IBP, Inc. v. Herman

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 1, 1998 Decided June 2, 1998

No. 97-1389

IBP, Inc.,

Petitioner/Cross-Respondent

v.

Alexis M. Herman, Secretary of Labor,

and

United States Department of Labor,

Respondents/Cross-Petitioners

Consolidated with

No. 97-1461

On Petitions for Review of an Order of the

Occupational Safety and Health Review Commission

Charles M. Chadd argued the cause for petitioner/cross-
respondent, with whom Jerome K. Bowman and John J.
Vecchione were on the briefs.

Bruce Justh, Assistant Counsel for Appellate Litigation,
United States Department of Labor, argued the cause for
respondents/cross-petitioners, with whom Joseph M. Wood-
ward, Associate Solicitor, and Ann S. Rosenthal, Counsel,
were on the brief. Terri P. DeLeon, Counsel, entered an
appearance.

Arthur G. Sapper argued the cause for amici curiae Na-
tional Association of Manufacturers, et al., with whom Ste-
phen C. Yohay was on the brief.

Before: Edwards, Chief Judge, Silberman and Ginsburg,
Circuit Judges.

Opinion for the Court filed by Circuit Judge Silberman.

Silberman, Circuit Judge: IBP, Inc. petitions for review of
the Occupational Safety and Health Review Commission's
order holding it responsible for the failure of another employ-
er's employees to comply with certain safety procedures. We
grant the petition for review and vacate the Commission's
order.

I.

IBP, Inc. (the Company) operates a meat processing plant
in Madison, Nebraska. In 1990, it hired DCS Sanitation
Management, Inc., an independent contractor, to clean the
plant's machinery after the close of production each day. To
guard against the unintended activation of dangerous machin-
ery, the Secretary of Labor has promulgated "lockout/tagout"
(lockout) regulations under the Occupational Safety and
Health Act. 29 C.F.R. s 1910.147 (1997). The regulations,
inter alia, require employers to implement and enforce proce-
dures by which employees cut machines off from their power
sources before performing maintenance on them. DCS had
its own lockout policy pursuant to those regulations, and was
also bound by contract to comply with the Company's lockout

policy. All of the Company's machines were capable of being
locked out, and DCS employees were trained in the proper
procedures.

Three Company employees, a product control manager and
two inspectors, remained in the plant during the sanitation
process. According to the contract, the Company could "tag"
areas that did not meet its sanitation standards and DCS
would have to reclean them. During the course of their
quality control inspections, Company employees often saw
DCS employees violating lockout procedures. One product
control manager reported that "[o]n numerous occasions, I
observed DCS employees ... reaching into tables [and] con-
veyors that were running, using fat augers as ladders to crawl
up to the upper floors, riding on tables that were moving,
[and] jumping across tables that were moving." Company
employees often motioned to DCS employees to stop danger-
ous conduct, but DCS employees did not always take kindly
to such suggestions. A Company employee testified that

[o]ne time, when a DCS hourly was retrieving pieces of
fat from the boneless loin paste table[,] I told him to stop
what he was doing. He turned to me and said, "I don't
work for you. You can't tell me what to do."

....

... Another time, I told a DCS hourly employee to
stop what he was doing and he turned to me and said, "I
don't have to." And the third time that comes vividly to
my mind, a DCS hourly employee was using the fat
auger at the east end of the ham line complex as a ladder
to get to the upper floor.

I hollered at him to stop what he was doing. He
continued up the auger, turned and shouted obscenities
at me.

Company employees reported the lockout violations they
observed to DCS supervisors and sometimes to Company
supervisors as well. On one occasion, a DCS employee who
was recleaning a tagged area stuck his hand into a moving
belt after his supervisor turned his back. The Company
quality control inspector told the DCS supervisor and later

reported the incident to Company management. In response,
the Company's Safety Director recommended that DCS re-
view lockout procedures with its employees. Similarly, after
one of the three occasions when a DCS employee actually
caught his hand in a moving belt, the Company's Plant
Manager sought assurance that DCS would follow the lockout
program. But no Company employee ever tried to discipline
DCS employees for violations. When DCS' operations man-
ager was asked what oversight, if any, the Company had over
lockout, the manager responded: "We're there to enforce
[lockout as to] our own employees."

