Angel Brothers Enterprises v. Walsh ( 2021 )

Case: 20-60849 Document: 00516113075 Page: 1 Date Filed: 12/01/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
December 1, 2021
No. 20-60849
Lyle W. Cayce
Clerk
Angel Brothers Enterprises, Limited,
Petitioner,
versus
Martin Walsh, Secretary, U.S. Department of Labor,
Respondent.
Petition from the Decision of the
Occupational Safety & Health Review Commission
OSHRC Docket No. 16-0940
Before Jones, Costa, and Duncan, Circuit Judges.
Gregg Costa, Circuit Judge:
The Occupational Safety and Health Administration cited Angel
Brothers Enterprises because an employee was doing excavation work in a
trench that lacked cave-in protection. An administrative law judge and the
Occupational Safety and Health Review Commission affirmed the citation,
found the violation to be willful, and assessed a $35,000 penalty.
The central issue on appeal is whether a supervisor’s involvement in
a subordinate employee’s violation of workplace safety rules renders the
employer liable. We hold that imputing the supervisor’s knowledge of the
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safety violation to the employer is appropriate in this situation under basic
agency principles. And because Angel Brothers’ other challenges cannot
overcome the deference we owe agency factfinding, we deny the petition for
review.
I.
An Angel Brothers construction crew was installing a concrete
drainage pipe alongside a road in LaPorte, Texas. For the first two days of
the project, the crew had adequate protection from cave-ins. But beginning
on day three, the work would be too close to the street to continue with the
safety measure the company had been using—“benching” the walls of the
excavation. Angel Brothers safety manager Kevin Bennett thus told foreman
Salvador Vidal that the crew would need to start using a trench box, which is
placed in the ditch and has walls that guard against cave-ins.
Vidal did not follow those instructions. The very next day, crew
member Salvador Fonseca entered the excavation despite the lack of a trench
box. Vidal admitted that he allowed Fonseca to work without the trench box.
He thought that would not pose a problem because Fonseca would only need
to spend ten to fifteen minutes inside the excavation. Vidal did not want to
install the trench box because doing so would have blocked the adjoining
intersection and taken more time. Vidal and another employee, Jose Garcia,
stood by while Fonseca worked in the trench.
An OSHA Compliance Officer happened to visit the worksite while
Fonseca was working in the trench without adequate protection. The
inspector issued Angel Brothers a citation for violating the requirement that
“[e]ach employee in an excavation shall be protected from cave-ins by an
adequate protective system.” 29 C.F.R. § 1926.652(a)(1).
Angel Brothers has never disputed that Fonseca’s working in a trench
without cave-in protection violated OSHA rules. But it has challenged
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whether it can be held responsible for the violation. An ALJ held a hearing
and affirmed the citation against Angel Brothers as willful.
The Commission affirmed. It concluded that the Secretary of Labor
had proven all elements of the violation, including the employer’s
knowledge. In the Commission’s view, Vidal’s knowledge as a supervisor
flowed to the company. The Commission also rejected Angel Brothers’
affirmative defense, determining that the company did not prove that it
effectively enforced safety rules or disciplined employees for safety
violations. Finally, the Commission affirmed the ALJ’s finding that the
conduct was willful.
Angel Brothers’ third attempt to avoid the citation is now before us.
II.
We must accept factual findings of the Commission if they are
supported by “substantial evidence on the record considered as a whole” and
uphold those findings “if a reasonable person could have found what the
[Commission] found, even if the appellate court might have reached a
different conclusion.” Sanderson Farms, Inc. v. Perez, 811 F.3d 730, 734 (5th
Cir. 2016) (quoting 29 U.S.C. § 660(a)). We review legal conclusions for
“whether they are ‘arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with the law.’” Austin Indus. Specialty Servs., L.P. v.
Occupational Safety & Health Review Comm’n, 765 F.3d 434, 438–39 (5th Cir.
2014) (citation omitted); see 5 U.S.C. § 706(2)(A).
A.
