Chamber Cmerc US v. OSHA

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 3, 1998 Decided April 9, 1999

No. 98-1036

Chamber of Commerce of the United States,

National Association of Manufacturers, American Trucking

Associations, Inc.,

and Food Marketing Institute,

Petitioners

v.

United States Department of Labor,

Occupational Safety & Health Administration, and

Alexis M. Herman, Secretary,

United States Department of Labor,

Respondents

Food Distributors International, et al.,

Intervenors

On Petition for Review of an Order of the

Occupational Safety and Health Administration

Baruch A. Fellner argued the cause for petitioners. With

him on the briefs were William J. Kilberg, Eugene Scalia,

Stephen A. Bokat, Janice S. Amundson, Daniel R. Barney,

Lynda S. Mounts, George Green, and Peter A. Susser.

Bruce Justh, Assistant Counsel for Appellate Litigation,

U.S. Department of Labor, argued the cause for respondents.

With him on the brief were Joseph M. Woodward, Associate

Solicitor for Occupational Safety and Health, and Barbara

Werthmann, Counsel for Appellate Litigation.

Before: Silberman, Ginsburg and Sentelle, Circuit

Judges.

Opinion for the Court filed by Circuit Judge Ginsburg.

Dissenting opinion filed by Circuit Judge Silberman.

Ginsburg, Circuit Judge: The Occupational Safety and

Health Administration, part of the United States Department

of Labor, issued a "Directive" pursuant to which each employ-

er in selected industries will be inspected unless it adopts a

comprehensive safety and health program designed to meet

standards that in some respects exceed those required by law.

The Chamber of Commerce objects to the Directive on the

grounds that prior notice and an opportunity to comment

were required by the Administrative Procedure Act, and that

the envisioned inspections will violate the Fourth Amendment

to the Constitution of the United States. Because we agree

with the Chamber that the agency issued the Directive in

violation of the APA, we do not reach the constitutional issue.

I. Background

According to the OSHA, the Directive, which establishes

the "OSHA High Injury/Illness Rate Targeting and Coopera-

tive Compliance Program," represents a new, cooperative

approach to the problem of worker safety at some 12,500

relatively dangerous workplaces. The Directive first provides

that each of these sites will be placed on a so-called "primary

inspection list" and subjected to a comprehensive inspection

before the end of 1999. (But for the Directive, the OSHA

might have searched some of the sites, but it does not claim

that it would have searched all of them). The Directive next

provides that the agency will remove a workplace from the

primary inspection list, and reduce by 70 to 90 percent the

probability that it will be inspected, if the employer partici-

pates in the agency's "Cooperative Compliance Program."

Participation in the CCP obligates the employer to satisfy

eight requirements. An employer must agree, for example,

to "[i]dentify and correct hazards" and to "[w]ork toward a

significant reduction of injuries and illnesses." Most impor-

tant is the requirement that the employer implement a "com-

prehensive safety and health program" (CSHP) that meets

the standard established in the OSHA's 1989 Safety and

Health Program Management Guidelines.

The Directive spells out what is entailed. Most of the

requirements are procedural. A CSHP, for example, should

include regular, employer-conducted inspections of the work-

place, investigations of "near-miss" incidents, and a means by

which employees can complain of unsafe practices and cir-

cumstances without fear of reprisal. An adequate CSHP

should also, however, address specific substantive problems

associated with "ergonomics, materials handling, bloodborne

pathogens, confined space, [and] hazard communication." Al-

though many aspects of a CSHP are, not surprisingly, direct-

ed toward the prevention or correction of violations of the

Occupational Safety and Health Act, 29 U.S.C. ss 651-678,

the Directive makes clear that compliance with the Act is not

in itself sufficient for participation in the new CCP: "An

effective [CSHP] looks beyond specific requirements of law to

address all hazards. It will seek to prevent injuries and

illnesses, whether or not compliance is at issue." Further to

this point, an acceptable CSHP also obligates the employer to

be generally in compliance with applicable "voluntary stan-

dards," "industry practices," and even "suppliers' safety rec-

ommendations."