In 1993, a DCS employee was killed when he removed
debris from a running loin saddle machine. The Secretary of
Labor cited both the Company and DCS for willfully failing to
enforce the lockout policy against DCS employees. Her claim
against the Company was that it could have controlled wheth-
er DCS employees complied with lockout procedures, by
suspending its contract with DCS if necessary. She stipu-
lated to several key facts: that the hazard was the failure of
DCS hourly employees to follow lockout procedures, that no
Company employees created this hazard, that no Company
employees were exposed to it, and that DCS operated as an
independent contractor.

The ALJ vacated the citation against the Company, holding
that

[t]he sole indicia of control proven by the Secretary was
IBP's right to rescind its contract with DCS based on
DCS' safety violations. The Commission has never
found an employer/employee relationship, for purposes of
establishing liability under the Act[,] based solely on a
contracting entity's right to rescind its contract with an
independent contractor. This judge believes it would be
inappropriate to so extend liability under the Act.

IBP, Inc., OSHRC Docket No. 93-3059 (Apr. 7, 1995). The
Secretary sought review before the Occupational Safety and
Health Review Commission, which reversed the ALJ and
reinstated the citations. IBP, Inc., 17 O.S.H. Cas. (BNA)

2073 (1997). In its decision, the Commission emphasized that
no employer/employee relationship is necessary to establish
liability under the Occupational Safety and Health Act. Un-
der the Commission's "multi-employer doctrine," an employer
may be liable for hazards under its control even if none of its
own employees is exposed to the danger. The Commission,
like the Secretary, thought that the Company's right to cancel
its contract with DCS gave it control over the hazard.1 It
thus held the Company liable, but it did refuse to find the
violation willful.

Commissioner Montoya vigorously dissented, arguing that
the majority's decision "created a form of contractual indem-
nity that significantly expands the Commission's case law on
multi-employer liability." Id. at 2077 (dissenting opinion). In
her view, the Company's authority to cancel the DCS contract
could not establish "control" in any realistic sense of the
term. Prior Commission decisions had spoken of control
primarily in the context of the employer's ability to abate
physical hazards like defective machinery. She thought the
majority's reach to the Company particularly inexplicable
since DCS had been found liable in a separate proceeding and
was under a judicially enforceable order to enforce the lock-
out policy at the Madison plant. DCS Sanitation Manage-
ment, Inc. v. OSHRC, 82 F.3d 812 (8th Cir. 1996).

II.

Petitioner argues that it cannot be held responsible for
DCS' employees. According to the Company, OSHA duties
are confined to the employment relationship and the multi-
employer doctrine exceeds the Secretary's authority under
both the Occupational Safety and Health Act and its own
regulations. But even if the multi-employer doctrine is legiti-

__________
1 In finding control, the Commission relied on the Company's
ownership of the plant as well as its authority under the contract.
The Secretary does not defend the Commission's decision on the
property ground--which is understandable, since the Company's
ownership of the property does not add anything to its contractual
rights.

mate, the Company contends that the Commission erred in
this case by concluding that the Company's authority to
cancel the DCS contract gave it "control" over the behavior of
DCS employees. The Secretary, on the other hand, asks us
not only to deny the petition, but also to reverse the Commis-
sion's conclusion that the Company did not act willfully. She
defends the multi-employer doctrine by asserting that both
the Act and implementing regulations are ambiguous and that
we must defer to her interpretation permitting liability out-
side the employment relationship. Although she does not
elaborate much on the point, she also insists that the Compa-
ny had control of lockout enforcement.

Both parties, as well as amici curiae, devote considerable
effort to debating the legitimacy of the Secretary's multi-
employer doctrine. The doctrine had its inception in the
construction industry, where numerous contractors and sub-
contractors mingle throughout a single work site. Craft
jurisdictional rules typically prevent specialists of one craft
from performing work in another craft--so a plumber, for
example, cannot remove exposed wiring even if his own
employees must step over it to lay pipe. To address this
problem, the Secretary of Labor began bringing enforcement
actions against the employer responsible for a particular
hazard, regardless of whether the employer's own employees
were exposed to the danger. The Secretary's theoretical
justification for this approach was based on her reading of 29
U.S.C. s 654(a) (1994), which sets out two obligations for
employers:

Each employer--

(1) shall furnish to each of his employees employment
and a place of employment which are free from recog-
nized hazards that are causing or are likely to cause
death or serious physical harm to his employees;

(2) shall comply with occupational safety and health stan-
dards promulgated under this chapter.

