[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




                        OSHA'S DRAFT SAFETY AND


                          HEALTH PROGRAM RULE

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                     WASHINGTON, DC, JULY 22, 1999

                               __________

                           Serial No. 106-23

                               __________

         Printed for the use of the Committee on Small Business



                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
69-562                     WASHINGTON : 2000


                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director


                            C O N T E N T S

                              ----------                              
Hearing held on July 22, 1999

                               WITNESSES

Jeffress, Charles N., Assistant Secretary of Labor for 
  Occupational Safety and Health, U.S. Department of Labor.......     4
Singh, Jasbinder, President, Policy, Planning & Evaluation, Inc..    33
Beale, Henry B.R., Principal Economist, Microeconomic 
  Applications, Inc..............................................    37
Halprin, Lawrence P., Keller and Heckman, LLP....................    52
Fellner, Baruch A., Partner, Gibson, Dunn & Crutcher, LLP........    59

                                APPENDIX

Opening statements:
    Talent, Hon. James M.........................................    68
    DeMint, Hon. Jim.............................................    71
Prepared statements:
    Jeffress, Charles N..........................................    73
    Singh, Jasbinder.............................................    89
    Beale, Henry B.R.............................................    97
    Halprin, Lawrence P..........................................   111
    Fellner, Baruch A............................................   143
Additional material:
    Testimony of Robert J. Cornell, Director, Dealer Operations 
      and Environmental Regulations, Mon Valley Petroleum, Inc., 
      before the Subcommittee on Employment, Safety, and Training 
      of the Senate Committee on Health, Education, Labor and 
      Pensions, March 4, 1999....................................   163
    Letter from Robert J. Cornell, Director, Dealer Operations 
      and Environmental Regulations, Mon Valley Petroleum, Inc., 
      to Chairman James M. Talent................................   165
    OSHA's ``Summary of the Preliminary Estimates of Impacts, 
      Costs, and Benefits of the Rule as a Whole'' October 1998..   168
    OSHA's ``Initial Regulatory Flexibility Analysis'' October 
      1998.......................................................   170
    Draft Proposed Safety and Health Program Rule................   196
    Report of the Small Business Advocacy Review Panel Convened 
      for OSHA's Draft Proposal Rule on Safety and Health 
      Programs...................................................   201
    ``Occupational Injury and Illness Rates, 1992-96, Why They 
      Fell'' Hugh Conway and Jens Svenson, Monthly Labor Review, 
      November 1998..............................................   222

 
              OSHA'S DRAFT SAFETY AND HEALTH PROGRAM RULE

                              ----------                              


                        THURSDAY, JULY 22, 1999

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The committee met at 11:05 a.m. in room 2360 of the Rayburn 
House Office Building, the Honorable James M. Talent (chairman 
of the committee) presiding.
    Chairman Talent. Good morning.
    Our hearing this morning will focus on the Occupational 
Safety and Health Administration's draft safety and health 
program rule.
    The current version of the draft rule was released in 
October 1998. OSHA plans to issue a proposed rule based on the 
draft later this year.
    By OSHA's own estimation, the draft rule will require over 
four million American small businesses to adopt safety and 
health programs satisfying certain vague requirements, such as 
``management leadership,'' ``employee participation,'' ``hazard 
identification and assessment,'' ``hazard prevention and 
control,'' ``information and training,'' and ``evaluation of 
program effectiveness.''
    OSHA claims its rule is flexible, permitting employers to 
meet the requirements of the rule however they see fit. 
Unfortunately, the rule isn't flexible. It is vague.
    Flexibility and vagueness are not synonymous.
    IRS regulations, for example, are vague but nobody believes 
they're flexible. As any small business entrepreneur will tell 
you, there are two substantial problems with forcing employers 
to either comply with vague requirements or risk civil and 
criminal penalties.
    First, a small business acting in good faith has no way to 
know what specific steps it must take to demonstrate sufficient 
``management leadership'' or ``employee participation.''
    Second, such vague terms provide OSHA inspectors with 
extraordinary discretion to target and fine employers.
    Importantly, a recent study authored by a senior economist 
at OSHA suggests that the draft rule would not increase the 
safety of American workers. The study published in the November 
1998 Monthly Labor Review indicates that mandatory safety and 
health programs like those required under this rule are no more 
effective at reducing occupational injury and illness than 
voluntary safety and health programs.
    Indeed, in 1996, the median occupation injury and illness 
rate in states with mandatory safety and health programs was 
greater than that in states with voluntary programs or no 
programs at all. Moreover, the median reduction in injuries was 
greater in states with voluntary programs or no program.
    This finding isn't surprising. BLS statistics show that 
over 75 percent of all businesses, as well as 75 percent of 
businesses with ten or fewer employees have no recorded 
occupational injuries or illnesses at all in a given year. 
Thus, occupational injury and illnesses are concentrated among 
a relatively few high hazard industries. Many, if not most of 
those employers, already utilize safety and health programs in 
order to obtain lower insurance and workers' compensation 
premiums.
    In short, what this rule would do is burden three-quarters 
of employers and small businesses who sustain no injuries or 
illnesses. A few high hazard employers already have such 
programs.
    On a related note, I'm very disappointed with the 
Regulatory Flexibility analysis published by OSHA in support of 
the safety and health program rule. OSHA flagrantly 
overestimated the likely benefits of the rule and 
underestimated the associated compliance costs.
    Both Reg Flex and SBREFA afford valuable protections to 
small businesses and insurance rules that accomplish what they 
are intended to accomplish. They require OSHA to provide small 
entities with estimates of the compliance burdens associated 
with the rule, and then solicit feedback as to how the 
underlying safety objectives might be effectively achieved at a 
lesser cost to small employers.
    When an agency makes spurious assumptions in cost/benefit 
data, small businesses lose the underlying protections of the 
statute. But that's exactly what OSHA did during the safety and 
health program rulemaking. An independent report commissioned 
by the SBA Office of Advocacy concluded that ``OSHA's costs and 
benefits methodologies do not provide adequate information on 
their underlying assumptions; make faulty assumptions; and are 
fraught with inconsistencies, inaccuracies and missing data.''
    Here are a few examples. OSHA assumes that the draft Safety 
and Health Program will lead to a 20 to 40 percent reduction in 
occupational injury and illness, despite the fact that states 
imposing mandatory safety and health programs do not have lower 
occupational injury and illness rates than those without such a 
requirement, and 75 percent of effective businesses already 
have an occupational injury and illness rate of zero.
    OSHA includes the benefits but not the costs of hazard 
control in its estimate for the rule.
    According to the independent report commissioned by the 
SBA, hazard control is the most expensive variable associated 
with the rule, increasing compliance costs by over 50% or over 
$2 billion annually.
    It's just disingenuous to include the benefits supposedly 
received from hazard mitigation and not the cost to small 
business of that mitigation.
    I want to say, in conclusion, what's so frustrating to me 
personally about this proposed rule. It seems to me that, both 
in process and substance, this rule is a return to the old 
OSHA.
    None of us wants OSHA to concentrate on paperwork 
violations. None of us wants OSHA to proliferate vague new 
regulations that invite inspectors to be arbitrary. None of us 
wants OSHA to use its enforcement resources on honest small 
employers who simply want guidance in obeying the law. And none 
of us wants OSHA to hurt small business while accomplishing 
nothing.
    I'm afraid this proposed rule does exactly that, and I 
agree with the primary recommendation made in the independent 
report commissioned by the Office of Advocacy.
    OSHA should not promulgate the draft safety and health 
program rule but should rather augment outreach and 
consultation programs to help employers develop and implement 
effective safety and health programs on a voluntary basis.
    I'm going to defer to my friend, the Ranking Member, for 
such comments as she may have. I do want to say that we have 
the head of OSHA here today, another expert witness who 
undoubtedly will try and disabuse me and the Committee of these 
notions when he testifies. [Laughter.]
    [Mr. Talent's statement may be found in the appendix.]
    Chairman Talent. But it's a pleasure, as always, to 
recognize the gentlelady from New York for her comments.
    Ms. Velazquez. Thank you, Mr. Chairman, and good morning to 
everyone. And thank you for holding today's hearing on OSHA 
health and safety ruling.
    A safe work place is not a Democratic or Republican issue. 
It is an issue of success for American employers and employees.
    In that spirit, a Democratic Congress working in 
conjunction with a Republican Administration created OSHA, the 
Occupational Safety and Health Administration, to save lives, 
prevent injuries, and ensure a safe working environment.
    OSHA provides a forum where employees, together with 
employers, have a real say in how this nation's safety policy 
is written and implemented.
    I am sure that everyone in this room will agree that this 
nation's small businesses strongly support workplace safety. 
Small business owners want a safe workplace because it means a 
better environment for their employees, more productivity and, 
in the end, a successful business.
    What frustrates small businesses is that while they support 
a safe workplace and know that the policy is well-intentioned, 
they also know their business and the best way to accomplish 
safety goals.
    Small businesses believe in these goals, but often question 
the way they are implemented. They feel that, given more 
flexibility, they would be able to achieve the same goals 
without adversely affecting their business.
    It was this type of concern that small businesses expressed 
to me when OSHA first came out with the Health and Safety plan.
    And to be quite honest with you, this plan was not ready 
for prime time. So OSHA went back to the drawing board using 
tools such as ERISA to revamp the rule and make it usable for 
all small businesses.
    What we have here today is a much improved product. The 
issue for the members of this Committee to answer is, does the 
Health and Safety Program adequately address such issues as the 
cost to the business, the potential benefit, provide a clear 
and concise rule.
    Is it justified?
    I am sure, through today's hearing and others, we can 
continue to improve this process and ensure that workplaces 
throughout this country are safeguarded in a smart and 
effective way.
    Although there still is a long way to go in this process, I 
am confident that this hearing today is a significant step in 
ensuring that all concerned are listened to and taken into 
account.
    I look forward to hearing from our witnesses on the impact 
of this very important rule.
    Thank you, Mr. Chairman.
    Chairman Talent. I thank the gentlelady for her comments--
as always.
    Our first witness and our first panel today is Mr. Charles 
N. Jeffress. He is the Assistant Secretary of Labor for 
Occupational Safety and Health and has held that position since 
November, 1997. He has a BA from the University of North 
Carolina and is a graduate of the Senior Executives Program at 
the Harvard University School of Government. He was a Deputy 
Commissioner and Director of Occupational Safety and Health at 
the North Carolina Department of Labor from 1992 through 1997, 
and was the Assistant Commissioner of the North Carolina 
Department of Labor from 1977 through 1992.
    Secretary Jeffress, I don't normally go into such detail, 
but people don't normally have such an impressive bio. I want 
to introduce you to the members of the Committee. I don't 
believe you've ever testified here, but it's a pleasure to have 
you here, and please give us your statement.

