Abateco Services, Inc. v. Theron J. Bell, etc. , 23 Va. App. 504 ( 1996 )

COURT OF APPEALS OF VIRGINIA
Present: Judges Baker, Coleman and Elder
Argued at Salem, Virginia
ABATECO SERVICES, INC.
OPINION BY
v. Record No. 0328-96-3 JUDGE SAM W. COLEMAN III
NOVEMBER 19, 1996
THERON J. BELL,
COMMISSIONER OF LABOR AND INDUSTRY
FROM THE CIRCUIT COURT OF THE CITY OF STAUNTON
Rudolph Bumgardner, III, Judge
R. Leonard Vance for appellant.
John R. Butcher, Assistant Attorney General
(James S. Gilmore, III, Attorney General, on
brief), for appellee.
Abateco Services, Inc. (Abateco), a licensed asbestos
removal contractor, appeals the trial court's order which upheld
four citations issued by the Department of Labor and Industry
(Department) and $9,665 in civil penalties assessed by the trial
court against Abateco for refusing to provide the Department
access to its records as required by Abateco's subcontract and by
various provisions of the Virginia Occupational Safety and Health
Standards. Abateco contends that the citations were not valid
because it had revoked its contractual consent for the Department
to access its records and, therefore, it had no legal obligation
to produce the records without a warrant or court order. After
revoking its consent, Abateco asserts that the Department, which
had the statutory and regulatory right to access the records,
would have been required to obtain a search warrant or subpoena
in order to lawfully access its records. Therefore, Abateco
argues, because the Department was required to obtain a warrant
or subpoena for the records, it could not cite Abateco for
exercising its constitutional right to require the Department to
obtain a warrant in order to gain access to Abateco's private
records. Abateco also contends that the civil penalty of $9,665
as assessed by the trial court was excessive.
Initially, we decide the extent of Abateco's protected
privacy interest in its records, irrespective of the Department's
contention that it contractually waived whatever privacy right it
had. We must address this question because the Department
contends that Abateco, as a highly regulated industry, has no
expectation of privacy and regardless of the contractual waiver,
no search warrant would have been required to lawfully access the
records.
We hold that Abateco had a diminished expectation of privacy
in the requested records, however, we further hold that it
contractually waived whatever Fourth Amendment rights it
possessed in the records. Because Abateco could not unilaterally
revoke its contractual waiver of Fourth Amendment rights without
breaching the terms of the contract, the Department had the right
to inspect the records without a search warrant, provided it
could reasonably do so without breaching the peace. Accordingly,
because the Department was not required to obtain a warrant in
order to obtain access to the records, the citations issued by
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the Department were founded. Furthermore, the penalty of $9,665
assessed by the trial court was reasonable and within the range
provided for in Code § 40.1-49.4(A)(4)(a). Therefore, we hold
that the trial court did not err in upholding the citations and
the penalty imposed by the trial court was not excessive.
I. FACTS
Abateco is an asbestos abatement contractor licensed in
Virginia pursuant to Code § 54.1-503. In November 1994, Abateco
was working as a subcontractor removing insulation containing
asbestos from the boiler and pipes at the Staunton Correctional
Center, a facility owned and operated by the Virginia Department
of Corrections.
The subcontract executed by Abateco incorporated several
documents, 1 among them being the General Conditions, which
provided:
Section 3(d). The provisions of all rules
and regulations governing safety as adopted
by the Safety Codes Commission . . . and as
issued by the Department of Labor and
Industry under Title 40.1 of the Code of
Virginia shall apply to all work under this
contract. Inspectors from the Department of
1
The subcontract stated:
The Contract Documents for this Subcontract
consist of this Agreement and any Exhibits
attached hereto, the Agreement between the
Owner and Contractor dated as of August 22,
1994, [and] the Conditions of the Contract
between the Owner and Contractor (General,
Supplementary and other Conditions) . . . .
These form the Subcontract, and are as fully
a part of the Subcontract as if attached to
this Agreement or repeated herein.
