Stark Excavating, Incorporated v. Thomas Perez

In the
United States Court of Appeals
For the Seventh Circuit
No. 14-3809
STARK EXCAVATING, INC.,
Petitioner,
v.
THOMAS E. PEREZ, Secretary of Labor,
Respondent.
On Petition for Review of an Order of
the Occupational Safety and Health Review Commission
OSHC-1:09-0004
ARGUED SEPTEMBER 24, 2015 — DECIDED JANUARY 29, 2016
Before MANION, ROVNER, and HAMILTON, Circuit Judges.
ROVNER, Circuit Judge. Stark Excavating, Inc. (“Stark”), an
excavation and paving company that typically handles about
250 jobs per year throughout central and southern Illinois, was
issued a number of citations at two different worksites in June,
2008, following inspections by the Occupational Safety and
Health Administration (OSHA). On June 5, 2008, an OSHA
inspector issued three citations to Stark relating to its Peoria,
2 No. 14-3809
Illinois, worksite for a serious eyewear violation under
29 C.F.R. § 1926.102(a)(2), a willful excavation cave-in protec-
tion violation under 29 C.F.R. § 1926.652(a)(1), and a repeat
excavation spoil piles violation under 29 C.F.R. § 1926.651(j)(2).
Seventeen days later, on June 22, another OSHA inspection, at
a Stark worksite in Champaign, Illinois, resulted in a citation
for a willful excavation cave-in protection violation under
29 C.F.R. § 1926.652(a)(1). The Secretary proposed penalties of
$2000 for the eyewear violation, $35,000 for the spoil piles
violation, and $70,000 each for the cave-in protections viola-
tions.
Stark contested the citations, which were consolidated for
hearing before an Administrative Law Judge (ALJ). After a
trial, the ALJ affirmed the citation for the eyewear violation
and the $2000 penalty, affirmed the spoil piles violation and
awarded a $20,000 penalty, and determined that the cave-in
protection violations were serious violations rather than willful
violations and imposed a $7,000 penalty for each of those
violations, for a total penalty of $36,000.
Both parties appealed the ALJ’s decision to the Occupa-
tional Safety and Health Review Commission (“Commission”).
The Commission affirmed the ALJ’s determination as to the
spoil piles violation and the serious cave-in protection violation
at the Champaign, Illinois, worksite and vacated the eyewear
violation. As to the Peoria cave-in protection violation, the
Commission determined that it should be characterized as
willful rather than serious and assessed a penalty of $60,000 for
that violation, for a total penalty of $87,000. Stark now appeals
only the issuance of the citation for a willful excavation cave-in
protection violation under 29 C.F.R. § 1926.652(a)(1) at its
No. 14-3809 3
Peoria worksite. Stark asserts that the Commission erred in
characterizing the violation as willful rather than serious, and
that it engaged in a good faith effort to comply with the
regulation.
Section 1926.652(a)(1) provides that “[e]ach employee in an
excavation shall be protected from cave-ins by an adequate
protective system designed in accordance with paragraph (b)
or (c) of this section.” Different types of soil pose different risks
under the pressure of holding up a trench wall. Lakeland
Enterprises of Rhinelander, Inc. v. Chao, 402 F.3d 739, 742 (7th Cir.
2005). For instance, a trench dug in firm clay will pose different
problems than one dug in loose, sandy soil, and other factors
such as water saturation levels, fissures, and previous displace-
ment of the soil will also contribute to the soil’s relative
stability. Id. The soil type is classified depending upon its
characteristics into several categories, with Type A constituting
the most stable type followed by Type B and Type C. Id.
Excavation risks may be mitigated in various ways such as
through sloping, the use of benched grades, or the use of a
trench box. Where sloping is the protective measure used, the
soil type determines the slope required for safety such that
Type A soil can be sloped up to 53 degrees, Type B may be no
steeper than 45 degrees, and Type C cannot exceed 34 degrees.
Id.; 29 C.F.R. § 1926, subpt. P, app. B.
At the Peoria worksite on the day of the citation, Stark’s
crew was replacing a leaking underground fire hydrant
waterline in an excavation in front of a Starbucks coffee house.
That task involved removing an existing fire hydrant, installing
a new one, and backfilling the area. Foreman Jason Schupp was
the supervisor of the crew at the site that day and arrived at
4 No. 14-3809
approximately 7:00 a.m. The task was estimated to require half
a day, but Schupp testified that he wanted to complete the job
quickly in the hope that it would result in future business from
the developer. At that time, Schupp obtained a soil sample
from the excavation site and analyzed it with his penetrometer.
