Report of the Small Business
Advocacy Review Panel on the Draft Safety and
Health Program Rule
December 18, 1998
CONTENTS
1. INTRODUCTION
2. OSHA's OVERVIEW OF THE PROPOSED SAFETY AND HEALTH PROGRAM RULE
3. APPLICABLE SMALL ENTITY
DEFINITION
4. INDUSTRIES THAT MAY BE
SUBJECT TO THE PROPOSED REGULATIONS
5. SUMMARY OF OSHA'S SMALL
ENTITY OUTREACH
6. SMALL ENTITY
REPRESENTATION
7. SUMMARY OF SER INPUT
8. PANEL DISCUSSION AND
RECOMMENDATIONS
1. INTRODUCTION
his report has been developed by the Small Business Advocacy Review Panel consisting of representatives of the Occupational Safety and Health Administration, the Office of Advocacy of the Small Business Administration, and the Office of Information and Regulatory Affairs of the Office of Management and Budget, for the proposed Safety and Health Program rule that OSHA is currently developing. On October 20, 1998, OSHA’s Small Business Advocacy Panel Chair convened this panel under section 609(b) of the Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA). Section 609(b) requires the convening of a review panel prior to the publication of any Initial Regulatory Flexibility Analysis that an agency may be required to prepare under the RFA. In addition to the chair, Marthe Kent, the panel consists of the Associate Solicitor for Occupational Safety and Health, Joseph Woodward; the senior OSHA economist for this rule, Robert Burt; the Acting Administrator of the Office of Information and Regulatory Affairs within the Office of Management and Budget, Don Arbuckle; and the Chief Counsel for Advocacy of the Small Business Administration, Jere Glover.
This report provides background information on the proposed rule being developed and the types of small entities that would be subject to the proposed rule, describes the Panel’s efforts to obtain the advice and recommendations of representatives of those small entities, summarizes the comments that have been received to date from these representatives, and presents the findings and recommendations of the Panel. The complete written comments of the small entity representatives are attached as Appendix A of this report.
Section 609(b) of the RFA directs the review panel to report on the comments of small entity representatives and make findings about issues related to certain elements of the Initial Regulatory Flexibility Analysis (IRFA), as outlined in Section 603 of the RFA:
This Panel Report will be provided to the Assistant Secretary for OSHA, and OSHA must include this report in the rulemaking record. OSHA may also, as appropriate, modify the proposed rule, the Initial Regulatory Flexibility Analysis, or the decision as to whether an Initial Regulatory Flexibility Analysis is needed, based on the Panel’s recommendations.
It is important to note that the Panel’s findings and discussions are based on the information about the safety and health program rule available at the time this report was drafted. OSHA is continuing to conduct analyses relevant to the proposed rule, and additional information may be developed or obtained during the remainder of the rule development process. The Panel makes its report while development of the proposed rule is still underway, and its report should be considered in that light. At the same time, the report provides the Panel and OSHA with an opportunity to identify and explore potential ways of shaping the proposed rule to minimize the burden of the rule on small entities while achieving the rule’s statutory purposes (i.e., protection of the safety and health of workers on the job). Any options the Panel identifies for reducing the rule’s regulatory impact on small entities may require further analysis and/or data collection to ensure that the options are practicable, enforceable, and consistent with the Occupational Safety and Health Act.
Table 1 provides, for background purposes, OSHA’s summary of its reasons for developing the draft safety and health program rule.
Table 1. OSHA'S Reasons for Developing the Draft Safety and Health Programs Rule
See Viewing Utilities if necessary.
In developing its draft proposed regulation, OSHA has relied on its substantial experience with safety and health programs and those of the states, private firms, trade associations, and insurance companies during the 1980s and 1990s. OSHA believes that those experiences clearly show that: 1) various entities have required, implemented, or endorsed safety and health programs as an effective way to reduce occupational injuries, illnesses and fatalities; 2) those programs achieve that objective; 3) OSHA’s proposal is consistent with these other efforts; and 4) the proposal is also firmly grounded in the OSH Act and in other OSHA policies and experiences. OSHA believes the main lesson to be learned from these experiences is that employers with effective, well-managed safety and health programs achieve a higher level of compliance with OSHA standards and the General Duty Clause and have substantially lower injury, illness and fatality rates and lower workers’ compensation costs than is the case for employers without such programs. A safety and health regulation could generalize this experience to all employers and employees in covered workplaces.