To establish an OSHA violation, the Secretary “must show by a
preponderance of the evidence: (1) that the cited standard applies; (2)
noncompliance with the cited standard; (3) access or exposure to the
violative conditions; and (4) that the employer had actual or constructive
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knowledge of the conditions through the exercise of reasonable due
diligence.” Sanderson Farms, 811 F.3d at 735. Angel Brothers disputes only
the final requirement.
How do we determine the knowledge of inanimate business entities?
Because “a corporation can only act through its agents,” it “is usually liable
for acts of its supervisors in the performance of their assigned duties.” W.G.
Yates & Sons Const. Co. v. Occupational Safety & Health Review Comm’n, 459
F.3d 604, 607 (5th Cir. 2006) (first quotation from Ocean Elec. Corp. v. Sec’y
of Labor, 594 F.2d 396, 399 (4th Cir. 1979)). That principle of vicarious
liability is Agency Law 101. See Restatement (Third) of Agency §
2.04 (“An employer is subject to liability for torts committed by employees
while acting within the scope of their employment.”). An employer can be
held responsible not just for the conduct of its agents but also for their
knowledge. Id. § 5.03 (“[N]otice of a fact that an agent knows or has reason
to know is imputed to the principal if knowledge of the fact is material to the
agent’s duties to the principal”). We have recognized the application of
these general agency principles in the OSHA context: “[W]hen a corporate
employer entrusts to a supervisory employee its duty to assure employee
compliance with safety standards, it is reasonable to charge the employer
with the supervisor’s knowledge, actual or constructive, of non-complying
conduct of a subordinate.” Yates, 459 F.3d at 607 (brackets omitted)
(quoting Mountain States Tel. & Tel. Co. v. Occupational Safety & Health
Review Comm’n, 623 F.2d 155, 158 (10th Cir. 1980)).
Based on what we have said so far, this would seem to be an open-and-
shut case. Angel Brothers’ foreman knew about the safety violation, ergo the
company knew about the violation.
But it is not so simple. The rub is an exception Yates recognized from
the ordinary application of vicarious liability. When a supervisor’s “own
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conduct is the OSHA violation,” the supervisor’s knowledge should be
imputed to the employer only if the supervisor’s misconduct was foreseeable.
Yates, 459 F.3d at 607, 609; accord Penn. Power & Light Co., 737 F.2d 350,
354–55 (3d Cir. 1984); Mountain States, 623 F.3d at 158 (both requiring
foreseeability when the violation is a supervisor’s own conduct). But see
Dana Container, Inc. v. Sec’y of Labor, 847 F.3d 495, 499–500 (7th Cir. 2017);
Danis-Shook Jt. Venture XXV v. Sec’y of Labor, 319 F.3d 805, 811–12 (6th Cir.
2003) (both automatically imputing knowledge to the employer when a
supervisor commits the violation); see also Wayne J. Griffin Elec., Inc. v. Sec’y
of Labor, 928 F.3d 105, 109 (D.C. Cir. 2019) (noting that the court was
“skeptical” of Yates’s foreseeability requirement given the “background
common law of agency” but not resolving the question). The rationale for
the Yates exception is a concern that a strict liability regime, rather than one
requiring knowing misconduct, would result if one supervisor were the
source of both the underlying violation and the company’s awareness of it.
459 F.3d at 607–09.
That situation is not present here. The violation was a crew member’s
working in the unsafe trench, and foreman Vidal allowed the violation to
occur in contravention of his duty to ensure worker safety. Cf. id. at 607.
Angel Brothers nonetheless tries to characterize the violation as one
involving the foreman’s “own malfeasance” because he authorized the
crewmember to work in the trench. But authorizing another’s violation is not
the same as committing the violation oneself. Yates makes this clear in both
what the opinion says and what it did. The opinion “emphasize[s]” that the
exception extends to “only the situation in which it is the supervisor himself
who engages in unsafe conduct and who does so contrary to policies of the
employer.” Id. at 609 n.8. And while Yates rejected imputing a supervisor’s
knowledge to the employer for a citation listing the supervisor’s failure to
wear fall protection when working on a slope, id. at 610 (remanding to the
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agency for a foreseeability inquiry), a companion citation against the
employer for “allowing the two crewmen to wear the harnesses backwards”
was not even challenged on appeal, id. at 606. On its own terms then, the
Yates exception does not apply when, like here, a supervisor did not commit
the safety violation.