STATEMENT OF CHARLES N. JEFFRESS, ASSISTANT SECRETARY OF LABOR 
               FOR OCCUPATIONAL SAFETY AND HEALTH

    Mr. Jeffress. Thank you very much, Mr. Chairman. I 
appreciate the opportunity to come and talk with you today.
    As evidenced by your comments, Mr. Chairman and Ms. 
Velazquez, the concerns about safety and health programs and 
the way OSHA is approaching this as a rule are things that are 
useful to be aired, helpful to be aired, and I'm delighted to 
have a chance to tell you from our perspective where we are on 
this.
    As indicated, it is still early in the process and we have 
a long way to go in terms of public participation in shaping 
the final rule that we're proposing.
    The safety and health programs are simple, systematic 
approaches to managing workplace safety and health that are 
widely recognized as fruitful ways to reduce the numbers of 
job-related injuries and illnesses and the number of job-
related fatalities in workplaces.
    In developing this rule, OSHA has worked extensively with 
stakeholders from industry, labor, safety and health 
organizations, state governments, trade associations, insurance 
companies, small businesses, people from all walks of life, in 
addressing the issue how we should best require safety and 
health programs in workplaces.
    The draft rule would require the safety and health programs 
include five core elements, Mr. Chairman. You referred to some 
of these. Management leadership and employee participation; 
hazard identification and assessment; hazard prevention and 
control; training; and evaluation of program's effectiveness.
    Reduced to their basic level, these elements require an 
employer to work with its employees to find workplace hazards 
and fix them, and to ensure that employees and supervisors can 
recognize hazards when they see them.
    Again, simple, straightforward requirements.
    OSHA's interest in workplace safety and health programs has 
grown steadily since the early 1980s when the Agency first 
initiated its Voluntary Protection Program [VPP] to recognize 
companies in the private sector with outstanding records in the 
area of worker safety and health.
    It became apparent to us in working with the best of the 
best, if you will, in American business that these worksites 
which had achieved injury and illness rates markedly below 
other companies in their industries, relied on safety and 
health programs to produce these kinds of results.
    At VPP worksites, which today routinely achieve injury and 
illness rates as much as 60 percent below the average for their 
industries, safety and health programs have become self-
sustaining systems that are fully integrated into the day-to-
day operations of the facility.
    At these worksites, worker safety and health is a 
fundamental part of the company's business, a value as central 
to the success of the company as producing goods and services 
or earning a fair profit.
    We have applied what we've learned about safety and health 
programs from VPP companies and our other stakeholders to 
smaller businesses, the area of interest to this Committee, 
through the addition of the agency's Safety and Health 
Achievement Recognition Program, also called SHARP, which we 
direct at high hazard businesses with fewer than 250 employees.
    OSHA has found that the programs implemented by these small 
businesses have reduced total job-related injuries and 
illnesses by an average of 45 percent and lost worktime 
injuries and illnesses by an average of 75 percent.
    A few examples. Mereen-Johnson Machine Company worked with 
its 95 employees in Minneapolis, implemented a program and 
achieved a lost workday injury rate 60 percent below the 
industry average.
    Applied Engineering, Inc., a manufacturer of specialties 
materials with 74 employees, located in Yankton, South Dakota, 
reduced its lost workday injury rate from 6.0 in 1993 to 0.0--
not lost time injuries--in 1997, a success the company's 
president attributed to the implementation of a safety and 
health program.
    The search for straightforward common sense approaches to 
worker protection has led many businesses to implement safety 
and health programs, it has motivated business associations to 
adopt their own model programs, and to recommend these model 
programs to members.
    The National Federation of Independent Business's Ohio 
Chapter (NFIB) developed a comprehensive document entitled 
``Workplace Safety Program Guidelines,'' which explains to NFIB 
members how to design and implement an effective safety and 
health program.
    The guidelines include the same elements that OSHA has 
identified as keys to a successful program. According to the 
NFIB guidelines, and I quote, serious accidents or injuries can 
be very disruptive to any successful operation and to lives of 
the people involved.
    An important step that an employer can take to effectively 
prevent these losses is the development of an organized safety 
plan or accident prevention program.
    Earlier this year, the National Association of 
Manufacturers (NAM), in testimony before the Senate 
Subcommittee on Employment, Safety, and Training, echoed the 
sentiments of those who proclaim the value of safety and health 
programs.
    At the hearing, Robert Cornell from Mon Valley Petroleum in 
McKeesport, Pennsylvania, told the Subcommittee, and again, I 
quote, ``today we have an effective safety program resulting in 
fewer injuries and reduced workers' compensation costs.''
    Mr. Cornell's company used a comprehensive analysis of its 
safety and health violations and proactive employee involvement 
to address potential hazards. As a result, they reduced lost 
workdays from 70 in the early 90s to zero from 1995 through 
1998.
    These examples included companies that implemented programs 
voluntarily but the results from mandatory programs are equally 
impressive, Mr. Chairman.
    Data from the four States with mandates covering most 
employers and OSHA's enforcement experience, show 
overwhelmingly the effectiveness of this approach.
    The General Accounting Office (GAO), in 1992, concurred 
with earlier OSHA assessments of the value of comprehensive 
safety and health programs.
    Since OSHA last testified before this Committee regarding 
this issue, a Small Business Advocacy Review panel has reviewed 
our draft proposed rule, as required by the Small Business 
Regulatory Enforcement Fairness Act [SBREFA].
    The version analyzed by the SBREFA panel was different, as 
you indicated, from the one that we described to you when we 
last testified before your Committee.
    For example, when we testified before you two years ago, 
our draft called for employers to conduct hazard assessments at 
a frequency, and I quote, ``appropriate to safety and health 
conditions at the workplace.''
    Mr. Chairman, you suggested that there was some vagueness 
in our proposal. OSHA concurred with that. We revised the draft 
and presented the SBREFA panel one that provided that such 
assessment should occur at least every two years, and when 
changes in workplace conditions indicate that a new or 
increased hazard may be present.
    The Agency also added a grandfather clause to the version 
of the draft proposal provided to the SBREFA panel. The 
grandfather clause responded to concerns raised here in this 
Committee and various other small businesses who already 
operate effective programs and should not be required to change 
them.
    Several recommendations in the SBREFA panel's report, after 
they concluded their review, suggested that OSHA further 
clarify certain portions of its rule in our company analysis.
    For example, the panel suggested OSHA should clarify, in 
our preamble, how the Safety and Health Program Rule interacts 
with other OSHA rules, with the existing requirements of the 
general duty clause and with National Labor Relations Act 
requirements.
    OSHA is responding to these issues as we prepare our 
proposal for publication in the Federal Register.
    For example, the draft provided the SBREFA panel required 
training to be provided, evaluations to be performed, ``as 
often as necessary.''
    Instead, we are now considering language calling for review 
when the employer has reason to believe that all or part of the 
program is ineffective.
    These changes should both clarify that an employer need not 
guess when reevaluation or new training should be conducted, 
but instead must exercise reasonable care in this, as they are 
required to do under all other portions of our regulations and 
Tort law, for that matter.
    In addition, this change puts the burden of proof on OSHA, 
should lack of training or evaluation be considered a possible 
violation of the rule.
    The Agency is also further evaluating the accuracy and 
transparency of our cost estimates, and we plan to solicit 
comments and raise in the preamble of the proposed rule 
regulatory alternatives for consideration.
    In addition, when any final rule is published, OSHA will 
provide a variety informational and outreach materials to 
simplify compliance. Materials will include checklists, model 
programs, decision logics, and an Internet-based expert advisor 
to help employers determine how to comply and when they have 
met their regulations under the rule.
    We will even refer to model programs that have been adopted 
and published by trade associations, unions, and others, as 
examples of programs that meet the requirements of the rule.
    Some small business stakeholders have questioned whether 
the rule should be universally applicable. OSHA believes 
there's strong evidence to support such coverage.
    Stakeholders have expressed a similar point of view. For 
example, John Cheffer of the Travelers Insurance Company 
testified before the National Advisory Committee on 
Occupational Safety and Health, and I quote:
    ``We consider any proposed safety and health standard to be 
the centerpiece from which all other rules and standards flow, 
in effect, the ultimate safety and health guideline document 
for the nation. If that view is accepted, by its very nature it 
must be generic, flexible, and universally applicable.''
    Another reason for applying the rule to establishments of 
all sizes is the risk currently posed to employees working in 
small businesses. Although small businesses with ten or fewer 
employees account for only 15 percent of employment in this 
country, 30 percent of all work-related fatalities reported to 
BLS in 1997 occurred in these workplaces.
    Fifteen percent of employees but 30 percent of fatalities 
in businesses with fewer than ten employees.
    By comparison, businesses with 100 or more employees 
accounted for only 20 percent of all work-related fatalities.
    Based on these numbers, the risk of fatalities in 
businesses with ten or fewer employees is four to five times 
higher than the risk of fatalities in businesses with 100 or 
more employees.
    Although most stakeholders, as OSHA does, oppose exempting 
small businesses from coverage, they agreed with OSHA that 
every effort should be made to ease compliance burdens for 
small businesses.
    The assistance materials we are developing will meet that 
need.
    In conclusion, Mr. Chairman, safety and health programs 
already make a significant difference in the lives of many of 
