BEFORE THE WORKERS' COMPENSATION BOARD OF



                          THE STATE OF OREGON



                           HEARINGS DIVISION



Oregon Occupational Safety &                                    
  Health Division			)  Docket No: SH-93253

					)

	Plaintiff		 	)  Citation No. U6958-039-93

					)

REYNEL PIPELINE, INC.			)

					)

	Defendant		 	)  OPINION AND ORDER



	Pursuant to notice, a hearing was held in the above matter on
February 2, 1994, in Salem, Oregon, before Referee Donna
Garaventa.  The plaintiff, Oregon Occupational Safety & Health
Division (hereinafter Or OSHA), was represented by J. Kevin
Shuba, Assistant Attorney General.  The defendant, Reynel
Pipeline, Inc., was represented by Willard E. Fox.  The
proceedings were recorded by Marlene Cromwell of Business
Support Services.  The record was closed on February 2, 1994.



	No affected employees elected to appear as parties pursuant to
OAR 438-85-411.



	This is a contested case under the Oregon Safe Employment Act,
ORS 654.001 to 654.991.



                         EXHIBITS



	Exhibits 1 through 13 were received into evidence.



                         ISSUES



	1.  Defendant contests Item 1-1 of Citation No. U6958-039-93,
challenging both the violation and the reasonableness of the
proposed penalty.



	2.  Defendant contests Item 1-2 of Citation No. U6958-039-93,
challenging both the violation and the reasonableness of the
proposed penalty.



	3.  Or OSHA withdrew Items 1-3 and 1-4 of Citation No.
U6958-039-93 in their entirety.



                         FINDINGS OF FACT



Stipulations:



	Or OSHA stipulated that, if it is found that the Oregon Safe
Employment Act does not apply to Reynel Pipeline, Inc., then the
citation should be dismissed.  Or OSHA also stipulated that,
under OAR 437-01-145(2)(a), an additional 30 percent reduction
in the penalty should be applied for the corporation's good lost
workday record.



	The defendant stipulated that, if the Oregon Safe Employment
Act applies, the administrative rules require a protective
system to be in place in this situation and that there was no
protective system in the trench at the time of the inspection.



	Both parties stipulated that the severity of Items 1-1 and 1-2
was serious and that the probability of an injury occurring was
low.



Findings based on the record:



	John Yarnell and Robin Reynolds are the sole shareholders of
Reynel Pipeline, Inc., which was established in April, 1993, for
the purpose of excavating and laying sewer, water, and storm
pipes in the ground.  Yarnell and Reynolds perform all the work
for the corporation.  Yarnell has more than 25 years of
experience working around excavations, including 15 years as a
foreman with responsibility for safety.  During that time, he
conducted safety meetings and safety classes, and was
responsible for deciding on safety measures.  Reynolds has spent
16 years as an excavator and has been responsible for safety on
job sites, including conducting safety meetings and making
decisions regarding protective systems.  Yarnell and Reynolds
elected not to provide workers' compensation coverage.  Neither
Yarnell nor Reynolds has missed work due to an injury since the
company was formed in April 1993.  



	Neither Yarnell nor Reynolds receives regular wages for work
done, but each draws money from the corporation as he needs it
if it is available.  During 1993, Yarnell withdrew approximately
$3,000 from the corporation; Reynolds took a draw of more than
$11,000.



	Reynel Pipeline, Inc. sub-contracted with Ed's Underground to
lay pipe at Tualatin Commons, a city renewal project.  



	On August 24, 1993, Frank Upham, a safety compliance officer
for Or OSHA, conducted a safety inspection of the job site where
various operations of the project were being conducted.  He
approached John Yarnell because he noticed him in the trench
without safety protection.  At the time of the inspection,
Yarnell was standing in the six-foot deep trench laying the pipe
while Reynolds operated the excavator to dig the trench.  There
was no protective system in place in the trench.



	Upham approached Yarnell, who indicated that he and Reynolds
were the sole owners of the corporation, that they had no
employees, and that the workers' compensation and safety
statutes did not apply to them.  Upham asked Yarnell what type
of soil he was working with and Yarnell responded that he did
not know, that it looked fine to him.  Upham did not talk to
Reynolds.  



