See below for latest California Ruling on penalties

Federal and State regulations govern lead-based paint removal and the disposal of waste. There are substantial penalties for failure to comply. This article is more appropriately about the cost of failure to properly handle leaded waste. Lead-based paint removal is governed by several laws that can lead to liability of both the contractor and the owner. These laws originate on both the Federal and State level. In some cases, specially formed districts with a state have applicable regulations.

As a practical matter, the cost of compliance with the rules and regulations is something for the marketplace to determine. These are the costs for the containment of the area of removal; worker protection; and ultimately, disposal of the lead waste.

Failing to comply, however, has its own costs. Laws now exist which provide for the reporting and cleanup of uncontrolled releases in the environment of hazardous waste. Liability can extend to the owner, owner’s consultant, transporter, and contractor who generates the waste. Given the penalties and extensive liability for permitting the discharge of lead waste, compliance ultimately makes economic sense.

The cost of lead removal, like any other issue in a construction contract, is a matter of allocation of risk. Financial responsibility for some liability and damages can be allocated to certain parties by contract clauses designed for that purpose.

There are several United States laws pertaining to the generation of hazardous waste which may affect both the facility owner, and the contractor who physically generates the waste. This article will identify the laws, the purpose of each, the types of behaviors that give rise to liabilities, and the penalties or damages that can be exacted as remedies.

RCRA has eleven stated "objectives." which, for our purposes, include the following:

"Assuring that hazardous waste management practices are conducted in a manner which protects human health and the environment;"

"Requiring that hazardous waste be properly managed in the first instance, thereby reducing the need for corrective action at a future date;"

"Minimizing the generation of hazardous waste and the land disposal of hazardous waste by encouraging process substitution, materials recovery, properly conducted recycling and reuse, and treatment;"

"Establishing a viable Federal/State partnership to carry our the purposes of this chapter...;"

"Providing for the promulgation of guidelines for solid waste collection, transport, separation, recovery and disposal practices, and systems.."

These objectives are essentially under the category of waste management. The RCRA also has as its second goal the research and development of better resource recovery and reuse. However, it is the waste management that immediately concerns the facility owner and contractor. The parties listed below have certain reporting requirements to the United States Environmental Protection Agency (US EPA) once the hazardous waste comes into existence.

Owner of the Facility - The most likely candidate for coverage under RCRA is the owner or operator of the facility with the lead paint. This, in fact, is true of every law discussed in this article.

Generator of Waste - Second on the list is the contractor which physically generates the waste. The generator is equally responsible with the owner for the prevention of the unauthorized disposal of the waste materials.

The Transporter of Hazardous Waste - The transporter has extensive reporting requirements, as it is under certain regulations pertaining to the maintenance of a shipping manifest. Also, the transporter is required to properly label the waste and contain it for transportation. These requirements are installed by the EPA in conjunction with the Department of Transportation.

The Storage Facility - The fourth party covered by the RCRA is the storage facility, or "Treatment, Storage, and Disposal Facility (TSD)."

Liability arises upon the "generation" of 100 kilograms (220 lbs.) of waste per month. In other words, waste management practices pursuant to RCRA are required when this amount of waste is created. Liability is created under RCRA, not for the generation of waste itself, but for the failure to properly dispose of the waste or comply with certain reporting requirements. Generally, anyone who generates, treats, transports, or disposes of hazardous waste must notify the EPA. Each notification results in the issuance of an identification number. No one under RCRA may store, dispose of, transport, or offer for transport any hazardous waste without an EPA identification number. For the contractor or facility owner, this means that the transporter to whom the waste is turned over must also have an EPA identification number. If the transporter does not have such a number, the generator or owner cannot turn over the waste for removal from the site.

Further, the transporter must prepare a manifest which must be executed by anyone transporting or handling the waste. Copies go to the generator and the owner. Packaging, labeling, and reporting requirements are extensive for the removal of the waste from the site and are important, not only for the actual transporter. The obligation is placed on the "generator" to package, label, and mark all hazardous waste for transportation. The generator must also give placards, required by the United States Department of Transportation, for hazardous waste to the transporter before the waste can be transported off-site.

There are both civil and criminal penalties applicable to violations of RCRA, or the regulations contained in the Code of Federal Regulations (29 CFR 1926.62, Lead Exposure in Construction, Interim Final Rule). These penalties are enforced by the EPA Administrator.

Compliance Orders - The Administrator has the authority to issue a "compliance order" whenever he determines there has been, or is in existence, a violation of any requirement of RCRA. The order can require compliance immediately or within a specified time period, or both. The Administrator may commence a civil action in the United States District Court in the jurisdiction on which the violation occurred for appropriate relief, including temporary or permanent injunctions.

