Fifth Circuit Reverses Course after 37 Years; Holds OSHA Has Authority to Enforce Multi-Employer Citation PolicyOn November 26, 2018, the Fifth Circuit released its opinion in Acosta v. Hensel Phelps Construction Co., which held that despite prior rulings to the contrary, OSHA is authorized to issue citations against contractors for safety violations regardless if the employer actually employs the employee(s) exposed to the hazard.

Under OSHA’s multi-employer worksite policy, an employer who causes a hazardous condition, often referred to as the “creating employer” or a general contractor or other employer having control over a worksite who should have detected and prevented a violation through the reasonable exercise of its supervisory authority, often referred to as a “controlling employer” may be cited for a violation, whether or not its own employees were exposed to the hazard. Generally, this gives compliance officer’s authority to issue citations to general contractors responsible for safety violations of subcontractors and others not employed by the general contractor.

However, in 1981, the Fifth Circuit held that OSHA’s multi-employer worksite policy was unenforceable in Texas, Louisiana and Mississippi because an employer can only receive a citation for safety violations that expose its own employees to the hazard. Fast forward thirty-seven years – the Fifth Circuit was given the opportunity to confirm this holding but decided to side with seven other circuit courts and ruled that OSHA has the authority “to issue a citation to a general contractor at a multi-employer construction worksite who controls a hazardous condition at that worksite, even if the condition affects another employer’s employees.”

The factual background of the case helps set the stage for the Fifth Circuit’s decision. Hensel Phelps was hired as the general contractor to build a public library in Austin, Texas. Hensel Phelps subcontracted portions of the work, including the excavation on the project. The regional OSHA office received complaints about safety issues for the project, so a compliance officer conducted an inspection at the worksite. The compliance officer found subcontractor employees working next to an excavated wall without proper sloping or other protections from cave-in hazards. The compliance officer reported that Hensel Phelps knew of this practice and directed subcontractors to continue work regardless. This investigation prompted OSHA to issue citations for violations of the cave-in protections under the general trenching and excavation rules. Hensel Phelps received a willful citation from OSHA under OSHA’s multi-employer worksite policy even though Hensel Phelps employees were not exposed to the hazard. Under the multi-employer worksite rule, OSHA could issue citations to more than one employer for a hazardous condition regardless if the employer actually employs the employee(s) exposed to the hazard.

Hensel Phelps appealed the citation to the Occupational Safety and Health Review Commission (the “Commission”). The Commission found that Hensel Phelps had sufficient control and authority over the jobsite including the sub-subcontractor and the employees working in the cited condition. The Commission pointed out that normally, the citation would be affirmed under applicable Commission case law. However, the Commission acknowledged that the project was located in the geographical jurisdiction of the Fifth Circuit which did not recognize the multi-employer worksite rule. Thus, the Commission ordered that Hensel Phelps could not be liable for an OSHA violation based solely upon a subcontractor’s employees’ exposure to the dangerous condition.

OSHA, through the Secretary of Labor’s office, appealed the Commission’s decision to the Fifth Circuit Court of Appeals in an attempt to overturn the Fifth Circuit’s prior rulings. On November 26, 2018, the Fifth Circuit issued an opinion in the case reversing 37 years of precedent. Specifically, the Fifth Circuit indicated that its prior decision in 1981 was obsolete and given changes in the law (mainly due to US Supreme Court decisions), the courts should defer to the Secretary of Labor’s interpretation of the statutes it enforces.

Contractors operating in the region should be mindful of this change in the law as it affects risk management and safety issues on almost all construction projects. OSHA officers will likely be briefed on the change and ready to apply it to each job site they visit. While contractors should always be mindful of safety on the job, they should pay particular attention to ensure that all subcontractors on a job site are following the contractor’s safety protocols.

Cannabis and the Contractor: Effective Drug Testing Policy and ComplianceAlthough marijuana is an illegal drug under federal law, a majority of states have now legalized its use in one form or another. Additionally, Canada recently legalized the use of marijuana, and proposals for loosening America’s federal prohibition abound in Congress. This rapidly evolving legal landscape presents new challenges for contractors (and other employers), particularly those working in several states. Contractors must balance complying with often divergent federal and state laws, maintaining a safe work environment, and protecting employees’ rights. Although difficult at times, there are steps contractors can take to help navigate this legal minefield successfully.