2. OSHA’s OVERVIEW OF THE PROPOSED SAFETY AND HEALTH PROGRAM RULE
To ensure that the proposed regulation could be applied to all employers and workplaces in the general industry and maritime sectors, OSHA has developed a performance-oriented rule. The proposed rule would require that employers:
Each of these requirements is described in the proposed rule in a plain language, question and answer format. Each of the basic requirements is applicable to all kinds of employers. Each provision is written broadly to allow employers flexibility in its application so that compliance can differ in small and large firms, in technologically simple and complex environments, and in low and high hazard firms. To ensure that this flexible, performance-oriented approach is maintained in the actual enforcement of the rule, OSHA has developed a draft enforcement policy designed to assure that penalties under this rule are limited to cases where employers systematically fail to identify and control significant hazards. In this context, a systematic failure means that employees are exposed to a pattern of serious hazards that are inadequately controlled or are not controlled. Penalties will not be issued in situations in which the employer has failed to carry out purely procedural requirements but has nevertheless successfully controlled the hazards in the workplace. OSHA generally will not use this safety and health program rule to penalize employers twice for the same offense. OSHA will only penalize the employer for a failure to comply with an underlying requirement in a particular standard or for failure to comply with the General Duty Clause unless the employer has also systematically failed to identify and control significant hazards, in which case penalties may ne issues under this regulation as well.
3. APPLICABLE SMALL ENTITY DEFINITION
To define small entities, OSHA used, to the extent possible, the Small Business Administration (SBA) industry-specific criteria published in 13 CFR Section 121. Because these definitions apply to 4-digit SIC code industries and OSHA did not conduct its analysis at this level of detail, and because some industry classifications use small business definitions requiring data not readily available from general data sources (such as kilowatt hours of electricity produced), OSHA instead used the definitions of small entities for industry divisions, except in cases where there was no division definition; in such cases, OSHA used the industry (2-digit SIC code) definition of small entity.
4. INDUSTRIES THAT MAY BE SUBJECT TO THE PROPOSED REGULATION
The proposed rule would apply to all employers in general industry, shipyard employment, marine terminals, and longshoring operations. In terms of standard industrial classification codes, this means that the standard would apply to certain small entities in SICs 07, agricultural services; 08, forestry; 09, fisheries; 14, oil and gas well drilling, and SICs 20 to 99, with the exception of some operations in SIC 45, railroads, and SIC 44, water transportation (other than longshoring and marine terminals). The proposed rule would also apply to small public entities in State-plan states; approximately 50% of all state and local employees work in State-plan states and would be covered by the proposed rule.
The proposed rule would cover 4.16 million establishments operated by 3.93 million entities defined as small by the SBA. About 72.7 percent of the total number of affected establishments are operated by small entities. The proposed rule covers 4.08 million establishments operated by 3.93 million very small entities, defined for analytical purposes as entities employing fewer than 20 workers. About 71.3 percent of the affected establishments are operated by these very small firms. Entities meeting the SBA small business criteria have 32 million employees and account for 32.24% of all employees within the scope of this rule. Very small entities (i.e., entities with fewer than 20 employees) have 16 million employees and account for 16.52% of all employees within the scope of the rule.
5. SUMMARY OF OSHA’s SMALL ENTITY OUTREACH
General Outreach
Even before SBREFA’s enactment, the Panel notes that OSHA had conducted extensive outreach about this rule to employer and employee organizations, including organizations that represent small employers, in the affected industries. In October of 1995, OSHA held the first series of stakeholder meetings to discuss preliminary ideas for a safety and health program rule and the significant issues raised by such a rule. This first session was a two-day meeting with more than 50 participants. (Notes summarizing the stakeholder meetings, and a transcript of the first series of meetings, are available in the docket for this rulemaking (Docket S-027).) As a result of the input received at this meeting and the interest expressed by stakeholders, OSHA decided to hold additional meetings at regular intervals during the development of the regulation to assure that all interested persons had an opportunity to participate in the development of the safety and health program rule. For example, during November and December of 1995, OSHA staff met with representatives from organizations such as the National Plumbing, Heating, and Cooling Contractors Association; the Synthetic Organic Chemical Manufacturers Association; the National Association of Manufacturers; the U.S. Chamber of Commerce; the American Petroleum Institute; the Chemical Manufacturers Association; Organization Resources Counselors; the American Farming Association; the American Trucking Association; and the Industrial Safety Equipment Association. These meetings were informal two-way discussions of the issues and often involved the sharing of information on best practices.