our nation's workers, and in the financial bottom line of many 
of our businesses.
    We're designing a rule that provides a general framework 
for employers to follow, but leaves each individual employer 
free to add a workplace-specific procedure, and to adopt 
management practices that suit the characteristics of that 
particular workplace.
    We are committed to working with employers of all sizes, 
both during and after the development of this rule, to ensure 
that the rule provides sufficient flexibility, that our 
guidelines and compliance-assistance information provide 
suitable information to meet the compliance needs of employers 
and to assure that workers are protected.
    [Mr. Jeffress' statement may be found in the appendix.]
    Chairman Talent. Thank you, Mr. Jeffress. I appreciate you 
summarizing your testimony.
    I'm going to go into a couple areas, then I'm going to go 
on to the other members, and I may have more questions later.
    Let me get to the heart of what I see as the problem here, 
and you referred to it extensively in your testimony.
    You recite, as support for this mandatory safety and health 
program rule, the fact that many small businesses, and 
businesses in general, have had effective voluntary safety and 
health programs about which they are very enthusiastic.
    You mentioned the NFIB of Ohio, for example. They do have a 
very effective voluntary program. I have a survey from their 
membership that indicates that 80 percent of the NFIB 
membership supports the use of voluntary programs, and a 
similar number opposes the use of mandatory programs.
    What I want to suggest to you and get your comment on--and 
then go into some specific examples of what I'm talking about--
is why they should have this distinction. I don't believe it's 
because they say they're for voluntary programs but they really 
don't care about safety. Then they don't want the mandatory 
programs because at heart they don't care about what happens in 
the workplace.
    I don't think that's the case for most of them: It is the 
case for some.
    I think it's very important that OSHA is there for those 
that don't give a hoot about worker safety.
    The reason I mention this to you--and I'm going into this 
long comment before my question. Personally, I want you to keep 
working on this, but I think if you go down this road--which is 
the wrong road--you're just going to get further and further 
away from where you want to be.
    I don't think this model is going to work, and here's why.
    These small businesses don't think these mandatory 
situations and these mandatory rules work. If the rule 
specifically requires a series of things businesses have to do: 
two meetings a month, training seminars and this sort of thing, 
then it's going to mandate specific requirements. As I think 
you recognize, when you say you don't want a one-size-fits-all 
approach, it is because it requires a whole lot of things that 
in thousands of workplaces will not have any relationship to 
worker safety and drives up costs without achieving anything. 
This you say you don't want to accomplish, and I understand 
that.
    On the other hand, if it's vague and just says, ``okay, 
have some training.'' Then, what you do is you simply create an 
invitation for arbitrariness in terms of what the inspectors 
do. The small businesses have no understanding of what they 
have to do to comply with the law.
    So, there's no way around it with these mandatory systems. 
You're either going to be requiring a lot of things that aren't 
going to be of any significance in a lot of places, or you're 
creating a situation where there is no law.
    In essence, you make the inspector the policeman, the judge 
the jury. Now, I know you're a reasonable person with long 
experience in this. That's one of the reasons I want to know 
your personal reaction to that.
    Mr. Jeffress. Thank you, Mr. Chairman.
    I suspect that the answer to that survey of 80 percent of 
the businesses opposing a mandatory rule of that type would not 
have been very different if the survey had been about a 
mandatory rule of any other type.
    Most of us would rather do things of our own volition than 
be required to do something. I don't believe that answer is 
unique to safety and health programs.
    I suspect it would be true of anything.
    The good news for those folks is that if 80 percent of them 
favor the voluntary program, and are implementing that 
voluntary program as designed, then they are grandfathered, and 
this mandatory rule would not require them to do anything 
different from what they're doing today.
    So the idea of this standard, by putting that grandfather 
clause in that you and other members of this Committee support, 
and by referencing programs that work, programs that have all 
the required elements like the NFIB program, allows employers 
to continue doing what they are doing voluntarily, the things 
that work.
    Chairman Talent. They are only grandfathered in if the meet 
the requirements of the rule, so they're only grandfathered in 
if they would satisfy the rule in the first place. That's not a 
grandfather clause.
    Mr. Jeffress. Sure that's a grandfather clause. It means 
they don't have to change anything in what they're doing. They 
can keep doing it exactly.
    Chairman Talent. They don't have to change it if it would 
comply with the rule anyway.
    Mr. Jeffress. We will be referencing the model programs 
like the NFIB program, saying if you're doing what this program 
requires, if you're doing what this program recommends, if 
you're performing the elements of this program, you don't have 
to change a thing.
    This allows us to target those people who are not putting 
programs in place to create programs.
    Chairman Talent. This gets back to another problem. What we 
have here is your assurances--and I respect you--if Charles 
Jeffress was walking into every workplace in this country to 
enforce this rule, and we could clone you. However, you're not 
going to be walking in, and I'm not here trying to slam OSHA 
inspectors.
    You have to understand where the average small business 
person is coming from.
    Because I'm going to get to this in a second, and I promise 
the Committee I'm not going to do what I did a month or two ago 
and take 40 minutes with my questioning.
    When I do care about something, I do like to get into it, 
but I will defer soon.
    Let me take my brother for instance--as people who are 
regular attendees of these hearings know----
    [Laughter.]
    Mr. Jeffress. But since I'm here for the first time----
    Chairman Talent. If you are a regular attendee of these 
hearings and you're not on the Committee, I suggest you get a 
life, okay? [Laughter.]
    My brother owns a tavern. He and my sister-in-law pretty 
much run this place. First of all, keep in mind--and this is a 
partial list--he's dealing with the Division of Liquor Control. 
Have you ever dealt with the Division of Liquor Control?
    Mr. Jeffress. Fortunately, no.
    Chairman Talent. He's dealing with the IRS, he's dealing 
with the public health people, he's dealing with a lot of very 
sincere, zealous people like you, each of them doing their own 
thing, and doing this all by himself.
    So he is spending an awful lot of time dealing with these 
people, and what you're now saying to him is, ``Here is a set 
of requirements.'' And, I'm going to go into--in just a 
second--how he's supposed to interpret this stuff.
    ``And we promise you that we're going to be reasonable in 
enforcing this.'' But the truth of it is, as far as he knows, 
somebody could walk into his front door, and what that person 
says at that time is the law, and my brother doesn't know what 
that person's going to say.
    I mean, you just have to understand, you talk to them on 
the ground, this is what they will tell you. So, this is 
another thing that he goes to bed at night thinking about: 
``Right now, no matter what I do, I'm not in compliance with 
the law.''
    You see?
    And it doesn't achieve anything. It doesn't accomplish 
anything in terms of worker safety.
    Let me go through some of these things. You tell me how, if 
you were my brother, you'd do this, okay?
    ``Demonstrating management leadership of the program. 
``Okay,'' establishing a program responsibilities of managers, 
supervisors and employees.''
    If he has a program that satisfies this core element 
establishing the program responsibilities of managers, 
supervisors and employees, he's fine.
    So is an oral communication with them enough?
    Mr. Jeffress. Yes, sir.
    Chairman Talent. You're absolutely certain of this?
    Mr. Jeffress. Yes, sir.
    Chairman Talent. It doesn't say that here.
    Mr. Jeffress. No, sir, it doesn't. It does say that if he 
has less than ten employees, he doesn't have to put anything in 
writing.
    How many employees does he have?
    Chairman Talent. I think it depends on whether you count 
part time or not. I think you do count part time. He may have 
more than ten, but let's assume he has less than ten, so he 
doesn't have to put it in writing.
    But if he's questioned, he's got to prove he did it.
    Mr. Jeffress. Actually, if he's questioned, we actually ask 
the employees if they know the safety precautions they should 
be taking. Then he's got a program that works.
    Chairman Talent. If I was his lawyer, and for some 
purposes, I am----
    [Laughter.]
    Mr. Jeffress. I bet that's a tough job.
    Chairman Talent. If you were his attorney--I don't know if 
you are an attorney--wouldn't you advise him to keep records so 
that he could prove this if he had to?
    Mr. Jeffress. No, I wouldn't. If he says that he has done 
this, since I'm not an attorney, I don't have to provide that 
advice but if he says he has done this, and employees know what 
to do, the only way that OSHA could issue any citations is if 
OSHA could prove he didn't do it.
    He does not have the burden of proof to prove that he did 
it. We have the burden of proof to prove that he didn't. And if 
his employees know how to protect themselves, there's no reason 
for OSHA to go there.
    I will agree with you, Mr. Chairman. I think one of the 
most difficult things for OSHA to do, once we propose this rule 
and adopt this rule, will be to help train our employees on how 
to evaluate safety and health programs fairly.
    What is an effective program?
    Our compliance officers are used to enforcing the rules and 
looking at the specification rule that you referred to earlier, 
where it's easier to judge whether there's a violation or not.
    If there's no barrier to protect someone from falling off 
an open-sided platform, it's easy to judge.
    How do you judge whether there's enough employee 
involvement? That's much more difficult to judge.
    So there is going to be a challenge for OSHA to look at how 
do we apply this, how do we evaluate programs, how do we assure 
the reasonableness of our compliance officers, the thousand 
federal and the thousand state folks that are out there, 
consistency and reasonableness of those compliance officers in 
applying this rule.
    I agree with you. I think that is a challenge we have. I 
think it's not only a challenge to the safety and health 
programs.
    When we go to ergonomic rules, they also will be program-
