Client Alert: California’s Unfair Competition Law (B&P §17200) Preempted by Federal Workplace Safety Law

In Solus Industrial Innovations LLC v. Superior Court (No. G047661, filed 9/22/2014) (“Solus”) the California Court of Appeal, Fourth Appellate District, held California’s Unfair Competition Law (Business & Professions Code §17200) is preempted by the federal Occupational Safety and Health Act of 1970 (“Fed/OSHA”) because the Unfair Competition law, as approved by the United States Secretary of Labor, does not include any provision for civil enforcement of workplace safety standards by a state prosecutor through a complaint for penalties.

Solus Industrial Innovations, LLC (“Solus”) is a plastics manufacturer. In 2007, Solus installed a residential water heater at its commercial facility in Orange County. The water heater exploded in March 2009, killing two workers. California’s Division of Occupational Safety and Health (“Cal/OSHA”) investigated and determined the explosion was caused by a failed safety valve and lack of any proper safety feature on the water heater. Cal/OSHA charged Solus with five violations of Title 8 of the California Code of Regulations. Because deaths were involved, Cal/OSHA forwarded the results of its investigation to the Orange County District Attorney.

In March 2012, the Orange County District Attorney filed criminal charges against Solus’ plant manager and maintenance supervisor. The District Attorney also filed a civil action against Solus, including two causes of action for violation of California Business & Professions Code §17200 – the Unfair Competition Law (“UCL”). The action sought civil penalties under the UCL in the amount of $2,500 per day, per employee, from November 29, 2007 through March 19, 2009.

Solus demurred to both claims, contending they were preempted by Fed/OSHA, because a state prosecutor’s pursuit of civil penalties under the UCL is not part of California’s workplace safety plan approved by the United States Secretary of Labor. The trial court overruled the demurrer. Solus appealed and the Fourth Appellate District reversed, noting the UCL was not even in effect when the Secretary of Labor approved the Cal/OSHA plan. The California Supreme Court, however, ordered the Fourth Appellate District to reconsider its decision in light of former Civil Code §3370.1 – which was in effect when the Cal/OSHA plan was approved – providing for the imposition of similar penalties based on acts of unfair competition.

In Solus, the Court again concluded that the State’s reliance on the UCL to address workplace safety violations was preempted. The Court determined that on the matter of workplace safety regulation, the federal government’s intent to preempt is clear with the enactment of Fed/OSHA. Pursuant to the federal legislation, the states remain free to legislate any occupational safety or health issue with respect to which no federal standard is in effect, or to side-step the federal legislation all together by submitting a state plan for the development of such standards and their enforcement.

Here, California’s state plan was submitted in 1973 and approved by the United States Secretary of Labor. The federal regulation approving California’s plan specifies “[t]he State’s program will be enforced by the Division of Industrial Safety of the Department of Industrial Relations” and “[a]dministrative adjudications will be the responsibility of the California Occupational Safety and Health Appeals Board.” Section 17204 of the UCL, however, allows a public prosecutor to bring actions for relief seeking civil penalties, restitution and/or injunctive relief, which private litigants cannot seek.

Noting that the UCL was enacted after the Secretary of Labor approved Cal/OSHA, the Court ruled there was no basis to infer that the Secretary of Labor contemplated the UCL in approving Cal/OSHA. Further, the Court noted the State had failed to demonstrate the civil penalties available under former Civil Code section 3370.1 were considered or approved by the Secretary of Labor when Cal/OSHA was approved. The State was also unable to demonstrate that former Civil Code § 3370.1 had ever been used by a state prosecutor to impose civil penalties against a defendant for workplace safety issues.

The Solus Court therefore held that the District Attorney “cannot presently rely on the UCL to provide an additional means of penalizing an employer for its violation of workplace safety standards.”

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September 24, 2014