On May 6, 1996, OSHA sent stakeholders a summary of the provisions then under consideration for a program rule for general industry to serve as a focus for discussions at upcoming stakeholders’ meetings. By this time, approximately 200 stakeholders had expressed an interest in participating in the development of the rule. In response to this interest, OSHA held four half-day stakeholder meetings on June 5-6, 1996. These meetings provided invaluable input to the Agency in formulating the requirements of the rule and minimizing its impacts on small businesses.
On November 15, 1996, OSHA sent a draft of the regulatory text of the proposed safety and health program rule to stakeholders in preparation for discussions at additional stakeholder meetings. Again, because so many stakeholders expressed interest in participating in the development of the proposal, OSHA scheduled six half-day stakeholder meetings for December 10-12, 1996. At these meetings, OSHA discussed its responses to ideas generated during the earlier stakeholder meetings and described its thinking on the provisions of the rule. Again, the discussion advanced the development of the proposal substantially.
The Panel is keenly aware of the potential impact that a safety and health program regulation may have on small businesses; many small businesses and organizations representing small businesses attended the stakeholder meetings, and staff from the Office of Advocacy of the Small Business Administration were also present at several of the stakeholder meetings. To ensure that small businesses throughout the country had an opportunity to be heard and to tell OSHA about their experiences, OSHA joined with the Small Business Administration to sponsor regional meetings with small business employers in Atlanta, GA, Philadelphia, PA, Columbus, OH, and Portland, OR. These meetings, held in the Summer of 1997, gathered input on the special problems of small businesses and their successes with safety and health programs in anticipation of the formal convening of the panel. Each meeting was attended by 15-25 small business owners, representatives, and trade association representatives. The Panel understands that these meetings were particularly useful to OSHA because the Agency was able to gain insights about small business at the grass roots level. The input also helped OSHA advance the rulemaking to the point where the Panel could commence. Summaries of these stakeholder meetings will be entered into the docket.
In December of 1997, the Massachusetts Coalition on Occupational Safety and Health arranged a meeting to enable OSHA to meet with small business employees to discuss the need for a safety and health program rule and hear about their experiences on the front line. Hearing from workers from small firms provided a unique perspective on the methods used by small business employers to identify hazards as well as the pressures often faced by small business and their employees.
The stakeholder meetings featured many frank and open exchanges of opinion, and written summaries have been entered into the docket for most of these meetings. For example, some stakeholders expressed support for a rule, while others opposed a regulatory approach. Similarly, some stakeholders favored the inclusion of all small business within the scope of the rule, while others felt that some exemption of small businesses would be appropriate. Two critical issues at these stakeholder meetings on which there was wide agreement were the importance of a consistent and reasonable enforcement policy and of good outreach programs.
The SBREFA Panel
On October 20, 1998, the OSHA SBREFA Panel chair convened the Panel for this rulemaking. The Panel provided small entity representatives with initial drafts of the rule, a summary of the rule, the Initial Regulatory Flexibility Analysis, a summary of the benefits and costs of the rule as it affected firms in the small entity representative’s industry, OSHA’s draft enforcement policy for the rule, and a list of issues of interest to panel members. The Panel held teleconferences with the SERs on November 12th and 13th, in which most of the small entity representatives participated and which allowed for interactive discussion. After these teleconferences, the Panel received the written comments of small entity representatives; these comments, and the Panel’s responses to them, form the principal basis for the Panel’s report.
6. SMALL ENTITY REPRESENTATIVES
In consultation with the Office of Advocacy of the Small Business Administration, OSHA invited 18 small entity representatives (SERs) to participate in the panel process. Table 1 shows the names, affiliations, and industries of the SERs that chose to participate in the process, and indicates whether a particular SER submitted written comments. At least 5 of the SERS were participants in either OSHA’s VPP or SHARP programs.
