A.C. Castle Construction Co. v. Acosta

United States Court of Appeals
For the First Circuit
No. 17-1537
A.C. CASTLE CONSTRUCTION CO., INC.
Petitioner,
v.
R. ALEXANDER ACOSTA, Secretary of Labor;
U.S. DEPARTMENT OF LABOR,
Respondents.
PETITION FOR REVIEW OF AN ORDER OF
THE OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION
Before
Torruella, Lipez, and Kayatta,
Circuit Judges.
James F. Laboe, with whom Orr & Reno, P.A. was on brief, for
petitioner.
Amy S. Tryon, Senior Attorney, U.S. Department of Labor, with
whom Nicholas C. Geale, Acting Solicitor of Labor, Ann S.
Rosenthal, Associate Solicitor for Occupational Safety and Health,
and Charles F. James, Counsel for Appellate Litigation, were on
brief, for respondents.
February 7, 2018
KAYATTA, Circuit Judge. General contractor A.C. Castle
Construction Co., Inc. appeals fines imposed by the Occupational
Safety and Health Administration ("OSHA") for violations related
to an accident at a construction worksite in Massachusetts.
A.C. Castle argues, among other things, that OSHA wrongly held it
responsible for the acts and omissions of a subcontractor. For
the reasons below, we affirm.
I.
Two roofers fell over twenty feet and sustained serious
injuries at a residential construction site in Wenham,
Massachusetts on October 2, 2014, when a spruce board used for
scaffolding snapped in half. OSHA inspectors promptly
investigated the worksite and the two employers involved:
A.C. Castle, the general contractor, and Provencher Home
Improvements ("PHI"), the sole proprietorship of Daryl Provencher
and the only subcontractor on the job. The Secretary of Labor,
charged with enforcing the Occupational Safety and Health Act
of 1970, 29 U.S.C. §§ 651-678 (the "OSH Act"), subsequently cited
both A.C. Castle and PHI under the OSH Act. The Secretary
proffered two alternative theories for citing both companies,
rather than just the roofing subcontractor PHI: first, that under
Occupational Safety and Health Review Commission ("Commission")
precedent, the two companies constituted a single employer; and,
second, that under the common law agency test set forth by the
- 2 -
United States Supreme Court in Darden, Daryl Provencher was a
supervisory employee of A.C. Castle. See Nationwide Mut. Ins. Co.
v. Darden, 503 U.S. 318 (1992). Under either legal test, the
constructive or actual knowledge that Provencher possessed of the
worksite violations would be imputed to A.C. Castle. See Empire
Roofing Co. Se., 25 BNA OSHC 2221, 2222 (No. 13-1034, 2016); Cent.
Soya de P.R., Inc. v. Sec'y of Labor, 653 F.2d 38, 40 (1st Cir.
1981).
A.C. Castle and Provencher challenged the citations.
Following a three-day testimonial hearing, the Administrative Law
Judge ("ALJ") determined that Provencher and A.C. Castle "acted as
a single employer in the worksite" and that Provencher "was a
supervisory employee working for A.C. Castle." In so ruling, the
ALJ did not rest on her finding that Provencher was an employee of
A.C. Castle as an independent and sufficient basis upon which to
justify the citation of A.C. Castle. Instead, she relied on that
finding to provide support for the conclusion that A.C. Castle and
PHI could be treated as a single employer. The ALJ also rejected
A.C. Castle's argument that it did not have fair notice that it
would be treated as a single employer with PHI. Regarding the
substance of the citations, the ALJ found that A.C. Castle
willfully failed to ensure that the scaffolding was adequate to
support the intended load, and assessed penalties totaling
$173,500. The claims against Provencher were dismissed as moot
- 3 -
because of his death after the hearing but before the ALJ ruled.
After the Commission declined A.C. Castle's petition for review,
A.C. Castle filed this appeal.
II.
The citations of A.C. Castle hinged on a finding that
A.C. Castle was "the employer of the affected workers at the site."
Allstate Painting & Contracting Co., 21 BNA OSHC 1033 (Nos. 97-
1631 & 97-1722, 2005); see also 29 U.S.C. § 658(a). The ALJ
reached this finding after properly placing the burden of proof on
the Secretary. See Allstate, 21 BNA OSHC 1033. In now challenging
that finding on appeal, A.C. Castle raises three issues:
(1) whether substantial evidence supports the ALJ's conclusion
that Provencher was a supervisory employee of A.C. Castle,
(2) whether the ALJ erred in treating A.C. Castle and PHI as a
single employer, and (3) whether the Secretary of Labor violated
A.C. Castle's right to fair notice in treating PHI and A.C. Castle
as a single employer where before it had not. We address these
issues in turn.
