Daily Rules, Proposed Rules, and Notices of the Federal Government
The Occupational Safety and Health Administration (OSHA) is providing notice that Curtis-Straus LLC (CSL) applied for renewal of its recognition as a Nationally Recognized Testing Laboratory (NRTL). (See Ex. 2—CSL renewal application dated 06/04/2004.)
The Agency processes applications by an NRTL for initial recognition, or for an expansion or renewal of this recognition, following requirements in Appendix A to 29 CFR 1910.7. This appendix requires that the Agency publish two notices in the
CSL applied to OSHA for its initial recognition in February 1998 when it was a limited liability company chartered in the Commonwealth of Massachusetts. After processing the application, including performing the necessary on-site assessments, OSHA announced its preliminary finding on the application in a notice published in the
Wendel describes itself as “one of the most prominent listed investment companies in Europe. Its philosophy is to invest for the long term, as a majority or principal shareholder, in listed or unlisted companies with leadership positions, so as to accelerate their own growth and business development” (
On June 4, 2004, CSL submitted its renewal application. On April 27, 2007, OSHA informed CSL by letter that CSL appeared not to meet the NRTL Program policy on independence under
OSHA responded to CSL on August 14, 2008 (see Ex. 6—OSHA letter to CSL, dated 08/14/2008), and reiterated the following concerns about CSL's independence: (1) The substantial relationship
On February 20, 2009, CSL responded by letter (see Ex. 7—CSL letter to OSHA, dated 02/20/2009) describing its efforts to: (1) Monitor Wendel's acquisitions; (2) perform enhanced certification procedures on products manufactured by subsidiaries and other companies organizationally affiliated with Wendel; and (3) use both external and internal audits to ensure that CSL maintains its independence. CSL asserted that it would accomplish these efforts through extensive procedures it has in place to identify public Wendel subsidiaries, its conflict management procedures that require additional witnessing and review of test data on products produced by Wendel subsidiaries, audits by internal compliance officers, and IFIA membership. It also informed OSHA that it was changing its executive leadership and augmenting its board of directors with additional independent directors to dilute the potential for undue influence upon the board. However, the mutual board members shared between BVSA, Legrand, and Wendel would remain on the board. OSHA fully considered CSL's efforts to rebut the presumption of undue influence. However, on January 19, 2010, the Agency responded with a negative finding of renewal (see Ex. 8—OSHA negative finding of renewal, dated 01/19/2010). OSHA based its decision, in part, on concerns that OSHA would not be able to effectively monitor CSL's efforts, even if CSL made good-faith efforts, because of the extent and complexity of Wendel and Legrand's operations. OSHA does not have the resources or expertise to monitor all of Wendel's and Legrand's acquisitions, products, and operations.
In response to the negative finding of renewal, CSL submitted a revised application on October 18, 2010 (see Ex. 9—CSL revised renewal application, dated 10/18/2010). The revised application reiterated its commitment to objective testing, the procedures of the CSL Compliance Committee, and requirements of the external audits. CSL also proposed a temporary limitation, in which CSL would limit its testing and certification to existing customers and products. On August 1, 2011, CSL notified OSHA that Wendel reduced its ownership of Legrand from 32% to 11.1% (Ex. 10). However, as described below, the revised application and reduction in ownership fail to address the fundamental violation of the NRTL independence requirement.
OSHA requires NRTLs and applicants to be “completely independent” of the manufacturers of the equipment the NRTLs are testing (see 29 CFR 1910.7(b)(3)). This independence requirement is fundamental to the third-party testing and certification system. Early in the NRTL Program, OSHA extended the practices that two NRTLs—Underwriters Laboratories (UL) and Factory Mutual Research Corporation (FMRC)—instituted in their testing and certification programs. These practices included having no affiliations with (
The NRTL Program Directive that was in effect when CSL applied for NRTL recognition stated that, to meet the independence requirement, NRTLs and applicants “must be free from commercial, financial and other pressures that could compromise the results of its testing and certification processes” (see NRTL Program Policies, Procedures, and Guidelines—CPL 01-00-003—CPL 1-0.3 (NRTL Program Directive), Appendix C.V). The Directive makes it clear that NRTLs and applicants must avoid these pressures from manufacturers of equipment.