directed. Some of our earlier rules hinted at this, the process 
safety and management rules that has a communications standard.
    OSHA is moving away from specification rules and towards 
rules that require systems to be put in place, and we have to 
move from teaching compliance officers simply to cite specific 
violations to analyzing and evaluating systems.
    That is a challenge for us.
    Chairman Talent. And if you fail in that challenge, it's 
the business people who pay.
    Do you see what I'm getting at?
    Mr. Jeffress. I submit to you, if we fail in that 
challenge, it's the employees who are getting hurt who will pay 
as well.
    Chairman Talent. That assumes that compliance with the 
challenge would actually reduce the number of incidents at the 
workplace, which is another aspect of this.
    You're saying he would not have to communicate in writing 
because the rule does not require recordkeeping for employers 
with less than ten employees.
    Mr. Jeffress. Correct.
    Chairman Talent. You see, I would read that as saying, 
``you don't have to keep records of what you have done. You 
don't have to keep records of the fact that you sent them 
something in writing, but it still may mean you have to send 
them something in writing''.
    Mr. Jeffress. No, it very specifically allows that not to 
happen. As a matter of fact----
    Chairman Talent. It says, ``recordkeeping of what you have 
done.'' It doesn't mean that you don't have to do anything in 
writing.
    Mr. Jeffress. In small businesses, I believe in my counsel 
to the small business, the most effective way for an owner, for 
a manager--and it's generally the owner--to communicate to the 
employees that safety is important is to have the direct 
conversations, is to have the interaction between the owner and 
manager.
    The reason it doesn't happen in larger businesses is, once 
you get above 50, 60 employees, it becomes more difficult for 
the owner to know every employee, to have conversations with 
every employee.
    But the most effective way would be direct conversations, 
rather than something in writing that the employee may or may 
not know whether you're serious about it.
    Chairman Talent. I tend to agree, but I don't know that 
that's how this is going to be interpreted on the ground: 
``provide managers, supervisors and employees with access to 
relevant information and training.''
    Okay, so what does ``training'' mean?
    Would my brother have to bring an expert in? Would he have 
to send them to some kind of school? Does he have to provide 
training?
    And this is serious because, you know, I'm not an expert at 
running a tavern, but I've spent a fair amount of time in this 
one. [Laughter.]
    Chairman Talent. For example, in my evaluation of the 
hazards, they cut lemons and limes. Now if a person's been a 
bartender for ten years, and my brother hires him, does he have 
to train him how to cut lemons and limes?
    You see? We laugh at this, but if my brother's going to 
take all this seriously, if he has time to know what's 
happening and take it seriously, and he's looking around his 
tavern for hazard identification--which is a whole other 
thing--that's what he's going to look at.
    Does he have to provide somebody like that with training 
and does he have to bring somebody in to train them? Does he 
have to look up on the Internet or some other place the best 
way of cutting lemons and limes to avoid cutting yourself?
    I don't know. I haven't talked to him. He probably gets 
some cuts that way.
    The truth is, we don't know what he has to do.
    Mr. Jeffress. In terms of training, there's no requirement 
that any specific type of training be done. The requirement is 
that the employer look at what the hazards are in that 
particular business in the tavern.
    If there is a problem with cuts, then you need to look at 
that hazard. If there's a problem, as I've read some of your 
earlier stories, with lifting beer kegs, you need to look at 
the hazards, and talk to the employees about the hazards.
    You've got somebody that's been doing it for ten years. You 
watch them do it a couple of times, they know how to do it, 
you're done.
    You find someone who comes in new, and you find that they 
don't know the difference between a sharp knife and a dull 
knife, they put the knife in a location they're likely to rub 
up against it after they're finished, obviously you've got to 
do some work training that employee.
    Chairman Talent. What you're saying is what we really want 
people to do is use common sense in this, right?
    See, I agree with that. But the way you get people to use 
common sense is to provide incentives for them to want to use 
common sense.
    That's not what bureaucracies produce. And no matter how 
much, how sincere you are, and how much you try and train 
people, you are managing a bureaucracy.
    I could bring in hundreds and hundreds of people who will 
tell you the experiences that they've had. This is not intended 
to be critical of your compliance officers, okay?
    I've talked with a lot of them too. I know what they're 
trying to accomplish. It would be very similar.
    Let me just ask you this. Why wouldn't it be similar to if 
the state legislature wanted to say, ``Look, we're going to 
eliminate all the specific rules for driving. We just want you 
to be careful, and we're being very flexible here. You decide 
what `careful' means.
    But if a police officer decides that you're not being 
`careful' and wants to write you a ticket, here's you remedy. 
You can appeal this to an administrative panel and up to a 
court and eventually they may decide that you were `careful', 
notwithstanding what the police officer decided, but that's 
going to cost you tens of thousands of dollars. The assurance 
you have is we're going to train the police officers and we're 
going to make sure they don't go out there and abuse their 
authority.''
    Now as a driver, would you like that kind of a system?
    Mr. Jeffress. There have been people who have suggested 
that OSHA should only adopt this rule and repeal all the rest 
of our rules because this rule should be the fundamental 
guideline for every business.
    I don't believe that. I think it's important that we have 
specific guidance and specific rules where we have specific 
hazards and we know what best practices are.
    What this rule does is to say, in addition to here's the 
guidelines, here are the regulations, here are the rules on 
specific hazards.
    We found it's important to have a system in place so that 
you manage safety, just like you manage productivity, like you 
manage quality. It's important to have a system in place to 
manage safety.
    And our findings, based on business experience, are that 
when people put systems in place to manage safety, they greatly 
reduce their injuries, they greatly reduce their costs of 
workers' compensation, costs as a result of injuries.
    Those are the kinds of findings that Congress expects us to 
act on when we find things that make a difference in the 
workplace.
    So I don't believe that we should abolish all the 
individual rules. I don't think we should eliminate all the 
specification standards. I believe it is important, having 
recognized that systems make a difference, to require that 
systems be in place.
    Chairman Talent. I recognize the gentlelady from New York.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Jeffress, can you please explain to us, for the benefit 
of the members of the Committee, where are you on this rule, 
and what steps need to be taken before you adopt a final rule?
    Mr. Jeffress. Yes, ma'am.
    OSHA has a draft proposed rule that we have put on the 
Internet so everyone in the public that's interested can look 
at it, and comment on it.
    And we've been through the SBREFA process.
    Our next step is to make the modifications in the rule as 
the SBREFA panel recommended, and to submit it within the 
Executive Office Branch for review.
    Our expectation is that this review will be completed and 
we will publish the proposal for public comment about the end 
of this year, of this calendar year.
    Following that publication, we will have months of time for 
people to comment in writing, for people to attend public 
hearings, and respond to us at those hearings, as to what 
problems they see with the rule, what alternatives they would 
suggest.
    In our publication, we will post several alternatives and 
ask for advice on those alternatives, and anticipate again 
several months of hearings and responding to those hearings.
    So that the final publication of the final rule is, I would 
guess, at least 18 months away.
    Ms. Velazquez. What you are telling me is that we are far 
from finished?
    Mr. Jeffress. Yes, ma'am.
    Ms. Velazquez. Mr. Jeffress, if the benefits of this 
program are in fact so much greater than the cost, as you 
maintain, why do you think so many small businesses have not 
adopted them voluntarily?
    And if there is a good reason why you believe that these 
programs have to be mandatory, rather than at the discretion of 
the employer?
    Mr. Jeffress. Yes, ma'am.
    The Congress, in 1970, in adopting the OSHA Act had 
concluded that the Workers' Compensation, the economic 
incentives, if you will, for reducing injuries and illnesses 
weren't sufficient. That the country needed a program of 
governmental mandates to move employers beyond where we were, 
just based on economic incentives and have mandates for better 
performance.
    Since that time, since 1970, the fatality rate's been cut 
in half, injuries and illnesses, while they have gone up and 
down at different times, we have a trend of declines in each of 
the last five years. We're now at the lowest level on record.
    I believe that Congress was accurate that in fact a 
government program of mandated behavior with respect to safety 
and health makes a difference.
    There is at least a three-to-one benefit in terms of safety 
and health programs from the economic analyses that are 
available, from the company reports that come to us. Every 
dollar that a company invests in safety and health, they save 
at least three dollars, and the VPP companies will report four, 
five and six dollar savings for every dollar invested in safety 
and health programs.
    Many small businesses, as the Chairman indicated, are 
dealing with so many different things, they can only deal with 
what's right in front of them at the time.
    And what we're asking with this rule, and I think what 
we're asking on safety and health generally, is to take a 
longer view, realize that there is a payback on safety and 
health, and invest in that payback.
    So we believe that the OSHA program has worked, the OSHA 
Act has worked. It has worked by mandating improvements where 
we know that those make a difference.
    Here's a case where we firmly believe that safety and 
health programs will make a difference.
    Ms. Velazquez. Many small businesses have expressed that 
they do not have the resources nor the expertise to comply with 
the OSHA rule.
    If you disagree with this, please tell us why you disagree 
with this. How will small business find out what they have to 
do? Will they need private consultants? Will OSHA consultation 
be available during the implementation period?
