The Hidden Cost of an OSHA Citation

03.25.2019

Most employers are familiar with Cal/OSHA Citations and Penalties. Cal/OSHA has been increasing the penalty amounts over the past few years. The following is a summary some of the most common penalty amounts:

Regulatory violations: New penalty is $13,047 maximum per violation.
General violations: New penalty is $13,047 maximum per violation.
Serious violations: New penalty is $25,000 maximum per violation.
Willful & Repeat violations: New penalty is $130,464 per violation.

The amount of the maximum penalties has increased substantially over the past few years but the cost of a violation can include far more than the penalty issued by Cal/OSHA. A Cal/OSHA citation can also increase the employer’s exposure for workers compensation claims.

Workers Compensation Claims

An employer’s workers’ compensation insurance carrier is generally obligated to furnish medical care, wage replacement benefits, vocational rehabilitation, and death benefits to employees who sustain an industrial injury; however, if an employee’s injury is caused by the serious and willful misconduct of the employer, the employee is entitled to a supplemental award, similar to punitive damages in a tort action. An employer, rather than an insurer, is liable for this penalty payment, since California prohibits insurance from covering liability for serious and willful misconduct. (Cal. Ins. Code § 11661.)

Liability for Serious and Willful Misconduct Under Labor Code Section 4553

“Serious and willful misconduct” within the meaning of Section 4553 is an act deliberately done for the express purpose of injuring another, or intentionally performed whether with knowledge that serious injury is a probable result or with a positive, active, wanton, reckless and absolute disregard of its possibly damaging consequences.” (Ferguson v. Workers' Comp. Appeals Bd. (1995) 33 Cal. App. 4th 1613, 1622.)

“Willful misconduct” means something different from and more than negligence, however gross. (Johns-Manville Sales Corp. v. Workers' Comp. Appeals Bd. (1979) 96 Cal. App. 3d 923, 931.) The term “serious and willful misconduct” is described as being something “much more than mere negligence, or even gross or culpable negligence” and as involving “conduct of a quasi-criminal nature, the intentional doing of something either with the knowledge that it is likely to result in serious injury, or with a wanton and reckless disregard of its possible consequences.” (Id. at 931-932.) The mere failure to perform a statutory duty is not, alone, willful misconduct. It amounts only to simple negligence. (Id. at 932.)

To prove the employer is guilty of serious and willful misconduct, the employee must show the employer: (1) knew of the dangerous condition; (2) knew the probable consequence of its continuance would involve serious injury to the employee; and (3) deliberately failed to take corrective action. (Johns-Manville Sales Corp. v. Workers' Comp. Appeals Bd., supra, 96 Cal. App. 3d at 933.)

Liability for Serious and Willful Misconduct Under Labor Code Section 4553.1 – Violation of Safety Order

An employer may also be found to have engaged in serious and willful misconduct when the employer violated a safety order promulgated by the Department of Industrial Relations. (Cal. Lab. Code § 4553.1.) Under Labor Code Section 4553.1, the Appeals Board must find: (1) the specific manner in which the safety order was violated; (2) the violation of the safety order proximately caused the injury, and the specific manner in which the violation constituted the proximate cause; and (3) the safety order, and the conditions making the safety order applicable, were known to, and violated by, a particular named person, either the employer or a representative, or that the condition making the safety order applicable was obvious and created a probability of serious injury, and that the failure of the employer or a representative to correct the condition constituted a reckless disregard for the probable consequences.

A decision from a Cal/OSHA administrative law judge (ALJ) is not necessarily binding on the Workers’ Compensation Appeals Board regarding whether the employer engaged in serious and willful misconduct. (Bosell v. Workers’ Compensation Appeals Board (2002) 67 Cal. Workers’ Comp. C. 447 (writ denied); Eastwood v. Cooper Construction, 2015 Cal. Wrk. Comp. P.D. LEXIS 587.) While not binding, it is likely that any judge hearing a workers compensation case involving a "serious and willful misconduct" claim will be influenced by any finding in the Cal/OSHA proceeding.

Amount of Penalty for Serious and Willful Misconduct

If an employee is injured as a result of serious and willful misconduct by the employer, he or she is entitled to a 50 percent increase in the amount of compensation otherwise recoverable, together with costs and expenses not to exceed $250. (Cal. Lab. Code § 4553.) The 50 percent increase is to be calculated based on the entire award, not just compensation indemnity. (Ferguson v. Workers' Comp. Appeals Bd., supra, 33 Cal. App. 4th at 1613.). “[A]n award for increased compensation due to serious and willful misconduct of an employer under section 4553 must be calculated with reference to every benefit or payment . . . includ[ing] medical treatment payments, medical-legal fees and vocational rehabilitation costs, as well as all indemnity benefit payments.” (Id. at 621.)

If you have any questions or need further information please contact Jonathan S. Vick at (562) 653-3200.