A.
Brian LeBlanc is the owner and sole manager of
A.C. Castle, which has its principal place of business at LeBlanc's
home in Danvers, Massachusetts. A.C. Castle normally operates as
a general contractor and claimed no direct employees of its own at
the time of the OSHA investigation. LeBlanc was friends with
- 4 -
Provencher, who was the sole proprietor of PHI, a construction
subcontracting company based at Provencher's home in Beverly,
Massachusetts. LeBlanc and Provencher had been friends for over
thirty years at the time of the OSHA investigation. In 2015,
ninety-five percent of Provencher's income came from A.C. Castle.
Provencher estimated that generally around seventy-five percent of
his projects came from A.C. Castle, as he occasionally performed
work for other general contractors.
The ALJ found that Provencher was employed by
A.C. Castle as a supervisor of the workers on the Wenham job site.
In reaching this conclusion, the ALJ applied the common law agency
test set forth by the Supreme Court in Darden. See Darden, 503
U.S. at 324–24. A.C. Castle argues that the record lacks
substantial evidence to support the ALJ's conclusion in applying
that test, as evidenced by the ALJ's failure to consider many of
the Darden factors, and an undue reliance on facts that are typical
of the relationship between a general contractor and a
subcontractor.
Darden's test is as follows:
In determining whether a hired party is an
employee under the general common law of
agency, we consider the hiring party’s right
to control the manner and means by which the
product is accomplished. Among the other
factors relevant to this inquiry are the skill
required; the source of the instrumentalities
and tools; the location of the work; the
duration of the relationship between the
- 5 -
parties; whether the hiring party has the
right to assign additional projects to the
hired party; the extent of the hired party’s
discretion over when and how long to work; the
method of payment; the hired party’s role in
hiring and paying assistants; whether the work
is part of the regular business of the hiring
party; whether the hiring party is in
business; the provision of employee benefits;
and the tax treatment of the hired party.
Darden, 503 U.S. at 323–24 (internal quotation marks and citation
omitted).
In applying this multifactor test,
[A]ll of the incidents of the relationship
must be assessed and weighed with no one
factor being decisive. However, in most
situations, the extent to which the hiring
party controls the manner and means by which
the worker completes her tasks will be the
most important factor in the analysis.
Alberty-Vélez v. Corporación de P.R. Para La Difusión Pública, 361
F.3d 1, 7 (1st Cir. 2004) (internal quotation marks and citations
omitted).
The ALJ properly focused on the most important factor,
control, finding that LeBlanc "exercised an unusual amount of
control over Mr. Provencher's actions, atypical of a traditional
contractor/subcontractor relationship." In expanding on this
finding, the ALJ also looked at the source of instruments and
tools, the assignment of work, the length of the relationship, and
the hiring of other workers. Specifically, the ALJ stated:
Mr. LeBlanc and Mr. Provencher had a thirty-
year working relationship. Mr. LeBlanc
- 6 -
scheduled the roofing projects and told
Mr. Provencher in what order they were to be
done, which necessarily determined the
location of the work. Mr. LeBlanc arranged
for the building materials to be delivered to
the worksites and provided the dump
truck . . . . He also arranged for the only
safety training provided to the roofing crew
and provided Mr. Provencher with a copy of
A.C. Castle's safety program and instructed
him to implement it. Mr. LeBlanc told
Mr. Provencher when he needed to hire more
employees to complete the contracted roofing
projects on time. Mr. Provencher paid the
roofing crew members on Fridays, after he
received payment from Mr. LeBlanc.
Mr. Provencher did not have a business license
and could not bid on projects; he was
dependent on A.C. Castle for the great
majority of his work. Mr. LeBlanc conducted
spot inspections on Mr. Provencher's
worksites and instructed him to abate specific
safety infractions.
LeBlanc also appears to have directed Provencher to
double up the spruce planks sold at the hardware store when used
as scaffolding (a direction ignored on the day of the accident).
LeBlanc gave Provencher (who had no credit cards or money on hand)
interest-free loans to purchase equipment and materials, which
LeBlanc docked in $500 increments from amounts otherwise due to
Provencher. LeBlanc influenced when that equipment needed to be
replaced. For example, he told Provencher he "probably need[ed]
new ladders" and then loaned the funds to buy them. LeBlanc also
let Provencher purchase materials on A.C. Castle's account at the
local hardware store, where A.C. Castle received a discount.
Provencher could not complete purchases on A.C. Castle's account
- 7 -
without the clerk first calling LeBlanc for authorization.