	Based on his conversation with Yarnell, Upham issued Citation
No. U6958-039-93.  He cited the company for a violation of OAR
437-03-001, 29 CFR 1926.651(k)(1), classifying the violation as
serious, and imposing a penalty of $1,350; 29 CFR
1926.652(a)(2), classifying the violation as serious and
imposing a penalty of $1,350; OAR 437-40-030(2)(c), classifying
the violation as serious and imposing a penalty of $1,350; and
OAR 437-03-001, 29CFR 1926.21(b)(2), classifying the violation
as serious and imposing a penalty of $1,350.  Each penalty was
reduced 10 percent from the $1,500 set under the rules, based on
a classification of the company as a small business.  



	The inspection was concluded and Yarnell and Reynolds did not
work any longer that day.  The owner of Ed's Underground arrived
on site shortly after the conclusion of the inspection and, when
told of the inspection, immediately ordered his employee, Tyrone
Belgard, to shore the trench.  When Yarnell and Reynolds
returned the following day, they sloped the trench at an angle
acceptable under safety standards to accommodate Class C soil. 



                 CONCLUSIONS AND OPINION



	The policy of the Oregon Safe Employment Act is set out in ORS
654.003, and provides in pertinent part:



"The purpose of the Oregon Safe Employment Act is to assure as far as possible safe and healthful working conditions for every working man and women in Oregon, to preserve our human resources and to reduce the substantial burden, in terms of lost production, wage loss, medical expenses, disability compensation payments and human suffering, which is created by occupational injury and disease. . . ."
In an effort to accomplish the policy, ORS 654.010 requires every employer to furnish employment and a place of employment which are safe and healthful for its employees. ORS 654.005(5) defines an employer as:
". . . any person who has one or more employees, or any sole proprietor or member of a partnership who elects workers' compensation coverage as a subject worker pursuant to ORS 656.128." (Emphasis added).
The definition of "person" in ORS 654.005(7), includes a corporation. ORS 654.005(4) defines an "employee" as:
". . . any individual, including a minor whether lawfully or unlawfully employed, who engages to furnish services for a remuneration, financial or otherwise, subject to the direction and control of an employer, and includes salaried, elected and appointed officials of the state, state agencies, counties, cities, school districts and other public corporations, or any individual who is provided with workers' compensation coverage as a subject worker pursuant to ORS Chapter 656, whether by operation of law or by election." (Emphasis added.)
In this case, the pivotal question is whether or not, at the time of the inspection, Reynel Pipeline, Inc. was an employer for purposes of application of ORS Chapter 654. If it was not, then Or OSHA did not have jurisdiction to issue a citation and the citation must be dismissed. If it was, then the correctness of each item must be addressed. Or OSHA does not dispute that the corporation may be exempt under a specific provision in ORS Chapter 656 from carrying workers' compensation insurance. It contends, however, that under the definitions contained in ORS Chapter 654, the corporation is an employer subject to the Safety Act because Yarnell and Reynolds are employees of the corporation. In addressing Or OSHA's contentions, a determination of the status of the corporate officers must be made, based on an analysis of the applicable statutes. Under the definitions set forth in ORS 654.005, Reynel Pipeline, Inc. is a person and is, therefore, an "employer" subject to the act under ORS 654.010 if Yarnell and Reynolds are considered employees under the definition set forth in ORS 654.005(4). That definition poses two requirements, both of which must be met for the term, "employee," to apply. First, Yarnell and Reynolds must be individuals engaging to furnish services for a remuneration. They each performed services for the corporation and obtained a "draw" from the holdings of the corporation. Further, they were the sole shareholders of the corporation, and, through the profit obtained through the services they performed for the corporation, they received an increase in the value of their stock. I find that they individually performed services for the corporation for a remuneration. Second, Yarnell and Reynolds must have been subject to the direction and control of the corporation. As officers of the corporation, they directed and controlled their own actions, as employees of the corporation, to perform the various activities. Therefore, although they were officers of the corporation, at the time of the inspection, they were acting as employees of that entity. See McKeown v. SAIF, 116 Or App 295, 298 (1992). I conclude that, under the definitions set out in OAR 654, at the time of the inspection, Reynel Pipeline, Inc. was an employer subject to the Oregon Safe Employment Act. Therefore, Or OSHA had authority to inspect the job site and to issue a citation. Item 1-1 Item 1-1 alleges a violation of OAR 437-03-001, 29 CFR 1926.651(k)(1), which provides:
"Daily inspections of excavations, the adjacent areas, and protective systems shall be made by a competent person for evidence of a situation that could result in possible cave-ins, indications of failure of protective systems, hazardous atmospheres, or other hazardous conditions. An inspection shall be conducted by the competent person prior to the start of work and as needed throughout the shift. Inspections shall also be made after every rainstorm or other hazard increasing occurrence. These inspections are only required when employee exposure can be reasonably anticipated."