Nor does it make sense to extend the Yates exception to cases in which
a supervisor authorizes a subordinate to violate a safety rule. Consider two
situations. Situation A is this case, in which a supervisor authorizes a
subordinate to engage in unsafe work. In Situation B, the subordinate
chooses to engage in unsafe work on his own; a supervisor later visits the
construction site and sees the unsafe condition. By any measure, there is a
stronger case for holding the employer liable in Situation A given the active
involvement of the supervisor. See Floyd S. Pike Elec. Contractor, Inc. v.
Occupational Safety & Health Review Comm’n, 576 F.2d 72, 77 (5th Cir. 1978)
(“Because the behavior of supervisory personnel sets an example at the
workplace, an employer has if anything a heightened duty to ensure the
proper conduct of such personnel.”). Yet Angel Brothers’ position is that
the supervisor’s knowledge of the violation would be imputed to the
employer only in Situation B in which the supervisor’s knowledge of the
violation only came about through happenstance. The active involvement of
the supervisor in the Situation A violation would be tantamount, in Angel
Brothers’ view, to a violation by the supervisor and thus give rise to the Yates
exception. This theory that would impute a supervisor’s knowledge to the
employer only when he has passive involvement in a subordinate’s safety
violation upends agency principles. Restatement (Third) of
Agency § 5.03.
Caselaw likewise rejects Angel Brothers’ attempt to treat a
supervisor’s own safety violation and a supervisor’s involvement in a
subordinate’s violation as one and the same. The parties debate our
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unpublished applications of Yates. Those decisions are not binding, so they
do not control our decision today. But we note that their outcomes maintain
the distinction between a citation based on the supervisor’s own violation of
a safety standard and a citation based on a subordinate’s violation. We did
not automatically impute knowledge when the violation was the supervisor’s
failure to ensure a crane operator’s qualifications. Deep S. Crane & Rigging
Co. v. Harris, 535 F. App’x 386, 388 (5th Cir. 2013). We did impute a
supervisor’s knowledge to the company when the supervisor’s misconduct
was not the “physical condition[] constituting the violation.” Calpine Co. v.
Occupational Safety & Health Review Comm’n, 774 F. App’x 879, 883–84 (5th
Cir. 2019). Here the safety violation was the presence of crew member
Fonseca, not foreman Vidal, in the unsafe trench.
The Eleventh Circuit also limits its Yates-like exception to violations
citing the supervisor’s own misconduct. See ComTran Grp., Inc. v. U.S.
Dep’t of Labor, 722 F.3d 1304, 1317–18 (11th Cir. 2013). When a subordinate
commits the violation, it follows traditional agency principles of imputation.
Quinlan v. Sec’y, U.S. Dep’t of Labor, 812 F.3d 832, 840–41 (11th Cir. 2016).
In doing so, it has explained there is “little or no difference between the
classic situation in which the supervisor sees the violation by the subordinate
and disregards the safety rule . . . and [a] situation in which the supervisor
sees the violation and pitches in and works beside the subordinate to expedite
the job.” Id. at 841. Despite the differing levels of involvement by the
supervisor, both of those scenarios involve a subordinate’s violation of safety
rules so “it is reasonable to charge the employer with the supervisor’s
knowledge” of the subordinate’s misconduct. Yates, 459 F.3d at 607(citation omitted).
Angel Brothers’ argument—that a supervisor’s knowledge cannot be
imputed to the employer when the supervisor authorizes, or takes some other
active role in, a subordinate’s safety violation—finds no support in Yates, in
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agency principles, or in other caselaw. Ordinary imputation principles thus
apply. Foreman Vidal’s knowledge of the crew member’s safety violation is
attributable to Angel Brothers.