He recorded the soil type as Type B on the Daily Report, which
is a report he had used every day in the time period before the
inspection. On that Daily Report, Schupp would record the soil
type and then determine what type of cave-in protection to
use, whether sloping, benching, or the use of a trench box. The
soil type was recorded by checking boxes on the top half of the
Daily Report form, and the bottom half of that page had boxes
to check indicating the method of protection used. That bottom
portion provided that for Type B soil, if sloping is the means of
protection, then the maximum allowable slope was 45 degrees.
Although Schupp completed the top half of the form, he did
not fill out the bottom half and did not take any action to
determine whether the excavation met the 45 degree slope
requirement. He testified that he “did not pay attention really
how the hole looked” stating “I looked at it. I knew it was—I
just wanted to get in there and get the hydrant on is really the
bottom line.” Laborer Matt Bohm entered the excavation by
ladder and Schupp, from a vantage point at the top edge of the
hole, observed him working there for approximately 10
minutes. At that time, OSHA Compliance Safety and Health
Officer Karl Armstrong approached the worksite. Armstrong
spoke with Schupp upon his arrival and Schupp declared that
once he realized OSHA was on-site it “kind of hit home with
me like my hole, I’m sure it’s not sloped right, I didn’t take the
time to go ahead and do my practices. …”
No. 14-3809 5
The petitioner does not contest that the slope of the
excavation was not in compliance with the regulation.
Armstrong measured the slope at various areas of the wall,
and determined the slope of those areas to be 60, 70, 76 and 80
degrees. All of those slopes indisputably exceeded the permis-
sible slope of 45 degrees. Accordingly, Stark concedes that the
regulations were violated in that the excavation site failed to
comply with 29 C.F.R. § 1926, but argued that the non-compli-
ance should be characterized as serious rather than willful and
that it engaged in a good faith effort to comply with the
regulations.
Pursuant to 29 U.S.C. § 666(k), a violation is “serious” if
there is a substantial probability that death or serious physical
harm could result from the violative condition. Stark does not
contest that the violation in this case arose at least to the level
of serious, but challenges the characterization of the violation
as willful. In Dukane Precast, Inc. v. Perez, 785 F.3d 252, 256 (7th
Cir. 2015), we held that “proof of willfulness … requires proof
only that the defendant was aware of the risk, knew that it was
serious, and knew that he could take effective measures to
avoid it, but did not—in short, that he was reckless in the most
commonly understood sense of the word.”1
1
In Dukane, we distinguished this standard from the one applicable under
29 U.S.C. § 666(e) which decrees imposition of criminal penalties. In that
context, to be deemed “willful,” a violation must have been committed
knowingly, that is, with awareness of the essential facts and legal require-
ments. Id.; United States v. L.E. Myers Co., 562 F.3d 845, 853 (7th Cir. 2009).
We have held that the willfulness requirement in that provision requires
actual knowledge, which “‘may be proved by showing deliberate indiffer-
(continued...)
6 No. 14-3809
The citation issued to Stark regarding the Peoria site cave-in
protection characterized the violation as willful. The ALJ first
determined that Foreman Schupp’s direct knowledge of
Bohm’s work activity in the excavation was imputed to Stark
and Stark does not challenge that here. The ALJ then con-
cluded, however, that the violation was serious but not willful.
First, the ALJ noted that Stark had developed a well-docu-
mented excavation safety program with adequate rules and
employee training which did not support a determination that
if informed of a duty to act it would not have cared. The ALJ
further held that the evidence did not rise to the level of
intentional, knowing or voluntary disregard for the Act or
plain indifference to employee safety. As support for that
determination, the ALJ stated that the record demonstrated “a
reasonable effort by the Respondent to slope the excavation as
opposed to not taking any steps at all to slope the walls.” ALJ
Op. at 10-11. That statement by the ALJ is unsupported in the
record. There is no indication that Schupp, or anyone else
affiliated with Stark, took any action to slope the excavation so
as to comply with the requirements of the Act, and the mea-
surements of the walls, which are drastically non-compliant,
reflect that failure. Therefore, the ALJ erred in relying on that
factor in determining that the violation was not willful. The
remaining factors set forth by the ALJ are unhelpful. The ALJ
1
(...continued)
ence to the facts or the law … or by showing awareness of a significant risk
coupled with steps to avoid additional information … .’” Id., quoting United
States v. Ladish Malting Co., 135 F.3d 484, 490 (7th Cir. 1998). The Commis-
sion’s findings would support a determination of willfulness under either
standard.