Or OSHA contends that the defendant violated the above standard by having no soil classification made for the trench, by having no protective system in place, by failing to have the employer have competent person training, and by failing to have each employee trained to recognize unsafe conditions. The standard requires only that a competent person make inspections. "Competent person" is defined in Section 1926.650(b) as:
". . . one who is capable of identifying existing and predictable hazards in the surroundings, or working conditions which are unsanitary, hazardous, or dangerous to employees, and who has authorization to take prompt corrective measures to eliminate them."
The determination of whether or not a person is "competent" for purposes of the rule is a question of fact. There is no requirement for a person to have formal training. Experience can be considered sufficient to qualify an individual as competent to make the required inspections and determinations. Here, Yarnell did not think the Safety Act applied to his corporation. His response, if the question was asked, was based on that understanding. His testimony at hearing, however, established that he had significant knowledge and expertise based on his extensive experience in the excavation field, including responsibilities involving safety maintenance and determinations. Upham did not even inquire regarding the qualifications of Reynolds, who was also knowledgable and experienced in excavating and, likewise, had experience in implementing safety programs and measures. All witnesses testified at hearing that there are several ways to determine the classification of the soil, one of which is observation. It was that test that Yarnell and Reynolds used to determine the classification of the soil at that job site. Based on the testimony in the record, I find that both Yarnell and Reynolds possessed sufficient expertise and experience to make daily inspections of the excavation and adjacent areas. Further, I find that Yarnell and Reynolds had sole authorization to take corrective measures to eliminate any hazards identified. Thus, I conclude that, at the time of the inspection, there were competent people on site to inspect the excavation, the adjacent areas, and the protective systems daily and at all other times required by the Act. I conclude that the citation in Item 1-1 is improper and should be dismissed. Item 1-2 OAR 437-03-001, 29 CFR 1926.652(a)(2) provides:
"Protective systems shall have the capacity to resist without failure all loads that are intended or could reasonably be expected to be applied or transmitted to the system."
Defendant admitted at hearing that the rules require a protective system and that there was no protective system in the trench at the time of the inspection. It argues, however, that the penalty was unreasonable. OAR 437-01-145 sets out the formula for determining penalties for violations of the Act. The penalty schedule is set out in Table 1 following OAR 437-01-145(5). The parties stipulated at hearing that the violation was a serious violation that could result in death, but that the probability of an accident occurring was low. Under the table, the penalty is set at $1,500. OAR 437-01-145 allows for penalty adjustments in three situations. Or OSHA reduced the defendant's penalty by ten percent for the small business classification under OAR 437-01-145(2)(c). That reduced the $1,500 penalty to $1,350. At hearing, Or OSHA stipulated to an additional 30 percent reduction under OAR 437-01-145(2)(a), for the defendant's lost workday cases incidence rate. That reduces the penalty to $900. Defendant alleges an entitlement to an additional 20 percent reduction under OAR 437-01-145(2)(b), based on an immediate correction of the violation. Or OSHA contends that the violation was not corrected before the end of the inspection and that, therefore, no such reduction is allowed. The inspection was conducted on August 24, 1993. Shoring was placed in the trench after Upham left the site and Yarnell and Reynolds had left work for the day. Thereafter, the trench was sloped to safety standards. However, Yarnell and Reynolds did not correct the violation, nor did they commence correction of the violation before Upham left at the end of the inspection that day. I find that the defendant is not entitled to an additional reduction under OAR 437-01-145(2)(b) for immediate correction of the violation. Items 1-3 and 1-4 Or OSHA stipulated to a withdrawal of Items 1-3 and 1-4 and the associated penalties in their entirety. ORDER NOW, THEREFORE, IT IS HEREBY ORDERED: 1. Item 1-1 of Citation No. U6958-039-93 and the proposed penalty is dismissed. 2. Item 1-2 of Citation No. U6958-039-93 is affirmed. The associated penalty is reduced to $900. 3. Items 1-3 and 1-4 of Citation No. U6958-039-93 and the proposed penalties are dismissed. NOTICE TO ALL PARTIES: You are entitled to judicial review of this Order. Proceedings for review are to be instituted by filing a petition in the Court of Appeals, Supreme Court Building, Salem, Oregon 97310, within 60 days following the date this Order is entered and served as shown hereon. The procedure for such judicial review is prescribed by ORS 183.480 and ORS 183.482. Entered at Salem, Oregon March 11, 1994 WORKERS' COMPENSATION BOARD Donna Garaventa Referee