| Name(s) | Affiliation | Industry (SIC Number in parentheses) |
Written Comments Provided |
|---|---|---|---|
| Nancy Klim | D&E Industries, Inc. | Steel Foundries (SIC 3325) | No |
| Scott Rankin | Vulcan Spring And Manufacturing Co. | Reconstituted Wood Products (SIC 2493) | Yes |
| Clyde Stryker | Spirit Communications | Computer Systems (SIC 5045) |
No |
| Sam Brooks | S. Brooks and Associates | Temporary Services (SIC 7363) | Yes |
| Andy Hathaway | Jones Stevedoring | Stevedoring (SIC 4491) | No |
| Laurie Anderson, Kenneth Schmidt | Anchor Manufacturing | Printing Equipment Cleaners (SIC 2893) | Yes |
| Steve Watkins | Boda Manufacturing | Power Generators (SIC 3621) | Yes |
| Steve Hays | G.H. Stenner Company, Inc. | Chemical Control Pumps (SIC 3589) | No |
| Frank Copple | T&G Industrial Equipment Inc. | Wholesale Paint Spraybooths, Conveyors, Dryers and Ovens (SIC 5084) | Yes |
| Mark Leguillon | Shinco Silicones Inc. | Chemicals (SIC 28) | Yes |
| Brian Landon | Landon’s Carwash, Laundry, and Paint Touch Up | Carwash and Other Services (SICs 72 and 75) | Yes |
| Jim Balmain | Smith’s Bakery | Retail Bakery (SIC | Yes |
| Katherine Gekker | The Huffman Press | Printing (SIC 27) | Yes |
| Mike Fagel | Aurora Packing Company | Food Products (SIC 20) | No |
| Ron Lyons | Stewart Brothers Paint Company | Paints (SIC 2851) | Yes |
| Peter Myer | Sequins International | Sequins (SIC 23) | No |
| Kevin Adkins | City of Goldsboro | Municipality | No |
7. SUMMARY OF SER INPUT
This summary reflects both the oral comments expressed by the SERs in two teleconferences and the written views submitted by them to the Panel. The complete text of the written comments has been provided as Appendix A to this document, and will be submitted to the docket as part of this report.
Costs and Impacts
Total Costs
Almost all of the SERs felt that the costs of compliance
projected by OSHA were underestimated. Several stated that
OSHA’s costs might well be underestimated by a factor of ten
to twenty. Some SERs provided estimates of the man-hours or costs
the proposed rule would require to implement in their firms. Mr.
Lyons estimated that program setup would require 72 to 96 hours
to comply with the core elements of the rule and $18,000 to
$20,000 to pay for hazard control. Mr. Watkins estimated that his
firm had spent 300 man-hours developing and implementing its
existing safety and health plan and had incurred hazard control
costs of approximately $5,000. Mr. Watkins estimated that the
annualized costs for a 6- to 10-person firm in his industry would
be approximately $1,350 per year. Mr. Watkins felt that
OSHA’s estimate of 1 to 3 hazards discovered in the first
year was in line with his firm’s experience, but that the
hazards had been much more expensive to control than OSHA
estimated. Mr. Copple estimated that the program would cost
around $1,000 to set up for a firm with fewer than 10 persons.
Mr. Leguillion estimated that his firm’s program had
required 180 hours to establish and $1,000 for hazard control.
Several SERs believe that the costs for certain specific elements, in particular, were underestimated (see discussion below). Some SERs with fewer than ten employees also felt that OSHA had failed to recognize the costs of recordkeeping for facilities such as theirs. These SERs felt that, even though the draft does not specifically require a written program, they would need to have a written program to demonstrate compliance during an inspection. Some SERs also emphasized that training costs had been underestimated because all of the training required by existing OSHA requirements would far exceed OSHA’s training cost estimates. Mr. Brooks stated that OSHA had failed to account for lost labor when it estimated training costs.
Training
Many SERs were particularly concerned with training costs. One
SER has found that " it is the training that takes time,
effort, and costs." Another pointed out that his program
required 55 hours of employee training per employee per year, and
felt that small firms would not have the resources for this kind
of effort. Mr. Landon noted that the many hats worn by employees
in very small businesses would mean that a lot of training would
be required per employee. Mr. Brooks, an SER in the temporary
employment business, emphasized the special training problems of
temporary employees, who would need to work in many different
work sites.
Special Costs for Small Businesses
Some SERs also believe that OSHA has not adequately considered
that almost all of the work in setting up the program would need
to be performed by the manager of a small firm, whose time has a
special value because the manager would be unable to work on the
fundamental business of the small firm while he or she was
setting up the program. Some SERs felt that OSHA had generally
not appropriately accounted for the opportunity costs of
employees’ (as well as the manager’s) time. Some SERs
questioned whether OSHA’s belief that clerical time would be
used to carry out some program-related activities was accurate,
and expressed concern that, in small businesses, the
manager’s time would be needed instead.
Cost of Outside Assistance
Many SERs felt that small businesses would need consultants in
order to implement their programs and that OSHA had not fully
accounted for such costs. For example, Mr. Lyons felt that a
consultant costing $4,000 to $5,000 would be necessary to help a
firm like his set up this program. Mr. Balmain estimated the
necessary consulting costs at approximately $3,000. Another SER
reported using a program that cost $2,500 and provided the buyer
with two workplace inspections and 6 employee seminars per year.
