Last Friday, the United States Court of Appeals for the District of Columbia vacated guidance from the Occupational Safety and Health Administration (OSHA). The guidance, which was issued in the form of a 2015 Memorandum, required farm supply companies selling anhydrous ammonia to--for the first time--comply with a complex safety program designed to protect workers from highly hazardous chemicals.
OSHA is tasked with protecting the health and safety of Americans in the workplace. In 1992, the agency issued a final rule, the Process Safety Management (PSM) Standard, to protect the safety of those who work with hazardous chemicals. The Standard, which was finalized after required notice and comment, requires employers who store and handle hazardous chemicals to follow the PSM program, a complex system of emergency planning and response contingencies, including compliance audits, hazard analysis, safety reviews, and more. From the inception of the rule, “retail facilities,” such as gas stations and agricultural supply dealers were exempt. OSHA believed that retail facilities did not present the same hazards as other workplaces covered by the rule because the chemicals were typically in small value packages or containers, making a release of those chemicals much more unlikely. The definition of an exempt retail establishment was one where “more than half of the income is obtained from direct sales to end users.”
Then in April of 2013 disaster struck. A fertilizer company in West, Texas, exploded, leveling the small town and killing 15 people. The company stored large amounts of anhydrous ammonia, as well as ammonium nitrate. It qualified as an exempt retail establishment not required to follow the PSM program because it sold bulk distributions to farmers and other end users.
After the explosion, President Obama issued an executive order, ordering the Secretary of Labor to identify any changes that needed to be made to the retail exemption to meet the goal of “preventing major chemical accidents.”
In 2015, OSHA issued a memorandum rescinding the "50 percent test" and issuing new guidance providing that exempt retail establishments must be organized to sell merchandise in small quantities to the general public (think Home Depot selling a container of lawn fertilizer).
Because farm supply establishments often sell chemical fertilizers in bulk to farmers directly, they do not qualify as exempt under the new definition. As such, thousands of farm supply outlets were suddenly subject to the PSM program. Consequently, the Agricultural Retailers Association, the Fertilizer Institute, and a number of individual businesses filed an action challenging the new guidance. They argued that the guidance amounted to a new standard that should have been subject to notice and comment procedures.
On Friday, September 23, the United States Court of Appeals for the District of Columbia agreed, ruling that OSHA failed to abide by proper procedural standards and vacating the memorandum.
Specifically, the court ruled that the new definition of retail establishment constituted a new “occupational safety and health standard.” Challenges to such standards may be brought directly to a court of appeals, pursuant to 29 U.S.C. § 655(f). Also, when OSHA issues a new standard, it must adhere to notice and comment procedures set forth in the Occupational Safety and Health Act. OSHA conceded that this was the law, but argued that the new definition was not a new “standard,” merely an interpretation of an existing one.
The court disagreed, finding that the basic function of the new definition was to address a “particular significant risk.” This was the hallmark of a new standard, that it imposed upon employers new and more demanding safety standards. OSHA conceded that the new definition would subject up to 4,800 facilities to new and more demanding substantive safety standards.
Because the new definition was a new standard, the court found that it had jurisdiction to hear the matter. The court then vacated the memorandum, ruling that it was invalid because OSHA had failed to comply with necessary notice and comment procedures.
It is important to note that the decision did not call into question the substance of the new standard. Rather, it held that OSHA must start over. If the agency again attempts to narrow the retail exemption for the PSM Standard, it must follow the notice and comment procedures required by the OSH Act.
Before the court ruling, lawmakers had already blocked implementation of the guidance through a policy rider in the omnibus spending bill in December of 2015. That action was due to expire this week. Lawmakers had also introduced legislation to require OSHA to withdraw the guidance and provide notice and comment rulemaking for any revisions.
We’ll keep you posted as to how OSHA proceeds.
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