A.C. Castle also provided tee-shirts and sweatshirts with
A.C. Castle's logo for Provencher and other PHI workers to wear.
LeBlanc was also involved in the hiring and firing of
PHI's workers. On several occasions when PHI needed to hire
workers, LeBlanc placed ads in the newspaper on Provencher's behalf
because, without a credit card, Provencher could not do so himself.
Provencher would inform LeBlanc when he had trouble with worker
attendance. He would ask LeBlanc for help firing absentee workers,
saying on one occasion to LeBlanc, "You need to get rid of this
guy." LeBlanc would also suggest to Provencher how large a crew
he would need to hire for a given project.
A.C. Castle argues that the foregoing findings describe
only the close coordination often necessary between a general
contractor and a subcontractor. Certainly, it is fair to say that
such coordination often exists between such entities. After all,
a principal role of the general contractor is to coordinate the
work of the subcontractors. Here, though, we have a recurring
relationship with one general contractor and one subcontractor in
which the general exercises control not only over the timing and
scope of the work, but also over the details of how the work is
performed, and over many internal operations of the subcontractor,
particularly the managing of personnel and equipment.
- 8 -
A.C. Castle correctly points out that the evidence was
not one-sided. Provencher provided many of the tools Provencher
and PHI workers used, did some small amount of work for other
parties, signed contracts as a subcontractor for each job, was not
paid in the form of a salary, and received an IRS Form 1099 rather
than a W-2. In nevertheless deciding that all of the evidence
collectively described a principal-agent relationship, the ALJ
considered how A.C. Castle itself portrayed the relationship in
dealing with regulators and customers. For each building permit,
A.C. Castle was required to submit an affidavit stating who held
the workers' compensation insurance for the project. The form
affidavit gave LeBlanc a choice: "I am an employer with [blank]
employees," or "I am a general contractor and I have hired the
sub-contractors listed on the attached sheet." In the forms on
record, LeBlanc did not identify himself as a general contractor
or Provencher as a subcontractor. Instead, he checked the employer
box and filled in the number of workers. LeBlanc also made sure
that his customers understood that all the workers on the project
were his employees. To that end, he prohibited Provencher from
describing himself to the customer as a subcontractor. And, as
noted, A.C. Castle furnished the workers with tee-shirts bearing
A.C. Castle's name, and placed A.C. Castle signs at each worksite.
The ALJ found LeBlanc's insurance affidavits, as confirmed by his
representations to customers, to be credible descriptions of his
- 9 -
relationship with Provencher, and his attempts to recant those
statements not credible.
A.C. Castle's representations were, in substance,
representations that he controlled Provencher as an employee, not
as an independent subcontractor. We see no error in the weight
the ALJ gave to those representations in making the fact-intensive
conclusion that the relationship between A.C. Castle and
Provencher, for purposes of this case, is best seen as that of
employer and employee. And with those representations added to
the other facts in the record elucidating their distinctive
relationship, there is enough to provide substantial evidence for
the ALJ's conclusion.
B.
The ALJ might well have concluded her analysis after
determining that Provencher was a supervisory employee of A.C.
Castle. After all, the only other workers involved at the worksite
were those whom Provencher in turn supervised, and who were
presented as A.C. Castle employees in A.C. Castle's various
representations. And that was, in substance, what the Secretary
argued. Instead, the ALJ essentially gave A.C. Castle a second
bite at the apple by also assessing the relationship between
A.C. Castle and Provencher under the Commission's "single
employer" test.
- 10 -
That test appears to have originated in Advance
Specialty Co., 3 BNA OSHC 2072 (No. 2279, 1976). In that case,
the Commission pointed to the practice of the National Labor
Relations Board in treating as a single entity two businesses where
there is "a combination of most or all of the following factors:
a common worksite, a common president or management, a close
interrelation and integration of operations, and a common labor
policy." Id. at *3. Without explanation, the Commission
reformulated that test to hold that "when . . . two companies share
a common worksite such that the employees of both have access to
the same hazardous conditions, have interrelated and integrated
operations, and share a common president, management, supervision
or ownership, the purposes of the [OSH Act] are best effectuated
by the two being treated as one." Id. at *4. The Commission's
reformulation, unlike the NLRB formulation of its rule, seems to
require that all three (rather than a combination of most) factors
be satisfied in order to treat two employers as one. Nevertheless,
the Commission itself has since described its rule as "essentially
adopt[ing] the 'single employer' concept of the [NLRB]." C.T.
