The Unintended Impact of Imminent Danger
In today’s enforcement-first environment, no company is immune from imminent danger orders.
By Jason P. Webb
A little-noticed provision of recently enacted legislation is causing headaches for mine operators without providing meaningful benefit to the public. On July 21, 2010, the Dodd-Frank Wall Street and Consumer Protection Act (Dodd-Frank Act) was enacted in an effort to expand federal oversight of financial markets. Section 1503 of the Act contained new reporting requirements regarding mine safety, including disclosing the receipt of an imminent danger order issued pursuant to Section 107(a) of the Federal Mine Safety and Health Act of 1977 (Mine Act). In addition to imminent danger orders, Dodd-Frank requires companies to report their identification by the Mine Safety and Health Administration (MSHA) as candidates for or placement on a pattern of violations. This provision affects all publicly traded companies that operate or have subsidiaries that operate mines and requires disclosures within four days of their occurrence.
Public companies receiving such an order are now required to complete and file a Form 8-K “current report” with the Securities and Exchange Commission (SEC). The SEC characterizes Form 8-K current reports as necessary “to announce major events that shareholders should know about.” Other information required to be disclosed includes a company’s entry into bankruptcy or receivership, releases of important non-public financial information regarding the results of operations, as well as material modifications to the rights of security-holders.
Section 107(a) of the Mine Act authorizes MSHA inspectors to issue orders requiring the immediate withdrawal of all miners from an area where the inspector determines an imminent danger exists. Defined as a condition or practice which could reasonably be expected to cause death or serious physical harm before they can be abated, Congress viewed imminent danger orders as identifying important breaches of safety protocol that may be of interest to shareholders and potential investors. However, and unlike accidents which operators are required to report to MSHA under 30 CFR § 50.10 and are exhaustively defined at 30 CFR § 50.2(h), there is no similar provision defining or offering binding criteria to aid inspectors in their determination of what constitutes an imminent danger.
Given this discretion, it should come as little surprise that there are different perceptions among inspectors as to what sort of event constitutes an imminent danger to the health and safety of miners. For instance, on May 5, 2011, one underground mining company issued a Form 8-K to disclose to shareholders that it had received an imminent danger order. In that instance, an employee of a landscaping contractor used by a subsidiary of the company was observed using a weed-eater without glasses. The inspector indicated that “actual grass and weed clippings were observed to be physically present on the employee’s face in close proximity to his eyes.” Similarly, a western surface mining company received an imminent danger order after two different coyotes had been spotted in the vicinity of the mine and its surface facilities. Aggregates producers are not immune from such orders. After all, there are rattlesnakes in Texas and yard clippings in North Carolina. In the final analysis, no company is immune from such orders in today’s enforcement-first environment.
While these filings are highlighted because they are humorous in their liberal construction of what constitutes an “imminent danger” to miners’ health or safety, the concern is that the mere issuance of an imminent danger order could unfairly prejudice the company in the eyes of investors and shareholders. Given the importance of other information that is required to be disclosed via Form 8-K and the presence of wildlife withstanding, investors might attach undeserved weight to other 107(a) orders that, in actuality, relate to poor individual decision making or natural events and not poor safety cultures. Such orders may also simply be invalid.
Fortunately, Section 107(e) permits operators to contest imminent danger orders within 30 days of their issuance. Because the order has no penalty attached, this is the only time it can be contested. If subsequently vacated, it would be appropriate for an operator to issue a subsequent Form 8-K to provide notice of its vindication.
The other related concern is that Congress’ selection of imminent danger orders as a proxy for mines’ safety cultures was not a good one. As the examples previously discussed reveal, naturally occurring phenomena are required to be reported, but have no bearing on a company’s safety culture. A review of other imminent danger orders likewise reflects isolated instances of poor decision making on the occurrence of natural and short-term events rather than systemic safety problems. If the purpose of Form 8-K disclosures is, as the SEC provides, to inform shareholders as to major events affecting safety and health, then one would think that Congress could have identified another more appropriate standard on which to rely. Of course, mine operators don’t make the laws; rather, like the rest of us, they just have to follow the rules whether they serve the intended purpose or not.
Jason P. Webb is an associate in the Pittsburgh office of Jackson Kelly PLLC. Previously, he clerked at the Office of Administrative Law Judges, U.S. Department of Labor. He can be reached at 412-434-8055 or firstname.lastname@example.org.
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