No. 14-3809 7
noted Schupp’s testimony that he did not know whether the
sloping was in compliance with the regulations, and distin-
guished that situation from one in which a supervisor mea-
sured the angles, determined that the wall was non-compliant,
and proceeded without rectifying the situation. Based on that
distinction, the ALJ was unconvinced that the evidence rose to
the level of willfulness. In so holding, the ALJ also pointed to
Schupp’s testimony that he “usually get[s] into trouble because
[he] take[s] too much time making sure that ditches are
correct.” The ALJ identified that statement as support for a
finding that Schupp’s conduct reflected inaction due to
negligence rather than willfulness. Later in the opinion,
however, the ALJ identified the same statement as reflecting an
“unsavory conundrum for Respondent’s supervisors—risking
trouble for taking the time to properly implement safety
measures, or, risking trouble for not taking the time to properly
implement safety measures.” ALJ Op at 15. That “unsavory
conundrum” noted by the ALJ encompassed two intentional
responses by supervisors—one of which sacrificed time for
safety compliance and the other which sacrificed safety
compliance for time savings. Interpreted in that context,
Schupp’s statement would reflect a willful determination to
forgo the safety practices in order to save time.
On appeal, the Commission agreed with the ALJ that the
foreman, Schupp, and thus Stark, had a heightened awareness
of the requirements of the cited OSHA provision, which is
uncontested by Stark on appeal. It concluded, however, that
the record supported the Secretary’s contention that the
foreman “deliberately disregarded” those requirements. The
Commission noted Schupp’s testimony that at the start of work
8 No. 14-3809
that day he determined that the excavation contained Type B
soil and recorded that information in the Daily Report. Printed
on the report itself is the requirement that if sloping is the
means of protection utilized then the slope for an excavation
with Type B soil is 45 degrees. Therefore, as a person who filled
out such reports on a daily basis including that morning when
he recorded the Type B determination, Schupp was aware that
the excavation walls at that site could not be sloped more than
45 degrees without violating safety requirements.
The Commission then concluded that although Schupp
testified that he was in a hurry and was not paying attention,
the evidence showed that he knew or at least deliberately
avoided knowing that the slopes of the east and west walls
exceeded 45 degrees by a wide margin. First, the Commission
noted that there was no support for the ALJ’s contention that
the record demonstrated reasonable efforts by Stark to slope
the excavation. The Commission then noted that although
Schupp completed the top portion of the report indicating the
soil type, he did not complete the lower portion pertaining to
cave-in protection. It then concluded that “[h]aving classified
the soil type and recorded it on the Daily Report, we find it
incredible that the foreman could have failed to observe the
marked discrepancies between the slopes that actually existed
— up to 80 degrees—and the 45-degree slopes that the foreman
knew were required for this particular excavation. Under these
circumstances, we find that the foreman either knew the slopes
of the excavation walls exceeded 45 degrees, or deliberately
avoided this knowledge in his admitted haste to complete the
work.” Comm’n op at 21-22.
No. 14-3809 9
On appeal, Stark argues that the ALJ, not the Commission,
was able to observe the demeanor of Schupp in assessing
credibility, and that its determination that the conduct was not
willful was based upon that credibility determination. Citing
Super Excavators, Inc. v. Occupational Safety and Health Review
Comm’n, 674 F.2d 592, 594 (7th Cir. 1981), and Union Tank Car
Co., Inc. v. Occupational Safety and Health Admin., 192 F.3d 701
(7th Cir. 1999), Stark argues that an ALJ’s credibility determi-
nations must be honored by a reviewing court unless those
determinations are contradicted by incontrovertible documen-
tary or physical evidence. It asserts that we therefore must
defer to the ALJ’s credibility determination as to Schupp. There
are myriad problems with this argument, but the most glaring
is that in those cited cases we were reviewing the ALJ’s
determination, not the Commission’s decision, because the
Commission had declined to exert its discretionary review in
those cases. Super Excavators, 674 F.2d at 593, Union Tank Car,
192 F.3d at 704. Neither of those cases presented us with the
question as to what our role is when reviewing the decision of
the Commission.
We have, however, addressed that precise question in other
cases. We have noted that “[w]here the Commission reverses
an ALJ, it is the Commission’s order alone that is reviewed.”