The Secretary has repeatedly argued that subsection (a)(1)
creates a general duty running only to an employer's own
employees, while (a)(2) creates a specific duty to comply with

standards for the good of all employees on a common work
site--the employer's own as well as anyone else's--that could
be endangered by a violation. See Anthony Crane Rental v.
Reich, 70 F.3d 1298, 1305-06 (D.C. Cir. 1995). But, as the
Company and amici point out in this case, the Act defines the
term "occupational safety and health standard" as one "rea-
sonably necessary or appropriate to provide safe or healthful
employment and places of employment." 29 U.S.C. s 652(8)
(1994) (emphasis added). And it defines "employer" as "a
person engaged in a business affecting commerce who has
employees." 29 U.S.C. s 652(5) (1994) (emphasis added).
The Secretary's view has always been that because of the
Act's broad "remedial" purpose, these references to the em-
ployment relationship were not intended to be restrictive or
interpreted in the common law sense. But cf. Nationwide
Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-25 (1992) (reject-
ing the argument that the word "employee" in a statute
should be interpreted with an eye to the mischief to be
corrected in favor of the "well-established principle" that
Congress is presumed to use "employee" in the common-law,
master-servant sense). Yet she does not take her interpreta-
tion to its next logical step and argue that anyone who
happens to appear on a work site is covered so long as he is
an employee of someone. She interprets her own regulations,
which say that "[i]n the event a standard protects on its face
a class of persons larger than employees, the standard shall
be applicable under this part only to employees and their
employment and places of employment," 29 C.F.R.
s 1910.5(d) (1997), as distinguishing between workers on the
job and mere passers-by.

The Company and amici object to any form of the multi-
employer doctrine, but they particularly object to it outside
the construction context, where they say there are no craft
jurisdictional rules to justify it. The Commission has sanc-
tioned non-construction multi-employer liability in only one
other instance. Harvey Workover, Inc., 7 O.S.H. Cas. (BNA)
1687 (1979).2 There, the cited employer was engaged in

__________
2 Although the Secretary describes non-construction multi-
employer liability as well-established, the cases that she cites to

offshore drilling and hired a welder to repair a damaged
water jet line on its barge. Harvey Workover failed to check
the atmosphere inside a sealed compartment on the barge,
and the welder, as well as three of Harvey Workover's own
employees, fell unconscious from oxygen deficiency after en-
tering it. Finding Harvey Workover liable, the Commission
said: "We no longer find the distinction between construction
sites and other worksites valid. The safety of all employees
can best be achieved if each employer at multi-employer
worksites has the duties to (1) abate hazardous conditions
under its control and (2) prevent its employees from creating
hazards." Id. at 1689. Thus, although that case could have
been decided on the basis of Harvey Workover's duty to its
own employees who entered the sealed compartment, it in-
stead significantly extended the multi-employer principle.
Since the lockout violations in the Company's case took place
in a non-construction setting, the Commission relied on Har-
vey Workover to hold the Company liable.

We see tension between the Secretary's multi-employer
theory and the language of the statute and regulations, and
we have expressed doubt about its validity before.3 Anthony

__________
support this proposition are not on point. See Red Lobster Inns of
Am., Inc. 8 O.S.H. Cas. (BNA) 1762 (1980) (although the employer
was not in the construction industry, the violation occurred on a
construction site); Rockwell Int'l Corp., 17 O.S.H. Cas. (BNA) 1801
(1996) (addressing multi-employer defense available under
s 654(a)(1) rather than multi-employer liability under s 654(a)(2)).

3 The doctrine has somewhat of a checkered history. The first
time the Secretary cited an employer for exposing only another
employer's employees to danger, the Commission rejected the
citation as beyond his authority under the Act. Brennan v. Gilles
& Cotting, Inc., 504 F.2d 1255 (4th Cir. 1974). There, the Secretary
tried to hold a general contractor responsible when two employees
of its subcontractor were killed in a scaffolding collapse. The
Commission vacated the citation because the general contractor was
not the "employer" of the deceased employees. On review, the
Fourth Circuit reached the same result on regulatory grounds.
Focusing on 29 C.F.R. s 1910.5, the court held that the word
"employees" was ambiguous and the Commission's interpretation

Crane Rental, 70 F.3d at 1306-07. But it is once again
unnecessary to decide that issue, because even under the
expansive Harvey Workover rule, the Secretary has to estab-
lish petitioner's control--and we agree essentially with Com-
missioner Montoya that the Secretary did not make that
showing.

