CH2M Hill Site-Safety Decision Provides Valuable Lessons

A recent federal appeals court decision to strike down an OSHA penalty imposed on CH2M Hill is welcome news to architects and engineers who feel OSHA has been trying to hold them responsible for jobsite safety. While the court made it clear that its decision was based on the facts of that particular case, the decision hints that OSHA needs to reconsider its efforts to cite architects and engineers under construction site safety standards.

According to Dick Crowell, XL Design Professional’s senior vice-president and co-author of XL Design Professional’s Contract Guide, the decision underscores the primary importance of contracts.

"The court even scolded OSHA for ignoring the express language of the contract," he said. "In its opinion, the court said, ‘Contracts represent an agreed upon bargain in which the parties allocate responsibilities based on a variety of factors. . . . To ignore the manner in which the parties distributed the burdens and benefits is contrary to our notion of contract law.’"

In addition, Crowell said, "Architects and engineers must be absolutely sure that their professional services agreement and the contractor’s general conditions place responsibility for the means, methods, techniques, sequences and procedures, as well as jobsite safety, solely and squarely on the contractor."

The decision marked the end of a decade-long legal battle. In 1987, during a construction project on the Milwaukee sewer system, methane gas was discovered. The sewer district directed the lead engineering firm, CH2M Hill, to investigate. Methane was indeed present and CH2M Hill drafted a contract modification that addressed, among other things, the kinds of electrical equipment that could be used in the tunnel. The district reviewed and approved the modification.

In late 1988, methane was again detected in a tunnel and the contractor evacuated its employees, but did not turn off the electrical power. Contrary to its evacuation plan, three contractor supervisors re-entered the tunnel after only 17 minutes. They were killed by an explosion, presumably caused when one of the three attempted to operate a grout pump.

OSHA issued citations to the contractor and CH2M Hill, for "willful violation of the construction standards that apply to employers engaged in construction work."

OSHA’s New Test

The case against CH2M Hill turned on the legal question of whether OSHA’s construction standards apply to professional firms with responsibilities similar to those exercised by CH2M Hill.

From the beginning, CH2M Hill argued these standards did not apply and the initial OSHA administrative law judge agreed. On review, however, the Occupational Safety and Health Review Commission concluded the standards did indeed apply.

The commission announced a new test to determine whether CH2M Hill was substantially engaged in construction — and thus responsible for safety. The test stated that an architectural or engineering firm was engaged in construction work if it:

1. Possessed broad responsibilities in relation to construction activities, including both contractual and de facto authority over the work of the trade contractors; and,

2. Was directly and substantially engaged in activities that were integrally connected with safety issues, notwithstanding contract language expressly disclaiming safety responsibility.

CH2M Hill appealed and the court sent the matter back to the OSHA process. Using that new test, a second administrative law judge found CH2M Hill had violated the regulations and imposed a series of fines, amounting to $200,000.

CH2M Hill believed there were important principles at stake and, instead of paying $200,000 in fines, chose to stand its ground and appeal once again. In the ensuing years, it incurred legal fees estimated at least five times the amount of the fines.

"CH2M Hill took the high road," Crowell said. "They did the professions an enormous service."

The Court Rejects OSHA’s Arguments

CH2M Hill’s resolve paid off. In September 1999, the U.S. Court of Appeals for the Seventh Circuit struck down the fines, saying that, because CH2M Hill’s responsibilities "did not rise to a level that constituted being engaged in construction work, the regulations do not apply to it."

The court said that "even if this ‘new’ test were appropriate, OSHA still fails to establish that CH2M Hill contractually or on a de facto basis exercised direct authority and control over or substantially engaged in activities integrally connected with the safety measures. . . ."

Several professional engineering and architecture associations and societies (including the American Consulting Engineers Council, National Society of Professional Engineers, American Institute of Architects and American Society of Civil Engineers) had urged the court to reject the commission’s new test, claiming it was arbitrary, vague and too broad. The court acknowledged that these views were well supported, but refrained from basing its decision on the appropriateness of the test.

The court pointed out that the commission had previously concluded that a "professional" employer is engaged in construction work only if the employer, either contractually or in actuality, had substantial control over the safety program, had the authority to stop work, or had substantial supervision over actual construction. CH2M Hill did not have any of these powers. The commission, the court said, appeared to have not only departed from the substantial supervision test but also from its own precedents.

The court could have gone further, but chose not to. In fact, it stressed that while the regulations were not applicable to CH2M Hill in this instance, they may apply to some professionals — construction managers, for example — working on construction.

According to Crowell, that’s why an architects’ and engineers’ contractual scope of services and conduct during the construction phase are both so important.

"Field personnel must do nothing to undermine the contract language," he said. "Engineers and architects who step beyond the duties set forth in a professional services agreement and exercise de facto supervision, are likely to be held responsible by OSHA."

CH2M Hill Civil Case

In addition to the OSHA action, a civil case was brought against CH2M Hill by the estates of the three supervisors killed in the blast. According to Wyatt McCallie, General Counsel for CH2M Hill, it was able to tender the defense of that case to the contractor’s general liability insurer and was defended at no cost to CH2M Hill.

"This is why we strongly advise architects and engineers to make sure that the general conditions require that the contractor provide evidence of satisfactory general liability insurance coverage and that the policy names both the owner and the design professional as Additional Insureds," said XL Design Professional’s Dick Crowell. (Policyholders: For more information, refer to XL Design Professional’s Contract Guide or call your agent.)