The Administrator is also authorized to issue penalties up to $25,000 for each day of noncompliance for each violation of an RCRA requirement. Considering the several reporting requirements that exist simply for the preparation of the waste to leave the site, such penalties can be very high. It should be pointed out that penalties are viewed by the Administrator with an eye to the seriousness of the violation and "any good faith efforts to comply with applicable requirements."

These orders become final unless the alleged violator requests a hearing within 30 days after the order is service. The hearing is to be held "promptly" and is open to public. The Administrator has the authority to issue subpoenas for witnesses and producing of documents. For each hearing, the Administrator can issue special rules for that specific hearing for "discovery procedures."

If the order becomes effective, the Administrator has the authority to assess another civil penalty of up to $25,000 per day "continued noncompliance." Further, the Administrator can suspend or revoke any permit issued to the violator, regardless of whether is was issued by the Administrator or a state agency.

Criminal Penalties - These are obviously reserved for the more serious violator. RCRA provides that the following violations may lead to fines of up to $50,000 per day of violation or imprisonment of up to two years, or both:

• Transportation of, or causing to be transported, any hazardous waste to a facility which does not have a RCRA permit;

• Treatment, storage, or disposal of any hazardous waste without a permit, in violation of any requirement of the permit, or in violation of any interim status regulation or standard;

• Omission of material information or the making of false statements or representations on any application, label, manifest, record, report, permit, or other document filed with or used by the Administrator or by the State in the case of any authorized State program;

• Generating, storing, treating, transporting, disposing of, in any way handling hazardous waste which the party then destroys, alters, conceals, or fails to file on any record, etc. required by the Administrator or by the State in the case of any authorized State programs;

• Transportation of a hazardous waste without a manifest.

RCRA provides even harsher penalties for "knowing endangerment." Under this violation, any person who transports, treats, stores, disposes of, or exports any hazardous waste and who knows that "he places another person in imminent danger of death or serious bodily injury...shall be subject to a fine of not more than $250,000 or imprisonment for not more than fifteen years, or both." Organizations are subject to fines of up to $1,000,000.

It should be pointed out that these violations must be "knowingly" done to create the criminal liability. The statute provides when a person’s state of mind is "knowing." For example, RCRA points out that a person’s state of mind is "knowing," for the purposes of proving knowing endangerment, "if he is aware of the nature of his conduct."

Cases interpreting this statute indicate that is is not necessary for the Government to show that the violator knew of the existence of reporting or disposal requirements; instead, all that must be shown is the the person knew what he was doing.

Two cases from United States Courts of Appeals illustrate this point. In the first, a corporation turned over hazardous waste consisting of paint and solvents to a recycler. The recycler did not have a permit for the transportation or storage of the waste. The waste was discovered by government officials to be buried in illegal disposal sites in two states. The government brought criminal charges against the corporation and its employee who was responsible for the disposal of hazardous wastes. The 11th Circuit Court of Appeals held that "it would be no defense to claim no knowledge that the paint was a hazardous waste within the meaning of the regulations, nor would it be a defense to argue ignorance of the permit requirement." The Court upheld the jury verdict convicting both defendants.

In the second case, the director of a public works department of a city purchased paint for road maintenance. Fourteen 55-gallon drums were not used, and the director ordered them buried at the city’s sewage treatment plant. Two years later, the superintendent of the plant notified the EPA. The public works director appealed his conviction of knowingly disposing of hazardous waste without a permit. The grounds for the appeal were that there was no proof by the government that he knew the city did not have a permit. He also argued that it had to be shown that he knew the material was hazardous. The 9th Circuit Court of Appeals denied his arguments, holding that the statute did not expressly make knowledge of the lack of a permit a requirement for a conviction. On the issue of knowledge of whether the waste was hazardous, the Court further held that the defendant "knew that the chemical wastes had the potential to be harmful to others or to the environment, or in other words, it was not an innocuous substance like water."

This act is commonly known as "Superfund," because of the trust fund that is created by the payment of fees. The fund is ostensibly to pay for the cleanup of abandoned waste sites, a purpose which was not covered by RCRA. CERCLA, also administered by EPA and, in appropriate instances, by State agencies, calls for the Administrator to act in response to a determination that there exists some endangerment to the public health, welfare, or environment. The Administrator may take a variety of actions to handle a site that is determined to contain hazardous waste.

The act or omission which triggers CERCLA’s application is generally the release of hazardous waste into the environment. When that occurs, the owner or operator of the site must report the release to the EPA. The reporting requirements are quite specific because they are all tied into the amount released. If a hazardous waste, in what is defined as a "reportable quantity," is released, the reporting requirements are triggered. Failure to notify can result in fines or imprisonment for up to three years-five years in the event of a second violation-or both. There is also a requirement for reasonable notice of the release of hazardous substances to the public by publication in a local newspaper.

Liability under CERCLA may also extend to the officers or directors of a corporation. Different tests of responsibility have been established by Federal Courts.