Taylor Co., 20 BNA OSHC 1083 (Nos. 94-3241 & 94-3327, 2003). One
reviewing court has presumed the two tests to be the same, see
Altor, Inc. v. Sec'y of Labor, 498 Fed. Appx. 145, 148 n.3 (3d
Cir. 2012), while another has pointed out their differences, see
Solis v. Loretto-Oswego Residential Health Care Facility, 692 F.3d
- 11 -
65, 74 (2d Cir. 2012), as well as the predominance of a four-
factor version of the test in other statutory contexts, id. at 73–
74 (referencing the Labor Management Relations Act, the Fair Labor
Standards Act, and the Age Discrimination in Employment Act (citing
Pearson v. Component Tech. Corp., 247 F.3d 471, 486 (3d Cir. 2001)
(collecting cases))).
For our purposes, we can ignore any uncertainty about
the precise nature of the test, as the ALJ employed the three-
factor formulation in a straightforward fashion, and neither party
challenges the ALJ's stated formulation. Rather, the parties train
their arguments on whether the ALJ properly found all three factors
to be present to the extent that they warranted treating
A.C. Castle as the employer of the affected workers. Our role in
assessing those arguments is limited. We ask only whether the
ALJ's findings of fact are supported by substantial evidence
considering the record as a whole, 29 U.S.C. § 660(a); P. Gioioso
& Sons, Inc. v. Occupational Safety & Health Review Comm'n, 675
F.3d 66, 72 (1st Cir. 2012), and whether the findings are
arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with the law, 5 U.S.C. § 706(2)(A); Capeway Roofing
Sys., Inc. v. Chao, 391 F.3d 56, 58 (1st Cir. 2004). With these
standards in mind, we turn to the ALJ's precise findings and
A.C. Castle's critique of those findings.
- 12 -
1. Common Worksite
The ALJ found that A.C. Castle and PHI shared as a common
worksite the Parsons Hill Road home roofing site where the accident
occurred. A.C. Castle argues that the common worksite test directs
our attention to the "business address" of the two entities, rather
than to the location at which their employees worked. While a
shared headquarters or business address generally satisfies the
common worksite factor, A.C. Castle points to no precedent
indicating that a common business address or headquarters is
necessary to satisfy this factor. And to rule that it is essential
would rewrite the test as stating "common business address" rather
than "common worksite," which is the term used in Advance
Specialty. 3 BNA OSHC 2072, at *4. Given the Act's focus on worker
safety, see 29 U.S.C. § 651, it is not unreasonable to look to the
location at which the employees worked and were exposed to
workplace hazards, i.e., the "worksite," not just the "business
address." For this reason, we find nothing arbitrary, capricious,
abusive, or violative of the law in the ALJ's finding that the
construction site was the relevant site in applying the common
worksite test.
At the same time, we agree with A.C. Castle that in cases
involving general contractors and subcontractors, the common
worksite factor as construed by the ALJ in this case will almost
always be satisfied. In our view, though, all this means is that
- 13 -
in this industry this factor carries with it less probative force
than it otherwise might in decreeing two companies to be one and
the same. And the other prongs of the test ensure that this factor
alone is not dispositive.
A.C. Castle also argues that even the construction
worksite was not common in this case because LeBlanc was not at
the site when the accident occurred, and thus he was not exposed
to the hazardous conditions. But LeBlanc had been to the site to
secure and arrange the work, and A.C. Castle points to no precedent
holding that workers from each entity must be at the site at the
time the violation occurred, or directly exposed to the risk.
Also, Provencher supervised the roofing crew that set up the faulty
scaffolding apparatus at the worksite, and was himself physically
present at the site shortly before the accident. As we have
explained above, the ALJ reasonably treated him as an employee of
A.C. Castle. So in that sense, A.C. Castle was present at the
worksite.
2. Interrelated and Integrated Operations
The same factual findings employed in deeming Provencher
to be a supervisory employee of A.C. Castle make clear that the
operations of A.C. Castle and Provencher's sole proprietorship
were integrated to a degree well beyond what one would expect to
find in the customary relationship between a general contractor
and a subcontractor. The integration of their operations also
- 14 -
notably included the pertinent subject of workplace safety: PHI
had no safety program of its own, and LeBlanc arranged for and at
times paid for PHI workers to receive OSHA trainings hosted at
LeBlanc's home. LeBlanc gave Provencher a binder containing A.C.
Castle's safety policies and instructed Provencher to follow its
dictates. See C.T. Taylor, 20 BNA OSHC at 1087 ("[T]reating these
two companies as one is an effective way of addressing the fact
that, on this particular occasion, Taylor and Esprit handled safety
matters as one company.")
