Fourth Circuit Attempts to Clarify Law on Constructive Knowledge/Employee Misconduct
Thirty-five years ago, then-Supreme Court Justice White, writing a dissent to the Court’s denial of a petition for certiorari, described the issues of “employer knowledge” and “employee misconduct” in OSHA enforcement case litigation, and the overlapping evidence and the different burdens of proof to establish these issues, as a “confusing patchwork of conflicting approaches.”
The confusion in this area of OSH law arises from the fact that the evidence for “actual or constructive knowledge of the violative condition” (which is part of OSHA’s burden of proof to establish an OSHA violation), and “employee misconduct” (an affirmative defense, and thus the employer’s burden to prove), are often similar, if not identical. The Secretary may allege the employer had “constructive knowledge” because its safety program regarding the violative condition was nonexistent or ineffective. And, in alleging employee misconduct, the burden is on the employer to show that it had an effective safety program, including employee discipline for violations of work rules. The additional complication is that OSH law generally applies “agency” law, so that the knowledge of a supervisor is imputed to his or her employer. Thus, where a supervisor is involved in the violative conduct, applying agency law would automatically establish the employer’s knowledge of the violation.
Justice White’s still-apt description of the state of the law was quoted in a recent decision by the 4th Circuit Court of Appeals, New River Electrical Corp. v. OSHRC, (Feb.1, 2022). In the decision, Judge Cullen writing for the unanimous court attempted to clarify how the burdens of proof and evidence fit together, at least in cases in the 4th Circuit.
New River Electrical was cited by OSHA after an electrical accident involving one of its employees. A crew from New River Electrical was engaged in replacing underground electrical cables for a new residential subdivision in Columbus, Ohio. The electric utility was responsible for de-energizing the lines, while New River’s standard procedures required its employees to test, tag, and ground all transformers before recabling or replacing them. “As it turned out, no one had tested, tagged, or grounded the transformer that shocked” the New River employee. The employee suffered second- and third-degree burns.
Immediately after the accident, two New River foremen accessed the cable that the employee had been working on and tagged and grounded the transformer. They initially denied, but eventually admitted having done so. The employer, suspecting that their foremen had not been truthful in the initial investigation, fired both.
At the trial, the employer introduced into evidence its safety manual, its disciplinary records for the previous 3 years, its risk assessment for the project, and its job site audit evaluations.
The Administrative Law Judge affirmed the violations, though he grouped them into one citation and a single penalty of $12,934. The Commission did not direct the case for review, and the ALJ’s decision became the Commission’s final order. On appeal to the court of appeals, the employer had a choice among the 6th Circuit (where the violation occurred), the 4th Circuit (where New River Electric is headquartered) or the D.C. Circuit. The employer appealed to the 4th Circuit, which covers the states of Maryland, Virginia, West Virginia, North Carolina and South Carolina.
The Fourth Circuit’s opinion began by noting the different approaches taken by the courts of appeals on the issue of imputing a supervisor’s own misconduct to the employer to establish the employer’s knowledge of the violative condition. “The Sixth Circuit has held that a supervisor’s own misconduct can be imputed to the employer, whether or not the misconduct is foreseeable…Our precedent requires that a supervisor’s misconduct must be foreseeable for a violation to be imputed to the employer.”
In a footnote, that Fourth Circuit noted that several other circuit courts (the Second, Third, Fourth, Fifth, Sixth, Tenth and Eleventh) were in agreement with its approach, that is, that OSHA must show something more than simply the supervisor’s misconduct to establish employer knowledge, that the supervisor’s misconduct must be shown to be “reasonably foreseeable.”
Violations, the Court said, would be “reasonably foreseeable” if the employer failed to use “reasonable diligence.” According to the Court, OSHA generally shows that the employer failed to use reasonable diligence in one of three ways: (1) by showing that the employer failed to take proper precautions at the worksite where the violation occurred, (2) by showing prior similar violations by the employer’s employees, or (3) by showing that the employer’s safety program is inadequate. (Although all three may all bear on an evaluation of the employer’s safety program, the Court made clear that it was referring specifically to a 4-part test: the employer established work rules to prevent the unsafe condition or behavior, the rule was adequately communicated to employees, the employer took steps to discover any noncompliance, and the employer effectively enforced the rule when employees transgressed it. These are the same four elements necessary to prove employee misconduct.)
The Court then went on to try to clarify how the evidence and burdens of proof for employer knowledge and employee misconduct might intersect.
If OSHA relies on the third means of showing the employer failed to use reasonable diligence, that is, that the employer’s safety program and enforcement were inadequate, then the adequacy of the employer’s safety program is part of the Secretary’s case to prove (to show constructive knowledge).
but, if OSHA relies on the first or second means of showing the employer failed to show reasonable diligence, then the employer may provide evidence of its safety program to prove employee misconduct.
and, finally, “we recognize that the Secretary may seek to prove constructive knowledge by the inadequacy of a safety program, and the employer may assert an unpreventable employee-misconduct defense. In those cases, the affirmative defense is effectively subsumed by the knowledge element of the Secretary’s case-in-chief…In those cases, an ALJ may very well find that the Secretary’s success in proving constructive knowledge in his case-in-chief effectively forecloses the employer’s unpreventable-employee-misconduct defense. But in reaching that conclusion, the ALJ must still analyze these doctrines separately.”
Returning to the New River Electric case itself, the Court said that the ALJ had confused the evidence submitted to prove constructive knowledge with evidence submitted on the employee misconduct defense.
The Court said that in making its case for constructive knowledge, the Secretary had relied on evidence that New River failed to conduct an adequate risk assessment and grounding plan before beginning work. Evidence regarding the adequacy of New River Electric’s safety program, according to the Court, had been presented as part of New River Electric’s defense, including its affirmative defense of employee misconduct, which the Secretary attempted to rebut.
The Court said that the ALJ had conflated the evidence, and had considered evidence of New River’s safety program in judging that OSHA had established the employer’s constructive knowledge.
By relying on evidence submitted by the Secretary to disprove the “employee misconduct” defense to show that the employer had constructive knowledge, “the ALJ essentially relieved the Secretary of his burden to prove his prima facie case [of constructive knowledge].” Furthermore, the Court said, since it was not clear that the evidence submitted by the Secretary to rebut the employer’s affirmative defense was sufficient to establish the Secretary’s prima facie case of constructive knowledge, the Court remanded the case to the Commission “for further proceedings that properly allocate the burdens of proof between the parties.”
Whether the Fourth Circuit’s extensive treatment and effort to clarify the law was successful is debatable. Despite the Court’s careful delineation of the means by which the Secretary may show lack of “reasonable diligence,” the evidence for constructive knowledge often consists of a variety of evidence. In fact, the Court noted that the ALJ in this case discussed the employer’s failure to take proper precautions at the worksite as a basis for finding constructive knowledge, but nonetheless said the ALJ had primarily relied on the inadequacy of New River’s safety program to support constructive knowledge, and therefore remanded the case.
Nonetheless, the Court’s decision may create more opportunity for employers to prevail on the employee misconduct defense in cases that are within the jurisdiction of the Fourth Circuit. The Commission and Commission judges must separately consider evidence regarding constructive knowledge and employee misconduct, rather than concluding that if constructive knowledge is established, the employee misconduct defense may be quickly dismissed.