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Labor and Industry shall be granted access to
the Work for inspection without first
obtaining a search warrant from the court.
* * * * * * *
Section 21. The Architect/Engineer, the
Owner, the Owner's inspectors and other
testing personnel, and inspectors from the
Department of Labor and Industry shall have
access to the Work at all times.
(Emphasis added).
Upon receiving notification pursuant to Code § 40.1-51.20
that Abateco was working at the Staunton Correctional Center, the
commissioner assigned an industrial hygienist to conduct an
unannounced inspection at the site under the authority of Code
§ 40.1-51.21. On November 10, 1994, the inspector visited the
site and attempted to conduct an inspection. Abateco's site
supervisor refused to allow an inspection without a search
warrant despite the fact that the subcontract expressly stated
that the Department, under the General Conditions of the
Contract, would be granted access to the work without a warrant.
On November 16, 1994, the inspector returned to the site to
attend a construction progress meeting with representatives of
Abateco, the Department of Corrections, and the architects.
During this meeting, Abateco's contract with the Commonwealth was
discussed. At that time, Abateco's president acknowledged that
the contract provided for warrantless access to the records, but
he stated that Abateco would not voluntarily allow the inspector
to conduct a search.
On November 22, 1994, a complaint from an employee working
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at the Staunton Correctional Center prompted the commissioner to
send the inspector back to the site under authority of Code
§ 40.1-51.2, which requires the commissioner to inspect employee
complaints of hazardous conditions. Abateco's site supervisor
again refused to allow the Department to conduct an inspection
without a search warrant. At that time, the inspector asked to
see certain records that Abateco was required to keep by the
Department's regulations pertaining to asbestos removal. The
requested records included those showing employee exposure to
asbestos, 2 records of employee asbestos training, 3 employee
medical records, 4 and written hazard communication program
documents. 5
Abateco's supervisor refused to make these records available
without a search warrant. The inspector then called Abateco's
president, who also refused to consent to an inspection of the
records and of the workplace. The inspector advised Abateco that
a refusal to provide the records would be considered a willful
violation of the regulations, but Abateco continued to refuse to
provide access to the records.
2
Required by Virginia Occupational Safety and Health
Standard § 1926.58(n)(5)(ii).
3
Required by Virginia Occupational Safety and Health
Standards § 1926.58(k)(4)(ii).
4
Required by Virginia Occupational Safety and Health
Standards §§ 1926.58(m) and (n).
5
Required by Virginia Occupational Safety and Health
Standards § 1926.59(e)(4).
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As a result of Abateco's refusal, the commissioner issued
four citations for willful failure to produce the records. In
accordance with Code § 40.1-49.4(4)(A)(a), the commissioner
proposed a civil penalty of $20,000. After a bench trial on the
merits, the trial judge found Abateco guilty of four willful
violations and assessed a penalty of $9,665, which consisted of
$5,665 for the commissioner's costs and $1,000 for each citation.
Abateco appeals the trial court's decision and argues that,
despite its contractual consent to warrantless searches by the
Department of Labor and Industry, it had the right to withdraw
its consent and to demand a warrant under the Fourth Amendment
before allowing inspection of the requested records. Abateco
contends that because it had an expectation of privacy in its
records, those records were not subject to being searched except
upon a showing of justifiable cause and with a warrant, subpoena,
or injunction. Abateco also asserts that the contract did not
create an irrevocable waiver of Fourth Amendment rights and that
Abateco properly revoked the contractual waiver when the
inspector asked to see the records.
II. EXPECTATION OF PRIVACY IN RECORDS
The Department contends, as the trial court held, that
Abateco has no reasonable expectation of privacy in those records
that it is required to maintain because it is involved in the
removal and disposal of asbestos, an industry that is heavily
regulated by statute and by regulation. Abateco's claim that the
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citations were not valid because a warrant was required to
lawfully search the records is predicated upon the premise that
it has a reasonable expectation of privacy in those records as
far as the Department is concerned.
