AAA Delivery Services, Inc.

Plain-English summary

AAA distributed newspapers through street-corner vendors, one of whom died after an automobile struck him while he was selling papers. OSHA cited AAA for failing to provide reflective clothing, but the Commission later vacated the citation because the vendor was an independent contractor rather than an employee. AAA sought $50,812.54 in fees and expenses under the Equal Access to Justice Act. The judge found OSHA had a reasonable legal basis to argue that reflective vests were protective equipment and a reasonable factual and legal basis to treat the vendor as an employee under the common-law factors. He denied the fee application because OSHA's position had been substantially justified.

Decision snapshot

• Cited standard(s): 29 C.F.R. § 1910.132(a)
• Outcome: AAA's Equal Access to Justice Act application for $50,812.54 was denied.
• Key point: An employer's ultimate success does not justify a fee award when OSHA's factual and legal positions were reasonable at the time of litigation.

Full text (OSHRC public release)

                                             United States of America
             OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION
                             1924 Building - Room 2R90, 100 Alabama Street, SW
                                         Atlanta, Georgia 30303-3104

Secretary of Labor,
Complainant,
v. OSHRC Docket No. 02-0923
AAA Delivery Services, Inc.,
Respondent.

Appearances:

      Ann G. Paschall, Esq., U. S. Department of Labor, Office of the Solicitor, Atlanta , Geo rgia
      For Com plainant

      Brent I. Clark, Esq., Seyfarth Shaw, Chica go, Illino is
      For Respond ent

Before: Administrative Law Judge Stephen J. Simko, Jr.

                     DECISION ON FEE AND EXPENSE APPLICATION
      AAA Delivery Services, Inc. (AAA), seeks an award for fees and expenses in accordance

with the Equal Access to Justice Act, 5 U. S. C. § 504 (EAJA), for costs incurred in its defense
against a citation and proposed penalty issued by the Secretary of Labor on May 10, 2002, following
the death of Patrick McDonough, a newspaper vendor.
The court heard the case on January 23, 2003, and vacated the citation in a decision issued
on May 30, 2003. The court concluded the cited standard did not apply to the cited conditions. The
Secretary filed a motion for reconsideration of the decision, which the court denied on June 23, 2003.
The Secretary petitioned the Review Commission for review, which the Commission granted. On
September 1, 2003, the Commission vacated the citation, but on a different basis than the one used
by this court. The Commission held that Patrick McDonough was an independent contractor, and
not an employee of AAA.
On November 30, 2005, AAA filed an application for fees and expenses in the amount of
$50,812.54. The Secretary filed a response opposing AAA’s application on December 30, 2005.
AAA replied to the Secretary’s response on January 23, 2006.
For the reasons discussed more fully below, AAA’s application is denied.
Issues
The Secretary does not dispute AAA’s eligibility under the EAJA. The issues are:
1. Was the Secretary substantially justified in bringing this case against AAA?; and
2. If not, is AAA entitled to the entire amount of $ 50, 812.54 it claims as eligible fees
and expenses?
Facts
AAA is a Florida corporation engaged in the business of purchasing, distributing, and selling
newspapers in the Fort Lauderdale area. On November 23, 2001, an automobile struck and killed
McDonough as he was selling newspapers, distributed by AAA, at a busy intersection in Boca Raton,
Florida. Following an inspection by Occupational Safety and Health Administration (OSHA)
compliance officer Natasha Sanborn, the Secretary issued a citation to AAA alleging a serious
violation of 29 C.F.R. § 1910.132(a) for failing to provide reflective clothing to its vendors. The
Secretary proposed a penalty of $4,900.00.
Principles of Law
EAJA
Commission Rule 2204.101 provides:
The Equal Access to Justice Act, 5 U.S.C. 504, provides for an award of attorney or
agent fees and other expenses to eligible individuals and entities who are parties to
certain administrative proceedings (called “adversary adjudications”) before the
Occupational Safety and Health Review Commission. An eligible party may receive
an award when it prevails over the Secretary of Labor, unless the Secretary’s position
in the proceeding was substantially justified or that special circumstances make an
award unjust.

   Commission Rule 2204.106(a) provides in pertinent part:

   The position of the Secretary includes, in addition to the position taken by the
   Secretary in the adversary adjudication, the action or failure to act by the Secretary
   upon which the adversary adjudication is based. The burden of persuasion that an
   award should not be made to an eligible prevailing applicant because the Secretary’s
   position was substantially justified is on the Secretary.




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    Commission Rule 2204.201(a) provides in pertinent part:

    The application shall show that the applicant has prevailed and identify the position
    of the Secretary that the applicant alleges was not substantially justified.