II. Analysis

The Chamber of Commerce petitions for review of the

Directive first on the ground that the agency should have

conducted a notice and comment rulemaking proceeding prior

to issuing it. Before considering the Chamber's argument,

however, we must consider the agency's objection that the

case is not within the jurisdiction of this court.

A.Jurisdiction

Under the OSH Act, 29 U.S.C. s 655(f), this court has

jurisdiction to review a "standard" issued by the OSHA. An

OSHA "regulation," however, is subject to review in the

district court, pursuant to the Administrative Procedure Act,

5 U.S.C. s 703. See Workplace Health & Safety Council v.

Reich, 56 F.3d 1465, 1467 (D.C. Cir. 1995). The OSH Act

does not define the term "regulation," but describes a "stan-

dard" as a rule that "requires conditions, or the adoption or

use of one or more practices, means, methods, operations, or

processes, reasonably necessary or appropriate to provide

safe or healthful employment." 29 U.S.C. s 652(8). The

question whether a rule is a "standard," so defined, is to be

answered with reference to its "basic function ... rather than

the exact nature of the 'practices, means, methods, operations

or processes' ... it embodies." Workplace Health, 56 F.3d at

1468 (quoting Louisiana Chemical Ass'n v. Bingham, 657

F.2d 777, 781 (5th Cir. 1981)). If the basic function of the

rule is to "address[ ] ... a specific and already identified

hazard, [and it is] not a purely administrative effort designed

to uncover violations of the Act," then the rule is a standard.

Id. (quoting Louisiana Chemical, 657 F.2d at 782). If, on the

other hand, the rule is "merely a general enforcement or

detection procedure," then it is a regulation. Id. In other

words, a standard, unlike a regulation, is "aim[ed] toward

correction rather than mere inquiry into possible hazards."

Id. (quoting Louisiana Chemical, 657 F.2d at 782).

The OSHA argues that the Directive here at issue must be

considered a regulation for two reasons. First, it lacks some

of the formal attributes of the typical standard. In particu-

lar, according to the agency, an employer's participation in

the CCP is strictly voluntary; the Directive is not backed by

the threat of a legal sanction, and it does not preempt any

regulation imposed by a state. Second, we are told, the

Directive cannot be a standard because it does not address a

"specific and already identified hazard."

Although the proper characterization of the Directive is not

without difficulty, we do not think either argument that it is a

regulation rather than a standard withstands scrutiny. As to

the first, it is true that the Directive does not formally

require anything: An employer is not subject to a legal

penalty for failing to join the CCP; it will be subject only to a

safety inspection for its recalcitrance. Our concern, however,

is with the practical effect (the "basic function") of the rule,

not its formal characteristics. 56 F.3d at 1468. The Cham-

ber of Commerce asserts, and the agency does not deny, that

as a practical matter being subjected to a safety inspection

can be quite as onerous for an employer as paying a fine

imposed by the OSHA. See Cerro Metal Prods. v. Marshall,

620 F.2d 964, 974 (3d Cir. 1980) (comprehensive OSHA "[i]n-

spections ... frequently extend over several weeks. They

necessarily create inconvenience to the employer and a cer-

tain amount of lost time for employees who escort the inspec-

tor or are otherwise disrupted in their work").* Indeed, one

of the agency's objectives, as stated in the Directive, is to

"leverage limited OSHA resources" by encouraging employ-

ers to adopt a "comprehensive safety and health program."

This can only mean that the agency is intentionally using the

leverage it has by virtue solely of its power to inspect. The

Directive is therefore the practical equivalent of a rule that

obliges an employer to comply or to suffer the consequences;

the voluntary form of the rule is but a veil for the threat it

obscures. For the same reason, it is of no great moment that

the Directive purports not to preempt state law, although that

is undoubtedly a point of difference between it and a formal

OSHA standard. The distinction is not germane to our

inquiry because the failure to preempt does not make the

Directive, as a practical matter, any more or less a rule that

__________

* For this reason, we also reject the OSHA's separate argument

that the Chamber does not have standing to sue because, absent a

legal penalty for non-participation, employers suffer no cognizable

injury.