Under its independence policy, OSHA presumes that “pressures” exist if there is a substantial relationship between the NRTL or applicant and a manufacturer “of products that must be certified which could compromise the objectivity and impartiality in determining the results of its testing and certification processes.” Substantial, for purposes of the policy, “means of such a nature and extent as to exert undue influence on the testing and certification processes.”
In some limited situations, the policy allows OSHA to prescribe “conditions” on NRTLs or applicants for initial or continued recognition, even when the Agency determines that pressures exist. Such conditions, however, “must be consistent with the policy,” in that they must effectively eliminate the pressures stemming from the substantial relationship. The Directive also provides examples of options OSHA may consider when imposing conditions: (1) Restricting the suppliers for whom the NRTL or applicant may test and certify products; or (2) restricting the type of products the NRTL or applicant may test and certify.
Whether imposing conditions on an NRTL or applicant is appropriate is a judgment made by the Agency on a case-by-case basis. OSHA has discretion whether to impose conditions in a particular case. The independence policy does not
In analyzing these situations, OSHA must carefully examine the ownership situation; the types of products at issue; the scope and magnitude of the NRTL's or applicant's operations; the scope and magnitude of the operations of the manufacturers making, and the employers using, the products; and other factors. OSHA also must consider the degree to which it can monitor the NRTL or applicant's compliance with any imposed conditions, which is a particularly important factor. OSHA typically audits NRTLs once a year to ensure they continue to meet the NRTL requirements, including the independence requirement, and to maintain the quality of their testing and certification operations. If imposing conditions on an NRTL or applicant would be difficult or impossible for OSHA to audit effectively, imposing conditions on the NRTL or applicant would not be appropriate.
OSHA believes its policy on NRTL independence is a straightforward approach for judging an NRTL's or applicant's compliance with the Agency's independence requirement under 29 CFR 1910.7. OSHA cannot perform in-depth analyses of an NRTL's or applicant's ownership or financial relationship and interests. Therefore, the NRTL or applicant has the burden of showing it is independent, and that any relationship with a manufacturer or employer involves no, or only minor, pressures.
Wendel Investissement (Wendel) owns, at least in part, both CSL and Legrand (a manufacturer). Wendel owns 58% of CSL and 11% of Legrand through various intermediaries. Legrand is a manufacturer of various products, many of which require NRTL certification if used in the workplace. Under the NRTL independence policy, this relationship constitutes a “substantial relationship,” in which a major owner of a supplier of products requiring NRTL certification has an ownership interest in excess of two percent in CSL, an NRTL. Because of this substantial relationship, OSHA presumes that pressures exist on CSL that could compromise the results of its testing and certification processes and that CSL, therefore, is not independent.
CSL attempted to rebut the presumption of pressures. In various letters to the Agency, CSL explained why it believes it is not subject to pressures from Wendel or Legrand that could compromise the results of its testing and certification processes. CSL stated that its relationship to Legrand is highly attenuated and that its decision making is independent of both Wendel and Legrand (Ex. 9, p. 3). To rebut the presumption of pressures, CSL also proposed that it renew temporarily only product certifications for existing customers not associated with Wendel (Ex. 9 pp. 1, 10). Finally, CSL claimed that it took a variety of steps to ensure that it will not test or certify any products made by Legrand (Ex. 9, pp. 10-12). The Agency carefully considered this information, and finds that CSL did not adequately rebut the presumption of pressures, as discussed below.
To rebut the presumption of pressure, CSL contended that “the relationship of Legrand or other Wendel holdings is highly attenuated” (Ex. 9, p. 3) and, as such, does not result in undue pressure on CSL. CSL argues that Wendel is a long-term investor that does not manage CSL's day-to-day operations. CSL also noted that Wendel does not exert control over CSL, therefore assuring CSL's independence from Wendel and Legrand.
