               distinguished from inadvertent or accidental or ordinarily  
               negligent-and the employer is conscious of the fact that  
               what they are doing constitutes a violation, or is aware  
               that a hazardous condition exists and no reasonable effort  
               was made to eliminate the hazard.
                 A "repeat violation" - when a recurrence of the  
               previously cited standard, regulation, order or condition  
               is found within three years of the previous violation  









                                                                  AB 2774
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               becoming a final order. Repeat violations differ from  
               willful violations in that they may result from an  
               inadvertent, accidental or ordinarily negligent act. If a  
               repeat violation is also willful, a citation for willful  
               violation is issued.
          
          Civil penalties are issued to employers for alleged violations  
          and/or failure to abate a violation. An employer who receives a  
          citation for a "serious violation" may be assessed a civil  
          penalty of up to $25,000 for that violation.  Penalties for  
          "general" and "regulatory" violations may be assessed up to  
          $7,000 for each violation.  A penalty of not less than $5,000  
          nor more than $70,000 may be assessed an employer who willfully  
          violates any occupational safety and health standard or order.   
          The maximum civil penalty that can be assessed for each repeat  
          violation is $70,000.

          Criminal penalties may also be levied in certain cases.  For  
          example, a willful violation that causes death or permanent or  
          prolonged impairment of the body of any employee results, upon  
          conviction, in a fine of up to $250,000 or imprisonment up to  
          three years, or both - and if the employer is a corporation or  
          limited liability company, the fine may not exceed $1.5 million.  
           Anyone convicted of making a false statement or certification  
          on records or other documents required under the Cal/OSHA  
          program is subject to a fine of up to $70,000 or imprisonment up  
          to six months, or both.  The law also contains misdemeanor  
          provisions relating to matters such as knowingly or negligently  
          violating a workplace safety and health regulation, repeatedly  
          violating a regulation, or refusing to comply with a regulation,  
          and thereby creating an employee hazard.  Criminal penalties are  
          enforced by the local district attorney.





           "Serious Physical Harm" and the 1985 Abatti Farms/Produce Case 

          As discussed above, current California law provides that a  
          "serious violation" shall be deemed to exist in a place of  
          employment if there is a substantial probability that death or  
          "serious physical harm" could result from a violation (Labor  
          Code  6432(a)).  However, the code does not contain a specific  
          definition of the term "serious physical harm."









                                                                  AB 2774
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          However, case law does provide some guidance.  The seminal  
          decision is a 1985 Decision After Reconsideration (DAR) issued  
          by the Occupational Safety and Health Appeals Board (Appeal  
          Board) in Abatti Farms/Produce<1>.

          The Abatti Farms/Produce case involved a citation issued against  
          an employer for a "serious violation" related to the use by  
          farmworkers of short lettuce knives to cut tall weeds between  
          mature heads of lettuce.

          In its decision, the Appeals Board first noted that the statute  
          does not define the term "serious physical harm."  The Appeals  
          Board noted that prior Appeals Board decisions had essentially  
          equated the term with "serious injury or illness," which is  
          defined in statute<2>.  However, the Appeals Board stated that  
          that definition was "inadequate" under the circumstances of that  
          case.

          Instead, the Appeals Board adopted a different definition for  
          "serious physical harm" by stating the following:

               "For the purpose of the Act, the Appeals Board defines  
               'serious physical harm' as an injury or illness, immediate  
               or cumulative, occurring in the place of employment or in  
               connection with any employment which is the consequence of  
               a condition, practice, means, method, operation or process  
               which requires inpatient hospitalization for a period in  
               excess of 24 hours for other than medical observation, or  
               which causes an employee to suffer a loss of any member of  
               the body, or which causes an employee to suffer any serious  
               degree of permanent disfigurement, or which reasonably  
               could lead to impairment of part of the body by  
               substantially reducing its efficiency on or off the job for  
               more than 24 hours.  A single such practice can be properly  
               classified as serious." (emphasis provided).

          Critics have alleged that subsequent Appeals Boards (including  
          the present one) have limited the scope of this definition by  
          improperly limiting its application only to cases involving  
          cumulative injury or illness.  For the vast majority of other  
          "serious violation" cases, critics contend that the Appeals  
          Board has instead reverted to merely applying the "serious  


          ---------------------------
          <1> 1985 CA OSHA App. Bd. LEXIS 121
          <2> See Labor Code  6302(h).








                                                                  AB 2774
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          injury or illness" definition to define the term "serious  
          physical harm."







           Why Does It Matter?  

          As discussed above, current California law provides that a  
          "serious violation" shall be deemed to exist in a place of  
          employment if there is a substantial probability that death or  
          "serious physical harm" could result from a violation (Labor  
          Code  6432(a)).