Both the Company and the Secretary frame our review of
this issue as a "substantial evidence" question, surely because
the Occupational Safety and Health Act's judicial review
provision provides that "[t]he findings of the Commission with
respect to questions of fact, if supported by substantial
evidence on the record considered as a whole, shall be conclu-

__________
reasonable. (Insofar as the court deferred to the Commission's
interpretation of the regulation rather than the Secretary's, its
opinion has been overruled by Martin v. OSHRC, 499 U.S. 144
(1991).) The Second Circuit was far more receptive to the Secre-
tary's theory. In Brennan v. OSHRC, 513 F.2d 1032 (2d Cir. 1975),
the Secretary cited a subcontractor for failing to install perimeter
guards and allowing material stored on upper floors to hang over
the edge. The Commission refused to sanction the liability because
none of the subcontractor's own employees was exposed to the
danger. The court, vacating the order, appeared to hold not only
that multi-employer liability was permissible, but that the Act
actually required it. Id. at 1038. After Brennan v. OSHRC, the
Commission changed its position and began endorsing the Secre-
tary's efforts to impose multi-employer liability. Most circuits have
accepted multi-employer liability, at least in the construction con-
text. See Teal v. DuPont de Nemours & Co., 728 F.2d 799 (6th Cir.
1984); Beatty Equip. Leasing, Inc. v. Secretary of Labor, 577 F.2d
534 (9th Cir. 1978); Marshall v. Knutson Constr. Co., 566 F.2d 596
(8th Cir. 1977). The Seventh Circuit has implicitly accepted multi-
employer liability under s 654(a)(2), but has also held that a "multi-
employer defense" exists under s 654(a)(1). Thus the employer is
not liable under the general duty clause when its own employees
are exposed to hazards beyond its reasonable control. Anning-
Johnson Co. v. OSHRC, 516 F.2d 1081 (7th Cir. 1975). Only the
Fifth Circuit has squarely rejected multi-employer liability, holding
that the s 654(a)(2) duty to comply with OSHA standards runs from
an employer only to his own employees. Melerine v. Avondale
Shipyards, Inc., 659 F.2d 706 (5th Cir. 1981).

sive." 29 U.S.C. s 660(a) (1994). This provision, however,
neither restricts our review to questions of fact nor precludes
arbitrary and capricious review of Commission decisions.
While that section governs factfinding, Congress did not
intend to relieve the Commission of the reasoned decision-
making requirement of the Administrative Procedure Act.
S.G. Loewendick & Sons, Inc. v. Reich, 70 F.3d 1291, 1294
(D.C. Cir. 1995); see also 5 U.S.C. s 706(2)(A) (1994). And
whether it is legitimate for the Commission to conclude that
the Company's ability to cancel the contract gives it "control"
over the hazard is more naturally and appropriately tested in
terms of reasonableness than in terms of evidentiary weight.
See Bangor Hydro-Electric Co. v. FERC, 78 F.3d 659, 663 n.3
(D.C. Cir. 1996). Of course, using reasonableness as the
analytic framework is a matter of conceptual ease rather than
substantive difference, for the substantial evidence standard
is no more than a specific application of arbitrary and capri-
cious review. Association of Data Processing Serv. Orgs. v.
Board of Governors of the Fed. Reserve Sys., 745 F.2d 677,
681-86 (D.C. Cir. 1984). To be sure, we have said that the
statute's use of substantial evidence as the standard of review
for informal rulemaking (which does not have a testimonial
record) is so anomalous that Congress must have intended a
somewhat more searching review than we would perform
under the normal APA arbitrary and capricious standard.
AFL-CIO v. Marshall, 617 F.2d 636, 648-52 (D.C. Cir. 1979);
Industrial Union Dep't v. Hodgson, 499 F.2d 467, 472-76
(D.C. Cir. 1974); see also AFL-CIO v. OSHA, 965 F.2d 962,
970 (11th Cir. 1992). But we have never given that OSHA
judicial review standard any special significance in an adjudi-
cation. See Loewendick & Sons, 70 F.3d at 1294; Anthony
Crane Rental, 70 F.3d at 1302.

The clause at issue in the DCS contract provided:

IBP may terminate this Agreement without penally [sic]
upon not less than one week's notice to Contractor if
Contractor violates IBP's Contractor Safety Policy (a
copy of which is attached to this Agreement), or if
Contractor is cited for a repeat violation by OSHA or the

State equivalent agency, or if Contractor's operations
result in a death or amputation injury.