    Mr. Jeffress. Yes, ma'am. OSHA consultation will be 
available. Congress has funded and OSHA has provided for the 
last 20 years free consultation programs available to small 
businesses in every state in the country.
    Rather than do this through OSHA employees, we contract 
directly with state labor departments to provide that. But any 
business with fewer than 250 employees can have a free on-site 
consultation.
    The consultant comes on site, helps that owner evaluate 
what the problems are, helps design a plan that corrects for 
those hazards. There are no penalties, there are no fines, 
there's no cost. It's free of charge.
    About three years ago, we started working with these staffs 
in the 50 states of these consultants on safety and health 
program systems. We're ahead of ourselves on the consultation 
side than we are on the rulemaking side.
    And the consultants have had training in what constitutes 
an effective program, how to help the employer set up an 
effective program, how to evaluate one. So these consultants 
are trained and ready today, and are working today to work with 
small businesses to put these in place.
    In addition to that free on-site assistance from trained 
professionals, we also will be providing materials information. 
The Internet is becoming an increasingly popular way to 
communicate.
    We had over 17 million hits on our Internet site last 
month. As a matter of fact, one of the advisors specifically 
for small businesses on recognizing hazards in your business 
has been so popular with small businesses that the National 
Federation of Independent Business has put a hot link between 
their Internet site and our Internet site specifically to refer 
their members to this Internet advisor on how to recognize the 
hazards of your business.
    We will use both publications, the Internet, and free, on-
site consultation to assist businesses to meet this.
    Ms. Velazquez. Mr. Jeffress, the Chairman made reference to 
this, and I'm going to ask the same question because so many 
small businesses have expressed their concern to me, so I want 
to reinforce this issue.
    And that is that they have argued that this rule will give 
OSHA inspectors free rein to cite them for offenses, even 
though you explained that the burden of proof is on OSHA, is on 
the inspector to prove and to show that they haven't been 
complying, the employers.
    What type of controls will OSHA have in place to ensure 
that fair and compassionate enforcement will be in place?
    Mr. Jeffress. The first step is to ensure employers that 
this safety and health program rule applies to those hazards 
which are already covered under the OSHA Act.
    We are not asking employers to go beyond the OSHA Act to 
look for things that aren't otherwise covered, that aren't 
otherwise already recognized, either through explicit standards 
or the general duty clause that recognizes generally accepted 
industry practices.
    So the first reassurance is that we're not looking for 
people to discover things that we haven't otherwise already 
drawn attention to or industry practices haven't already drawn 
their attention to in terms of what's covered.
    Secondly, there's no double jeopardy here. It's not that 
employers can be cited for a specific hazard and then also 
cited for failure of a program just because that hazard exists. 
There's not going to be double jeopardy.
    The third, as I mentioned to the Chairman, we have a 
specific course for safety and health program evaluation that 
we are developing for our compliance officers on how to do this 
and how to do this well.
    Every compliance officer in the nation will have that 
course and will have been trained in how to apply the standard 
in a fair and effective way.
    So we're trying to provide reassurance to the businesses, 
as well as trying to train our employees on how to apply it 
appropriately.
    Ms. Velazquez. Mr. Jeffress, did you have an opportunity to 
read the testimony that will be provided by other witnesses 
today?
    Mr. Jeffress. That testimony was only provided to us 15 
minutes before this hearing, so I'm afraid I've not had a 
chance to read the testimony of the other witnesses. I am 
generally aware of the PPE evaluation of the analysis done for 
the safety and health program rules.
    Ms. Velazquez. Would you please comment on that?
    Mr. Jeffress. In doing the economic analysis of our rule, 
we have gone to great lengths to look at what are the costs to 
businesses of implementing safety and health programs.
    We have taken the actual information provided to us by 
businesses into that cost. We've gone so far as to analyze the 
cost in 300 different industries, in seven different sizes of 
employers within those 300 different industries.
    I'm very confident in the analysis that has been done and I 
think it's a rigorous analysis.
    Dr. Beale will be here later today, as well, and he can 
comment on the rigor and the accuracy of that analysis.
    In looking at the report done by PPE, and again, Dr. Singh 
will be here to defend that to you, and you'll hear more from 
here about that.
    I find their analysis is much more simplistic.
    For example, instead of using 300 different industries and 
seven different employment sizes, they used a national average 
to look at the impact on the businesses.
    Statistically they used the median cost of workers' 
compensation claims instead of the average or the mean cost of 
workers' compensation claims to compute numbers.
    One thing I've learned in dealing with lawyers and 
economists is you can find people who believe strongly in 
directly opposite things.
    You probably are going to have that situation before you 
today in terms of the PPE analysis and Dr. Beale's analysis.
    I will tell you, though, that I have looked at the 
assumptions we have used.
    I've looked at the way the calculations are done, and while 
I am not an economist, I have confidence in what we have done.
    I believe the PPE analysis is flawed.
    Ms. Velazquez. Thank you. Thank you, Mr. Chairman.
    Chairman Talent. Let me just follow up on a couple of 
things.
    You mentioned one of the reassurances that small business 
people have is the protection of the specific requirements 
regarding hazards so that if they haven't violated another 
rule, they're not in violation of this one.
    Go ahead.
    Mr. Jeffress. I actually said, if there is a violation of 
another rule, it is not, by definition, also a violation of 
this. There won't be double jeopardy. There may in fact be an 
ineffective safety and health program, but that will not be an 
absolute statement simply because there's another violation.
    Chairman Talent. So an employer can be in violation of this 
rule while having a workplace that's perfectly safe with regard 
to the other rules?
    Mr. Jeffress. If there's no violation of other rules, Mr. 
Chairman, I don't believe there's any way in the world OSHA 
would cite or could sustain a citation if they did, of the 
safety and health program rule.
    Chairman Talent. This is a separate rule, and it has 
separate obligations apart from the other substantive ones?
    Mr. Jeffress. It has separate obligations.
    Chairman Talent. If it's totally linked to the other rules, 
why require it?
    Mr. Jeffress. My point is, in terms of keeping hazards from 
occurring, we believe systems make a difference. If you don't 
have any violations of any other rules, I suspect your system 
is effective.
    It would be very difficult for us to prove the system is 
ineffective if there are no violations.
    Chairman Talent. You're saying that absent proof of the 
violation of a substantive hazard, the system works. What if 
somebody doesn't have a system and they don't have any other 
violations?
    Mr. Jeffress. You posit that that is in fact the case. I 
would suggest to you, Mr. Chairman, that that's not my 
experience.
    Chairman Talent. But this covers four million small 
businesses, right? A lot of those people are small employers in 
occupations that are not very hazardous. They don't have any 
kind of formal safety and health system--anything approaching 
what you're talking about.
    They may not have accidents at the workplace.
    Are you assuming that the only way somebody can be 
accident-free at the workplace is if they have a safety and 
health program with your five core elements in it?
    Mr. Jeffress. You just changed. You said no accidents at 
the workplace. Earlier, we were talking about whether there 
were any violations.
    Chairman Talent. All right, no violations.
    Mr. Jeffress. There is a substantial difference, Mr. 
Chairman, as you pointed out. A high percentage of businesses 
have no accidents, and that's impressive and that's important. 
We don't find that high a percentage of businesses that have no 
violations.
    The potential for accidents exists at most businesses in 
America.
    Chairman Talent. I think now I understand. An inspector can 
walk into any workplace in the country and find a violation or 
a substantive hazard.
    So on the ground, they understand this, Mr. Jeffress. So 
the point is if he thinks the safety and health program is in 
violation of this rule, he can just find something else, and on 
that basis, to fine everybody.
    Mr. Jeffress. That's not what I said. I very specifically 
said the existence of a violation by itself of another specific 
standard was not necessarily an indication of a violation of 
the safetyand health program rule.
    Chairman Talent. But you see, what you have to understand, 
this is a law here. To the average person, that's how they 
confront this. It requires them to do certain things. It's very 
hard to determine what it requires them to do, but it requires 
them to do it.
    And I can go through other questions, if you want: how 
often they need to have meetings with employees in order to 
satisfy the requirements about regularly communicating, what it 
means to say, ``provide ways for employees to become involved 
in hazard identification?''
    As a practical matter, a compliance officer can come here, 
and he can say, ``As regards to your business, this standard of 
regular communication means a meeting once a month. You haven't 
had a meeting once a month here--a violation of the rule.''
    There is nothing that small employer can do about it. This 
is why when you're talking about burdens of proof, it's not so 
much a question of whether you've proved a violation of the 
standard, it's a question of what the standard is.
    This isn't law. I mean, this says go have a program which, 
if Charles Jeffress was in here and looked at, he would think 
it's a good program. It's not law. It's a vague kind of 
requirement that's backed up by the coercive power of the OSHA 
statute.
    You see why people would view that as unfair, as 
potentially a threat to them?
    Mr. Jeffress. Mr. Chairman, I would submit to you that most 
of the code of laws and the code of behavior in this country is 
based on a reasonable person test. What would a reasonable 
person do?
    Every businessman and every businesswoman in operation in 
this country that has a business has that responsibility to 
behave in a way a reasonable person would.
    It's in the common law, it's in the Tort law, that's the 