This SER found this program particularly useful because the
training was industry specific. On the other hand, Mr. Copple
didn’t think that his firm would need outside consultants to
achieve compliance with the rule. All of the SERs whose programs
had been established with the aid of OSHA or state consultation
programs felt that this assisstance had been essential in setting
up their programs. Most SERs felt that some form of outside
assistance would be necessary, but hoped that OSHA, industry
associations, or states could provide the necessary assistance.
Cost Pass-Through
In addition to feeling that costs were higher than OSHA had
estimated, many SERs felt that they would be unlikely to be able
to pass on their costs to consumers. One SER pointed out that
prices rise and fall, and stated that a rise in price would
simply result in a loss of business. Another SER said it is the
big guy and not the little guy that can absorb costs. In the view
of most SERs, competition with larger businesses and the overall
competitive framework of their industries would prevent
pass-through from happening.
Benefits as an Offset to Costs
Some SERs pointed out, however, that the benefits from the
program would serve to offset the costs. Mr. Watkins stated that
his program had not only improved safety and health but also had
resulted in improvements in productivity and operations. One SER
argued that costs should not be a concern where employee safety
is at stake.
Benefits and Effectiveness of the Rule
Some SERs stated that the benefits of the rule would be low for
smaller firms. Mr. Landon pointed out that, based on BLS data,
businesses with fewer than ten employees in industries other than
agriculture and construction had injury rates of 1.9 per 100
fulltime workers, as compared to 7.5 per 100 fulltime workers for
private industry overall. Mr. Landon also pointed out that very
small businesses have employers who work alongside their
employees, share the same tasks, and have strong personal
relationships with their employees that contribute to health and
safety. Ms. Gekker also pointed out that, as a small business
manager, she walks the floor of her company every day. She also
stated that none of the four serious accidents that had occurred
in her business would have been prevented by this rule. Mr.
Brooks felt that he had seen no measurable results from his
existing safety and health program. Mr. Landon, as well as
several other SERs, argued that the rule would accomplish little
because most small businesses lack the training to identify and
mitigate hazards. Only education, consultation, and outreach
could in fact affect small businesses, in the opinion of these
SERs. Ms. Gekker felt that there was no serious safety and health
problem to be addressed in many small businesses. On the other
hand, some SERs reported that they had achieved significant
benefits from their own safety and health programs. One SER
reported cutting his accident and illness rate by 79% as a result
of his program. Another SER reported increasing his firm’s
productivity by 63% and having gone for two years without an
accident.
Litigation and Labor/Management Relations
Mr. Balmain was concerned that OSHA had omitted the costs of, and
problems potentially resulting from, litigation, liability and
labor/management issues. Mr. Balmain argued that the draft rule
would be used by plaintiffs to establish a "standard of
care" and would be used by unions and employees to
"harass, threaten, sue, organize, and/or extort cash from
employers." Mr. Balmain was also concerned that employees
might cite the rule and the absence of adequate training in
"wrongful discharge" and other suits against their
employers.
Number of Small Entities
In response to a request for comment on this topic, Ms. Gekker stated that there were 54,000 companies classified as commercial printing establishments and that approximately 80% of these employ 20 or fewer employees. No other SER commented on this topic.
Description of Projected Requirements and the Expertise Required to Meet Them
Clarity of the Rule
Many SERs found the rule clear. However, even some of those who
found the rule clear were concerned that the rule’s
performance language was "open to many interpretations"
(Mr. Lyons). Other SERs were concerned about the language of the
rule, however. For example, Mr. Landon found the language of the
rule "vague" and the implications for enforcement
"troubling and scary." Mr. Balmain referred to the rule
as being full of "weasel words" and gave as examples of
unclear provisions the requirement to demonstrate the
effectiveness of existing programs and the requirement to
"systematically identify and assess hazards." Mr.
Balmain concluded that the rule could not be clarified to
eliminate misunderstandings: "even if the final rule...went
on for a hundred pages, there still would be ambiguities on every
page." Another SER asked how the term "near miss"
was to be defined. Some SERs argued that cross- references to
other rules and laws are confusing for small employers, and that
the rule itself should provide explanations rather than
cross-references to National Labor Relations Board (NLRB)
requirements, the General Duty Clause, and other OSHA standards.
Many SERs felt that the General Duty Clause was a key to
understanding the requirements of the rule but felt that most
small businesses would have no idea what the General Duty Clause
required. Some SERs were unclear on the relationship between the
requirements of the safety and health program and other OSHA
requirements, particularly the requirements of other program
rules such as bloodborne pathogens and hazard communication.