          Therefore, the existence (or lack thereof) of an adequate  
          definition of "serious physical harm" affects the ability of  
          "serious violations" proposed by the DOSH to be upheld  
          throughout the appellate process.

          Critics allege that currently (with no statutory definition for  
          "serious physical harm") far too many citations issued after  
          serious injuries or fatalities are reclassified as general  
          violations.  Therefore, they contend that employers who should  
          be cited and penalized appropriately for serious violations are  
          instead given a "slap on the wrist" and issued a general  
          violation citation instead.

          Moreover, critics contend that the inadequate definition  
          currently applied by the Appeals Board also impacts the behavior  
          of DOSH to issued proposed serious violation citations in the  
          first place.  The attached "Appendix" contains information on  
          the percentage of all citations issued as "serious" for  
          California as compared to other states with state-run OSHA plans  
          (and compared to federal OSHA).  That data indicates that  
          California issues "serious" citations in 19 percent of all  
          violations, compared with an average of 43 percent for other  
          state plans and 77 percent for federal OSHA.

          Critics also point to other interpretations of the current  
          Appeals Board that make it exceedingly difficult to prove  
          "serious violation" cases.  For example, the Appeals Board has  
          also applied a strict interpretation of the requirements that  









                                                                  AB 2774
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          there be a "substantial probability" that serious physical harm  
          occur - at least a 50 percent chance.  In fact, in a recent  
          article the Chief of DOSH characterized this interpretation by  
          stating, "That is impractical, unrealistic and calculated to  
          make it almost impossible for us to meet our burden.<3>"

          In addition, there have been concerns that the Appeals Board has  
          erected extremely high evidentiary standards for expert  
          testimony by DOSH inspectors and others in serious violation  
          cases.  Recent Appeals Board decisions have found DOSH  
          inspectors not competent to testify as to likelihood of serious  
          injury as well as other matters well within an inspector's  
          training and knowledge.  Again, the Chief of DOSH has publicly  
          criticized this interpretation, stating, "It would seem that the  
          public interest might be better served if the highly paid and  
          trained safety engineers and industrial hygienists who conduct  
          investigations and issue citations are allowed to offer  
          testimony as to why they have classified a citation as serious.   
          An administrative law judge might find their testimony  
          compelling or not so compelling, but it seems inconsistent with  
          common sense to disallow them the opportunity to offer their  
          opinion at hearing.<4>"





           Recent Federal OSHA Letters and Audit  

          Critics here in California are not the only ones to have raised  
          concerns about this issue.

          In recent months, federal OSHA has commenced an audit of DOSH  
          (including a "special study" of the Appeals Board) looking at a  
          number of issues.  However, federal OSHA has raised particular  
          concerns about the issues involving "serious violations" and the  
          current Appeals Board's interpretation of the term "serious  
          physical harm."

          In a January 8, 2010 letter to the Chair of the Appeals Board,  
          federal OSHA stated the following:


          ---------------------------
          <3> Cal-OSHA Reporter  Vol. 37, No. 2 (January 15, 2010) Page  
          00-9649.
          <4> Id. at 00-9650.








                                                                  AB 2774
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               "One area of concern that has been identified during our  
               initial review is regarding Appeals Board policy/approach  
               for reviewing the classification of serious violations.

               Section 17(k) of the [Federal] Act provides that 'a serious  
               violation shall be deemed to exist in a place of employment  
               if there is a substantial probability that death or serious  
               physical harm could result from a condition which exists,  
               or from one or more practices, means, methods, operations  
               or processes which have been adopted or are in use, in such  
               place of employment unless the employer did not, and could  
               not with the exercise of due diligence, know the presence  
               of the violation.'

               In the recently updated Field Operations Manual (FOM) for  
               OSHA, it states that the CSHO shall utilize the following  
               definition of 'serious physical harm':

               Impairment of the body in which part of the body is made  
               functionally useless or is substantially reduced in  
               efficiency on or off the job.  Such impairment may be  
               permanent or temporary, chronic or acute.  Injuries  
               involving such impairment would usually require treatment  
               by a medical doctor or other licensed health care  
               professional?

               ?Unfortunately it appears that in defining 'serious  
               physical harm,' the Board's current policy limits this  
               phrase to the Labor Code definition of 'serious injury,' at  
               section 6302(h).  There are other issues of concern  
               regarding the issuance of serious violation, however even  
               if this finding is correct, a determination of the [D]OSH  
               program not being at least as effective as?Federal OSHA is  
               possible."  (original emphasis included).

          The audit is expected to be completed and released in the next  
          several months.