"requires conditions ... necessary ... to provide safe or

healthful employment."

The OSHA's second argument is that the Directive does

not fit squarely within the definition of the term "standard"

that we accepted from the Fifth Circuit in Workplace Health:

Insofar, that is, as the Directive is intended to encourage the

spread of safety programs that address "all hazards" in the

workplace, the OSHA argues it is not a "remedial measure

addressed to a specific and already identified hazard." 56

F.3d at 1468. That the Directive must therefore be deemed a

regulation, however, does not follow. While the Directive fits

the definition of a standard only imperfectly, it fits the

definition of a regulation not at all. The Directive is clearly

not, for example, "a purely administrative effort designed to

uncover violations of the Act." By its terms, it aims to foster

safety policies more stringent than any required by the Act or

by the regulations implementing the Act, including, as we

have seen, "voluntary standards," "industry practices," and

"suppliers' safety standards." Cf. id. ("[S]tandards should

aim toward correction rather than mere inquiry into possible

hazards"). Nor, in view of the Directive's stated goal of

correcting, rather than merely uncovering, specific dangers in

the workplace, including hazards not covered by any OSHA

standard, can it be described as "merely an enforcement or

detection procedure designed to further the goals of the Act

generally."

In any event, we doubt that the "specific and already

identified hazard" criterion can bear the weight the OSHA

would place upon it. The phrase was not integral to the

outcome reached in either Workplace Health or Louisiana

Chemical. The rules held to be regulations in those cases

were procedural; they did not directly address any hazard,

specific or otherwise, identified or not. See Workplace

Health, 56 F.3d at 1466 (rule requiring employers to report

work-related deaths and hospitalizations); Louisiana Chemi-

cal, 657 F.2d at 778-79 (rule requiring employers to make

available records of employees' exposure to toxic substances).

In fact, Louisiana Chemical suggests that the specificity of

the hazard a rule aims to correct is not as important as

whether the basic function of the rule is substantive. That a

rule is directed toward a particular danger, rather than

danger in general, may be relevant to whether it qualifies as a

standard; it is not, however, dispositive. See id. at 783 n.9

("Our problem with calling the Records Access rule a stan-

dard lies not so much in the number [of hazards it addresses]

as with our perception of its basic function: enforcement and

detection. Lack of particularity is merely one aspect of this

function").

In sum, we are forced by the jurisdictional structure and

form of the OSH Act to characterize the Directive either as a

"standard" or as a "regulation." Although neither moniker is

entirely apt, we conclude that the Directive is a "standard"

within the meaning of s 652(8) because it effectively obligates

employers, under penalty of certain inspection, to adopt a

CSHP, and thereby imposes upon employers new safety

standards more demanding than those required by the Act or

by any pre-existing regulation implementing the Act. And

because the Directive is a standard, we have jurisdiction

under s 655(f) to consider the Chamber's petition to review it.

B.Notice and Comment

Under the APA, 5 U.S.C. s 553, an agency seeking to

promulgate a rule must first provide the public with notice of,

and an opportunity to comment upon, a proposed version of

it. The OSHA concedes that the Directive is, in APA par-

lance, a "rule," and therefore that s 553 applies. See United

States Dep't of Labor v. Kast Metals Corp., 744 F.2d 1145,

1149-51 (5th Cir. 1984) (agency inspection plan is a rule for

purposes of s 553). The agency takes the position, however,

that notice and comment rulemaking was not required be-

cause the Directive falls into the exceptions provided in

s 553(b)(3)(A) for "rules of agency ... procedure" and "gen-

eral statements of policy."