As we have already discussed, A.C. Castle fairly
protests that any integration was not complete. PHI did some work
for other general contractors. There was no common payroll or
benefits system. Provencher had his own workers' compensation
insurance for his workers, and he had his own CPA. So, too, it is
fair to say that some degree of direction is customarily given by
general contractors to their subcontractors. For all of these
reasons, we agree that this factor weighed only lightly in favor
of a single employer finding. But, as with the common worksite
factor, we see no abuse of discretion in finding that the weight
of this factor, while small and likely insufficient in the normal
case of construction general contractors and subcontractors,
nevertheless incrementally added to the balance building in the
direction of the ALJ's finding.
- 15 -
3. Common Management or Supervision
It is the final factor that provides the added heft
necessary to tilt the balance in favor of the ALJ's single employer
determination. As we have explained, the ALJ found that Provencher
was a supervising employee of A.C. Castle. Whether that finding
by itself might have justified holding A.C. Castle liable, as
argued by the Secretary, we need not decide. The ALJ made more
modest use of her finding that Provencher was A.C. Castle's
supervisory employee, using it to support the conclusion that there
was common management or supervision. And certainly it provides
strong support for that conclusion, as it leaves a single line of
management running from LeBlanc through Provencher to the workers
supervised by Provencher. In short, the ALJ effectively found not
a single employer merely because two employers acted as one;
rather, she effectively found that there was only one employer.
And, as explained above, substantial evidence supported that
conclusion. We therefore find no reason to upset the ALJ's
conclusion on the single employer test.
C.
Because OSHA had previously treated PHI and A.C. Castle
as distinct entities, A.C. Castle says it lacked fair notice that
- 16 -
OSHA would treat it as the employer of the PHI workers in this
instance. We reject this argument.
The fair notice rule applies in scenarios in which OSHA
informs a company (or suggests to it) "that its procedures or
processes are safe and satisfactory," but then issues a citation
for the "same procedures in a later inspection." Trinity Marine
Nashville, Inc. v. Occupational Safety & Health Review Comm'n, 275
F.3d 423, 430 (5th Cir. 2001). Here, OSHA did not represent to
A.C. Castle that any particular process or procedure complied with
its rules. Instead, upon learning new information about the
relationship between A.C. Castle and PHI, OSHA found it appropriate
to cite the two companies together for violations related to the
October 2014 accident. Neither the Commission's single employer
test nor the Darden common law test were a secret to A.C. Castle.
And the very fact that those inquiries are so fact-intensive means
that for a given worksite inspection, the Secretary of Labor may
or may not have grounds to treat two ostensibly distinct companies
as one. Thus, we agree with the ALJ that A.C. Castle's fair notice
argument has no merit.
III.
A.C. Castle also challenged before the ALJ, and
challenges on appeal, the Secretary's claim that A.C. Castle
willfully violated a rule requiring that any scaffold component be
capable of supporting its own weight and at least four times the
- 17 -
maximum intended load (Citation 2, Item 1: violation of 29 C.F.R.
§ 1926.451(a)(1)). A violation of an OSHA rule is "willful" when
the relevant company actor exhibits "plain indifference" toward a
safety requirement or when he or she has evidenced a state of mind
such that, lacking actual knowledge of a given rule, if he or she
were informed of the requirement, "he [or she] would not care."
Brock v. Morello Bros. Const., Inc., 809 F.2d 161, 164 (1st Cir.
1987); see also Kaspar Wire Works, Inc., 18 BNA OSHC 2178 (No. 90-
2775, 2000).
Provencher, the supervisor of the roofing crew,
purchased the rough spruce planks that did not meet OSHA
regulations. The planks were incapable of supporting their weight
and four times the maximum intended load, as 29 C.F.R.
§ 1926.451(a)(1) required. Provencher claimed not to know that
these planks were identified by the hardware store he and LeBlanc
patronized as "not for stagin[g]," and thus were not graded for
use in scaffolding. And Provencher seemed not to care that the
planks were of a quality insufficient to support the weight
required. He admitted that even if he had known that the boards
he purchased for the scaffolding were not suitable for use as
staging -- which would have indicated to him that they could not
support the required load -- he may have used them anyway. This
admission demonstrates sufficient indifference to the requirements
of 29 C.F.R. § 1926.451(a)(1) to constitute willfulness under the
- 18 -
rule set forth in Brock. Moreover, the evidence that Provencher
used these planks for over twenty years, that the receipts from
the hardware store always showed that they were "not for
stagin[g]," and that LeBlanc knew Provencher used these planks for
scaffolding and apparently instructed Provencher to double them
up, supports the ALJ's conclusion that the "willful" standard has
been met.
IV.
For the foregoing reasons, we deny A.C. Castle's
petition for review.
- 19 -