Calif. Agents: Tread Carefully When Providing Workplace Safety Advice

By | May 4, 2011

Woe to the employer who is not attentive and actively engaged in health and safety.” That’s the warning the California Division of Occupational Safety and Health (Cal/OSHA) is giving employers in the Golden State that are at risk of committing a serious workplace safety violation, according to Donald Dodson, managing consultant for Aspen Risk Management Group.

Thanks to the passage of state Assembly Bill 2774, which took effect in January 2011, Cal/OSHA has changed the definition of what’s considered a serious workplace violation — and raised the monetary penalty for serious citations to up to $25,000 per violation. Additionally, the bill changes how a serious violation is investigated and the appeals process for Cal/OSHA citations. Because of the changes AB 2774 made to Labor Code section 6432(a), insurance agents and brokers who advise employers on workplace safety, or help clients put injury and illness prevention plans (IIPP) in place, may face increased liability, experts warn.

Understanding the Law

Back in 2009, Cal/OSHA faced pressure from the federal Occupational Safety and Health Administration due to its low percentage of serious violations compared to other states, and many serious citations were being dismissed on appeal, Dodson said. Nationally, 77 percent of all citations in 2009 were classified as serious. Among state plans, on average 43 percent of citations were classified as serious. But in California, only 19 percent were classified as serious, he said. Thus AB 2774 was developed in 2010, redefining a serious violation and its penalties.

Bill Krycia, regional manager for Cal/OSHA, said AB 2774 is designed to:

  • Clarify the definition of a serious workplace violation;
  • Improve Cal/OSHA’s citation process by redefining how serious violations are cited;
  • Clarify procedures for issuance of a serious citation; and
  • Clarify procedures for the appeals process when determining if the citation was issued correctly.

Perhaps the most significant change is to the standard of proof for serious citations. Previously, when Cal/OSHA wanted to issue a serious citation, it had to prove there was a “substantial probability” that a serious violation would occur.

For example, if you bumped into an unguarded power take-off (PTO) on the back of a tractor, 51 percent of the time it would cause a serious injury, Krycia explained. Under AB2774, Cal/OSHA officials just need to show that there is a “realistic possibility” that there would be serious injury. Because the PTO on the back of a tractor is a known hazard and is required to be guarded, there’s a realistic probability that if you bump into that hazard, it will cause serious injury. If an employer doesn’t keep the PTO guarded, the employer risks being issued a serious citation with an accompanying penalty of up to $25,000 per violation, he said.

While the change sounds minor, “the previous definition was inadequate and made it exceedingly difficult to prove that a serious violation existed,” said California Department of Industrial Relations (DIR) Director John C. Duncan. “This significant clarification will allow Cal/OSHA to better identify serious violations, as well as provide improved guidance for the Appeals Board in cases where the issuance of a serious citation is in question.”

“The new interpretation of a serious violation will help strengthen the Cal/OSHA program, improve enforcement efforts and better protect California’s workers. It will help us accurately issue serious citations to more effectively address the most egregious violations,” added Cal/OSHA Chief Len Welsh.

The new law also establishes procedures for notifying employers of the possibility that they may face a citation for a serious violation and requires Cal/OSHA staff to consider certain factors before issuing a serious citation.

New factors used to accurately issue serious citations include any training given to employees and supervisors, existing workplace safety procedures, supervision of employees exposed to the hazard, as well as contributing information the employer wishes to provide to explain why he or she believes that no serious violation exists.

Among the workplace safety procedures Cal/OSHA inspectors will review are employer safety programs, including IIPPs, to determine if they include:

  1. Programs for training workers and supervisors about preventing employee exposures to hazards.
  2. Programs to find, limit access to, and correct hazards in the workplace.
  3. Programs to supervise employees exposed or potentially exposed to hazards.
  4. Programs to communicate about safety rules and programs with employees.

“The IIPP has to be a reflection of the employer’s worksite,” said Jim Hay, corporate ergonomics and safety consultant for California State Compensation Insurance Fund. The new law states that there is a “rebuttable presumption” that a serious violation exists in your workplace if Cal/OSHA can demonstrate a “realistic possibility that death or serious physical harm could result from the actual hazard created by the violation. This will make it harder for employers to win a (serious citation) appeal,” he added.

On the bright side, with the passage of AB 2774, there now is opportunity for employers to meet and informally discuss an inspector’s findings and proposed citations before they are issued, said Fred Walter, managing partner at Walter & Prince, a law firm that specializes in OSHA defense, serious and willful misconduct and crisis management.

Cal/OSHA must provide an opportunity for the employer to discuss the findings no later than 15 days before they are issued. At this meeting, the employer can present arguments why the citations should not be issued, or should be modified. Cal/OSHA has even developed a form for employers to use to facilitate the interactions: Form 1BY.