Need for Special Expertise
Almost all SERs felt that outside expertise would be necessary to
achieve compliance, but some felt the program could be
implemented without outside assistance. Ms. Gekker stated that
" most small business owners have neither the background or
the skill to develop a comprehensive safety and health
plan." She supported this point by recalling the
difficulties and assistance she had needed to implement an
OSHA-required hazard communication program. All SERs that
imlemented their program with the assistance of OSHA’s
(free) consultation service or its equivalent felt that such
assistance would be essential to any small business trying to
implement the rule.
Value of Recordkeeping Exemption
Some SERs also felt that the recordkeeping exemption would serve
no useful purpose because small entities with fewer than ten
employees would feel the need to keep records for compliance
purposes anyway.
Clerical Time
Some SERs questioned whether OSHA’s belief that clerical
time would be used to carry out some program-related activities
was accurate, and expressed concern that the manager’s time
would be needed instead.
Duplicative and Overlapping Rules
Some SERs wondered how this rule might overlap with existing OSHA program requirements, such as the bloodborne pathogens rule. Mr. Balmain argued that everything important in the rule was already required by the General Duty Clause and therefore the rule was unnecessary. Mr. Balmain also questioned how employee participation would interact with NLRB requirements and how industry associations could provide adequate support without being subject to the Sherman Anti-Trust Act. One SER felt that health and safety was already adequately covered by the overlapping combination of State OSHA rules, EPA rules, local fire department rules, and the county’s hazardous materials program. One SER felt that there would be an overlap between the rule and state workers’ compensation rules.
Regulatory Alternatives
Nonregulatory Approaches Preferred
Many, if not most, SERs felt that a rule would neither be a
useful nor necessary way of implementing safety and health
programs. Several SERs pointed out that OSHA’s limited
enforcement resources would be inadequate to enforce the rule in
small businesses. SERs suggested a variety of nonregulatory
approaches. Many SERs who had made use of OSHA’s
consultation services had high praise for that program. They
urged that OSHA publicize and expand this program as an
alternative to issuing a safety and health program rule. Some
SERs urged OSHA to make more use of industry associations and the
resources of these associations. For example, Mr. Rankin urged a
general shift to consultation through the use of enforcement
officers to provide consultation, with no fines for violations
that the employer corrects within a reasonable time, and
increased cooperation between industry association consultation
services and OSHA consultation services.
Testing the Rule on a Subpopulation
Mr. Balmain suggested that the rule should first be tested on a
sample population of employers to see if it performs as OSHA says
it will. If it does, he suggested that OSHA then promulgate it
more widely. In discussion, the possibility of trying the rule in
a single industry sector as a pilot project was also suggested.
Exemptions to Coverage of the Rule
If it is decided to issue a rule, SERs suggested a variety of
exemptions to the rule’s coverage. Mr. Landon believes that
firms with fewer than 10 employees have lower injury rates and
higher costs and should therefore be exempted from the rule on
these grounds. Mr. Balmain urged OSHA to consider exempting
either all firms in low hazard industries or all small businesses
in low hazard industries. Some SERs suggested an exemption for
firms that were participants in the VPP or SHARP programs. Ms.
Gekker pointed out that the nature of the hazards in an industry
may change over time. In her industry, commercial printing, work
has shifted from mechanical to computer methods, and even the
remaining heavy press equipment is safer because it is computer
controlled. Other SERs suggested establishment-specific
approaches to exemption. For example, Mr. Schmidt suggested that
firms with outstanding records should be exempted from the rule.
Mr. Schmidt felt that outstanding firms already have a culture in
place which emphasizes safety and health. On the other hand, Mr.
Lyons argued that firms with good records should not be exempted
from the rule because "safety and health are a day to day
function of all business and should remain that way."
Mr. Copple recommended that the recordkeeping exemptions for firms with fewer than 10 persons should apply only to firms that both had fewer than 10 employees and were in low hazard industries.
Alternatives with Respect to Enforcement
Some SERs also offered suggestions with respect to the
Agency’s enforcement policy. Mr. Copple and Mr. Leguillon
suggested that there should be no penalties if the employer
corrected the problem within some time limit. Mr. Copple
suggested that the rule be enforced entirely at the State level.