B.
Angel Brothers’ knowledge of the safety violation only establishes a
prima facie case of unlawful conduct. The company is not liable if it can show
that the violation resulted from unpreventable employee misconduct. To
establish this affirmative defense, the employer has the burden to prove that
it: “1) has established work rules designed to prevent the violation, 2) has
adequately communicated these rules to its employees, 3) has taken steps to
discover violations, and 4) has effectively enforced the rules when violations
have been discovered.” Yates, 459 F.3d at 609 n.7. The Commission found
that Angel Brothers had work rules to prevent the excavation violation and
took steps to discover those violations. But it rejected the defense based on
Angel Brothers’ failure to prove the final requirement: that the company
effectively enforces its safety rules upon discovering violations.
Even if a factfinder could reach a contrary view, substantial evidence
supports the Commission’s conclusion that Angel Brothers did not
demonstrate effective enforcement.
First, after receiving this citation, Angel Brothers failed to discipline
Fonseca for entering the unsafe trench. One might respond that Angel
Brothers is still challenging the citation, but recall that it has never disputed
that Fonseca violated the OSHA regulation by working in an unsafe trench;
it is only challenging whether the company should be penalized for that
violation. And Fonseca also violated Angel Brothers’ own safety rules, which
require that an employee seeing an unsafe condition in a trench “REFUSE
TO WORK” and report the condition “FOR IMMEDIATE CORRECTIVE
ACTION.” Fonseca faced no consequence for ignoring this directive.
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Second, although Angel Brothers is a large company that performs
more than a thousand excavations annually, it has only documented two
instances of disciplining employees for rules violations (including
disciplining foreman Vidal for this instance). Both of these consequences
only came after OSHA inspectors uncovered the violations. Angel Brothers
could not identify any examples of discipline for safety violations it detected.
What is more, in the five years preceding the ALJ hearing, five OSHA
inspections had uncovered four trenching violations (including this
instance), meaning at least two violations resulted in no discipline.
The dissent takes a different view of this twice-in-five-years
disciplinary record, believing it shows that Angel Brothers “had a great
overall record demonstrating effective enforcement.” Dissenting Op. 2.
That seemingly untenable position depends on a conclusion that the lack of
discipline means the company had a perfect safety record other than the four
times OSHA found violations. But the Commission did not have to accept
the statistically implausible claim that although OSHA found violations
during 80% of its five inspections, the company committed no safety
violations the other 6,000 or so times it performed excavations. Probability
aside, testimony from Angel Brothers supervisors rejects the idea that the
company was so unlucky as to be violating safety rules only when OSHA was
looking. Field safety manager Bennett said that he “frequently” finds
“irregularities” when inspecting excavation worksites and on “rare”
occasions those unsafe conditions exist when employees are in the trench.
Indeed, Bennett discovered a spoil pile being too close to the excavation at
Vidal’s worksite the day before OSHA’s inspection. But no one was
disciplined for that. Even Angel Brother’s Director of Safety does not
maintain the company has a perfect safety record other than when OSHA
visits. He said the company routinely disciplines and even terminates
employees for safety violations. All this evidence is at odds with the notion
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that Angel Brothers only violated safety rules four times among thousands of
excavations.
For these reasons, the Commission was not compelled to find that
Angel Brothers had a “nearly perfect” safety. Dissenting Op. 2. And on the
ultimate question about the effectiveness of Angel Brothers’ safety regime,
our substantial-evidence review must account for this being an issue on which
the company bears the burden. The issue thus is not whether substantial
evidence supports the view that Angel Brothers “did not effectively enforce
the rules,” id., the issue is whether the evidence required the agency to find
that Angel Brothers did effectively enforce the rules. The Commission said
this element of the affirmative defense was a “close question,” and there was
some disagreement among the Commissioners on the effect of certain
evidence. But given the deference we owe agency factfinding, the
Commission gets to make the close calls. Because the evidence does not
compel a conclusion contrary to the one the Commission reached, we must
defer to its ruling that Angel Brothers failed to establish the affirmative
defense.