The EPA can also order remedial, or cleanup, efforts. This can be done by either an order to the responsible party, or by the Government having the work performed and then pursuing the responsible party. A willful violation of, or refusal to comply with, any order may result in fines of up to $25,000 per day of noncompliance. The Government is further authorized under CERCLA to seek punitive damages of up to three times the amount expended in cleanup costs.

CERCLA also provides that private citizens can pursue actions against a violator. Essentially, all they must do is perform the cleanup or be legally responsible for it. The significance of this provision is that a private party may be moved to action more quickly that the EPA.

CERCLA expressly prohibits any contractual device which transfers any liability of a person or entity to another. In other words, the owner or his consultant cannot sign a contract with a contractor, and transfer all responsibility for CERCLA compliance to the contractor. CERCLA does permit one with liability to be indemnified or held harmless. This means that, while an owner, for example, may still be legally responsible to the EPA or to a private citizen who performs the cleanup, the owner may seek reimbursement from the consultant advising him or from the contractor which generated the waste.

However, this may be a distinction without any substantive difference. If one could transfer liability, then one would never be the focus of an enforcement action. In other words, one would not be named in an enforcement action or be named in the compliance order. In fact, one would never be named.

However, the indemnification does not prevent a person or entity from being named. All an indemnification, or "hold harmless’ clause, does is to substitute the financial pocket of one for another. While this sounds acceptable, it must be kept in perspective of the financial well-being of the indemnitor at some point in the future. Liability under CERCLA may arise decades after the owner or generator was on-site and the waste created. Will the indemnitor still be financially capable of paying any liability at that point? Keep in mind that corporate officers may be personally liable under CERCLA. In that case, an individual of a small company could find himself named in an enforcement action, or named as a party in a compliance order years after the project. With the liability following the director personally, the possibility exists that the indemnitor may not be around to live up to its obligations.

Probably the best known area of controversy in lead-based paint removal, and for hazardous waste generally, is the liability arising out of OSHA. The act has now been in existence for almost 25 years. Its purposes are: to keep the place of employment free from recognized hazards, and force compliance with promulgated OSHA standards. The standards are created by a commission which periodically reviews worker safety issues.

OSHA expressly creates a duty on each employer to "furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm..." and to "comply with occupational safety and health standards promulgated..." by the Act.

The Act further gives the Secretary, or his designated agent, the right to enter into any place of employment and inspect and investigate all conditions during regular work hours and at any other reasonable time. He is further empowered to issue Subpoenas to require the attendance of witnesses and the production of evidence. Failure to comply leaves the violator subject to the contempt powers of the appropriate United States District Court.

The inspection can be done either at the Secretary’s initiative, or on the request of any employee. An employee representative will accompany the Secretary during the investigation at the work site. If there is no representative, the Secretary may interview an appropriate number of employees about conditions. Further, there are record-keeping requirements pertaining to employment.

Assuming a violation is found during the investigation, the Secretary will issue a citation. The employer has 15 days to notify the Secretary of its intent to contest the citation. If the employer does not intend to contest the citation, then it must comply within the allotted time or face further penalties, if appropriate. If the employer does intend to contest the citation and provides proper notice to the Secretary, the Commission provides the employer with a hearing.

The Secretary also has injunctive power to enforce his citations. The right arises where "danger exists which could cause death or serious physical harm immediately or before the imminence of such danger can be eliminated through the enforcement procedures otherwise provided." It should be noted that in certain circumstances the employee can seek this relief if there is no action by the Secretary.

Violations of the Act (other than for retaliation against a "whistleblower") are broken down as follows:

• Willful or repeated violations can lead to a penalty of up to $70,000 but not less than $5,000 for each willful violation;  (See below for latest California Ruling on penalties)

• A serious violation can lead to a penalty of up to $7,000;

• A violation that is not considered to be serious can lead to a penalty of up to $7,000;

• Failing to correct a violation can be punished by up to $7,000;

• A violation causing the death of an employee can, for the first such violation, lead to a penalty of

• $10,000 or six months imprisonment or both. A second such violation can lead to a penalty of $20,000 or twelve months imprisonment or both;

• Giving advance notice of an inspection can result in a penalty of $1,000 or six months imprisonment;

• Giving false statements in any reports or documents required by OSHA can result in a $10,000 penalty or six months imprisonment or both; and

• Violating posting requirements can lead to a penalty of $7,000.

The significance of the penalties is that they are cumulative for each employee. An example is a recent $5,000,000 fine against a coating contractor in Pennsylvania. The Secretary imposed the penalty after claiming that 20 employees were exposed to lead levels nearly 700 times higher than the permissible exposure level.

There were also allegations that the contractor failed to provide training, engineering controls, and respiratory protection. Finally, one allegation was there were deficiencies in the company’s medical surveillance program.