Mr. Copple felt that the enforcement policy would be less
confusing if it simply stated "what...the result [would be]
if an employer does not comply." Some SERs felt the
enforcement policy should be part of the rule. Many SERs felt
that OSHA must carefully train its compliance officers in its new
approach and new enforcement policy. Some SERs remain concerned
about the possibility of "double jeopardy," i.e., that
the rule will result in two penalties for the same violation.
Importance of Outreach
Most SERs felt that a rule could only work in association with a
strong outreach effort, with industry-specific and even
firm-specific aid on how to implement the program. Several SERs
felt that training videos and/or online help were an essential
part of any outreach effort.
8. PANEL DISCUSSIONS AND RECOMMENDATIONS
Costs and Impacts
Underestimation of Costs
The Panel is concerned that many SERs felt that OSHA had
underestimated costs. Some suggested that costs had been
underestimated by a factor of ten to twenty or more. The Panel
finds that OSHA appears to have underestimated the costs of the
rule. The Panel recommends that OSHA review its cost estimates in
light of these comments, with specific attention to those
comments that offered alternative cost and hour estimates or
explanations of why they believed the costs to be underestimated.
This review, with a presentation of the estimates provided by the
SERs, should be included as part of a revised IRFA. If OSHA
concludes that the costs were not significantly underestimated,
OSHA should consider alternative approaches to presenting the
costs so that they can be more readily understood by small
businesses, or should explain the rule more clearly so that small
businesses will not misunderstand the intended requirements.
Need for Clarity and Transparency
The Panel recognizes that many assumptions underlie OSHA’s
cost and benefits estimates, including the amount of time needed
to implement the rule’s requirements; the need for, and cost
and availability of, consultants; when and how entities will
incur regulatory costs; and whether presenting the costs as
national or firm-specific costs best conveys the necessary
information to the public. The Panel notes that the small entity
representatives had difficulty using the average annualized cost
estimates for a firm in their size-class and industry that OSHA
developed and presented to them.
In the interest of transparency and full disclosure, the Panel recommends that OSHA clearly present, in the preamble to any proposed rule, information on the key assumptions and estimates underlying the estimated program-related costs, hazard control costs, and benefits associated with the rule. OSHA should also present, for both the program-related and hazard control costs and the benefits of the rule, information on the time stream over which these benefits and costs would be incurred, highlight initial costs, and seek comment on the reasonableness of these estimates and assumptions in the context of individual firms. In addition, OSHA should present several firm-specific examples showing the time stream of costs for the hazard control and program-related costs. The Panel recommends that the Preliminary Economic Analysis contain a description of the methodology and the assumptions used to develop OSHA’s estimates.
Costs for Entities Already in Compliance
The Panel noted that the economic analysis does not ascribe any
costs to an entity with a health and safety program now in place.
Comments received during the panel process suggest that some
small entities may seek legal assistance to evaluate whether
their existing programs meet the federal mandate. The Panel
recommends that OSHA add to its cost analysis the cost of
evaluating compliance by entities with existing health and safety
programs, and seek comment on the need for legal assistance and
the cost of such assistance when conducting such an evaluation.
Treatment of Hazard Control Costs
The Panel recognizes that all of the benefits associated with the
proposed rule arise from illness, injury, and fatality reductions
resulting from hazard control steps taken as a result of a health
and safety inspection program, i. e., the hazard identification
activities that would be required by the rule. To the degree that
benefits arise from the rule, so too do hazard control costs. The
Panel recommends that descriptions of the rule’s effects
present both the costs of compliance for the health and safety
program and the costs of hazard control. The Panel also
recommends that presentations of the national benefits and costs
clearly include the hazard control costs as part of the full
effects of the rule.
Effectiveness of State Program Rules
The Panel notes the OSHA bases its benefits analysis in part on
its estimates of the success of State programs that contain
requirements similar to those in the proposed rule in reducing
the incidence of job-related illness and injuries. The Panel
recommends that OSHA include more details of this analysis to
justify this preliminary conclusion in the face of other evidence
that seems contradictory. For example, Washington state has
enforced comprehensive health and safety regulations for two
decades, but over the past decade, the rate of injuries and
illnesses reported in that state remains between 20 and 40
percent higher than the national average. Similarly, over the
past decade, Minnesota’s incidence rates fell below the
national average, but in the two years after implementation of
the state’s health and safety regulations, the state’s
rates have exceeded the national average. The Panel also notes
that illness and injury incidence rates vary from year to year
and that a similar pattern of year-to-year variations arises in
states with health and safety programs and in states without
them. The Panel recommends that OSHA more clearly display the
basis for its preliminary conclusion that state health and safety
programs are effective in reducing job-related injuries and
illnesses.