Chao v. Gunite Corp., 442 F.3d 550, 556 (7th Cir. 2006). We will
uphold the Commission’s findings of facts if supported by
substantial evidence on the record considered as a whole. Id. at
557; 29 U.S.C. § 660(a). “‘Substantial’ in this context ‘does not
mean a large or considerable amount of evidence, but rather
such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.’” KS Energy Services, LLC v.
10 No. 14-3809
Solis, 703 F.3d 367, 371 (7th Cir. 2012), quoting Pierce v. Under-
wood, 487 U.S. 552, 565 (1988). Moreover, “[o]ur deference to
the Commission includes deference to its credibility determina-
tions, except in extraordinary circumstances.” Chao, 442 F.3d at
557; Estrada-Martinez v. Lynch, ___ F.3d ___, 2015 WL 9584833
at *6 n.4 (7th Cir. Dec. 31, 2015)(the OSHA Board “is not bound
by fact and credibility determinations made by an administra-
tive law judge, although those determinations are entitled to
‘some weight,’ and there must be substantial evidence for
rejecting them.”); Allis-Chalmers Corp. v. Occupational Safety &
Health Review Comm’n, 542 F.2d 27, 30 (7th Cir. 1976)(“the
Commission was not bound by these credibility determinations
[of the ALJ], as long as its findings are supported by substantial
evidence.”); Kelly Springfield Tire Co. v. Donovan, 729 F.2d 317,
322 n. 6 (5th Cir. 1984)(“[t]he Commission is not bound by the
ALJ’s credibility determinations”).
Stark argues that the ALJ is in the unique position to
determine credibility because only the ALJ had the opportunity
to observe the demeanor of the witness. That is a relevant
consideration for the Commission to consider in assessing
whether to affirm the credibility finding of the ALJ. Moreover,
in Universal Camera Corp. v. NLRB, 340 U.S. 474, 496 (1951), the
Court noted that in reviewing whether the substantial evidence
standard is met when a Board and its examiner disagree,
“evidence supporting a conclusion may be less substantial
when an impartial, experienced examiner who has observed
the witnesses and lived with the case has drawn conclusions
different from the Board’s than when he has reached the same
conclusion. The findings of the examiner are to be considered
along with the consistency and inherent probability of
No. 14-3809 11
testimony.” In the present case, the ALJ’s decision was not
consistent and its determination was improbable in light of the
objective evidence. Substantial evidence in the record sup-
ported the Commission’s determination.
As was noted above, the ALJ based his conclusion in part
on the erroneous belief that the record demonstrated a reason-
able effort by the Respondent to slope the excavation as
opposed to not taking any steps at all to slope the walls. The
Commission properly noted that the ALJ’s finding was
unsupported in the record, and that alone provides a proper
basis for the Commission to reject the subsequent conclusions.
Moreover, the ALJ characterized Schupp’s statement that he
“usually get[s] in trouble because [he] take[s] too much time
making sure the ditches are correct” as evidence that his failure
to implement safety measures was due to negligence not
willfulness, but also pointed to that same statement as evidence
that supervisors faced the “unsavory conundrum” of either
performing the safety measures and risking trouble from Stark
for taking too much time or failing to perform the safety
measures and risking trouble from OSHA – both of which
evidence intentional conduct. The statement by Schupp, even
if credited, could support a determination that he therefore
chose not to make sure the ditches were correct because he
admittedly wanted to complete the project more quickly. See
Local 65-B Graphic Communications Conference of the Intl.
Brotherhood of Teamsters v. NLRB, 572 F.3d 342, 349 (7th Cir.
2009)(the difference of opinion between the ALJ and the
Commission was not whether to credit certain testimony, but
what conclusion to draw from the same piece of testimony).
12 No. 14-3809
Therefore, the Commission was presented with an ALJ
determination that was based on an assumption unsupported
in the record and on evidence deemed capable of contradictory
interpretations. Its determination that the ALJ erred in charac-
terizing the violation as serious rather than willful is supported
by substantial evidence in the record, and is consistent with the
initial characterization made in the original citation. The
evidence indicated that on a daily basis in the weeks preceding
the violation, Schupp filled out the Daily Report. On the date
of the violation, however, he filled out only the top portion of
the sheet, determining that the soil was Type B. The bottom
portion of the form provided that the maximum slope for type
B soil was 45 degrees, but Schupp failed to fill out that portion
indicating what methods of protection he was using including
proper sloping. Schupp’s action in determining the soil type
but then ignoring the slope requirements of the form is
evidence of willfulness. In addition, the undisputed evidence
in the record was that Schupp stood at the top of the excava-
tion looking into it for at least 10 minutes as a laborer worked
in it. The Commission held that given the drastic difference
between the 45 degree slope allowable and the 80 degree slope
found on at least one wall, Schupp could not have failed to
notice that the excavation failed to comply or at least was
deliberately avoiding such knowledge. The three walls were at
significantly steeper angles than the 45 degree slope allowed
with measurements of 60 to 80 degrees—a disparity that would
have been readily apparent to a person standing, as Schupp
was, at the top of the trench and looking into it for 10 minutes.
