Expect increased regulatory enforcement under the Obama administration

Seyfarth Shaw LLP

Last week, OMB Watch, a nonprofit research and advocacy organization, issued a report evaluating the Obama administration’s regulatory enforcement record in three key areas: environment, worker health and safety, and consumer health and safety. This alert summarizes some of the report’s most important findings.

The Environment

The Environmental Protection Agency’s (EPA’s) enforcement agenda under the Obama administration has focused on clean water issues. In October 2009, the EPA released the Clean Water Act Action Plan, in which it pledged to improve enforcement and to focus on major threats and major violators. Among the new focus areas are “non-point” water pollution sources, with concentrated animal feeding operations (CAFOs) being central to the aim. The Agency has already taken action against several CAFOs by forcing them to apply for discharge permits or fining them for violating existing permits.

Though the Obama administration has opened approximately the same number of clean water enforcement actions as Bush’s early administration did, Obama’s EPA has been more aggressive. In the first 18 months of Obama taking office, the EPA closed 95% of its actions, taking on average nine days to complete each one. The EPA under Bush’s first 18 months, however, closed only 87% of its actions, taking on average 26 days to complete each one. Obama’s EPA so far has issued penalties at a slightly lower rate than Bush’s did in its first 18 months (43 % compared to $46%) but the average penalty has been significantly higher under Obama ($13,135 compared to $9,962, a 32% increase).

Clean Air Act (CAA) enforcement has been more aggressive under Obama. In the administration’s first 18 months, the EPA opened 795 actions and concluded 99% of them, taking on average only 5 days to complete each one. During the same time frame of Bush’s administration, the EPA opened 658 actions and concluded 86%, taking on average 27 days to complete each one. Obama’s EPA has issued CAA penalties in a higher percentage of actions than Bush’s EPA (65% compared to 30%) but the penalty amount has been significantly lower under Obama, at $15,688 on average compared to Bush’s $28,666.

The Obama administrations EPA has also increased enforcement under the Resource Conservation and Recovery Act (RCRA). In the first 18 months of Obama’s EPA, the Agency opened 709 enforcement cases compared to only 473 in the first 18 months of Bush’s EPA. The completion rate under Obama has also been higher (96% compared to 78%) and the time to complete each action has been shorter (6 days on average compared to 37 days on average). Penalties, however, have been lower in Obama’s first 18 months than they were under Bush’s first 18 months ($15, 769 on average compared to $17, 693).

Worker Health and Safety Enforcement

The Occupational Safety and Health Administration (OSHA) has begun to target high-risk sectors and individual workplaces with historically poor health and safety records. In March 2010, OSHA sent letters to 15,000 workplaces with injury and illness rates above the national average. The letters offered assistance in improving workplace conditions and warned that targeted inspections may be forthcoming. OSHA also rolled out its Severe Violator Enforcement Program in April 2010, under which OSHA will increase inspections at workplaces with poor compliance records and pursue higher penalties for violators. Under the Obama administration, OSHA has placed a decreasing emphasis on voluntary compliance and compliance assistance.

The OSHA budget under Obama has grown significantly. The 2010 budget was $45 million more than the previous year, and Obama requested $14 million more for 2011. The bulk of the budget is designated for federal enforcement; the Agency expects to add 160 inspectors and other employees to its enforcement division. This increase may translate to an increased level of inspection activity, but so far Obama’s OSHA has not done significantly more inspections per year than Bush’s OSHA did. Citations, however, have increased dramatically under Obama. Between January 2009 to January 2010, federal and state OSHA programs handed out over 68,000 citations for violations, which is a 167% increase from the year prior. In the first half of 2010 alone, OSHA exceeded that number and issued 113,970.

The Mine Safety and Health Administration (MSHA) has begun to tighten mine safety enforcement policy in the wake of the Upper Big Branch coal mine explosion earlier this year. Obama increased enforcement at mines with poor safety records and issued 2,660 violations after inspecting 111 coal, metal, and nonmetal mines.

Consumer Health and Safety

Product labeling has been a high priority at the FTC and the FDA. In September 2010, the FTC filed a complaint against Pom Wonderful for unsubstantiated and misleading health claims about its pomegranate juice. The Agency has also proposed rules that would restrict the use of “environmentally friendly” product claims. At the FDA, increased use of warning letters has become part of a heightened enforcement effort. Earlier this year, the FDA sent warning letters to 17 companies, informing them that they were violating federal law by making misleading or false health claims. Targeted foods include teas, nuts, cereals, and olive oil. The FDA warned that if the companies didn’t fix the mislabeling, further action could result.

What This Means for Industry

Given the Obama administration’s enforcement record in the past 18 months and signs of even more aggressive enforcement in the coming years, industry should stay abreast of regulatory changes and be diligent in compliance efforts.