Need for Outside Consulting Services
The Panel recommends that OSHA consider whether the Agency’s
analysis has underestimated the need for help from outside
consultants and that OSHA examine the necessity for, cost, and
availability of consultant services.
Need for Recordkeeping
The Panel recommends that OSHA consider the possibility that even
firms not required to keep records will nevertheless keep such
records as a result of this regulation.
Cost Pass-Through
The Panel recommends that OSHA reconsider the extent to which
small firms can pass along any price increases to consumers or
would suffer feasibility problems if such costs could not be
passed along.
Injury and Illness Rates in Small Entities
The Panel noted that BLS studies and data indicate that injury
and illnesses rates in small entities (with 1 to 10 employees)
are only 40 percent of the national average, a finding that holds
for private industry as a whole and for each of the seven major
industrial sectors. These data suggest potential
cost-efficiencies associated with targeting regulatory proposals
at large employers and reduced requirements at small employers.
Other studies suggest different conclusions.
Because information on injuries stands at the heart of OSHA’s analysis of regulatory alternatives, the Panel recommends that OSHA display the information it has or can obtain that compares injury and illness rates and death rates by entity size, and that OSHA present other empirical data it may have collected in a manner that clearly establishes any potential underreporting of injuries and illnesses by small entities. The Panel recognizes that the current OSHA estimates differ from the BLS data and therefore that the use of these estimates must be strongly supported by relevant data.
Litigation and Employee/Employer Relations
One SER expressed concern that OSHA had not considered the
possibility of increased litigation and employee/employer
relations problems. OSHA’s experience suggests that
increased employee participation, such as the draft rule would
provide, decreases labor management problems because a
two-way communication channel is in place. OSHA also does not
believe that the rule will increase litigation; in fact, by
reducing the number of unidentified hazards and non-compliances,
it should reduce litigation. However, the Panel recognizes that
the issue of increased litigation risk, including employers’
perception of such risk, deserves further review and recommends
that OSHA describe the issue in the preamble and solicit comment
on it.
Number of Small Entities
The Panel recommends that OSHA solicit comment on whether OSHA’s approach may have caused the Agency to incorrectly estimate impacts on small entities in those cases where the SBA small entity definition differs from that of the industry division.
Description of Proposed Requirements
As noted above, the Panel recommends that OSHA consider the extent to which outside consultants will be necessary for small firms to comply with the rule.
The Panel also recommends that OSHA evaluate, and clearly state as part of the IRFA, the levels of expertise needed for compliance with each requirement, and the possible role of clerical personnel in carrying out the activities required by the rule. The IRFA’s discussion of the role of clerical personnel should consider the situation of very small businesses that may not have any clerical personnel.
The Panel also recommends that OSHA consider suggestions and solicit comment on the possibility of providing guidance that contains all cross-references in the rule and explains such concepts as the General Duty Clause so that small firms can understand these issues without having to go to other sources. The Panel also recommends that the proposed regulatory document provide a plain language description of the General Duty Clause and that the preamble provide further explanation and solicit comment on the rule’s description of that clause.
The Panel recommends that OSHA solicit comment on whether there should be a checklist for the key provisions of the hazard identification requirement, the content of that checklist, and whether that checklist should be included in the regulatory document.
The Panel finds that outreach will be critical to the success of any regulatory or nonregulatory alternatives. The Panel recommends that OSHA further consider the forms of outreach that will be necessary and that OSHA solicit comment on the most useful types of outreach and guidance. The Panel recommends that the compliance guides include example programs and be as specific as possible. OSHA should specifically solicit comment on the need for industry-specific guidance.
The Panel finds that there is concern about OSHA’s enforcement policy for the rule and agrees that this is a legitimate concern. The Panel recommends that OSHA clearly explain its draft enforcement policy in its regulatory document and solicit comment on the content of the enforcement policy and its possible inclusion in the regulatory document.
Duplicative and Overlapping Rules
The Panel recommends that OSHA clarify in its preamble the answers to the questions raised by some SERs concerning overlap with other OSHA rules, with the existing requirements of the General Duty Clause, and with NLRB requirements.
Regulatory Alternatives
The Panel recommends that OSHA analyze and solicit comment on the following alternative approaches, giving special attention and consideration to alternative 4, Targeted regulation based on industry risk data.
1. Non-regulatory guidance
2. A phased approach to the regulation
3. Exempt all small firms
4. Targeted regulation based on industry risk data
5. Targeted regulation based on firm-specific risk data
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