1.Procedural rule

A procedural rule is one that does not itself "alter the

rights or interests of parties, although it may alter the

manner in which the parties present themselves or their

viewpoints to the agency." Batterton v. Marshall, 648 F.2d

694, 707 (D.C. Cir. 1980). A substantive rule, in contrast, has

a "substantial impact" upon private parties and "puts a stamp

of [agency] approval or disapproval on a given type of behav-

ior." American Hosp. Ass'n v. Bowen, 834 F.2d 1037, 1047

(D.C. Cir. 1987). This distinction is often difficult to apply, as

even a purely procedural rule can affect the substantive

outcome of an agency proceeding. See JEM Broad. Co. v.

FCC, 22 F.3d 320, 326 (D.C. Cir. 1994). Because of this

difficulty, we apply s 553(b)(3)(A) with an eye toward balanc-

ing the need for public participation in agency decisionmaking

with the agency's competing interest in "retain[ing] latitude

in organizing [its] internal operations." Batterton, 648 F.2d

at 707.

In defense of its position that the Directive is a procedural

rule, the OSHA advances two arguments. First, minimizing

the significance of the CCP, it asserts that the Directive is

merely an inspection plan that does not put its "stamp of

approval or disapproval" on any particular behavior. Then,

ignoring the inspection plan, it maintains that the Directive

has no "substantial impact" upon covered employers because

of the voluntary nature of the CCP. But the inspection plan

and the CCP are two elements of the same rule; in determin-

ing whether notice and comment were required before it

could be promulgated, we must view the rule as a whole.

So viewed, it is apparent that the Directive cannot be

considered procedural. If the function of the CCP were

simply to provide each employer with the option of substitut-

ing self-inspection for an equivalent inspection conducted by

the OSHA, then the agency could make a creditable argu-

ment that the Directive does not represent the kind of

normative judgment characteristic of a substantive rule. See

Guardian Fed. Savings & Loan Ass'n v. FSLIC, 589 F.2d

658, 665 (D.C. Cir. 1978) (rule requiring regulated institutions

to hire private accountants to perform audits is procedural).

The OSHA may not, however, tell employers in one breath

that participation in the CCP requires more than mere com-

pliance with the OSH Act--which clearly ups the substantive

ante--and tell us in the next that the sole purpose of the CCP

is to make unnecessary the inspections it performs in order to

uncover violations of the Act. At least to the extent that

participation in the CCP requires more than adherence to

existing law, the Directive imposes upon employers more than

"the incidental inconveniences of complying with an enforce-

ment scheme," Bowen, 834 F.2d at 1051; it has a substantive

component.

This conclusion is supported also by the underlying reasons

for distinguishing between substantive and procedural rules

in prescribing procedures for rulemaking. The Directive is

intended to, and no doubt will, affect the safety practices of

thousands of employers. The value of ensuring that the

OSHA is well-informed and responsive to public comments

before it adopts a policy is therefore considerable. The other

side of the balance, moreover, is empty: The agency does not

contend that its need for "latitude in organizing [its] internal

operations" is implicated at all in the present case. Batter-

ton, 648 F.2d at 707.

Nor can the OSHA prevail by renewed resort to its obser-

vation that the Directive is not backed by the threat of a legal

sanction. Like the jurisdictional issue discussed above, the

question whether a rule is substantive or procedural for the

purposes of s 553(b) is functional, not formal. That is why

we examine how the rule affects not only the "rights" of

aggrieved parties, but their "interests" as well. Batterton,

648 F.2d at 707; see also Bowen, 834 F.2d at 1045 ("Substan-

tive rules are ones which grant rights, impose obligations, or

produce other significant effects on private interests"). Of

course, whether a rule has the force of law often will bear

upon its proper classification as substantive or procedural.

See, e.g., Chrysler Corp. v. Brown, 441 U.S. 281, 301-02 (1979)

(that agency rule is backed by the force of law suggests it is

substantive).* It will not necessarily be controlling, however.