           Recent Regulatory Action (or Lack Thereof)  

          In response to the concerns raised by Federal OSHA, in January  
          the Chief of DOSH filed a rulemaking petition with the Appeals  
          Board suggesting that they address the issue of "serious  
          violation" and "serious physical harm" via regulation.










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          The Appeals Board subsequently convened a series of "advisory  
          committee" meetings to consider these and other rulemaking  
          proposals.  At one of the initial advisory committee meetings  
          there was significant discussion of this issue.  The Cal-OSHA  
          Reporter article describing the advisory committee stated the  
          following:


               "One solution could be to reintroduce a fourth criterion  
               for 'serious physical harm' that the  Appeals Board adopted  
               in the Abatti Farms Decision After Reconsideration in 1985,  
               but that later boards apparently have disregarded.  That  
               version of the board added an injury or illness 'which  
               reasonably could lead to impairment of part of the body by  
               substantially reducing its efficiency on or off the job for  
               more than 24 hours.'  The other criteria include:

                           Inpatient hospitalization for more than 24  
                    hours for other than observation.
                           Loss of any body member.
                           Serious degree of permanent disfigurement.

               The DOSH Chief has told the board he believes there is no  
               legal impediment to it devising a formula for determining  
               serious physical harm using all four criteria, and the  
               board could clear up these issues through rulemaking.<5>"

          However, at subsequent Appeals Board advisory committee  
          meetings, the Chair of the Appeals Board indicated that they  
          could not address the issue of "serious physical harm" via  
          regulation because in the Appeals Board's opinion it was  
          "substantive" in nature rather than "procedural."  Therefore,  
          the Appeals Board is currently not proceeding with rulemaking on  
          this specific issue.

          In response to this decision not to proceed by the Appeals  
          Board, the Chief of DOSH has announced that he intends to  
          address this issue administratively via "Director's Regulations"  
          under the authority of the Department of Industrial Relations  
          (DIR).

           ARGUMENTS IN SUPPORT  :

          Supporters argue that this bill is a necessary first step to  



          ---------------------------
          <5> Id. at 00-9649.








                                                                  AB 2774
                                                                  Page I
          bring the California occupational safety and health program into  
          compliance with Federal OSHA law and will help strengthen the  
          Cal/OSHA program, improve enforcement, and result in better  
          working conditions for all California workers.  

          Supporters note that California's rate of serious citations is  
          currently the lowest in the country.  Moreover, California is  
          likely out of compliance with the Federal OSHA program.  In  
          January, 2010, Federal OSHA informed both DOSH and the Appeals  
          Board that it was conducting a Special Study of the state  
          program.  While Federal OSHA has not yet issued its findings,  
          the letters indicated the state plan was likely not as effective  
          as the Federal OSHA program with respect to the definition of  
          "serious physical harm."

          Supporters contend that this bill defines "serious physical  
          harm" to comport with Federal OSHA law and existing California  
          law.  The legislation closely tracks the definition of "serious  
          physical harm" in the Federal OSHA Field Operation Manual and  
          closely tracks current settled California law as set first forth  
          in a 1985 Appeals Board case, Abatti Farms/Produce.

          Supporters argue that this bill is needed because there is no  
          other avenue for defining "serious physical harm."  The Appeals  
          Board has indicated it will not issue a regulation defining  
          serious physical harm.  And even if the Department of Industrial  
          Relations issues such a regulation, the Appeals Board indicated  
          it is not obliged to follow that regulation.  They note that the  
          Appeals Board recently articulated in a March 25 public meeting  
          its position that it is not obligated to follow the dictates of  
          a regulation issued by DOSH or the Department of Industrial  
          Relations because "director's regulations are for agencies under  
          the director" and organizationally the Appeals Board is not  
          under the Department of Industrial Relations. 

          Finally, supporters conclude that California's occupational  
          safety and health program has been the best in the country in  
          many regards for years.  California cannot and should not risk  
          jeopardizing the entire program because one aspect is out of  
          compliance, particularly when this aspect of the problem may be  
          promptly and effectively addressed through legislation.  This  
          bill is a crucial tool in the effort to improve Cal/OSHA's  
          ability to reach the worst offenders and to level the playing  
          field for legitimate law-abiding businesses.  Supporters state  
          that this bill would benefit those employers that play by the  









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          rules by enabling Cal/OSHA more effectively to prosecute those  
          employers that gain an economic advantage from not protecting  
          their employees' safety and health.

           ARGUMENTS IN OPPOSITION  :

          A coalition of employer groups, including the California Chamber  
          of Commerce, oppose this bill unless amended, arguing that this  
          overly expansive definition will lead to an increase in  
          citations classified as serious that are now and should continue  
          to be classified as general.   A serious citation carries  
          significant financial implications so should therefore only be  
          issued where warranted. 