                                           Eligibility
    The party seeking an award for fees and expenses must submit an application within 30 days

of the final disposition in an adversary adjudication. 5 U.S.C. § 504(a)(2). The prevailing party
must meet the established eligibility requirements before it can be awarded attorneys’ fees and
expenses. Commission Rule 2204.105(b)(4) requires that an eligible employer be a “corporation . . .
that has a net worth of not more than $7 million and employs not more than 500 employees.”
Commission Rule 2204.105(c) provides, “For the purpose of eligibility, the net worth and number
of employees shall be determined as of the date the notice of contest was filed.” Commission
Rule 2204.202 (a) requires the applicant to “provide with its application a detailed exhibit showing
the net worth of the applicant as of the date of the notice of contest “that provides full disclosure of
the applicant’s assets and liabilities and is sufficient to determine whether the applicant qualifies
under the standards in this part.”
Prevailing Party
Section 504(a)(2) of 5 U.S.C. provides:
A party seeking an award of fees and other expenses shall within thirty days of the
final disposition in the adverse adjudication submit to the agency an application
which shows that the party was the prevailing party.

                                    Substantially Justified
    The Secretary must prove that her position in bringing this case was substantially justified.

“The test of whether the Secretary’s action is substantially justified is essentially one of
reasonableness in law and fact.” Mautz & Oren, Inc., 16 BNA OSHC 1006, 1009 (No. 89-1366,
1993). The reasonableness test comprises three parts. The Secretary must show: (1) that there is a
reasonable basis for the facts alleged, (2) that there exists a reasonable basis in law for the theory it
propounds, and (3) that the facts alleged will reasonably support the legal theory advanced. Gaston
v. Bowen, 854 F.2d 379, 380 (10th Cir. 1988).

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                                         Analysis
   The Secretary does not dispute AAA’s assertion that it employed fewer than 500 employees

and had a net worth of less than $7 million on the date of its notice of contest (see Attachment A to
AAA’s EAJA Application). The Secretary concedes AAA meets the eligibility requirements under
the EAJA. The Secretary also concedes AAA prevailed in her proceeding against it. The Secretary
disputes AAA’s claim she was not substantially justified in citing it, as McDonough’s employer, for
violating 29 C.F.R. § 1910.132(a) by failing to provide him with reflective clothing.
Applicability of the Standard
This judge vacated item 1, alleging a serious violation of 29 C.F.R. § 1910.132(a), on the
grounds the standard did not apply to the cited conditions.
The standard at 29 C.F.R. § 1910.132(a) provides:
Protective equipment, including personal protective equipment for eyes, face, head,
and extremities, protective clothing, respiratory devices, and protective shields and
barriers, shall be provided, used, and maintained in a sanitary and reliable condition
wherever it is necessary by reason of hazards of processes or environment, chemical
hazards, radiological hazards, or mechanical irritants encountered in manner capable
of causing injury or impairment in the function of any part of the body through
absorption, inhalation or physical contact.

   The citation alleges: “On or about 11/23/01, workers were not provided with the proper

protective equipment such as a reflective vest while selling newspapers on a street corner under
limited visibility conditions.”
Under the reasonableness test, the record establishes the Secretary had a reasonable basis for
alleging the facts she did: it is undisputed that McDonough was not wearing a reflective vest at the
time of his death. The Secretary must also establish there exists a reasonable basis in law for the
theory she propounds, i. e., that under 29 C.F.R. § 1910.132(a), “protective equipment” includes
reflective vests. AAA argues this theory is not reasonable (AAA’s application, p. 4):
Throughout this litigation, the Secretary knew no court had previously found that
warning garments such as reflective vests constituted personal protective equipment
under the PPE standard. The Secretary also knew it had specifically defined
reflective vests to be warning garments, not personal protective equipment, in its
marine terminal and construction standards. . . . Nevertheless, the Secretary pursued
the case through hearing.

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      Despite AAA’s argument, the Secretary did have a reasonable basis in law for her theory that

reflective vests qualify as PPE. At the time of the litigation, the Commission had not (and as of this
writing, has not) definitively held 29 C.F.R. § 1910.132(a) does not apply to reflective vests. Cases
where this issue has arisen have either been decided on other grounds, or have been decided by
administrative law judges, whose unreviewed decisions have no precedential value.
While this court analyzed the standard’s language and concluded 29 C.F.R. § 1910.132(a)
was intended to include only equipment that acts as a physical barrier to potential hazards, this
conclusion is not immediately evident on the standard’s face. At least one administrative law judge
has found 29 C.F.R. § 1910.132(a) applies to reflective vests where employees working at night are
exposed to traffic. Judge Barkley, in an order issued August 6, 2004, denied respondent’s motion
to dismiss a citation for 29 C.F.R. § 1910.132(a), finding the standard applied to reflective vests
because traffic poses a “hazard of environment” to employees working in darkness. U. S. Postal
Service, (No. 04-0655, 1994).1 This is an issue over which reasonable minds can disagree.
The Secretary must also show AAA’s failure to require McDonough to wear a reflective vests
supports her theory that this failure constituted a violation of 29 C.F.R. § 1910.132(a). She has done
this. Citing AAA’s failure to provide McDonough with a reflective vest is consistent with her
interpretation of the standard.
The Secretary was reasonably justified in bringing this case against AAA.
AAA’s Employment Relationship with McDonough
The Commission found McDonough was an independent contractor, and thus was not an
employee of AAA. In making this determination, the Commission analyzed a number of factors as
set out in Nationwide Mutual Insurance Company v. Darden, 503 U.S. 318 112 S. Ct. 1344 (1992).
The Secretary argued before the Commission that, under Darden, the central inquiry is:
In determining whether a hired party is an employee under the general common law
of agency, we consider the hiring party’s right to control the manner and means by
which the product is accomplished. Among the other factors relevant to this inquiry
are the skill required; the source of the instrumentalities and tools; the location of the

