Monday, May 15, 2006

Learning From Enron: Why Accurate OSHA Recordkeeping Matters

Ask the average "person on the street" whether they've ever heard of Enron, and chances are at least eight out of ten will say, "Of course!" Ask the same people if they've ever heard of Jindal Steel and ten out of ten will say "Huh?"

The failure of Enron taught the nation how important honest accounting is when it comes to financial data. If investors cannot trust companies to self-report these data accurately, they cannot make rational investments decisions and the entire structure of our country’s financial system is undermined. That’s why the government has prosecuted these cases so vigorously, and why those convicted face long prison sentences.

Why is it so hard to see that accurate injury and illness data are just as fundamental to making the rational decisions needed to protect workers - who are the foundation of this financial system?

Why do we send the cheaters who undermine our financial system to jail, but those who cheat on the health and safety of workers get a pass? Could it be that, as a nation, we care more about money than workers?

These are the questions addressed by tonight's guest writers, two OSHA experts, who prefer to remain anonymous. They are writing under the pseudonym, ERM Jr.

Learning From Enron: Why Accurate OSHA Recordkeeping Matters

Blood or money – which matters more? Does the nation care more about financial fraud than it does about cheating on the health and safety of America’s workers? Read on and reach your own conclusion.

Recent press reports suggest that at two worksites, AK Steel’s Middletown, Ohio Works, and the Bay Bridge construction project in Oakland, California, employers are hiding the dangers of their worksites by not reporting injuries and illnesses on their OSHA logs, as required by law. Worse, despite these press accounts, so far OSHA appears not to be doing very much to enforce its recordkeeping rules.

There’s reason to believe these are not isolated cases. But before looking at these two projects in detail, it’s important to answer a fundamental question.

Does the underreporting of injuries and illnesses represent nothing more than a “paperwork” mistake, a bookkeeping error unrelated to protecting workers? That’s what many employers, and even some misguided OSHA officials, now seem to think.

Nothing could be further from the truth.

Why Accurate OSHA Recordkeeping Matters

First, OSHA relies on accurate injury and illness reporting to target its inspections at the most dangerous worksites. If employers cheat by not reporting injuries and illness, OSHA will spend its scarce enforcement resources inspecting employers who are self-reporting high rates, while passing over the dishonest employers whose workers are getting hurt.

Second, an inaccurate picture of what’s hurting workers not only skews OSHA enforcement, it undermines every single OSHA program. If it relies on bad data, how will OSHA know what standards to promulgate, what compliance assistance employers need, or how to do education and outreach? How will the agency be able to determine its own track record, to assess what it is doing right and what it is doing wrong, if it doesn’t know what’s happening to the people it’s supposed to be protecting?

Third, workers who are coerced into not reporting injuries and illness may not receive proper medical care, compounding the risks to their health and safety.

Finally, how will employers know what hazards to reduce and how to protect their employees, if they don’t have an accurate picture of where and why their workers are getting hurt? And like OSHA, how will companies know where their safety and health programs are working, where they need to improve?

Until recently, Assistant Secretaries of Labor for OSHA recognized the foundational importance of accurate recordkeeping in what they said and in what they did. But now that OSHA has “other enforcement priorities,” every year recorded injuries and illnesses decline…while fatalities, which are harder to hide and are collected and investigated separately, are going up. This is one reason to believe the AK Steel and Bay Bridge cases are just the tip of the iceberg.

A few examples reveal how seriously OSHA used to regard accurate injury and illness records.

“Accurate records are the foundation of sound safety and health programs.” (Assistant Secretary of Labor John Pendergrass, in an April 30, 1987 statement explaining a $474,900 penalty levied against Ford Motor Company for 119 alleged instances of violating OSHA’s recordkeeping requirements.)

Assistant Secretary of Labor for OSHA Joe Dear said in 1996 that reliable data “are a cornerstone in changing the agency’s performance measurements from activity-based, such as numbers of inspections and violations, to one focused on the ultimate outcome of reducing workplace injuries and illnesses.”

In 1991, recordkeeping violations ranked sixth on OSHA’s list of the most frequently cited standards. But this standard, 29 CFR 1904.2, hasn’t made the “top ten” list for many years. Is this because employers are now more honest?

"Documenting workplace injuries and illnesses is a vital part of protecting our nation's workers," said OSHA Administrator Charles N. Jeffress in an Oct. 20, 2000 press release explaining why the agency fined Jindal United Steel Corporation $1,702,800 for scores of recordkeeping violations from 1998 through 2000.
"Under our inspection targeting system, had this employer reported the correct injury and illness rate for 1998, the facility would likely have been placed on the list for a programmed inspection prior to the complaint that initiated this investigation."


“Failing to record workplace injuries and illnesses is a serious deficiency, not merely a paperwork violation. Accurate records of injuries and illnesses help workers and employers identify hazards that require correction and help OSHA pinpoint worksites that need to do a better job of protecting workers.”
A number of studies, including a recent one funded by NIOSH that will be discussed below, have found massive undercounting of occupational injuries and illnesses. Yet, for a variety of reasons, it’s just as difficult to prove injury and illness data at specific worksites are inaccurate as it is to untangle the accounting tricks employed by Enron. This is one reason OSHA has trouble enforcing its rules. The system is based on trust, but there are powerful incentives for managers and companies to cheat. As mentioned above, low rates mean OSHA inspections are less likely. In addition, many companies offer promotion and cash bonuses to managers and employees for low injury and illness rates. Low rates can mean lower workers compensation premiums, another incentive to cheat.

Learning from Enron

So why do we send the cheaters like Enron, who undermine our financial system, to jail but those who cheat on the health and safety of workers get a pass? Could it be that, as a nation, we care more about money than workers?

That’s the big picture and it’s a big problem, but unlike many big picture problems, there is a solution, and the solution lies in how OSHA handles the two cases we will next examine in detail, AK Steel and Bay Bridge.

These may seem like isolated cases, but no one worried whether Enron or WorldCom were isolated cases. Even one case of financial fraud was enough, because some investors were hurt. Furthermore, the government decided to prosecute those responsible to make an example of them and deter others from cheating. Conversely, the government no doubt realized fraud would spread if business leaders saw cheaters “getting away with it.”

If the government investigates and prosecutes when investors’ pocketbooks are hurt by fraud, shouldn’t it do the same when fraud may be concealing workers whose bodies are hurt?

So if OSHA cares about protecting the foundation of the nation’s workplace safety and health program, it needs to follow this example: investigate the cases of AK Steel, the Bay Bridge project, and any other instance where there is reason to believe employers are “cooking the books.” And if the agency finds evidence of hiding injury and illnesses, it needs to make an example of those responsible, by throwing the book at them.

Nothing less than the integrity of the nation’s entire workplace safety and health program is at stake.

-- ERM Jr.

Tomorrow Coming Soon: A Tale Of Two OSHA Cases: AK Steel and The Bay Bridge Project