California Court of Appeal Limits the Scope of California’s Unfair Competition Law by Denying Availability of Civil Penalties for Workplace Safety Violations

The Court of Appeal for the State of California, Fourth Appellate District in Solus Industrial Innovations, LLC v. Superior Court (2014) 229 Cal.App.4th 1291, held that a California district attorney cannot pursue civil penalties under California's Unfair Competition Law ("UCL") against Solus Industrial Innovations for a workplace safety violations that resulted in a fatal accident.

A California district attorney brought criminal charges and civil causes of action against Solus, including causes of action under the UCL.  Solus argued penalties under the UCL were not available for workplace safety violations because the UCL was preempted by federal workplace safety law and the Court of Appeal agreed.

Facts

Under the Supremacy Clause of the U.S. Constitution, Congress may preempt state law in matters that lie within the authority of Congress when there is an intent by Congress to do so.  When Congress passed the Occupational Safety and Health Act of 1970 ("Fed/OSHA") it preempted state laws on workplace safety.  Fed/OSHA offered states an opportunity to forego the federal law and continue to apply state law if the state submitted an enforcement plan to the Secretary of Labor ("Secretary") for approval and if the state laws and regulations were at least as effective as federal law.  California accepted this invitation and passed the California Occupational Safety and Health Act ("Cal/OSHA") in 1973, which was approved by the Secretary.

In 1977, California enacted the UCL, which defines unfair competition as any unlawful or, unfair or fraudulent business act.  Among other things, the UCL allows for civil penalties up to $2,500 per violation for engaging in unfair business practices. 

Following a fatal accident at Solus's plant, the district attorney filed criminal charges and four felony counts against Solus and two of its managers.  The district attorney also filed a civil action.  Two of the four civil causes of action were based in the UCL on the basis that the failure to comply with workplace safety standards was an unfair business practice. 

Decision

In rejecting the district attorney's attempt to apply the UCL to workplace safety violations, the Court of Appeal noted that California enacted the UCL four years after it submitted Cal/OSHA to the Secretary for approval.  Consequently, the Secretary could not have considered the civil penalties under the UCL as part of the state's enforcement mechanisms for workplace safety violations.  The Court of Appeal also noted that the fact that California's laws, including the UCL, were at least as effective as the federal standard was not sufficient to escape preemption.  Avoiding federal preemption under Fed/OSHA also required the state's laws to be incorporated into the enforcement plan approved by the Secretary.  The UCL's penalties were separate and in addition the Cal/OSHA penalties and regulations approved by the Secretary.  Therefore the UCL is not a valid avenue to impose additional penalties for workplace safety violations.

Questions

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Shane R. Larsen | 916.321.4500