Maintain a Safe Workplace and Jobsite

The Occupational Safety and Health Act’s general duty clause requires contractors to maintain a safe jobsite and work environment “free from recognized hazards that are . . . likely to cause death or serious physical harm.” Construction sites already contain a number of hazards that can result in personal injury, and an employee’s impairment due to drugs or alcohol can seriously increase the danger to persons and property. Accordingly, most contractors have zero-tolerance policies that ban the use of alcohol and illegal substances. Although zero-tolerance policies typically permit an employee to avoid adverse employment actions by disclosing the use of prescription drugs prior to a positive drug test, these policies otherwise prohibit the off-site consumption of alcohol or drugs that will result in a positive test. The legalization of medical marijuana in a number of states has made maintaining a zero-tolerance policy more difficult.

In some states, contractors must accommodate an employee’s use of medical marijuana. For example, in Noffsinger v. SSC Niantic Operating Co., LLC, a Connecticut federal court held that a federal contractor could not enforce its zero-tolerance drug policy against a medical marijuana user. Similarly, Oklahoma law prohibits contractors from discriminating or punishing an employee based on the employee’s status as a medical marijuana card holder or a positive drug test for marijuana or its components unless the employer would lose a benefit under federal law or regulations. Although these statutes do not prohibit contractors from disciplining employees who consume marijuana, or are under its influence, while on the jobsite, it may be difficult to determine when an employee is actually impaired and a drug test is warranted. This difficulty can give rise to liability for discriminatory drug testing or wrongful employment actions in instances where a contractor is mistaken.

Other states that have legalized medical marijuana do not require a contractor to accommodate employees’ use. In California, for example, a contractor can dismiss an employee who tests positive for marijuana and its components. Likewise, under Ohio law, contractors are not prohibited from refusing to hire, discharging, or disciplining a person because of the use or possession of medical marijuana, nor are contractors prohibited from establishing and enforcing a zero-tolerance drug policy.

Between these two ends of the accommodation spectrum, a number of states’ laws provide for varying levels of accommodation for employees’ medical marijuana use. In Illinois, for example, contractors are prohibited from discriminating against employees and job applicants who qualify as a medical marijuana patient unless the accommodation would result in the violation of a federal law or the loss of a federal benefit. Nonetheless, Illinois contractors may still impose reasonable limitations on the consumption of medical marijuana and enforce zero-tolerance and drug-free work place policies as long the policies are applied in a non-discriminatory manner. Other states, such as Delaware, Nevada, New York, and West Virginia, have similarly varied degrees of required accommodation.

To help navigate these nuanced laws, contractors, especially those with a multi-state footprint, should develop a well-defined drug policy and administer a drug testing program in a non-discriminatory manner.

Develop a Well-Defined Drug Policy

Developing a well-defined company policy on marijuana use will minimize the risk of harm to persons and property, and decrease the likelihood that drug testing and disciplinary action arising from marijuana intoxication will open the door to liability for adverse employment decisions. At a minimum, contractors should ensure that a company drug policy:

  • Defines the terms “marijuana,” “cannabis,” or any other derivation of the drug. Simply prohibiting the use of “illegal drugs” can create ambiguity because of marijuana’s legal status in various jurisdictions.
  • Indicates that the use of marijuana, whether recreationally or on the job, is strictly prohibited.
  • Articulates drug testing policies and procedures (including penalties for failing a drug test).
  • Educates employees on clinical issues relating to marijuana, such as its effects on the body, the length of time it can continue to impair cognitive and physiological functions, and the potential impacts on workplace safety and performance.
  • Is included in recruiting and new-hire onboarding materials to ensure notice to the individual.

 Consistently Administer a Drug Testing Program

Once a contractor adopts a drug policy, it is critical that drug tests are conducted uniformly for all employees. Failure to do so can subject a contractor to liability for discrimination claims that arise from adverse employment actions.