In 1967, the United States Supreme Court ruled that the
Fourth Amendment protects businesses from unreasonable
warrantless searches and seizures by administrative agencies.
See v. City of Seattle, 387 U.S. 541 (1967).
As we explained in Camara [v. Municipal
Court, 387 U.S. 523 (1967)], a search of
private houses is presumptively unreasonable
if conducted without a warrant. The
businessman, like the occupant of a
residence, has a constitutional right to go
about his business free from unreasonable
official entries upon his private commercial
property. The businessman, too, has that
right placed in jeopardy if the decision to
enter and inspect for violation of regulatory
laws can be made and enforced by the
inspector in the field without official
authority evidenced by a warrant.
Id. at 543. However, the Supreme Court also cautioned that
business premises could be inspected in many more situations than
private homes and that a case-by-case determination of
reasonableness is necessary. Id. at 456.
Following the See decision, the Supreme Court recognized an
exception to the warrant requirement for administrative searches
of closely regulated businesses and industries. See Colonnade
Catering Corp. v. United States, 397 U.S. 72 (1970) (liquor
licensees); United States v. Biswell, 406 U.S. 311 (1972) (gun
dealers); Donovan v. Dewey, 452 U.S. 594 (1981) (underground and
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surface mine owners); New York v. Burger, 482 U.S. 691 (1986)
(junkyard owners). Warrantless searches in these situations are
reasonable because "[c]ertain industries have such a history of
government oversight that no reasonable expectation of privacy
could exist . . . . The clear import of our cases is that the
closely regulated industry of the type involved in Colonnade
[liquor industry] and Biswell [gun dealers] is the exception."
Marshall v. Barlow's, Inc., 436 U.S. 307, 312 (1978) (citation
omitted). "When a dealer chooses to engage in [a] pervasively
regulated business and to accept a federal license, he does so
with the knowledge that his business records . . . will be
subject to effective inspection." Biswell, 406 U.S. at 316.
Abateco claims that it had a reasonable expectation of
privacy in the records requested by the commissioner's inspector
and that a warrant was required based upon the rationale of
Marshall. In Marshall, the Supreme Court struck down a provision
of the Occupational Safety and Health Act which permitted
inspectors to enter and inspect businesses without a warrant.
The Court held that Barlow's electrical and plumbing installation
business did not fall under the "closely regulated business"
exception to the warrant requirement. Id. at 314-15. However,
the Court also stated that "[t]he reasonableness of a warrantless
search . . . will depend upon the specific enforcement needs and
privacy guarantees of each statute." Id. at 321. It is that
standard which controls our determination of whether the
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Department's regulatory requirements that asbestos contractors
provide access to certain records encroaches upon the
contractor's protected privacy interests.
Asbestos removal is a highly regulated industry in Virginia.
Code §§ 54.1-500 through -517 provide a rigid scheme of
licensure for asbestos removal contractors. In addition to being
governed by the general provisions of Title 40.1, which apply to
all businesses regulated by the Department of Labor and Industry,
asbestos removal contractors are bound by Chapters 3.2 and 3.3 of
Title 40.1 which provide for notification requirements and
adherence to the National Emissions Standards for Hazardous Air
Pollutants. Asbestos removal and asbestos disposal present
health and safety hazards to the public and in the workplace.
Pursuant to the authority granted to the commissioner under Code
§§ 40.1-6(3) and (7), regulations governing occupational exposure
to asbestos and record-keeping requirements have been
promulgated. Because asbestos removal is so highly regulated in
Virginia, asbestos removal contractors have a diminished
expectation of privacy in work areas and in the records they are
required to maintain relating to asbestos removal and disposal.
Abateco urges us to find that it had a reasonable
expectation of privacy in its records even though the
Department's regulations required Abateco to prepare and maintain
the records. Abateco relies on McLaughlin v. Kings Island, 849
F.2d 990 (6th Cir. 1988), and Brock v. Emerson Electric Co., 834
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F.2d 994 (11th Cir. 1987), to support its position. In both
Kings Island and Brock, the courts found that OSHA could not
inspect without a warrant certain logs or records of employees'
injuries and illnesses which the statutes at issue required to be
maintained. The court in Kings Island stated, "[w]e conclude
that even though the records in question are required by law to
be kept, this does not remove any privacy expectation that the
employer may have in the information." Kings Island, 849 F.2d at
996.