1
In its reply, AAA argues the court cannot consider Judge Barkley’s order in determining substantial justification
because the Secretary did not refer to it in the proceeding below, so it is not part of the record. The Secretary is not
referring to Jud ge B arkley’s o rder as evid ence , but rath er in sup por t of her p osition that there is a reaso nab le basis in
law for the theory she propounds. Reference to the order is appropriate.

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   work; the duration of the relationship between parties; whether the hiring party has
   the right to assign additional projects to the hired party; the extent of the hired party’s
   discretion over when and how long to work; the method of payment; the hired party’s
   role in hiring and paying assistants; whether the work is part of the regular business
   of the hiring party; whether the hiring party is in business; the provision of employee
   benefits; and the tax treatment of the hired party. Nationwide Mutual Insurance
   Company v. Darden, 503 U.S. at 323-24 (quoting Community for Creative Non-
   Violence v. Reid, 490 U.S. 730, 751-752 (1989) (footnotes omitted)).

   Complainant stated that the fundamental question under the Darden test is whether the

alleged employer has the right to control work involved. In support of her position that AAA has
the right to control the work of its newspaper vendors, the Secretary argued:
AAA set the terms of payment and the hours of work. AAA supplied the goods to
be vended, and the sole tool of the trade, the money apron. All work sites were
determined initially by AAA - the intersections which the vendors came to prefer for
themselves - and transportation was provided by AAA from the vendor’s home to the
site and back again. Even on a daily basis, AAA chose where the vendor would work
if there was any dispute with personal preferences. AAA determined the fitness of
the vendors to perform their duties on a daily basis, reserving the right to reject their
services if they were incapacitated by drunkenness or other impairment. AAA
provided personal protective equipment in the form of orange vests, when asked.
AAA made safety training available, and provided transportation to and from the
safety training if a worker elected to take it.

   In short, but for AAA, these workers were unemployed. They could not
   independently hire out their services to another employer; there was no competitive
   market in which AAA was competing for these vendors’ services. The supposed
   contracts AAA had with McDonough were meaningless pieces of paper; one of them
   was not signed, and AAA failed to honor its apparently undertaking to get
   “independent contractor” insurance for him, even though it collected $2 weekly for
   supposed “premiums.” McDonough was AAA’s employee; he had a regular
   relationship with the company, it controlled his rate of pay, it controlled where he
   worked, and indeed it controlled whether he worked at all, since it reserved the right
   to reject his services on any given day.

   Secretary’s Opening Brief, pages 14 and 15.


   This court found it unnecessary to address the employment issue because it vacated the

citation on the grounds the cited standard was inapplicable. The Court in Darden cautions there is

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“no shorthand formula or magic phrase that can be applied to find the answer” to whether an
employment relationship exists. Id. at 1349. The totality of the factors must be weighed. Each case
must be decided on the facts peculiar to it.
While the Commission found that McDonough was not an employee of respondent, the
Secretary had a reasonable basis for the facts alleged. Although the vendors earned money by selling
newspapers which were provided by AAA, they had no downside economic risk. They were
guaranteed each day to receive all proceeds from the sale of 53 papers. The Secretary had a
reasonable basis in law for the theory that newspaper vendors are not independent contractors.
Compliance officer Sanborn recommended that no citation be issued to AAA based in her belief that
the vendors were independent contractors (attachment H to AAA’s EAJA application). AAA cites
this in support of its argument the Secretary was not substantially justified in bringing this action.
This argument is rejected. The recommendation of a compliance officer is not dispositive of a legal
issue.
At least one jurisdiction has found that newspaper vendors are employees, and not
independent contractors. See Kentucky Unemployment Insurance Commission v. Landmark
Community Newspapers of Kentucky, Inc., 91 S. W. 3d 575 (KY 2002). The facts of the case
reasonably support the legal theory advanced by the Secretary. Under these circumstances, the
Secretary was substantially justified in bringing this case against AAA.
Settlement Negotiations
AAA argues the Secretary was not substantially justified in pursuing this action after AAA
made a reasonable offer of settlement. This argument has no place in an EAJA petition. The
Secretary has met her burden in showing her positions in bringing the case were substantially
justified. She has no further burden of showing she was substantially justified in rejecting a
settlement offer, reasonable or not, from AAA.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The foregoing decision constitutes the findings of fact and conclusions of law in accordance
with Federal Rule of Civil Procedure 52(a).

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                                      ORDER
  Based upon the foregoing decision, it is hereby ORDERED that:
  AAA’s application for attorneys’ fees and expenses is denied.




                                               /s/
                                               STEPHEN J. SIMKO, JR.
                                               Judge

Date: March 13, 2006

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