standard of judgment.
    What is a reasonable person to do. What's a reasonable 
person expected to do. Within other OSHA rules, there's 
language such as, in the construction area, with respect to 
safety and health programs.
    It now says, the Rule now says that employers shall 
implement such programs as may be necessary. Various language 
like frequent and regular inspections.
    There are questions that have been raised about the 
language like, in close proximity or near. Those kinds of terms 
are interpreted in terms of what a reasonable person would 
interpret them. All those terms have been upheld by the Review 
Commission and by the courts.
    Are they vague? No, I think they are flexible. Other folks 
will see them as vague, but they are all going to be 
interpreted in terms of the reasonable person test.
    And as I say, I believe OSHA has responsibility to train 
our compliance officers in a way that a consistent 
interpretation of what a reasonable person would expect is 
applied. I think that's the challenge we have.
    But the alternative, to move away from reasonable person 
kinds of tests, as you indicated, the alternative to go to 
precisely, exactly what you have to do, and one rule that fits 
every workplace would be an impossible burden for American 
business.
    It's much more important, I think, and much more expected, 
a code of behavior that people are used to accommodating to 
have a reasonable person test.
    Chairman Talent. How often would you say a reasonable bar 
owner would meet with his people in order to satisfy the 
requirement of ``regular communication?''
    Mr. Jeffress. It depends on how many hazards he's had, how 
many accidents he has. You know, if you're having a series of 
accidents, you're probably going to talk to them every week.
    On the other hand, if you've been accident-free all year, 
you're going to remind them once a year or so that this is an 
important thing to do.
    Chairman Talent. It depends on the overall context and how 
you ought to respond in an overall context. And who makes that 
judgment about how you should respond in the overall context?
    Mr. Jeffress. The employer has to make that decision. It's 
the employer's business and the employer makes that decision.
    Chairman Talent. But once you set up a legal standard, you 
have somebody deciding whether the employer's response was 
adequate and who as a practical matter--for the average John 
and Jane Doe small employer--is the person who's going to 
oversee that?
    Mr. Jeffress. The employer makes that decision. If a 
compliance officer, up on complaint, believes that the decision 
was not made reasonably, then the compliance officer is going 
to discuss that with the employer. It may end up a citation, it 
may end up a discussion.
    Chairman Talent. One other thing. You went into the cost/
benefit analysis, and I'm just curious about something.
    I intend to get mostly into this with Dr. Beale and Mr. 
Singh because they're the experts, and that will be the next 
panel.
    As I understand it, in determining that mandatory rules 
would have benefits, you looked at the experiences, or OSHA 
looked at experiences in four states that had such mandatory 
requirements for five years that covered most employees.
    Mr. Jeffress. Yes.
    Chairman Talent. Why the five years?
    Mr. Jeffress. A couple of reasons. One, we know, even 
though we'd like to think that everybody listens to everything 
OSHA says, that it usually takes a while when a law is passed 
or a rule is passed, for people to realize what their 
obligations are and to put things in place.
    Secondly, like any other system, safety and health program 
management systems don't have immediate impact. It takes a 
while for employees to believe, it takes a while for the 
training to occur, it takes a while to see the benefits or the 
impact of those.
    So we believe that a longer period of analysis is 
appropriate for analyzing the impact of any particular role.
    Chairman Talent. The five-year figure, as opposed to six 
years or seven or three or four?
    Mr. Jeffress. Five years seems to be a reasonable amount of 
time to expect an impact.
    Chairman Talent. What did ``covering most employees mean?'' 
More than half?
    Mr. Jeffress. Actually, I think most of the laws are 
written for all employers, but then there exceptions because 
the OSHA Act may not apply to all employers.
    Chairman Talent. And if you don't know this level of 
detail?
    Mr. Jeffress. I'll be happy to get back to you on that, but 
in looking at the laws, themselves, the laws say all employers, 
but we're very much aware that most OSHA acts, including the 
federal OSHA Act, have exemptions for some employers.
    Chairman Talent. How did you account for actions in some of 
those states that might have reduced injuries--other rules, 
regulations, workers' comp decisions, incentives or whatever?
    Mr. Jeffress. It's impossible to discount for every other 
conceivable thing that may have had an impact, but these four 
states with mandatory programs, over a period of time, had 
significantly better performance than the national average.
    Chairman Talent. Which did you discount for?
    Mr. Jeffress. I'm not aware that we discounted for 
anything.
    Chairman Talent. It could have been something entirely 
unrelated to the mandatory safety and health program that 
produced the result then, couldn't it?
    Mr. Jeffress. There could well be other things that had 
impacts.
    Chairman Talent. Which states without mandatory safety and 
health programs did you compare those four states to?
    Mr. Jeffress. We compared it to the national average 
performance for all states.
    Chairman Talent. And you just looked at a national average 
for all states including those that had mandatory safety and 
health programs?
    Mr. Jeffress. For all states including those that had these 
programs, including some that had programs that applied. On a 
sub-set of employers, we took a national average and compared 
these four states to them.
    Chairman Talent. Did you compare it to any control group of 
states that just didn't have any mandatory safety and health 
programs?
    Mr. Jeffress. I'm not aware of our having done that. You 
could pick out a particular state that either had a better 
performance or a worse performance, I'm sure.
    There may be individual states that may have had better or 
worse performance. There may have been other factors out there 
that are important as well. I hope that OSHA, in the course of 
its existence, can continue to look at what improves----
    Chairman Talent. You see what I'm getting at?
    Mr. Jeffress. I believe I do. [Laughter.]
    Chairman Talent. The control group you compared this to was 
a national average including all states, those that had 
mandatory programs, those that didn't have mandatory programs, 
those that had partial and not otherwise, and you just told me 
that you didn't like the SBA economic analysis because they 
didn't differentiate, and just used broad numbers.
    But you used that in the control group that you compared 
this to, didn't you?
    Mr. Jeffress. But we isolated out those states, every state 
that had a mandatory program for all or almost all employees.
    Chairman Talent. That met your five-year requirement that 
seemed right and that covered most employees, and you're not 
sure what ``covering most employees'' meant.
    Mr. Jeffress. If that's really important to you, I will get 
you precisely the requirements of each of these four states, 
Mr. Chairman.
    Chairman Talent. You're the one who said you looked at it, 
you're familiar with it, and you thought it was pretty good.
    It seems to me what you did is similar to testing a drug 
where you give one control group the drug, and then you compare 
that against another group comprised of people who take the 
drug, people who don't have the drug, and some of whom received 
a partial amount of the drug but not as much as you gave the 
control group.
    That wouldn't be a very valid analysis, would it?
    Mr. Jeffress. No other state or group of states had a 
mandatory program that had five years experience, Mr. Chairman.
    Chairman Talent. If you just look at gross figures, which 
your economist did, Mr. Svensen, I think, in Occupational 
Injury and Illness Rates 1992-96, you can see why they fell. 
It's on page 47, and I can give you a copy if you want.
    He compares states that have mandatory safety and health 
programs under Workers' Comp, states with mandatory safety and 
health programs under state OSHA, states with voluntary safety 
and health programs under Workers' Comp, and states without 
comprehensive safety and health program requirements.
    The injury rates fell both in mean and median. Percent 
changes were greatest in the states that had no comprehensive 
safety and health program requirements.
    Mr. Jeffress. I'll be happy to get an analysis of that back 
to you. I'm not going to sit here and try to read and analyze 
it for you.
    Chairman Talent. I didn't expect you to. I'll have this put 
in the record.
    It seems to cast some doubt on the validity of OSHA's Reg 
Flex analysis.
    I will recognize Mr. Bartlett next.
    Mr. Bartlett. Thank you very much.
    In another life, I was a small businessman. We ran a 
company that did land development and home construction for a 
number of years, so I'm very familiar with this area.
    Let me ask you first why, on page 7, you made the comment 
that Mr. Cornell did not testify on behalf of OSHA's proposal?
    Mr. Jeffress. Right. That hearing was not on the safety and 
health program proposal. He was not testifying about mandatory 
safety and health program rules. He was simply testifying as to 
obviously the effectiveness and the belief they had that the 
safety and health programs did work for them.
    Mr. Bartlett. But he was testifying at what sort of an 
event?
    Mr. Jeffress. It was a Senate subcommittee hearing.
    Mr. Bartlett. But the fact that you were developing this 
rule was not a discussion at that meeting?
    Mr. Jeffress. That meeting was on a number of OSHA issues. 
This particular rule may or may not have come up. I wasn't 
present at the hearing. I don't want to tell you that it did or 
did not come up.
    Mr. Bartlett. But you referred to his comment because he 
indicated the existence of a health and safety program?
    Mr. Jeffress. The effectiveness of the program for his 
workplace, right. He was not in any way endorsing this rule or 
any particular rule. He was simply saying safety and health 
programs work, and that's what people tell us all across the 
country that they work, and that's really what I was referring 
to here.
    Mr. Bartlett. I believe that. And I believe that every 
small business, whether they have a formal safety and health 
program or not, have one. Because if one of my employees got 
hurt, I was the most concerned person about that. I lost--many 
of them were my friends. I had a friend who was hurt. I lost a 
member of the team. I couldn't replace him because if I got 
somebody, they were not a member of the team, and productivity 
went down. When somebody got hurt, I was hurt because 
productivity went down.
    So I had every incentive to make sure that my employees 
didn't get hurt.
    You said that small companies that account for 15 percent 