The Department argues that the Fourth Circuit case of
McLaughlin v. A.B. Chance Co., 842 F.2d 724 (4th Cir. 1988),
addressed the identical issue and should control this case. The
controlling rationale in A.B. Chance recognized that the employer
had a diminished expectation of privacy in the employee's injury
and illness records that were required to be kept, but that the
right to inspect those records involved a minimal intrusion. Id.
at 727. Because of the statutory duty to keep the records, there
was no additional burden imposed on the employer to compile
information or to "dig out supporting information, this work has
already been done." Id. The court limited its holding by saying
"under our ruling, the compliance officer must be on the
employer's premises as a result of an employee's health or safety
complaint before he may require production of the [logs] without
a warrant." Id. at 728.
We find the Fourth Circuit's reasoning in A.B. Chance
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persuasive. Because Abateco is required by law to maintain the
records to which the inspector requested access, Abateco had a
diminished expectation of privacy in the records. Both the Code
and the regulations promulgated by the Department place asbestos
removal contractors on notice that they are required to maintain
these records and to provide the Department access to them.
Therefore, Abateco had a diminished right to privacy in the
records. Moreover, when the inspector requested access to the
records he was on the site investigating an employee complaint.
Code § 40.1-6(7) empowers the commissioner to "require that
accident, injury and occupational illness records and reports be
kept at any place of employment and that such records and reports
be made available to the commissioner or his duly authorized
representatives upon request." The regulations pertaining to
this type of record provide that they shall be made available to
the commissioner upon request. See Va. Occupational Safety and
Health Standards §§ 1926.58(n)(5)(ii), 1926.58(k)(4)(ii),
1926.59(e)(4).
We find that Abateco had a diminished expectation of privacy
in those records that the inspector requested, for two reasons:
first, Abateco is a licensee in a closely regulated business in
the Commonwealth, which reduces its expectation of privacy; and
second, Abateco was required by law to create and maintain the
records. Having determined that Abateco has a diminished
expectation of privacy in these records, the question remains
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whether, absent a waiver of Fourth Amendment rights, a warrant is
required. We do not have to decide that question because Abateco
contracted with the commissioner to provide access to the records
upon request without requiring a warrant and Abateco cannot
unilaterally withdraw that consent, which was a condition of its
bargain to perform the asbestos removal.
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III. CONTRACTUAL WAIVER OF RIGHT TO PRIVACY
Code § 40.1-49.8 gives the commissioner authority to inspect
the workplace of employers "with the consent of the owner,
operator or agent in charge of such workplace . . . or with an
appropriate order or warrant . . . ." Moreover, Abateco's
contract expressly provides that the Department shall have access
to Abateco's records without obtaining a warrant. Abateco agrees
that it initially voluntarily consented to warrantless
inspections or searches. But, Abateco argues that its consent to
search was revocable at any time and was, in fact, revoked by the
site supervisor and the president's refusal to allow the
inspector to see the records. Abateco contends that because its
consent was withdrawn, the Department's attempted search of its
records violated Code § 40.1-49.8.
It is well-settled that a knowing and voluntary consent to
search obviates the need for a search warrant under the Fourth
Amendment. See Schneckloth v. Bustamonte, 412 U.S. 218, 222
(1973); Crosby v. Commonwealth, 6 Va. App. 193, 197, 367 S.E.2d
730, 733 (1988) (quoting Hairston v. Commonwealth, 216 Va. 387,
387, 219 S.E.2d 668, 669 (1975), cert. denied, 425 U.S. 937(1976)). More specifically, the right to require a search
warrant may be waived by written contract. See Zap v. United
States, 328 U.S. 624 (1946) rev'd on other grounds, 330 U.S. 800(1947).
