Is There Personal Liability For OSHA Penalties?

Normally, OSHA citations are issued only against the corporations which employ workers, not the individuals who own or control them. Thus, corporate entities are generally liable for penalties under the Occupational Safety and Health Act (“Act”) as opposed to supervisors, officers, or directors. Moreover, there is no statutory authority to extend liability under the Act to supervisors, officers or directors individually. However, under the traditional common law doctrine of “piercing the corporate veil,” a court may put aside limited liability and hold officers or directors personally liable for the corporation’s actions or debts. Although the standard may differ from court to court, it typically requires somewhat egregious conduct to justify piercing the corporate veil. 

In Secretary of Labor v. Juan G. Quevedo-Garcia, OSHRC Docket Nos., 20-1029, 20-1030, 20-1031, 20-1032 & 20-1042, an administrative law judge granted summary judgment for the Secretary of Labor finding an individual who owned the majority interest of a limited liability company and served as its only officer abused the corporate form and was thus, personally liable for approximately $2 million in workplace safety penalties. The underlying OSHA citations involved eight willful, ten repeat, and 12 serious violations for hazards, including failure to use fall, head, or eye protection; unsafe use of stepladders; scaffolding, housekeeping, and fire safety deficiencies; and lack of stair rails or forklift training. 

In Quevedo-Garcia, the court recognized that the Occupational Safety and Health Review Commission (“OSHRC”) has the authority to “pierce the corporate veil” to hold an individual (or a different business organization) responsible for the corporate employer’s violations and responsibility for resulting penalties. Although the court rejected the Secretary’s argument that the individual was the statutory employer, it found him to be liable under an alter ego theory which permits assigning statutory employer status under the Act to both a corporate employer and an individual for whom the corporate employer is an alter ego. In reaching its conclusion, the court examined several factors concerning the existence of a separate corporate personality: gross undercapitalization; failure to observe corporate formalities; non-functioning of other officers and directors; non-payment of dividends; siphoning of funds; corporate form a mere façade for operations of the individual; and circumvention of the Act.

The decision is a good reminder, particularly for smaller businesses where these factors may be more likely to exist, that it is important for OSHA and virtually every other area of the law to respect corporate formalities. 

Finally, it is worth noting that local district attorneys or other prosecuting offices may also bring potential criminal charges against individuals for workplace injuries depending on the circumstances. Some of these cases involve construction sites where the prosecuting body determines that certain individuals ignored safety warnings and/or intentionally failed to implement certain safety measures to maximize profits which subsequently led to worker fatalities. 

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