BIG company, but small OSHA penalties for workplace fatalities

While we're on vacation, we're re-posting content from earlier in the year. This post was originally published on February 28, 2011.

By Celeste Monforton

Roxanne Moyer wondered why managers at her husband's worksite would allow an obvious dangerous condition to exist. Workers could be so "close to molten steel [that it] just poured over on them." Her husband, Samuel Moyer, 32 died earlier this month at Arcelor Mittal's LaPlace, Lousiania steel mill in exactly that way. He was fatally burned with molten steel.

Mrs. Moyer sounds like a generous and forgiving soul, saying:

"I don't want it to happen to anybody else. And they've already changed things there. We've talked to fellow workers, and they've already put up a shield there and you can't even get that close to it anymore."

I'm not so tolerant. How is it that the world's largest steel company, with revenues topping $78 Billion in 2010, can ignore such a hazard? They didn't do anything about it until after a worker was killed?

Part of the problem is there are no meaningful consequences for employers who violate safety regulations that lead to worker injuries or deaths. Under workers' compensation law, it is next to impossible for a surviving family to sue their loved one's employer. Under OSHA, the maximum penalty for a serious violation is only $7,000. That penalty figure hasn't been updated since 1991; in today's dollars its only worth $4,400.

Arcelor Mittal has steel mills and other facilities in 60 or so countries, and in a dozen U.S. States. Since January 2007, federal and state OSHA inspectors have made about 25 inspections of the firm's plants located in Indiana, Michigan, Pennsylvania and Ohio. The vast majority of these inspection were commenced because of worker complaints and fatal incidents. When violations were identified by inspectors, however, the penalties are trivial, especially for a firm with Arcelor Mittal's wealth. Here's what I mean by inconsequential penalties:

Mr. George Pulver, 48 was burned over 60% of his body at the Arcelor Mittal plant in Conshohocken, Pennsylvania. He died on January 16, 2008. Following federal OSHA's investigation and a settlement, the company was assessed a final penalty of $5,625 for four serious violations.

Mr. James Wingfield, 55 was fatally crushed at the ArcelorMittal's Indiana Harbor plant. He died on March 24, 2008. Following Indiana-OSHA's investigation and a settlement, the company was assessed a final penalty of $3,975 for one serious and one other-than-serious violation.

Mr. Roger Prichard, 58 was fatally injured when he was caught in a machine that finishes steel rails at the Arcelor Mittal plant in Steelton, Pennsylvania. He died on April, 21, 2008. Following federal OSHA's investigation and a settlement, the company was assessed and final penalty of $6,375 for three serious violations.

Mr. Jason Belko, 23, was fatally crushed between an industrial train and a piece of equipment at the Arcelor Mittal plant in East Chicago, Indiana. He died on January 12, 2008. Following an investigation by Indiana-OSHA, no citations or penalties were issued to the company.

Mr. Jason Ham, 33, was fatally struck by a machine part at the Arcelor Mittal plant in East Chicago, Indiana. He died on October 20, 2010. Following Indiana-OSHA's investigation and a settlement, the company was assessed a $25,000 penalty for a repeat violation.

OSHA is not authorized to change the amount of its maximum civil penalty for serious, willful or repeat violations; only Congress can do that. As I noted above, those dollar amounts were last updated in 1991. OSHA does have leeway, however, in proposing reductions to proposed penalties based on the gravity of the violation, the company's past history, size, and good faith. Under its current policy, for example, OSHA will give an employer as much as a 60% discount on a penalty for being a small business, or a 25% discount for having a health and safety management system, or a 10% discount for not being cited by OSHA in the last three years. Given Congress' inaction to modernize OSHA's penalty structure, it was wise that the agency established a work group in 2009 to assess how those reduction factors could be revised to make the penalties a bit more meaningful. It's been 10 months since OSHA announced plans to make such amendments. The agency has yet to officially do so.

Federal OSHA is now investigating whether Arcelor Mittal violated health and safety regulations at its LaPlace, LA mill, including any that may have contributed to the death of Samuel Moyer, 33. If violations are identified, OSHA should propose the maximum penalty for each. Arcelor Mittal is not a small business, has a history of OSHA violations in numerous States, as well as a history of worker fatalities in the recent past. Discounts should not apply.

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$7000 is a substantial hit for a small company. I've worked for companies that might go out of business if they were forced to pay that at the wrong time. On the other hand for $78 billion company it is a rounding error for what they tip the sandwich lady.

Several ideas:
Separate accidents by how obvious the hazard is. A lack of guards and rails around where they pour molten steel is a pretty glaring hazard. Obvious hazards deserve higher penalties.

Penalties should be much higher for hazards that have been noted but not corrected. Doubling at each repeat citation sounds right to me.

Penalties should be linked to longer term corporate profits. 1% of annual corporate profits, determined by the average over ten years, sounds good. Big enough to get their attention but small enough that smaller companies don't have to go out of business.

Make it personal for people with the power to get things done in the corporation. In addition to a corporate fine there should be an executive fine. 1% of gross personal income per event, paid by the CEO, should go a long way to stiffening resolve.

I doubt any of that will happen but it is fun to think about corporations being deeply invested in the safety of their employees. Most of the economic problems we see today come down to the abandonment of the pact between business and labor that said that if the company did well the employees shared in the profits.