CSL's assertion that Wendel does not manage, or exert control over, CSL does not address the fundamental issue regarding the control that a parent company has over a subsidiary (
Although CSL claims an “attenuated” connection to Wendel, CSL did not provide any assurances that Wendel will refrain from exerting control over CSL, or pressuring CSL through Bureau Veritas. To the contrary, Wendel has a corporate policy that encourages exerting control over Bureau Veritas and CSL. Wendel's Web site states that its “policy is to be the key or controlling shareholder in its listed or unlisted investments on a long-term and hands-on basis. It expresses this commitment by actively participating in these companies' strategic decisions, based on the principle of direct, constructive and transparent give-and-take with their managers” (
CSL also claims that, because no member of its Board of Managers has “significant ties” to any of BVSA's parent companies, there is little
Furthermore, CSL asserted that individuals affiliated with Wendel and Legrand are no longer members of its Board of Managers (see Ex. 7). However, based on the information CSL provided, several BVSA-affiliated members remain on CSL's board: John Beisheim is Vice President of Acquisitions and Risk Management at BVCPS and Oliver Butler is a Senior Vice President of BVCPS (Ex. 7, p. 2). BVCPS is a subsidiary of BVSA, which is a subsidiary of Wendel. This arrangement perpetuates a direct line of communication and influence between Wendel and CSL by way of BVSA and senior officers at BVCPS. CSL provided no information to OSHA regarding the removal of members of its board who also were members of Legrand's, Wendel's, and BVSA's boards. These associations make Wendel privy to the BVSA's Board of Director's deliberations on behalf of CSL. Because of the close linkages, the potential remains for Wendel to influence CSL's testing and certification operations. Furthermore, since Wendel benefits from Legrand's success as a manufacturer of NRTL-certified products, the presumption is that pressures from Wendel could compromise CSL's testing and certification processes with regard to these Legrand products. In summary, the modifications CSL made to its Board of Managers provided little organizational separation between CSL and Wendel and, therefore, do not adequately rebut the presumption of pressures.
OSHA has concerns regarding entities that own intermediary companies between Legrand and Wendel, the companies these intermediaries own, and the business lines of these companies. The organizational chart provided by CSL on January 31, 2008 (Ex. 5; Ex. 1), fails to show the part owners of a number of these intermediaries. CSL also provided no information on the new intermediate owner of BVSA. Also missing is the name of intermediate companies owned by Wendel's subsidiaries. OSHA requested this information on August 14, 2008, but CSL repeatedly failed to provide the information required to address OSHA's concerns.
In its revised application, submitted October 18, 2010 (see Ex. 9), CSL requested that OSHA renew CSL's recognition by imposing a limitation that would restrict CSL to “only renew existing NRTL product certifications for existing customers * * * until the matter of ownership of [CSL] is resolved to OSHA's satisfaction.” CSL argued that this limitation would eliminate the presumption of pressure or other concerns regarding Wendel's ownership of CSL or the content of Wendel's holdings. CSL claimed that this approach would address OSHA's concerns regarding undue pressure because none of its existing customers had affiliations with Wendel. This limitation does not address OSHA's concerns adequately. The Agency must examine carefully the ownership situation; the types of products at issue; the scope and magnitude of the NRTL's and applicant's operations; the scope and magnitude of the operations of manufacturers making, and the employers using, the products; and other factors. OSHA also must consider the degree to which it can monitor NRTL compliance with such a condition.
As proposed by CSL, the limitation would be temporary and, therefore, would not resolve the ultimate independence issue. CSL would remain organizationally affiliated with Wendel, a situation in which Wendel could exert undue pressure on CSL. For instance, CSL's current NRTL certifications include testing for the standard UL 60950, which covers products made by Legrand. Under CSL's proposal, Wendel could still exert pressure on CSL to reject similar products made by Legrand's competitors.
Furthermore, CSL claimed that the proposed condition is a “self regulating” limitation that OSHA could audit easily. However, Wendel's operations are so vast that OSHA seriously doubts that CSL could effectively enforce the proposed condition. In this regard, Legrand is a world-wide enterprise with operations and affiliates in the U.S., Europe, Canada, Mexico, South America, China, and other Asian countries. One of these affiliates, Bticino, has operations in 60 countries. Wendel's 2007 annual report states that Legrand acquired 15 suppliers or manufacturers during the preceding three years, and the 2008 annual report describes Legrand as having a 19% market share of products and systems for electrical installations, and offering nearly 170,000 products. Moreover, CSL reports that it currently has 203 outstanding certifications distributed among 78 customers. Accordingly, it is infeasible for either OSHA or CSL to monitor every merger and acquisition of CSL's customers to ensure that none of these transactions involve a Wendel subsidiary. This infeasibility, along with the temporary status of this proposed condition, makes it an unacceptable option to resolve CSL's independence issue.