of the employees account for 30 percent of the work-related 
fatalities.
    Were you comparing companies of the same type?
    Now if you have two companies, and one of them is a roofing 
contractor with less than ten employees, and frequently they 
have less than ten employees, and the other contractor 
you'retalking about is a telemarketing company, which has 400 people 
sitting in a booth at a telephone, where would you expect to find the 
most fatalities?
    Mr. Jeffress. Beyond what I presented to you, we have done 
a further analysis within the construction industry in 
particular, of small firms versus large firms, where we're just 
looking at construction industry firms. It's even more 
pronounced in the construction industry that the fatality rate, 
if you will, is much, much higher for small firms than for 
large firms.
    Mr. Bartlett. Doing exactly the same thing?
    Mr. Jeffress. Yes, sir.
    Mr. Bartlett. I would need to see those, because some 
occupations are just hazardous. Putting roofs on houses is more 
hazardous than carpenters building a house, and there's nothing 
you can do to change that.
    Mr. Jeffress. Right. But we were looking just within the 
construction industry, what some employers in that industry 
experienced, and the small employers in fact have a fatality 
rate much higher than the large ones.
    Mr. Bartlett. The Chairman indicated, in his opening 
remarks, and I think he referred to it again later, that states 
without regulations had less injuries.
    How do you account for the fact that states without 
mandatory programs had less injuries?
    If that's true, then why would we want to be proposing 
mandatory programs? Why wouldn't we want to look at those 
states that had the lower injuries to find out why they had 
lower injuries in spite of the fact that they didn't have these 
mandatory programs?
    Mr. Jeffress. I would be delighted to have further research 
into what are successful experiences and what contributes to 
successful experiences, and I want to learn from all of that.
    As the Chairman indicated, there are a lot of factors 
beyond just safety and health programs that affect a state's 
performance.
    As you suggest, different people doing different kinds of 
work are going to result in significant different injury rates.
    So there are a lot of different things that contribute to 
that. And I assure you that OSHA continues to look at and 
analyze what can we learn from, what can we show that makes a 
difference.
    And we will act. That's what's happened with ergonomics. We 
have found significant problems with ergonomic injuries and 
we're acting in that area.
    So we will continue to look for what makes a difference 
between safe workplaces and unsafe ones, and when we find 
something, we'll act upon it.
    Mr. Bartlett. Let me suggest that the answer may lie in the 
difference between investing in health and safety and investing 
in compliance.
    When you have mandatory compliance, your primary focus is 
going to be on not getting fined. If you don't have mandatory 
compliance, I can tell you, as a small business owner, my major 
focus was on providing a safe workplace.
    Now I'm not sure that those are synonymous. I think if you 
are forcing people into compliance that they may not have the 
energy remaining to really focus on a safe workplace. And don't 
you think that may be the reason that states without mandatory 
compliance have a safer workplace than states with mandatory 
compliance?
    Mr. Jeffress. When I took this job in North Carolina, the 
first time I had a job directing an OSHA program, a good friend 
of mine, who was a safety and health director for a furniture 
company, invited me to speak to his supervisors, and he 
introduced me by saying he wanted me to know that he thought, 
as a safety and health program director, he had two jobs. One 
was to assure compliance with OSHA, one was to prevent 
accidents. And he didn't think one had anything to do with the 
other.
    I think you're saying something similar to that.
    Mr. Bartlett. I think that's right.
    Every businessman that I know wants a safe workplace for 
all the reasons that have been mentioned here. And you've only 
got so much energy, so many dollars, so many hours in the day, 
and you're going to focus your attention on something.
    And if you have a choice of focusing your attention on a 
safe workplace, and compliance and you know you're going to be 
fined, you're going to be put out of business, and I know small 
businesses that have been put out of business by exorbitant 
fines for rather trifling violations, by the way, you're going 
to focus your attention on that.
    And you may not have the time, the energy, and the dollars 
remaining to focus your attention on what's really important; 
that is, providing a safe workplace.
    You see, if it's true, sir, that the states which have no 
mandatory compliance have a safer workplace, wouldn't you 
therefore conclude that the promulgation of this rule would be 
counterproductive?
    Mr. Jeffress. My response to Dave Masters was, if that's 
what his view of his job was, my view of my job was to make 
those two relate, to see that they're closer related, to see to 
it that the causes of accidents are in fact the things that are 
addressed through OSHA rules.
    Looking at what makes workplaces safer, looking at 
individual experiences, looking at the hundreds of employers 
who we've worked with in the SHARP program, the hundreds of 
employers we worked with in the VPP programs.
    It's very, very clear that putting in place safety and 
health systems makes a difference because that system allows 
you, as the employer, to look at okay, what is it that are 
hazards here in our workplace that are hurting my employees, 
and address those things.
    I believe we're really headed the same place, Mr. Bartlett, 
giving that employer the permission and giving that employer 
the obligation to address what hazards exist in their workplace 
and correct those hazards is what will make those employees 
safer.
    I believe that's what OSHA ought to be about.
    Mr. Bartlett. I've talked to a lot of contractors in our 
district, and I will tell you that they are more terrorized by 
OSHA inspections than they are an IRS audit.
    Is that how you want them to react to your inspectors?
    Mr. Jeffress. No. My preference, by far, is that they have 
confidence in the safety of their sites and that they wouldn't 
be afraid for me to walk on, or a compliance officer, or you, 
or anyone else.
    Mr. Bartlett. In plain clothes, I would like you to 
accompany me to talk to some of these people. You will find 
that they are more terrorized by your inspectors than they are 
by an IRS audit.
    And I would submit, if that's the case, we've got a problem 
with your agency.
    Mr. Jeffress. I welcome your invitation.
    Mr. Bartlett. One last thing, Mr. Chairman.
    You made the remark about those who don't care about worker 
safety. There may be a few companies that don't care about 
worker safety, but aren't there, Mr. Jeffress, a lot of sources 
that will bring them to the point that they're going to care 
about worker safety?
    First of all, there is criminal negligence, if in fact they 
have been negligent in providing a safe workplace, that works. 
There's all the trial lawyers. There's the cost of insurance 
that goes up. There's Workers' Compensation costs that go up.
    Aren't there a lot of incentives to bring those few 
companies that might not be interested in a safe workplace to 
the point where they're going to be interested in a safe 
workplace or they're not going to be in business?
    That's to say nothing of the fact that they have a 
reputation for not having a safe workplace and they're not 
going to be able to hire anybody.
    Today, we have more jobs than we have workers. Don't you 
think that market forces will accomplish better what you want 
to accomplish?
    Mr. Jeffress. Congress found in 1970 that those market 
forces were not providing that. President Nixon agreed with 
them, and we ended up with the OSHA Act. I believe it's 
important that we continue to enforce the OSHA Act.
    Mr. Bartlett. If one looks back through history, Congress 
has not always done the right thing, sir. [Laughter.]
    Mr. Jeffress. I submit to you neither has OSHA.
    Chairman Talent. I just want to remind Mr. Jeffress that 
Congress passed SBREFA. That was signed by the President also. 
We'll get more into that later.
    Mrs. McCarthy?
    I'll just say I always hesitate to enforce the five-minute 
rule on the members when I've been flagrantly violating it 
myself. [Laughter.]
    So I haven't been, but we do have two more panels. I just 
want to remind the members of that.
    Mrs. McCarthy. You always do it when it's my turn. 
[Laughter.]
    Chairman Talent. That's not true because you never take up 
your five minutes. Please, as much time as you want.
    Mrs. McCarthy. I will not this time.
    Number one, I thank you for informing us and picking up on 
basically almost all the questions that have been asked.
    I want to go a little bit different, but I think we'll pick 
up more on what some of the members have brought up.
    I go along with small businesses. They are petrified when 
someone from OSHA comes in.
    What I'm going to ask you is, what kind of training are you 
giving your inspectors, and what kind of recourse do the 
employers have if there is an inspector out there that is being 
a bully or certainly being unfair to that employer?
    Because I think that's important, you know. As with any 
business, you're not going to have some good people in there, 
but it also comes down to how can we make sure that our 
inspectors are a little bit more friendly to our small 
employers?
    Mr. Jeffress. In the course of compliance officers' initial 
training, we require a basic compliance course. The basic 
compliance course for all compliance officers includes a code 
of conduct, if you will--not by that name--but the way to 
behave in terms of conducting an inspection.
    And there is an expectation on our part that our compliance 
officers are courteous, are fair, and are very clear in what 
they are communicating in terms of what the procedures are.
    For those occasions where an employer feels like he or she 
has been poorly treated by a compliance officer or when a 
compliance officer has abused the authority, the employer has 
the right, under our rules, to ask for a meeting with the 
supervisor, with the area director, if you will in that area 
office to discuss the issues that are presented.
    Again, there's no penalty, there's no cost to the employer 
for doing this. I'm happy to report to you that 90 percent of 
the cases where a compliance officer has cited a violation and 
where the employer believes that the compliance officer has 
done so inappropriately, 90 percent of those cases are resolved 
by settlement discussions with our area director, to the 
satisfaction of both OSHA and the employer.
    Where an employer believes, at that level, that it isn't 
sufficient, the employer can contest, and at that point has to 
file a formal contest. And there's an administrative law judge 
process through the OSHA Commission, which is independent of 