C.
Angel Brothers also contests the Commission’s finding that the
violation was willful, rather than the less serious classifications of repeated,
serious, or not serious. See 29 U.S.C. § 666(a)–(c). A willful violation is “an
act done voluntarily, with either an intentional disregard of, or plain
indifference to, OSHA requirements.” Georgia Elec. Co. v. Marshall, 595
F.2d 309, 317 (5th Cir. 1979).
A supervisor’s willful actions may be imputed to an employer in the
same way knowledge of violations may be imputed. Sec’y of Labor v. Tampa
Shipyards, Inc., 15 BNA OSHC 1533, 1541 (No. 86-360, 1992); see also
Caterpillar Inc. v. Occupational Safety & Health Review Comm’n, 122 F.3d 437,
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440 (7th Cir. 1997). Our conclusion that the foreman’s state of mind can be
imputed to Angel Brothers thus resolves this final challenge. Foreman Vidal
cannot plead ignorance of the trench box requirement. Just a day before the
citation was issued, a company safety manager instructed Vidal to install a
trench box to ensure the crew’s safety. It is hard to find better evidence of
willfulness than that.
***
The petition for review is DENIED.
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Edith H. Jones, Circuit Judge, dissenting:
With due respect to my colleagues, I disagree that Angel Bros. should
bear a fine in this case for the supervisor’s willful violation of the OSHA
trenching rule. As the majority notes, the company is not liable if a violation
resulted from unpreventable employee misconduct, and the majority agrees
this employer has satisfied three of four criteria for this affirmative defense.
Yates, 459 F.3d at 609 n.7. The disputed factor is whether the employer “has
effectively enforced the rules when violations have been discovered.” Id.The Commission admitted its decision on this factor was a close call. I would
say it was close to a deranged call.
This court is required to accept factual findings of the Commission
only when supported by “substantial evidence on the record considered as a
whole . . . .” Sanderson Farms, 811 F.3d at 734 (quoting 29 U.S.C. § 660(a)).
“Such consideration of the record ‘as a whole’ is required by 29 U.S.C.
§ 160(e)–(f).” STP Nuclear Operating Co. v. Nat’l Lab. Rels. Bd., 975 F.3d
507, 513 (5th Cir. 2020). Furthermore, “the evidence ‘must be substantial,
not speculative.’” Dish Network Corp. v. Nat’l Lab. Rels. Bd., 953 F.3d 370,
376 (5th Cir. 2020), as revised (Mar. 24, 2020) (quoting Brown & Root, Inc.
v. NLRB, 333 F.3d 628, 639 (5th Cir. 2003)). “The substantiality of evidence
must take into account whatever in the record fairly detracts from its
weight.” Universal Camera Corp. v. N.L.R.B., 340 U.S. 474, 488, 71 S. Ct.
456, 464 (1951). The Commission’s finding that Angel Bros. did not
effectively enforce the rules fails to properly account for the considerable
evidence in the record indicating Angel Bros.’ history of exemplary
compliance with safety regulations.
The alleged “substantial evidence” supporting the Commission’s
adverse finding consists of two points. First, the employer failed to discipline
the employee in the trench, Fonseca, even though it issued a warning to his
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supervisor Vidal as a result of the instant violation. But failing to discipline
Fonseca is hardly evidence of a failure to enforce the rules. As Angel Bros.’
representative testified, the company believed Fonseca felt bound on pain of
retaliation to enter the trench when so ordered by his supervisor. Although
the employer counseled its crews to speak out if they knew of safety
violations, any reasonable person knows that doing so would be a rarity,
especially when the violator is a direct supervisor. Imposing discipline on one
hapless employee will hardly change human nature in the trenches; and
showing mercy to the underling while issuing a warning to the actual violator
hardly supports a finding that this employer did nothing.