The Commission thought this provision important because the
Company could have used it to pressure DCS to enforce
lockout precautions. Thus the Commission's theory is some-
thing like "control, once removed." The root hazard is, as the
Secretary stipulated before the ALJ, "the failure of DCS
employees to follow lockout/tagout," with the secondary, im-
plicit hazard being "DCS' failure to supervise its own employ-
ees."

In her brief and at oral argument, the Secretary has simply
stated in a conclusory way that substantial evidence supports
the finding of control. But the problem is not that the
evidence did not add up to "control," it is that the Commis-
sion has redefined control in an irrational way to meet the
evidence. To reason that petitioner's general control over
DCS, because of its ability to terminate the contract, sub-
sumes the power to discipline individual DCS employees is to
take the meaning of "control" to an unacceptably high level of
abstraction. The Company pointed out the safety violations
to DCS supervisors and management, which is the most it
could be expected to do. Cf. Red Lobster Inns of Am., Inc., 8
O.S.H. Cas. (BNA) 1762 (1980) (holding employer with "gen-
eral supervisory authority" over a work site liable for failing
to correct a hazard, but this employer also did not even warn
subcontractors of the danger). To require it to cancel its
contract with DCS, potentially bringing plant operations to a
halt, is to employ a howitzer to hit a small target. It is
unclear what the Secretary hoped to accomplish by her
approach, since, as Commissioner Montoya emphasized, DCS,
the employer who could easily control its own employees'
disciplinary infractions, had already been held liable for the
same violation. The majority's decision, moreover, seems to
reduce general contractors' incentive to advance workplace
safety--rather than cracking down on safety through contract
termination, they would respond to it simply by eliminating
any reference to safety in subcontracts.

Nor is there substantial evidence--under a normal under-
standing of "control"--to support the proposition that the
Company otherwise assumed the authority to enforce the
lockout program against DCS employees. The Secretary
notes that the Company reserved the right, in its "sole
discretion," to rescind any DCS employee's "IBP employee
ID card," an action that would effectively bar that employee
from the Madison plant. But this clause does not suggest
that the Company reserved the right to discipline DCS
employees. It could just as easily mean--and likely did--
that the Company wanted the authority to bar DCS employ-
ees when it thought that they posed a threat to the Compa-
ny's own employees or facility. Moreover, the other provi-
sions in the contract cut against the Secretary's position. It
stated that the "Contractor shall furnish the sole supervision
and control of such labor as is necessary to perform this
Agreement." (Emphasis added.) It also required DCS to
assume the responsibility for complying with OSHA stan-
dards and the Company's own lockout policy. Indeed, the
contract reflects the Company's disavowal of micromanage-
ment.

The Company's lockout policy, which required the Compa-
ny's managerial employees to enforce compliance "by all
personnel (management, hourly, and contractor)," using disci-
plinary action where warranted, gives slightly more support
to the Commission's conclusion. But, when compared with
the testimony of the Company and DCS employees, it is
hardly "substantial." Witnesses from both the Company and
DCS explained that they thought DCS retained sole disciplin-
ary authority. A Company safety director said that, under
the lockout policy, the Company could discipline "DCS the
company"--by contract suspension--but had no authority
over DCS employees. The Secretary herself stipulated that
Company personnel believed they had no authority to sus-
pend DCS employees from work. DCS management employ-
ees operated under the same understanding, testifying that
they were there to enforce safety rules as to their own
employees and that it was their responsibility to correct
safety problems. Moreover, the Company did not assume

responsibility for safety control by sending three employees
to perform quality control during the sanitation process. Any
doubts about the Company's de facto relationship with DCS
are clarified by the way DCS employees rudely rebuffed the
Company's attempts to warn them--responses like "you can't
tell me what to do" hardly suggest that anyone perceived the
Company as the one in control.

Finally, the Secretary tries to find support in the language
of a 1991 settlement agreement she entered with the Compa-
ny. Before the Company hired DCS to work at its plant, it
received an OSHA citation for a Company employee's failure
to lock out the same loin saddle machine at issue in this case.
The Company and the Secretary settled the citation, and a
provision of the agreement required the Company to "instruct
employees working on the loin saddle table that product may
not be retrieved from under said table except pursuant to the
lockout policy." Even assuming this clause is applicable here,
the Company satisfied it by providing DCS with a copy of its
lockout policy, notifying DCS supervisors when it observed
violations, and meeting with DCS management about the
importance of lockout safety. The agreement requires no
more.

* * *

The Company's petition for review is granted, the Commis-
sion's order vacated, and the citation dismissed.