Here, for example, the Directive will affect employers' inter-

__________

* Citing Chrysler Corp., the agency argues that because a rule

backed by the force of law is substantive, a rule that has no binding

legal authority must therefore be procedural. By the same reason-

ing, one would conclude that because all men are mortal, women

must be immortal.

ests in the same way that a plainly substantive rule mandat-

ing a comprehensive safety program would affect their rights;

that it so operates without having the force of law is therefore

of little, if any, significance. In practical terms, the Directive

places the burden of inspection upon those employers that fail

to adopt a CSHP, and will have a substantial impact upon all

employers within its purview--including those that acquiesce

in the agency's use of "leverage" against them. Consequent-

ly, we conclude that the Directive is a substantive rather than

a procedural rule.

2.General statement of policy

A general statement of policy "does not establish a binding

norm. It is not finally determinative of the issues or rights to

which it is addressed. The agency cannot apply or rely upon

[such a] policy as law because a general statement of policy

only announces what the agency seeks to establish as policy."

Pacific Gas & Elec. Co. v. FPC, 506 F.2d 33, 38 (D.C. Cir.

1974). The OSHA argues that the Directive meets this

definition, raising once more the point that the rule imposes

no formal legal obligation upon an employer that chooses not

to participate in the CCP.

In this context, the agency's contention has some intuitive

appeal: At first glance, one might think that a rule could not

be considered a "binding norm" unless it is backed by a

threat of legal sanction. Beyond that first glance, however,

its appeal is fleeting.

In American Bus Association v. United States, 627 F.2d

525 (1980), we held that the question whether a rule is a

policy statement is to be determined by whether it (1) has

only a prospective effect, and (2) leaves agency decisionmak-

ers free to exercise their informed discretion in individual

cases. See id. at 529-30. Both criteria lead us here to the

conclusion that the Directive is a substantive rule rather than

a policy statement. First, the Directive provides that every

employer that does not participate in the CCP will be

searched. The effect of the rule is therefore not to "an-

nounce[ ] the agency's tentative intentions for the future,"

Pacific Gas, 506 F.2d at 38, but to inform employers of a

decision already made. See American Bus Ass'n, 627 F.2d at

531 (order indicating that applicants providing certain docu-

ments would receive "immediate issuance" of certificate per-

mitting transport of goods to Canada had current, not pro-

spective, effect and therefore was not statement of policy); cf.

Pacific Gas, 506 F.2d at 40-41 (order intended to inform

public of types of plans that will receive "initial and tentative"

agency approval is policy statement). Indeed, the OSHA

admits in its brief that the inspection plan "leave[s] no room

for discretionary choices by inspectors in the field." And the

Directive itself suggests that the agency will not remove an

employer from the CCP unless the employer fails to abide by

the terms of the program. Therefore, although the Directive

does not impose a binding norm in the sense that it gives rise

to a legally enforceable duty, neither can it be shoehorned

into the exception for policy statements.

III. Conclusion

For the foregoing reasons, we hold first that the Directive

is a standard within the meaning of 29 U.S.C. s 655(f) and

therefore that we have jurisdiction over the Chamber's peti-

tion for review. Because the Directive is neither a procedural

rule nor a policy statement, we hold that the OSHA was

required by the APA to conduct a notice and comment

rulemaking proceeding before issuing it. The Directive is

therefore vacated without prejudice to the ability of the

agency to repromulgate it after observing the required proce-

dures.

So Ordered.

Silberman, Circuit Judge, dissenting: I would agree with

the majority on the merits if I thought we had jurisdiction to

review OSHA's Directive. But as I read Workplace Health

and Safety Council v. Reich, 56 F.3d 1465 (D.C. Cir. 1995),

the Directive is not a "standard" reviewable directly in the

court of appeals. That is so because, although I believe the

Directive is an APA regulation--I simply do not understand

the majority's explanation why it is not, see Maj. Op. at 6--it

is not directed at a "particular hazard." Therefore, under our

governing precedent, petitioners should be obliged to seek

review first in the district court.