Second, during a five-year period, when the company conducted
between 6,000 and 7,000 excavations, it received only four citations for
trenching violations. The Commission determined that Angel Bros. allegedly
disciplined employees for only two of the four. Does this factoid suggest
Angel Brothers was unwilling to effectively enforce trenching rules?
Hypothetically, even if one of the numerous company field safety managers
oversaw operations on only one occasion during each project, which is a
serious underestimate, then the company’s citation rate would be 0.067
percent. That looks like a great overall record demonstrating effective
enforcement. 1 In deciding otherwise, the Commission disregarded vital
1
The majority seems to misunderstand the point of our disagreement. The
majority goes to some length to establish that Angel Bros. did in fact commit safety
violations. But all agree that the record does not suggest that “the company committed no
safety violations” other than the four times identified by OSHA, and that “[a]ll this
evidence is at odds with the notion that Angel Brothers only violated safety rules four times
among thousands of excavations.” See Majority Op. at 9–10. The point I make is merely
that the record overwhelmingly indicates that the company enforced the rules by employing
appropriate disciplinary measures when such violations were detected, and also, perhaps
primarily, proactive measures to prevent violations before or as soon as they occur. The
majority opinion acknowledges some of this evidence as well, yet focuses instead on a
number of infractions rather than how the company responded to potential violations or
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aspects of the record, including (1) the company representative’s testimony
that they do in fact enforce safety rule violations against employees, and
(2) that safety audit records for supervisor Vidal’s worksites showed
exemplary compliance.
Additionally, the Commission’s opinion is inconsistent. On one hand,
the Commission approvingly acknowledged the company’s multiple
inspections of worksites and frequent, more penetrating, safety audits, which
are documented and signed by the respective foreman and inspector. On the
other hand, it held against the company that it failed to produce documentary
evidence of discipline for trenching rules violations. And it then made an
adverse finding on the issue of effective enforcement due to a lack of
“adequate documentation” of discipline. Yet only two pages earlier in its
decision, the Commission found that no supporting “documentation” is
required to prove either the company’s actual safety rules or that the rules
were effectively communicated to employees. Based on these irreconcilable
conclusions, Angel Bros. does not need to document the safety rules or the
conveyance of such rules to employees, but it does need to document all
disciplinary encounters or else it is not effectively enforcing the rules. This
makes little sense.
There is more than one way to “enforce” OSHA rules. A company
can proactively inspect and prevent violations before they occur, which is
existing violations. The issue presented to this court, as the majority acknowledges, is
whether substantial evidence supports the view that Angel Bros. did not effectively enforce
the rules, not whether there were occasional safety infractions at all. See id. at 10. In other
words, this court’s job is not to discern whether there were various infractions within the
6,000–7,000 excavations (there undoubtedly were some), but to discern whether Angel
Bros.’ overall enforcement of the rules was effective. Overall effectiveness does not require
zero infractions. The existence of evidence of some infractions in the record does not
overcome the substantial evidence of compliance also contained in the record.
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exactly what Angel Bros.’ history demonstrates. Or it can react by exerting
formal discipline after technical violations are observed. Positive safety
management versus negative safety hammering are merely two different
approaches. The record aptly indicates that Angel Bros. utilized positive
safety management with nearly perfect success. There is no “substantial
evidence” to support that Angel Bros. did not effectively enforce the rules.
Further, it is absurd to penalize the company for a proactive safety policy, yet
that is the result of the Commission’s rejection of this affirmative defense.
The deference that agencies are owed for findings of fact has important
limits. Carey Salt Co. v. N.L.R.B., 736 F.3d 405, 410 (5th Cir. 2013). And
“[a] flawed reading of the record provides no substantial evidence for a
finding.” Dish Network Corp., 953 F.3d at 376 (internal quotations omitted).
Where, as here, an agency’s finding belies significant aspects of the record, it
is not supported by substantial evidence. See STP Nuclear Operating Co.,
975 F.3d at 515 –17, 520.
For the foregoing reasons, I would grant the petition for review.
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