          Opponents point out that AB 1127 (Steinberg) of 1999  
          significantly increased penalties assessed on employers who are  
          cited for serious citations.  Prior to this measure,  
          California's base penalty for a serious citation was the same as  
          Federal OSHA - $5,000.  AB 1127 increased that base penalty more  
          than three times to the highest in the country at $18,000  
          (California Code of Regulations, Title 8, 336 (c) (1)).  This  
          enormous increase in liability to employers significantly  
          increased the number of citation appeals, resulting in a backlog  
          that has just been cleared this year.  Because of the level of  
          penalty that is assessed against an employer for a serious  
          violation, we should be judicious in issuing serious citations.   
          It is important that the violative condition and the hazard to  
          which the employee is exposed warrant such a penalty. 

          Opponents contend that this new definition will encourage  
          employer appeals because an employer's citation record is  
          considered in most competitive bidding situations.  Employers  
          routinely appeal serious citations which they believe are  
          unwarranted.  A significant increase in the number of serious  
          citations issued is likely to create a significant increase in  
          appeals to those citations.  The current Appeals Board resources  
          cannot timely adjudicate an increase in appeals that is likely  
          from this expansive change to the serious violation definition. 

          However, opponents do state that they appreciate the discussions  
          that they have had with author's staff and sponsors of the bill.  
           The employer coalition has submitted amendments to the bill for  
          consideration and will continue to participate in good faith  
          discussions.










                                                                  AB 2774
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           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Labor Federation, AFL-CIO
          National Lawyers Guild Labor & Employment Committee
          Worksafe

           Opposition 
           
          Associated General Contractors
                                                                          Associated Roofing Contractors of the Bay Area Counties, Inc
          California Association of Joint Powers Authorities
          California Association of Sheet Metal and Air Conditioning  
          Contractors' National Association
          California Automotive Business Coalition 
          California Chamber of Commerce
          California Chapter of the American Fence Association
          California Construction & Industrial Materials Association
          California Farm Bureau Federation
          California Fence Contractors Association
          California Framing Contractors Association
          California Independent Grocers Association
          California Manufacturers and Technology Association
          California Professional Specialty Contractors Association
          California Restaurant Association
          Engineering Contractors Association
          Flasher/Barricade Association
          Marin Builders Association
          Residential Contractors Association
          SafeCon
          Walter & Prince, LLP.
          Western Growers

           
          Analysis Prepared by  :    Ben Ebbink / L. & E. / (916) 319-2091













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                                      APPENDIX

                             FY 2009 Inspection Activity
                     Percent of All Violations Cited as Serious 

          
           --------------------- 
          |              |  FY  |
          |              | 2009 |
          |--------------+------|
          |Alaska        | 26%  |
          |--------------+------|
          |Arizona       | 23%  |
          |--------------+------|
          |California    | 19%  |
          |--------------+------|
          |Connecticut   | 28%  |
          |***           |      |
          |--------------+------|
          |Hawaii        | 60%  |
          |--------------+------|
          |Indiana       | 57%  |
          |--------------+------|
          |Iowa          | 65%  |
          |--------------+------|
          |Kentucky      | 63%  |
          |--------------+------|
          |Maryland      | 45%  |
          |--------------+------|
          |Michigan      | 37%  |
          |--------------+------|
          |Minnesota     | 74%  |
          |--------------+------|
          |Nevada        | 28%  |
          |--------------+------|









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          |New Jersey    | 82%  |
          |***           |      |
          |--------------+------|
          |New Mexico    | 67%  |
          |--------------+------|
          |New York ***  | 58%  |
          |--------------+------|
          |North         | 38%  |
          |Carolina      |      |
          |--------------+------|
          |Oregon        | 43%  |
          |--------------+------|
          |Puerto Rico   | 47%  |
          |--------------+------|
          |South         | 70%  |
          |Carolina      |      |
          |--------------+------|
          |Tennessee     | 55%  |
          |--------------+------|
          |Utah          | 71%  |
          |--------------+------|
          |Vermont       | 66%  |
          |--------------+------|
          |Virgin        | 53%  |
          |Islands ***   |      |
          |--------------+------|
          |Virginia      | 61%  |
          |--------------+------|
          |Washington    | 34%  |
          |--------------+------|
          |Wyoming       | 55%  |
          |--------------+------|
          |All State     | 43%  |
          |Plans         |      |
          |--------------+------|
          |Federal OSHA  |77%   |
           --------------------- 
                                                                           
                 Source: U.S. Department of Labor, OSHA, FY 2009.  
           State Plan ENFC Report, 11.19.2009, Public and Private Sectors  
                                      included.

                     *** State Plan covers public employees only