Attorney-Client Privilege in OSHA Compliance Self-Audits

Attorney-Client Privilege in OSHA Compliance Self-Audits

In the last six years, the U.S. Occupational Safety and Health Administration (OSHA) has substantially increased its citation of willful and repeat violations and initiated its aggressive “Severe Violator Program.” As a result, employers’ self-auditing efforts—which are designed to identify and address compliance issues before OSHA does—have become increasingly important. Unfortunately, OSHA has heightened the risk of self-auditing by more frequently seeking audit results during inspections. When the employer has been unwilling to voluntarily produce these materials, OSHA has not hesitated to issue a subpoena.

The most valuable tool now available to employers in their efforts to resist OSHA’s demands for audit materials is the attorney-client privilege. To appreciate the value of the privilege, it is important to consider OSHA’s position on self-auditing. In 2000, when OSHA adopted its policy on employer self-audits, it recognized that auditing is a worthwhile activity and represented that OSHA would “not use such reports as a means of identifying hazards upon which to focus inspection activity.”

Under the agency’s current leadership, however, OSHA regularly seeks self-audit results. Arguments by employers that the agency should be bound by its 2000 policy have produced mixed results. In Solis v. Grinnell Mut. Reinsurance (2011), a federal judge rejected an argument to withhold audit materials against OSHA subpoenas based on the agency’s 2000 policy. In a more recent federal court decision, Solis v. Grede Wisconsin Subsidiaries (2013), a judge found the 2000 policy could have binding significance. The employer, faced with a subpoena to produce audits, argued that the policy created a reasonable expectation that OSHA would not seek that documentation in an effort to identify subjects of examination and, therefore, that the subpoena constituted an unlawful search under the Fourth Amendment. The court concluded the agency could only require the production of audits once it identified other independent evidence of a safety hazard.

Despite the Grede decision, however, OSHA continues to insist that it is not bound by its own policy. Accordingly, employers are well advised to consider the value of legal privileges in protecting audits.

Courts such as the U.S. Court of Appeals for the Third Circuit, in Martin v. Bally’s Park Place Hotel (2011), have held that audit materials can be protected “attorney work product” when created “in anticipation of litigation,” including in response to OSHA inspections. However, because periodic auditing is not performed in response to some lawsuit or administrative investigation, work product protection is rarely sufficient.

The attorney-client privilege, on the other hand, can be an effective tool for protecting periodic compliance audits. If the audit is properly structured, particularly regarding the role of counsel and consultants, assertion of the privilege will often succeed. According to the U.S. Supreme Court, the attorney-client privilege applies to “[c]onfidential disclosures by a client to an attorney made in order to obtain legal assistance . . .” Fisher v. United States (1976). More specifically, the privilege applies to any communication that satisfies the following elements: it must be (1) a communication (2) made between privileged persons (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client.

Some of the arguments OSHA makes claiming that the privilege does not apply to audits include contentions that audits provide business advice rather than legal advice, or that audits are shared with individuals not necessary to the rendering of legal advice. The importance of assuring that an audit constitutes legal, rather than business, advice is illustrated by a 2012 federal court decision, Solis v. Milk Specialties. OSHA subpoenaed documents prepared by the company’s environmental health and safety vice president for in-house counsel concerning recommended fire safety compliance efforts.

After the company refused to comply with the subpoena based upon the attorney-client privilege, OSHA sought a federal court order compelling compliance. The court ordered production of the report, finding the privilege inapplicable because the purpose of the communications was to provide “business advice” rather than “legal advice.” The court explained that it was the burden of the employer asserting privilege to show that the work was performed to produce legal advice. In finding the employer failed to make this showing, the court emphasized that “[c]arrying that burden is more difficult in the context of in-house counsel because counsel is often involved in business matters as well as legal.”

Another challenge for employers in utilizing the privilege is the impact of the use of consultants. In Secretary of Labor v. Delek Refining (2011), the Occupational Safety and Health Review Commission considered the question of the “application of the attorney-client privilege to a document prepared by a third party” in connection with a self-assessment. The case concerned a refinery explosion that led to citations for process safety management (PSM) violations. During the course of the administrative litigation of those citations, OSHA issued a subpoena to a third-party consultant seeking a draft PSM report the consultant had prepared for the company’s counsel six months before the explosion. Delek filed a motion to quash based on the attorney-client privilege. OSHA argued that the report was not privileged because it was prepared by a consultant rather than an attorney.

After the administrative law judge (ALJ) denied the motion to quash, the employer sought review by the commission itself, resulting in an opinion announcing a three-part test for determining when a document prepared by a third party is protected by the privilege. Specifically, the commission instructed that the third-party document could only be subject to the privilege if all of the following applied:

1. “[T]he client must have provided information to the third party, rather than the third party providing its own information.” (As such, “the privilege will not apply where the attorney consults the third party to obtain information the client did not have . . . or employs the third party to gather data through studies and observations of the physical conditions at a client’s site . . .”).

2. “[T]he client must have sought legal advice as opposed to some other kind of advice or information” (such as technical or business advice).

3. “[T]he attorney [must have] needed the services of the third party—often described in terms of a need for the third party to ‘translate’ technical or complex information.” (In other words, defining “the third party’s role as that of a ‘translator or interpreter’ who serves to ‘improve the comprehension of the communications between attorney and client.’”).

The commission remanded the case to the ALJ for application of the three-part test. While the Delek decision establishes a narrower view of when a consultant’s work can be subject to privilege, it remains controlling law in commission proceedings and, therefore, requires consideration in designing an audit program.

Despite these hurdles, the most promising strategy for avoiding disclosure of audits to OSHA still is to conduct audits pursuant to the attorney-client privilege.

Here are a few tips for navigating the complexities of privilege:

1. Counsel, and not the employer, should retain and direct the activities of consultants.

2. Consider utilizing outside counsel (remembering the Milk Specialties court’s view that in-house counsel often provides business rather than just legal advice).

3. All of the documentation, including the engagement of counsel and consultants, should reflect that the auditing is a confidential process undertaken for the specific purpose of counsel formulating legal advice for the employer.

4. In composing an engagement letter for any consultants, ensure that the language is written in a manner consistent with the three-part Delek test.

5. Continually emphasize the importance of confidentiality to everyone.

6. Strictly control any note taking, emails or other documentation during the audit. There should be only one record of findings composed by counsel. Others should not create written records of the audit.

OSHA’s increasingly aggressive efforts to obtain employers’ self-audit work product has made the proper use of the attorney-client privilege even more critical. Accordingly, businesses should consider utilizing that privilege in conducting their audit programs and should also ensure that those programs are structured and documented in a manner that supports the applicability of the privilege.

Robert S. Nichols of Houston and Tim Wilkins of Austin are partners at Bracewell & Giuliani. Nichols has represented employers in litigation, administrative investigations and inspections, and other actions concerning alleged occupational safety and health violations. Wilkins is the head of the firm-wide environmental and natural resources practice group. He represents large companies that rely on him for strategic environmental permitting assistance, the defense of environmental enforcement actions and assistance with the environmental aspects of major transactions.

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