Previously, Cal/OSHA refused to speak to employers before citations were issued, and then only within the first 10 calendar days thereafter unless an appeal was filed, he said.

AB 2774 is designed to front-load the system so that smart employers will be proactive in tailoring their IIPPs to work conditions to avoid accidents and to promote safety, as well as work with Cal/OSHA to answer questions instead of waiting for citations to be issued. But a realistic result is that employers should expect to see more citations and costlier appeals, Walter said.

Agent Concerns and Opportunities

The worrisome aspect of AB 2774 for insurance agents and brokers is whether they will face increased liability, as they provide loss control and safety consulting services.

Historically, agents and brokers have helped clients put IIPPs into place, said Kevin Baker of Suhr Risk Services of California. Under AB 2774, if an employer doesn’t have an IIPP that is specific to their operation, they risk being fined by Cal/OSHA. “These are serious fines and about as scary as it gets,” he said.

“The immediate concern that’s being voice by some in the agent/broker community is, ‘yikes, I don’t want to be the one who gave them an IIPP program two years ago, and today they’re getting a citation that may be in the tens of thousands of dollars, and they’re going to turn right around and say, ‘If I’m having to pay Cal/OSHA a fine, I’m going back to my former buddy with whom I have a beef,'” Dodson said.

As a practical matter, Walter doesn’t think such an argument would hold much traction in court. “Although I think it would be a good thing to send out something very brief and general to clients that the law has changed dramatically and that they should keep written (IIPP) programs up to date.”

Because AB 2774 dramatically changes what’s considered a serious violation and can put a permanent black mark on employers in California, there’s room for brokers and safety and loss control professionals, as well as independent safety consultants, to provide consulting services to employers, Walter said.

“One of the things (the law) does is raise safety inspectors to the level of expert witnesses, and there also may be an area for insurance and loss control experts to hone their skills and provide expert testimony on behalf of employers, where that hasn’t been the case before,” he noted.

Aspen’s Dodson recommends insurance agents review the safety information they hand out to employers. Agents providing documents from workers’ comp carriers “need to look at the material to look at the quality of the content.”

If agents go beyond informing employers about the law change and assist employers in developing IIPPs, they should verify that the recommended plan is a Cal/OSHA-compliant document, Dodson said. A model IIPP plan is available from the DIR (, and it should be tailored to the employer’s exposures.

Dodson recommended adding a disclaimer indicating it is the employer’s responsibility to make sure the IIPP fits their operations, “that ‘we in the home office can’t possibly know all of the nuances and subtleties of any operation,'” he said.

Agents also should check their own errors and omissions insurance policies, making sure they’re not practicing without any risk transfer of their own. “Make sure it covers safety consulting, if you’re providing those services,” Dodson said.

Finally, insurance agents should use AB 2774 as an opportunity to dialogue with existing and new clients.

Suhr Risk Services’ Baker has done just that, noting he sent a mailing to all of his clients and potential prospects about the law changes. “I regularly use things like this … to open doors and help close deals with clients,” he said. “I look at it as my responsibility. If I’m an educated professional in my industry, this is the stuff I need to know. I may not need to know every detail, but I need to be able to explain the impact of AB 2774. We have an obligation as an industry to be a resource, to advise and educate.”

The discussion should engage the employer in a documented dialogue about worker safety. After all, the true goal is worker safety, Walter said.


Carefully Eye the 1BY

Before issuing a serious workplace citation, Cal/OSHA must meet and informally discuss its inspector’s findings and proposed citations not later than 15 days before they are issued, and allow employers to present evidence why the citation should not be issued. To help facilitate the dialogue, the agency is using the 1BY form: Cal/OSHA fills out the front with the charging allegations, and the employer writes the reasons he or she believes the citation should not be issued on the back.

But Fred Walter, managing partner at Walter & Prince, views the form as “something of a trap for employers.”

He explained his concern is two-fold. First, the form could be used as evidence if the citation is appealed.

“The employer, even with some diligence, may not know what occurred, but because they want to play nice with OSHA, say something on the form that they later want to recant,” Walter said. “An accident might have happened in a different way, or different factors that are revealed might create a different view of what occurred based on new information after the form has been filled out. But the problem is that the employer’s statements in the 1BY constitute admissions and may be used against the employer if a citation is issued an appealed.”

Second, once an investigation has concluded, the form becomes a public document and, in the worst case, could conceivably be available to licensing agencies to determine, for instance, if a construction firm should be licensed or not, Walter said.

“Because of all of the potential ramifications and venues the form could be used in, I hesitate to have our clients, the employers, fill those forms out without careful thought beforehand,” he said. “The other curious thing is there are no penalties for not filling out the 1BY form, and a employer’s refusal to fill out the form cannot be used against the employer in an appeal. … If an employer wants to sit down and participate in a dialogue with Cal/OSHA before a citation is issued and say why the citation is wrong, but not complete the form, they can still do so.”

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