Federal Appeals Court allows suit against top NC Labor Department officials to proceed

N.C. Labor Commissioner Josh Dobson's face appears on an elevator inspection certificate. (Carolina Journal photo by Mitch Kokai)

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  • The 4th U.S. Circuit Court of Appeals will allow a company to challenge N.C. Labor Department enforcement actions linked to a fatal Canton paper mill fire in 2020.
  • A company called ISG argues that N.C. Labor Commissioner Josh Dobson and the director of his Occupational Safety and Health Division are responsble for enforcement practices that violate federal law.

The 4th U.S. Circuit Court of Appeals has ruled that a company linked to a fatal 2020 paper mill fire in Canton can proceed with its lawsuit against two top N.C. Labor Department officials. The company contends that the officials violated federal law when assessing penalties of more than $100,000.

A unanimous Appeals Court panel rejected arguments from N.C. Labor Commissioner Josh Dobson and Kevin Beauregard, director of the Labor Department’s Occupational Safety and Health Division. The two men argued that the 11th Amendment blocked the suit.

The case stemmed from a Sept. 21, 2020, fire at the Evergreen Packaging Paper Mill in Canton. Two employees of Universal Blastco, a South Carolina-based company officially known as Industrial Services Group, died “due to carbon monoxide poisoning and blunt force trauma stemming from the fire,” wrote Appeals Court Chief Judge Roger Gregory.

In March 2021, the Occupational Safety and Health Division issued ISG three citations with 13 violations related to the incident. Penalties totaled $112,000.

ISG filed suit against Dobson and Beauregard. The complaint “contended that Dobson and Beauregard could not lawfully issue these citations because they maintain a practice of employee performance evaluation in violation of § 657(h).”

The reference to § 657(h) refers to Congress’ 1998 amendment of the federal Occupational Safety and Health Act. Federal law allows Dobson and his department to enforce the act through a “State Plan.” The 1998 amendment forbade a state labor secretary from “us[ing] the results of enforcement activities, such as the number of citations issued or penalties assessed, to evaluate employees directly involved in enforcement activities under this chapter or to impose quotas or goals with regard to the results of such activities.”

“Specifically, the Complaint asserted that Dobson, who plays a role in administering the North Carolina State Plan (“NC State Plan”) as the Commissioner of Labor, ‘has admitted that the performance of “compliance officers” — who inspect workplaces for hazardous conditions and issue citations for alleged violations — is evaluated based on … “the number of inspections opened and closed, and the number of citations issued and upheld.”’ Given the Commissioner’s admission, the Complaint alleged that the NC State Plan ‘directly violates’ § 657(h) and therefore ‘is preempted by’ the federal OSH Act.”

ISG claimed that Dobson and Beauregard violated the company’s due process rights by “engaging in enforcement activities against ISG despite lacking the proper legal authority to do so” and “incentivizing their compliance officers to commence investigation and enforcement activities and issue citations and penalties against ISG pursuant to an official policy or practice that violates and is preempted by federal law.”

The lawsuit asked a court to declare that Dobson’s “official policy or practice of evaluating
compliance officers’ performance based on the number of citations issued or penalties assessed violates the OSH Act.” The suit also asks for declarations that North Carolina’s policy falls out of compliance with federal law.

The company seeks an injunction blocking Dobson and Beauregard from taking enforcement actions against ISG or any other employer affected by the challenged policy.

“ISG’s claims focus on the NC State Plan’s past and continuing violation of § 657(h), which prohibits consideration of the number of citations issued or penalties assessed, as well as the implementation of quotas or goals with regard to such, in the course of employment evaluations,” Gregory wrote. “ISG’s Complaint also alleges Dobson’s repeated admissions that NC OSHA’s compliance officers’ performance is based, in part, on the number of citations they issue. … Therefore, we conclude that ISG properly alleges an ongoing or continuing violation of federal law.”

Judges Harvie Wilkinson and Toby Heytens joined Gregory’s opinion.