Given Schupp’s statement that he wanted to complete the
project quickly and that compliance efforts in the past proved
No. 14-3809 13
time-consuming, the objective evidence of the failure to fill out
the form and the obvious nature of the violation provide ample
support for the Commission’s determination that the violation
was willful.
Stark nevertheless asserts that its good faith efforts to
comply with the safety rules negate willfulness. It argues that
a company cannot be found to have willfully violated a
standard if it exhibited a good faith reasonable belief that its
conduct conformed to the law or made a good faith effort to
comply with a standard or eliminate a hazard, even though its
efforts were not complete, citing American Wrecking Corp. v.
Sec’y of Labor, 351 F.3d 1254, 1262 (D.C. Cir. 2003). Stark asserts
that it had safety rules in place to ensure that employees were
protected from cave-ins, its employees were adequately trained
in those requirements, and it conducted regular inspections
and otherwise ensured compliance with those rules. Stark
points only to general safety rules, however, and not to any
actions at this worksite to ensure cave-in protection. That
contrasts with the situation in American Wrecking, which
involved safety measures at the particular site to ensure
worker safety but which were different in kind from the
measures required by regulation. Id. We have held, however,
that there is no generic good faith defense for violations of the
Occupational Safety and Health Act. United States v. Ladish
Malting Co., 135 F.3d 484, 491 (7th Cir. 1998). Good faith efforts
to comply with the cave-in protection requirements at this site
would of course be relevant to the willfulness issue, but as
discussed above there is no evidence of such efforts here.
14 No. 14-3809
Moreover, Stark has failed to even present evidence of a
good faith effort to ensure compliance with safety rules. The
Commission addressed a similar argument by Stark below, in
which Stark argued that its extensive safety rules and compli-
ance mechanism established an affirmative defense of
unpreventable employee misconduct. As an initial matter, the
Commission acknowledged that Stark had established rules to
prevent safety violations which were communicated to its
employees, and that Stark monitored for compliance with
those rules through the actions of its Safety Director, Wayne
Clayton, by reviewing daily foreman reports and conducting
onsite safety audits. It concluded, however, that Stark failed to
demonstrate that it effectively enforced its own rules and
policies when violations were discovered. Stark’s policy
mandated the issuance of written safety tickets with progres-
sive disciplinary consequences for each safety violation, and
did not allow verbal warnings to be issued in lieu of those
written safety tickets. Under that policy, the first violation
should result in the issuance of a ticket and a written warning,
the second a ticket and a one-day suspension, the third a ticket
and a three-day suspension, and the fourth violation mandated
termination. The utilization of written tickets as opposed to
verbal warnings would facilitate effective enforcement of the
safety rules by allowing the tracking of violations by particular
employees especially when working for different foremen.
That policy, however, was routinely disregarded. Between
August 2006—when the policy was first implemented—and
the 2008 inspection at issue here, only 33 tickets had been
issued. Of those, six were issued by Stark’s area manager in
Champaign in September 2006 and the rest were issued by
No. 14-3809 15
Stark’s safety director Clayton. No other supervisor issued any
written tickets between September 2006 and the violation in
this case, and Schupp and Ron Martin, a Stark superintendent,
testified that they never issued any safety tickets and preferred
to verbally correct employees. As to Clayton, testimony also
indicated that the supervisors communicated by radio with
each other to provide advance warning when Clayton was in
the area conducting safety audits. In light of that evidence, the
ALJ concluded that Stark failed to demonstrate that it effec-
tively enforced its own rules and policies for safety violations.
The Commission affirmed the ALJ’s determination that Stark
failed to demonstrate effective enforcement, and we agree.
Accordingly, Stark failed to demonstrate that it had a safety
policy that was effectively enforced during that time, and its
argument fails for that reason as well.
The petition for review is DENIED.