If an employee tests positive for marijuana, the recourse available to a contractor can vary greatly under federal and state laws. For example, the Americans with Disabilities Act (ADA) currently does not shield an employee from adverse employment actions for using marijuana to treat a disability, even if the employee refrains from using medical marijuana while on the job. The ADA exempts from its scope the “illegal use of drugs” and defines that term to include any substances that are unlawful under the Controlled Substances Act, which currently lists “marihuana” as a banned substance. As a result, at least under the ADA, contractors can terminate an employee who tests positive for marijuana, even if that employee is disabled, prescribed medical marijuana, and only uses marijuana on his or her own time. Note, however, that under the ADA, if an employee discloses a disability and requests an accommodation, a contractor is required to consider reasonable accommodations, which could include transfer to a non-safety sensitive job (where the marijuana use may not pose a safety concern) or for temporary leave during treatment.

By contrast, as discussed above, some states require an employer to accommodate an employee’s use of medical marijuana and prohibit a contractor from terminating an employee for a failed drug test for marijuana use. Contractors should be mindful of the potential for conflict between their own drug testing policies and requirements mandated by federal or state laws. If there are questions as to what actions a contractor can take against an employee for failing a drug test, contractors should seek the advice of legal counsel.

The Measure of Success

An effective drug policy decreases hazards and promotes an accident-free work environment. While state and federal laws meant to promote this goal may seem straight forward when read in isolation, problems arise when these laws overlap or conflict with one another. The growing number of states legalizing marijuana use, and the nuanced differences between laws, will only amplify this problem. Although all contractors need to implement well-defined policies and procedures, it is particularly important that contractors operating in any of the 30 plus states in which marijuana is now legal in some form take time to review current policies and evaluate the need for changes to ensure employee safety and reduce company risk.  If you have questions about this rapidly changing legal issue, you should contact an attorney with experience in this emerging area of the law.

Important Update Re: Small Business Runway Extension Act of 2018We recently reported that, on December 17, 2018, President Trump signed into law a bill that amends the Small Business Act to require that the size of a federal contractor be measured by an average of five years—rather than three years—of revenue for the purpose of determining small business program eligibility. As commentators have noted, the bill did not have a specific effective date, and thus it should be presumed to be effective immediately under longstanding principles of statutory interpretation.

However, the Small Business Administration (SBA) very recently issued an Information Notice, which states:

SBA is receiving inquiries about whether the Runway Extension Act is effective immediately—that is, whether businesses can report their size today based on annual average receipts over five years instead of annual average receipts over three years. The Small Business Act still requires that new size standards be approved by the Administrator through a rulemaking process. The Runway Extension Act does not include an effective date, and the amended section 3(a)(2)(C)(ii)(II) does not make a five-year average effective immediately.

The change made by the Runway Extension Act is not presently effective and is therefore not applicable to present contracts, offers, or bids until implemented through the standard rulemaking process. The Office of Government Contracting and Business Development (GCBD) is drafting revisions to SBA’s regulations and SBA’s forms to implement the Runway Extension Act. Until SBA changes its regulations, businesses still must report their receipts based on a three-year average.

Interestingly, the SBA indicated in an April 2018 Federal Register notice that it was not in favor of changing the lookback period from three years to five years:

SBA believes that calculating average annual receipts over three years ameliorates fluctuations in receipts due to variations in economic conditions. SBA maintains that three years should reasonably balance the problems of fluctuating receipts with the overall capabilities of firms that are about to exceed the size standard. Extending the averaging period to five years would allow a business to greatly exceed the size standard for some years and still be eligible for Federal assistance, perhaps at the expense of other smaller businesses. Such a change is more likely to benefit successful small business graduates by allowing them to prolong their small business status, thereby reducing opportunities for currently defined small businesses.

Thus, it is possible that the SBA’s seemingly unfavorable view of the of the Small Business Runway Extension Act informed its decision to issue the Information Notice—even though, as commenters have noted, the validity of the SBA’s position about the present effect (or lack thereof) of the Act is questionable.

The bottom line is this: The SBA presumably will update its regulations in the near future to include the five-year lookback period set forth in the Small Business Runway Extension Act. Accordingly, any confusion created by the SBA’s recent Information Notice hopefully will be ameliorated fairly soon. In the meantime, whether the three-year lookback period or five-year lookback period applies needs to be analyzed on a case-by-case, situation-by-situation, and company-by-company basis.

If you have any questions about any of the foregoing issues, please do not hesitate to contact Aron Beezley.