CSL established a compliance program that includes participation in various ethics programs, as well as formation of a Compliance Committee of CSL's Board consisting of independent managers to “assure that there are no pressures to distort its NRTL testing and certifications” (Ex. 9, p. 10). CSL also noted that Bureau Veritas is a member of the IFIA, which CSL claimed “assure[s] independence with respect to * * * certifications” as a part of the IFIA's ethical requirements (Ex. 9, p. 12). The ethical programs include both internal and external audits. Furthermore, CSL claimed that its conflict-management procedures require that it test and certify all products “independently of all of its clients. It does not design or manufacture products that it tests or certifies” (Ex. 9, p. 10). However, implementation of this compliance program does not rebut the presumption of pressures.
First, OSHA does not allow an NRTL to “self certify” its independence. Second, CSL's policy does not address the fundamental ownership conflict (
As described above, OSHA's independence policy permits OSHA to impose conditions only when minimal pressures exist, and the conditions are consistent with the NRTL independence requirement. The extent to which OSHA may impose conditions on a manufacturer-owned NRTL depends in part on the ownership arrangement, the scope of the NRTL's recognition, and the scope of the products manufactured.
In this case, Wendel owns a substantial share of CSL and a manufacturer, rather than a small minority interest in either organization, which would severely limit the pressure it could exert on the NRTL. Furthermore, Wendel owns and operates an enormous variety of companies. Wendel could own companies that produce numerous types of products that require NRTL certification. In such cases, OSHA cannot impose conditions on CSL that are consistent with the fundamental requirement that NRTLs be independent of “any manufacturers or vendors of equipment or material being tested for [equipment requirements]” (see 29 CFR 1910.7(b)(3)). In this regard, OSHA must consider whether it can reasonably monitor an NRTL's compliance with the conditions. OSHA cannot monitor reliably the various CSL and Wendel ownership relationships and affiliations with the numerous subsidiaries of Wendel. As noted earlier, the Agency's policy on independence must provide a straightforward, practical approach to determining whether an organization meets the requirement for independence. Accordingly, OSHA is not requiring its staff to analyze actual or potential business activities that could cause actual or potential conflicts and pressures. When these activities are extensive, which is the case for the world-wide operations of Legrand, this information is far beyond OSHA's auditing capabilities under the NRTL Program. In summary, OSHA cannot reasonably determine with its existing resources the extent to which Wendel-affiliated companies contribute to the sale and manufacture of products submitted to CSL for NRTL testing and certification.
CSL contended that OSHA permitted other NRTLs in positions similar to CSL's to adopt conditions that rebut the presumption of pressures (Ex. 9, p. 6). In particular, CSL argued that OSHA permitted such conditions in the cases of Intertek Testing Services NA, Inc. (Intertek), National Technical Systems, Inc. (NTS), and Wyle Laboratories, Inc. (Wyle), and that those cases indicate that OSHA also should apply conditions in CSL's case (Ex. 9, pp. 7-9). OSHA disagrees with this argument because CSL's case differs from these other cases. As mentioned above, OSHA applies conditions only in circumstances in which minimal pressures exist, and OSHA can reasonably determine and monitor the effectiveness of the conditions, and the conditions are consistent with OSHA's independence requirement.
