Food and Beverage Industry in Regulatory Enforcement Crosshairs

June 30, 2016

Recent federal and state enforcement actions against food and beverage companies under environmental, safety and health statutes highlight the need for this industry to pay attention to both basic and unique compliance requirements imposed throughout the supply chain. 

Safety and Health Enforcement  

Frozen food producer Ajinomoto Windsor faces $140,000 in civil penalties, assessed after a federal Occupational Safety and Health Administration inspection this winter that arose from two amputations suffered by the company’s workers.  Both incidents were attributable to alleged failures to comply with OSHA standards fundamental to the entire manufacturing sector — machine guarding and “lockout-tagout.” OSHA imposed the maximum penalty of $70,000 for one “Repeat” violation and at or near the maximum penalty of $7,000 for each of six “Serious” violations.  It remains to be seen whether and on what theories Ajinomoto Windsor may contest these June 15 citations, as OSHA provides companies 15 working days to contest citations.   

As for state enforcement, the Washington Department of Labor and Industries recently fined potato processer Washington Potato Company a total of $213,160 for alleged violations discovered while investigating an employee injury.  The employee was injured by a machine that was left on during cleaning, prompting an investigation into the company’s lockout-tagout practices.  The investigation revealed a history of lockout-tagout violations, in addition to several other violations for machine guarding, fall protection, and confined space hazards.  The penalties assessed included $14,000 for a repeat violation for using a ladder with broken feet and $56,000 for a repeat lockout-tagout violation.  The state agency also served notice that the company had been identified as a “Severe Violator” subject to heightened scrutiny and follow-up inspections.  The privately held company is contesting the citations largely because the prior violations that form the basis for the “repeat” and “severe violator” designations were issued to loosely related companies that do not share control over safety operations with each other.

These worker safety violations serve as examples of safety and health regulators’ continued focus on lockout-tagout requirements, and a reminder that food and beverage companies should ensure their lockout-tagout procedures are strictly followed.  Lockout-tagout is consistently one of the most frequently cited standards by regulators, and the No. 1 most-cited standard in the food manufacturing industry. Moreover, the increased penalties for repeat violations highlight the importance of challenging erroneous OSHA violations that might otherwise be settled or go uncontested.  Food and beverage companies should also review their facilities’ past OSHA violations to identify areas of risk, as OSHA has increased the look-back period for repeat violations to five years and increasingly bases repeat citations on company facilities other than the one being inspected.  OSHA is also set to increase its penalty amounts by August 1, 2016, potentially raising its repeat penalty from $70,000 to up to $126,000 per violation. 

Environmental Enforcement

Environmental enforcement activity over this past year shows the variety of environmental regulations with which food and beverage companies must comply, including monitoring and recordkeeping requirements.

Clean Water: On June 23, beer-maker D.G. Yeungling and Son Inc. entered into a multimillion dollar consent decree with the United States to resolve alleged violations of the pretreatment requirements for indirect dischargers under the Clean Water Act from two of its Pennsylvania breweries. 

Yeungling’s Pottsville brewery discharges wastewater containing organic materials, including sugar and yeast, to the local sewer authority, which in turn discharges treated wastewater to the Schuylkill River.  The complaint accused Yeungling of numerous pretreatment program violations, including discharges of wastewater that exceeded effluent limitations for biological oxygen demand, among others; failure to submit timely discharge monitoring reports; and failure to report effluent limit violations. 

Once the consent decree is approved after a 30-day notice and comment period, Yeungling will pay a civil penalty of $2.8 million.  The company has also agreed to take a number of affirmative steps to improve environmental compliance at its breweries, including: 1) developing and implementing an environmental management system (EMS) to be prepared by an independent consultant; 2) conducting EMS and environmental audits, both to be performed by independent auditors approved by EPA; 3) developing a communication and notification plan; 4) constructing a pretreatment system at the old brewery and constructing enhancements for the new brewery’s pretreatment system; 5) hiring certified wastewater treatment operators; and 6) developing response plans for discharge limit violations.  In a press release issued June 23, Yuengling announced that it had already installed an $8 million “state-of-the-art” wastewater treatment system at its historic Pottsville brewery in keeping with the settlement.  Notably, future environmental audits will cover not only Clean Water Act compliance, but also compliance with the Clean Air Act, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Emergency Planning and Community Right-to-Know Act (EPCRA) and the Resource Conservation and Recovery Act (RCRA). 

With municipal water systems coming under increased scrutiny and the EPA’s “Keeping Industrial Pollutants out of the Nation’s Waters” national enforcement initiative, inspections and enforcement for violations of pretreatment standards are likely to be on the rise, and it is important for industrial facilities to vigorously monitor for and timely correct environmental compliance issues.

Clean Air: Last week, Trader Joe’s entered into a consent decree with the United States to resolve alleged violations of the Clean Air Act at its retail grocery stores associated with the maintenance of refrigeration equipment that contains the ozone-depleting substance R-22.  Under the Clean Air Act, businesses that utilize refrigeration equipment containing over 50 pounds of ozone-depleting refrigerants must monitor for and promptly repair leaks. 

The United States’ complaint alleged that Trader Joe’s had violated these requirements at 181 of its stores in California, Arizona and Nevada.  The company agreed to pay a $500,000 civil penalty and to implement a corporate refrigerant compliance management system, reduce its average refrigerant leak rate, and use refrigeration equipment that contains non-ozone-depleting substances in new stores and remodels.

This settlement follows similar enforcement actions for violations of Clean Air Act requirements for ozone-depleting substances at major grocery store chains, including a 2013 settlement between the EPA and Safeway.  Because food and beverage companies often use large refrigeration equipment, they should review their obligations under the Clean Air Act and ensure companywide plans are in place to detect and address releases of ozone-depleting substances.

Chemical Safety: JSB Industries recently settled alleged violations of the “general duty clause” of the Clean Air Act and the release notification requirements of CERCLA and EPCRA.  JSB, a family-owned and -operated business, runs wholesale bakery and distribution facilities for its Muffin Town and other frozen bakery brands.  The alleged violations arose from the use of anhydrous ammonia in refrigeration equipment. 

Due to the risks a release of anhydrous ammonia would present to the environment and public safety, facilities that use anhydrous ammonia are subject to specific regulations, including: 1) the “general duty” clause of section 112(r)(1) of the Clean Air Act; 2) the notice requirements in section 103 of CERCLA; and the 3) inventory reporting requirements of EPCRA.  Under its settlement for violations of these provisions, JSB will pay a civil penalty of $156,000.  It has already replaced the ammonia-based system at one of its facilities with a nitrogen-based system.  The company will also undertake a supplemental environmental project that will provide to local fire departments approximately $119,000 worth of equipment intended to assist with chemical release response.  EPA was particularly interested in this aspect of the settlement because it considers the neighborhoods around these bakeries to be “environmental justice areas of concern.”

These enforcement actions run the gamut of environmental, health and safety regulations governing food and beverage companies. They illustrate the regulatory reality that traditional environmental, safety and health enforcement is alive and well, and failure to comply results in government investigations and, at least in these cases, the payment of substantial penalties accompanied by ongoing, intrusive agency involvement in the operations of company facilities to ensure future compliance.