I thought there was a new sheriff in town? That is what Hilda Solis stated. Looks like their strategy of fining and shaming employers is not working.
We need to focus on prevention not fining after the fact. I guess giving millions of dollars to survivors of a dead worker somewhat helps. The best thing is prevention. Fining large companies is not very effective. OSHA needs to provide better consultation services that help small companies implement effective solutions. This is not happening at this time. What is the budget for this at OSHA and the State plans? Has it been increased? NOT
Larger companies that have the resources should invest more in their safety programs. This will prevent deaths, not fining. Insurance companies are very influential in this area.

This is a terrible tragedy. I wonder what Local 9121 was doing to help protect workers. Management and labor should work together to prevent injuries. I hope this never happens again.

February 1, Samuel Moyers, 33, an employee of ArcelorMittal Bayou Steel Plant located
in Laplace, Louisiana, was fatally injured resultant from burns over 90% of his body. He was a
member of Local Union 9121 in District 13.

Fining and shaming employers doesn't work when the fines are both rare and insignificant.

Basic psychology maintains that the predictability of punishment is far more important than the size of the punishment: A $10 fine for speeding enforced so there is a 99% chance of getting caught is far more effective than a $1000 fine for speeding if there is a 1% chance of getting caught.

Little or no enforcement and insignificant fines pretty much assure that nobody takes OSHA seriously. It is seen as being useful as a foil for pro-business think tanks, general industry apologetics, and handy excuse for not making financial goals.

OSHA is ridiculously undermanned and underfunded. Inspections are almost all voluntary and scheduled well in advance. Your chances of getting fined for anything are pretty close to zero as long as there aren't any deaths.

Even then, given regulatory capture and regulators being told they must take businesses side of every issue, short of maiming or death, OSHA is a toothless tiger. The local OSHA guy plays golf with the industry executives he regulates and they quickly come to an agreement as to any penalties. Most penalties are essentially symbolic fig leaves that are intended to demonstrate regulatory authority, concern for worker safety, show the public that bad operators are punished, while covering up that the greens fees at the local country club (tax deductible of course) are larger than what OSHA extracts in penalties.

It also has to be pointed out that the terrible tragedies business talks about in their press releases are seen in the board room as just the price of doing business. Yes, they will cut checks for the widows and orphans. Spend a couple thousand for a real nice service and headstone. They might even spring for one of those brass plaques. Of course, OSHA fines will get paid and they hire an outside safety consultant to give a lecture. Somebody will hang a few safety posters, dust off the fire extinguishers, make sure the first-aid kits have band-aids. A paragraph will be added to the company newsletter about how dedicated they are to safety. But given six months it will all slide back to the way it was.

Workers will complain about faulty equipment and lack of guards. Foremen will tell them that they can either shut up or quit. The CEO will get a pay raise because shareholder value was increased and it will all hum along until some overtired and overworked employee slips and another body is added to the pile.

And it all starts over with OSHA asking how much they have to do to make it look like they are regulating and the company executives will give a speechs about the tragedy while straining to try to look like they care while worrying that they might not make their regular tee time.

It is the standard kabuki theater of industry with regular performances held out front of the big machine where raw materials go in one side, profits come out the other, and a thin stream of blood trickles out from under the stage staining the shoes of the audience.

Safemba #2, The problem is that most large companies are self-insured. If there was a requirement for external insurance, then premiums for that insurance might exert some influence, but no insurance company is going to know and understand the safety details of a company's operations like the company and its employees do.

Worker's Compensation does put limits on what workers can collect for injuries on the job. There can be perverse incentives for workers to fake or even induce injuries if they got compensation for them. There are also perverse incentives for employers to treat injuries and payments as a cost of doing business.

I think a better approach would be that if there is an employee death onsite due to an accident, that the whole facility is shut down so it can be inspected and safety systems and employee safety training evaluated before it is restarted. In a steel mill, a cold shut down would likely take a week or more of lost production. A week of lost production is lost annual revenues of 1/52.

A plant manager that has a few weeks of lost production due to employee fatalities isn't going to be looked at favorably by the board and stockholders.

Maybe you have 3 days for the first fatality, 6 for the second, 12 for the third, 24 for the fourth, or some similar exponential increase. Shutting entire facilities down does exact penalties that are proportional to size of facilities. I think that is better than a fixed fine that is size independent.

I agree stopping work and production would make a point. Why is it when we have an environmental non compliance issue they can stop operations for several days? However kill a worker and there is very little work stoppage. Self insurance is no excuse. Every dollar you pay as a self insured comes out of profit and can have a significant effect on earnings. I have worked for self insured companies and they take safety very seriously. The cost of safety does influence earnings.

Art you are totally incorrect. Companies do take fatalities very seriously. No CEO or member of management wants a fatality at their site. Are you talking out of experience? I have worked for several Fortune 1000 companies and have yet to find one where having injuries or fatalities is "just the cost of doing business". In my opinion companies take safety very seriously. Why would you want an injured worker? And even worse a fatality? People that state that it is just the cost of doing business are wrong and are part of the Obama ideology that companies are bad for workers and people. This is part of the phony neo liberal hippie ideology.
There are some bad actors out there and they need to be punished but most companies do not want there workers getting injured or killed. Only phony liberal neo hippies make statements that companies do not care about safety. I have not had an opportunity to play golf with an OSHA staff or State plan rep. This is way out of line. I find most OSHA staff and State plan staff professional and passionate about their job. You will always find some that are incompetent but that is no different than any other government agency or private company.