In Zap, the petitioner contracted with the Navy Department
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to conduct experimental work on airplane wings. Id. at 626. The
petitioner's contract with the Navy provided that "the accounts
and records of the contractor shall be open at all times to the
Government and its representatives . . . ." Id. at 627. The
Court stated:
And when petitioner, in order to obtain the
government's business, specifically agreed to
permit inspection of his accounts and
records, he voluntarily waived such claim to
privacy which he otherwise might have had as
respects business documents related to those
contracts.
Id. at 628. Where businesses or entities have contractually
consented to inspections or searches of documents and worksites,
courts have uniformly held such provisions to be valid waivers of
the requirement for a warrant or subpoena under the Fourth
Amendment. See United States v. Brown, 763 F.2d 984 (8th Cir.),
cert. denied, 474 U.S. 905 (1985) ("The government has a
substantial interest in establishing methods by which it can
effectively monitor compliance with the regulations . . . . We
see no constitutional infirmity in the government requiring a
provider to agree to maintain records . . . and to permit
periodic audits of those records as a condition for [contracting
with the government]. . . ."); United States v. Jennings, 724
F.2d 436 (5th Cir.), cert. denied, 467 U.S. 1227 (1984); First
Alabama Bank v. Donovan, 692 F.2d 714 (11th Cir. 1982); United
States v. Griffin, 555 F.2d 1232 (5th Cir. 1977); Lanchester v.
Pennsylvania State Horse Racing Comm'n, 325 A.2d 648 (Pa. 1974).
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Although as a general proposition, consent to search granted
at the scene may be revoked, withdrawn, or partially limited by
the person who gives the consent, see Lawrence v. Commonwealth,
17 Va. App. 140, 435 S.E.2d 591 (1993); Grinton v. Commonwealth,
14 Va. App. 846, 419 S.E.2d 860 (1992); 79 C.J.S. Searches and
Seizures § 126 (1995), we hold that such is not the case when the
consent is given in a valid and binding bilateral contract.
Abateco contends, however, that contractual consent cannot
create an irrevocable waiver of Fourth Amendment rights. In
support of this argument, Abateco cites Tri-State Steel Constr.,
Inc. v. OSHRC, 26 F.3d 173 (D.C. Cir. 1994), and National Eng'g &
Contracting Co. v. OSHRC, 45 F.3d 476 (D.C. Cir. 1995). However,
neither case is sufficiently similar to the instant case to be
persuasive. In Tri-State Steel, although the general contractor
had contractually consented to searches, 26 F.3d at 176-77, the
subcontractor had not, which is different from the situation in
the instant case. Moreover, the subcontractors objected to
searches made by OSHA of the common areas, which led OSHA to
obtain warrants in order to search the areas that were under the
exclusive control of the subcontractors. Id. In National Eng'g,
the search was also conducted pursuant to a warrant. National
Eng'g, 45 F.3d at 478. The holdings in these cases are not
applicable to this case and do not support Abateco's argument
that it could revoke its contractual waiver.
A party "cannot accept the benefits of the contract and then
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assert he is entitled to be relieved of its obligations." Link
Assoc. v. Jefferson Standard Life Ins. Co., 223 Va. 479, 489, 291
S.E.2d 212, 218 (1982) (quoting United States v. Idlewild
Pharmacy, Inc., 308 F. Supp. 19, 23 (E.D. Va. 1969)); see also
Manassas Park Dev. Co. v. Offutt, 203 Va. 382, 385, 124 S.E.2d
29, 31 (1962) ("Where one enters into a contract to perform
certain acts, without any exceptions or qualifications, and
receives from the party with whom he contracts a valuable
consideration for his engagement, he must abide by the contract
. . . ."). Revoking only part of a written contract places a
party in breach of the contract unless the other party consents
to the revocation. See Spence v. Northern Va. Doctors Hosp.
Corp., 202 Va. 478, 483, 117 S.E.2d 657, 660 (1961). In this
case, Abateco attempted to unilaterally rescind the terms of its
contract with the Commonwealth by withdrawing its consent.