In the Intertek case, Intertek's parent acquired, and merged into Intertek's overall laboratory operations, a small manufacturer of laboratory test equipment, Compliance Design. Consequently, Intertek lost its independence because its parent company owned a manufacturer of equipment that needed NRTL approval. OSHA, however, imposed a condition on Intertek's recognition that effectively eliminated the pressures stemming from Intertek's relationship with Compliance Design (66 FR 29178). This condition included a no-testing policy for Compliance Design and for any other manufacturer affiliated with Intertek. Although OSHA received no information showing that Intertek or its parent owned any other manufacturing interest, the Agency imposed the broader condition as a precaution. OSHA could impose this condition because, unlike CSL's situation, Compliance Design was a small company that produced just one type of product; therefore, Intertek could enforce the no-testing policy. Because of Compliance Design's limited operations, OSHA could monitor effectively Intertek's compliance with the independence policy. As noted earlier, CSL's situation is much different than Intertek's because Wendel's and Legrand's operations involve multiple products manufactured and sold by numerous and various subsidiaries, making it impossible for OSHA to impose conditions on CSL's recognition that would mitigate all of the pressures and that OSHA could monitor reasonably and effectively.
OSHA also imposed a condition on Wyle (59 FR 37509). When OSHA granted Wyle NRTL recognition, Wyle was part of an organization with a division that manufactured and distributed electronic enclosure cabinets. As with Intertek, the condition imposed on Wyle required that Wyle not test or certify any equipment that used electronic enclosures manufactured by the affiliated division. Unlike CSL's situation, this condition was easy for Wyle and OSHA to monitor because the only product at issue was electrical enclosure cabinets.
Lastly, OSHA imposed conditions on NTS (63 FR 68306). NTS was a public company that “could conceivably perform the design and engineering services * * * for manufacturers or vendors of the products covered within the scope of the test standards for which OSHA has recognized NTS” (63 FR 68306). Because NTS is a public company, OSHA had a concern that manufacturers or vendors could acquire ownership of NTS. Accordingly, OSHA imposed a condition on NTS that restricted it from testing and certifying products for a client to which it sells design or similar services. OSHA also required NTS to provide OSHA an opportunity to review NTS's NRTL Quality Manual, Quality Assurance Procedures, and other procedures within 30 days of certifying its first products under the NRTL Program (63 FR 68306, 68309). OSHA imposed these conditions only as a preemptive measure because there was no evidence in the record that any manufacturers or vendors owned NTS, or that NTS was providing design and engineering services to manufacturers or vendors. However, this is not the case for CSL, in which a manufacturer's direct ownership interest and the potential for indirect affiliation with numerous other manufacturers and vendors, results in a presumption of pressure that violates the NRTL independence policy.
Thus, OSHA's determination regarding the imposition of conditions on CSL's NRTL recognition is consistent with the Agency's previous actions on this issue. Although OSHA provided CSL with several opportunities to rebut the presumption of pressures, CSL did not meet its burden of demonstrating by clear and convincing evidence that pressures do not, and will not, exist that could compromise the results of its testing and certification process.
CSL seeks renewal of its recognition for the one site that OSHA previously recognized. CSL also is requesting that OSHA renew its recognition to use the
Following a thorough review of the application file and other pertinent information, and for the reasons stated above, OSHA determined that CSL does not meet all of the requirements for renewal of its NRTL recognition. The NRTL Program staff, therefore, recommends preliminarily that the Assistant Secretary deny CSL's application for renewal of its NRTL recognition.
OSHA welcomes public comment as to whether CSL meets the requirements of 29 CFR 1910.7 for renewal of its recognition as an NRTL. Comments should consist of pertinent written documents and exhibits. Commenters needing more time to comment must submit a request in writing, stating the reasons for the request. OSHA must receive the written request for an extension by the due date for comments (see
The NRTL Program staff will review all comments submitted to the docket in a timely manner, and, after addressing the issues raised by the comments, will recommend whether to grant the renewal of NRTL recognition to CSL. The Assistant Secretary will make the final decision on granting NRTL recognition, and, in making this decision, may undertake other proceedings prescribed in Appendix A to 29 CFR 1910.7. OSHA will publish a public notice of this final decision in the
David Michaels, PhD, MPH, Assistant Secretary of Labor for Occupational Safety and Health, 200 Constitution Avenue, NW., Washington, DC 20210, authorized the preparation of this notice. Accordingly, the Agency is issuing this notice pursuant to Sections 6(b) and 8(g) of the Occupational Safety and Health Act of 1970 (29 U.S.C. 655 and 657), Secretary of Labor's Order No. 4-2010 (75 FR 55355), and 29 CFR 1911.