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November 14, 2019
Washington business owners should take notice of the Washington Department of Labor and Industries' increasingly utilized citation and penalty scheme through which L&I is imposing huge fines on unsuspecting businesses for violations L&I did not actually witness and that businesses were not even aware they had committed.
This scheme, which is often applied in the context of electrical citations issued through L&I following an investigation by the state electrical board, can be applied to any area regulated by L&I with a similarly punitive effect and without contemporaneous notice to unknowing offenders.
L&I's citation scheme starts with a seemingly run-of-the-mill violation witnessed by an L&I investigator. For example, a business may be issued a violation for performing electrical work without the proper administrator/master electrician certification. The business owner may dispute the work was improperly performed or may not have realized that the work performed required a certification.
L&I issues the initial citation and corresponding first offense (low dollar) fine, which is often simply paid by the business to avoid a costly appeal. With the knowledge of the violation, the business is then able to work with electrical board investigators to ensure it is in compliance with all electrical board regulations moving forward.
Here is where the story should end — the business has committed a violation, it has paid the fine, it has worked with L&I to make sure its future work is in compliance, and L&I has fulfilled its mandate to protect employees and the public from any subsequent violations by the business. However, this topic wouldn't be the subject of an article if that's where the story ended.
IS THE INVESTIGATION OVER?
Often during investigation of the witnessed violation, L&I will request additional information from the business, seeking time cards and invoices for all work performed prior to the witnessed violation — sometimes up to 18 to 24 months prior.
L&I provides the business generic and limited context for why this information is being requested and for what purpose it will ultimately be used. L&I makes this request for information under the authority provided by RCW 19.28.291 and warns the business that if it fails to comply with the request for information, L&I will issue a subpoena demanding the information.
Business owners are often unaware of the specifics of RCW 19.28.291, which only allows the electrical board to issue subpoenas when (1) there is reason to believe there has been a violation of the electrical code, and (2) the subpoena describes the possible violation, including an explanation of how the subpoenaed information relates to the possible violation.
Rather than reject the request and force the electrical board to issue a subpoena, businesses often simply comply with the request and provide the information, believing L&I to be working collaboratively with the business to ensure compliance.
After the information is provided by the business, months can elapse with no contact from L&I, leading a business owner to believe the investigation is over and the matter is resolved with its payment of the original citation. However, months after the information is provided, L&I will issue a broad-sweeping, retroactive citation based on its review of the information provided by the business, asserting statutory violations during the previously completed work based solely on the description of work included in the information provided by the business.
L&I issues a “matrix” style citation, which identifies and cites the business for numerous prior violations all within a single, continuing “violation.”
Depending on the volume of work performed by the business during the period requested, the business can be cited for numerous violations, with fines levied totaling hundreds of thousands of dollars. Those businesses facing the highest risk under this scheme are contractors performing high-volume, low-cost work, such as checking the condition of minor electrical equipment in convenience stores or restaurants.
Additionally, even third-party intermediary companies responsible for dispatching contractors to perform this type of work can be caught up in this scheme and face the same considerable fine.
As an example, a hypothetical third-party electrical dispatching company could work with local electricians to coordinate and perform repair services for restaurant and convenience stores. The dispatching company sends independent, properly licensed laborers to multiple locations during a typical day. The dispatching company works on approximately 500 projects during a given year. During a standard repair service, an L&I investigator witnesses what they believe to be a violation and cites the dispatch company, whose name is on the permit, for performing unlicensed electrical work, despite the laborer performing the work being properly licensed.
L&I then requests project records for all previous projects performed in the prior 12 months under the guise of RCW 19.28.291 and the threat of a subpoena for non-compliance. The dispatch company complies and provides the requested information. L&I then interprets the information provided by the company, determines in its sole capacity that during the prior projects similar work (as compared against the initial violation) was performed, and issues a citation with a violation matrix for a continuing violation including all 500 projects.
This penalty is conveyed to the dispatch company in the form of a single citation, covering approximately 12 months of work, and totaling in the hundreds of thousands of dollars.
L&I's retroactive assessment of violations and fines poses several serious problems:
The business, which was originally imposed a small fine for the single witnessed violation, is now faced with massive fines for violations it was not aware it was committing. The huge fine must be paid or appealed in a short amount of time. The retroactive application of the fines and the lack of contemporaneous notice deprives the business of an opportunity to rectify alleged violations of the electrical code before incurring huge penalties.
The retroactive violations were not actually witnessed by an L&I investigator, but instead determined by L&I's review of the information provided by the business. These unverified/unwitnessed citations are based solely on the L&I investigator's interpretation of out-of-context records and raise serious due process concerns.
L&I's matrix citation, which identifies numerous instances of alleged improper actions, is based on a single citation with an ongoing violation spanning numerous months. The citation imposes fines for each of the alleged improper actions contained within the ongoing violation; but the total fine imposed exceeds the maximum amount permitted by RCW 19.28.131 that can be imposed for any single violation ($10,000).
Businesses should be concerned with L&I's retroactive violation and penalty scheme because they could face enormous fines for alleged violations which they had no contemporaneous notice they were committing and no opportunity to correct prior to issuance of the citation.
Further, even though L&I did not witness the alleged violation being committed, the burden on appeal shifts to the business to disprove L&I's determination. Perhaps most significantly, this retroactive penalty scheme does not further L&I's mission to ensure employee and public safety by pushing businesses to ensure future compliance with L&I regulations. Under the current scheme, even a business who fully resolves any licensing issues following its initial notice of violation, could still be fined significant amounts for previous, unwitnessed, alleged violations which it has no ability to correct or rectify.
L&I's scheme imposes fines seeking to punish businesses as opposed to ensure compliance and safety.
Part two of this article, to run next week, will provide businesses with advice and recommendations for affirmatively protecting themselves against this type of violation and defending against an L&I retroactive citation if it should be issued. Stay tuned!
Eric Forner and Ryan Gilchrist are attorneys at Oles Morrison Rinker & Baker LLP.