To accept Abateco's position would be to allow the company
to accept the benefit of its bargain with the Commonwealth
without having to abide by its obligation to the commissioner.
Therefore, we hold that the trial court did not err in ruling
that Abateco's attempt to withdraw its contractual consent was
ineffective. Thus, because Abateco had contractually consented
to access its records without requiring a warrant, the trial
court did not err in upholding the Department's citations.
IV. EXCESSIVE CIVIL PENALTY
Abateco argues that the civil penalty of $9,665 imposed by
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the trial court was excessive because Abateco had reason to
believe it was justified in requiring the Department to obtain a
warrant before allowing its records to be inspected; therefore,
its refusal was not willful. We disagree. The evidence before
the trial court was sufficient to support its finding that
Abateco willfully violated the terms of the contract and Code
§ 40.1-51.21.
In assessing penalties, Code § 40.1-49.4(A)(4)(a) requires
consideration of the size of the employer's business, the gravity
of the violation, the good faith of the employer, and the
employer's history of previous violations. The contract that
Abateco entered into provided that it agree to submit to searches
by the Department of Labor and Industry without the need for a
search warrant. Abateco acknowledged the contractual provision,
but refused to comply with its contractual obligation and stated
that it had no intention of complying. Although the inspector
acknowledged at trial that he told Abateco that he thought
Abateco had the right to require a search warrant before being
searched, he also testified that the commissioner's position was
that a warrant was unnecessary under the contract. On these
facts, we hold that the trial court did not err in finding that
Abateco's refusal to voluntarily provide the documents to the
commission as required by the contract was a willful violation of
the contract and Code § 40.1-51.21.
Code § 40.1-49.4(J) provides that an "employer who willfully
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or repeatedly violates any safety or health provision of this
title or any standard, rule or regulation promulgated pursuant
thereto may be assessed a civil penalty of not more than $70,000
for each such violation." In this case, the trial court assessed
a penalty of $5,665 for the commissioner's costs in enforcing the
contract and the statutes and $1,000 for each of the four willful
violations. The maximum allowable penalty for a willful
violation is $70,000. The assessment of the commissioner's costs
and $1,000 penalty for each of the four willful violations is not
excessive.
V. CODE § 40.1-51.21
Abateco contends that, because it had already been inspected
by the Department earlier in 1994, the attempted inspection of
the records and worksite at the Staunton Correctional Center in
November 1994 was in violation of Code § 40.1-51.21. This
section states:
At least once a year, during an actual
asbestos project, the Department of Labor and
Industry shall conduct an on-site unannounced
inspection of each licensed asbestos
contractor's and RFS contractor's procedures
in regard to installing, removing and
encapsulating asbestos. The Commissioner or
an authorized representative shall have the
power and authority to enter at reasonable
times upon any property for this purpose.
Abateco urges this Court to interpret the language of the statute
to mean that each licensed asbestos contractor should be
inspected only once per year. The argument is not persuasive.
When a statute is plain and unambiguous on its face, a court
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may look only to the words of the statute to determine its
meaning. Brown v. Lukhard, 229 Va. 316, 321, 330 S.E.2d 84, 87
(1985). "An ambiguity exists when the language is difficult to
comprehend, is of doubtful import, or lacks clearness and
definiteness." Id. The language of Code § 40.1-51.21 contains
no ambiguity. It states that inspections of licensed asbestos
contractors must take place "[a]t least once a year." The
statute contains no words of limitation indicating that only one
inspection per year is allowed. The plain meaning of the statute
is that the Department of Labor and Industry must inspect once
per year, but can inspect more than once per year.
Because the subcontract allowed the commissioner to make a
warrantless search of the workplace and records, and because that
consent was not effectively revoked, the trial court did not err
in assessing penalty fines against Abateco for the four willful
violation citations issued by the commissioner. The penalty
assessed was not excessive. Accordingly, we affirm the decision
of the trial court.
Affirmed.
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