OSHA, to make that determination as to whether the citation was 
appropriate or not.
    But 90 percent of them get resolved in what we call our 
informal settlement agreement process, which is no cost, and 
where the employer and the director or supervisor for that area 
sit down and discuss what the compliance officer may or may not 
have found.
    Chairman Talent. Next is Mrs. Kelly.
    Mrs. Kelly. Thank you, Mr. Chairman.
    Mr. Jeffress, I don't know a whole lot about your 
background but I'd like to know, have you ever worked in the 
construction industry?
    Mr. Jeffress. Three summers, and then my first job out of 
college was a carpenter's helper.
    Mrs. Kelly. So you were on the working end of a hammer, 
pickaxe, shovel, whatever it took, is that right?
    Mr. Jeffress. Fortunately, it was a hammer most of the 
time.
    Mrs. Kelly. I want to know, when you're talking about that, 
you know from your own personal experience what it's like to be 
in the field wielding a hammer. If somebody walked up to you 
and said, you've got to wear a hard hat, goggles, gloves, et 
cetera, would you wear them if it was hot like it is today?
    Mr. Jeffress. If someone demonstrates to me that there's a 
hazard here and something's going to fall on my head and could 
hurt me, I'm going to wear that hard hat.
    Mrs. Kelly. Mr. Jeffress, did you wear a hard hat? You're 
young enough to be on the job when that was in effect.
    Mr. Jeffress. I did.
    Mrs. Kelly. Every day?
    Mr. Jeffress. Whenever there was a fall hazard, my boss 
says wear a hard hat, and I did.
    Mrs. Kelly. Was your boss there every day to tell you to 
wear a hard hat, or did he tell you once and then expect you to 
remember that?
    Mr. Jeffress. I was pretty low on the chain. I had a lot of 
bosses there. [Laughter.]
    Mrs. Kelly. Did they remind you, Mr. Jeffress?
    Mr. Jeffress. Not always.
    Mrs. Kelly. That's exactly my point. I think you 
understand. We can do a lot, you can do a lot. But the problem 
is when you get right down in the field, trying to help people 
protectthemselves is not always the easiest thing.
    Now, you are talking about people, about OSHA managing 
safety. Now, if this safety system is in a small family 
business constructing a few houses, as Mr. Bartlett was talking 
about, I want to know if you were a part of the family, would 
you always wear a hard hat?
    I'm not so sure. And I'm very concerned because I don't see 
where you, sitting here in Washington, writing legislation, can 
affect those people in small family businesses out there who 
need to protect themselves.
    I'm wondering why we are talking about--and I quote you 
here--you said that you maybe should repeal all other OSHA 
rules in favor of this one that you're talking about. Yet, I 
see here, in reading what you're talking about, very vague 
standards, and I don't see a whole lot here in localized 
education.
    What could you do about that?
    Mr. Jeffress. I agree wholeheartedly with you that OSHA's 
history has been to rely on the enforcement tool to assure 
compliance and to change behavior. And that we are derelict in 
not having done enough in the education and training arena.
    I believe it's very important that OSHA correct this 
balance and do more in the education and training arena.
    Mrs. Kelly. Is that written into here?
    Mr. Jeffress. The President's proposal to this Congress, 
pending today before your Appropriations Committee for a major 
expansion for OSHA is for education and training to put full 
time education training folks in every area office OSHA has 
around the country. No inspection responsibilities. Does not 
have the ability to cite or fine people but to teach and to 
train.
    We want one person with every area office to be available 
and accessible to American businesses. We need to do that. I 
agree with you.
    I would hope that this Congress would support that request.
    Mrs. Kelly. I want to go to something that you mentioned 
earlier, and that's Mr. Cornell's Senate testimony.
    Mr. Cornell has a business and it's in the petroleum, the 
Mon Valley Petroleum industry. And I'm reading from his 
testimony right now.
    What he said was, ``we found the language was not reader-
friendly,'' when he was talking about the guidelines 
established by OSHA here. ``We found the language was not 
reader-friendly and was, in fact, impossible for a layperson to 
understand. I think for the small business person to understand 
and then try to comply with OSHA is very frustrating.''
    I further want to quote from a letter that he sent that 
says, ``I do not believe for a minute that OSHA's plan to 
impose a one-size-fits-all safety and health program regulation 
that directly conflicts with specific needs and existing safety 
program of Mon Valley Petroleum will improve health and safety 
in our facilities. Rather, such a regulation would intrude into 
the management of our business by imposing a federally mandated 
structure for managing our safety and health program and 
compromising the initiatives Mon Valley has taken. * * * ''
    Now you quoted him as being supportive of what you were 
trying to do, and is this what he's saying to us here in this 
letter?
    With your permission, Mr. Chairman, I'd like to enter that 
in the record.
    Chairman Talent. Sure.
    [The information may be found in the appendix.]
    Mrs. Kelly. And his testimony in front of the Senate in the 
record.
    [The information may be found in the appendix.]
    Mrs. Kelly. That's contradictory. How do you stand for 
that?
    Mr. Jeffress. I believe you misquoted me, ma'am. I did not 
say he supported what we were trying to do. I said he supported 
the program of safety and health programs, that he believes 
they make a difference and he does, and he gave the Senate 
information that's included in that testimony about how 
impressive a change and how important it had been to his 
company.
    That's what's important here. Do you believe that safety 
and health programs make a difference. We've gone beyond what 
was in the original proposal here, and said, for companies that 
have effective safety and health programs in place, that meet 
the basic obligations, they'll be grandfathered in.
    So companies that are doing a good job and have their basic 
obligations in place will not have to change what they're 
doing.
    That change was made after the last testimony before this 
committee.
    Mrs. Kelly. Well I think he, in his testimony, from what 
I'm just reading here, implied that what you've written is 
extraordinarily vague. And I think that's the trouble he showed 
when he was writing this letter, and in his own testimony.
    One thing that I found vague in what you said was, you said 
you had done cost studies. First, I heard what I thought was 
300 industries, and then I heard what I thought was 700 
industries.
    Which is it?
    Mr. Jeffress. A cost study is a nationwide study. In doing 
the analysis, we looked at 300 different industries. Within the 
industries, we then looked at seven sizes of employers. The 
smallest employers fewer than ten up to 20. We looked at 
different sizes of employers, so you have seven classes of 
employers based on employment size, and then 300 different 
industries.
    Mrs. Kelly. I've run out of time, and there's a lot more 
I'd like to ask you.
    I would like permission, Mr. Chairman, to submit some 
questions, written questions to Mr. Jeffress because there's a 
lot here that you and I really, I'd like to sit down and talk 
with you about.
    Mr. Jeffress. I'd be happy to do that.
    Mrs. Kelly. But I'd like to do it by submitting questions 
to you, getting the answers, and then we can talk.
    Mr. Jeffress. I'd be happy to respond in writing, and meet 
with you as well.
    Chairman Talent. Ms. Christian-Christensen.
    Ms. Christian-Christensen. Thank you, Mr. Chairman.
    I want to apologize for coming late, and also missing most 
of your spoken testimony.
    When I came in, you were saying that for every one dollar 
spent, three dollars is saved.
    Is this also true for those smaller companies of under ten 
employees?
    Do you feel it's true even for them, even though their 
incidence of injuries on the job is far less than those with 
more employees?
    Mr. Jeffress. It is true. It is an aggregate figure. As the 
Chairman indicated, and many of you have referred to, there are 
a large number of employers that have no injuries this year, 
and they may have no injuries next year. And it may be the 
third or fourth year where they have an injury and someone else 
doesn't have that injury that year.
    So the three dollar return on investment for each dollar 
invested is an aggregate figure. I can'ttell you that it would 
be true every year. But I can tell you, over a period of time, for 
businesses it will be true.
    Ms. Christian-Christensen. I'm a physician, so I had some 
patient protection, employee protection regulations.
    Mr. Jeffress. The pathogen standards?
    Ms. Christian-Christensen. Yes. And we have so many 
regulations, I can understand what Mr. Bartlett was talking 
about.
    And in your response, it was a job in North Carolina, you 
said you were going to try to bring them together.
    Were you successful in that?
    Because I think it's important that we do see adhering to 
the rule, whatever it ends up being, and protecting our 
employees is one and the same, and not an additional burden.
    Mr. Jeffress. I agree with you. I think that is very 
important.
    I'd like to believe, in the five years I was in North 
Carolina, we did bring those a little closer together. You'll 
have to ask other folks for their opinion, as well.
    The other thing I would emphasize is I believe safety and 
health is in fact fluid, and I certainly hope that OSHA is, as 
we learn more that we make modifications.
    The bloodborne pathogens standard is one area where 
knowledge has been growing tremendously and we need to make 
some modifications to that, and we'll be making some based on 
the experiences people have reported to us.
    What we're proposing here in terms of the safety and health 
program rule is in fact our best analysis, our best proposal 
based on what we've heard so far. We will modify it based on 
what we hear next year in the hearings and written comments.
    But even so, it's going to need to be responsive, and it 
will need to be revisited from time to time. We need to 
continue to stay current and be responsible to people's 
experience.
    Ms. Christian-Christensen. Thank you.
    Thank you, Mr. Chairman.
    Chairman Talent. I just have a couple of more questions. 
Then we're going to release you, Mr. Jeffress, and go on to the 
next panel. I appreciate your patience very much.
    I want to go a little bit more into the cost/benefit 
analysis which is going to be the subject of the next panel.
    I just want to establish something with you as a factual 
basis here that two experts seem to disagree about.
    Part of what you hope is going to happen as a result of 
this rule is that the safety and health program people 
institute will lead them to identify and remove hazards at the 
workplace.
    That's correct, right?
    Mr. Jeffress. Yes.
    Chairman Talent. Now obviously, there's going to be some 
cost to removing those hazards?
    Mr. Jeffress. Yes, sir.
    Chairman Talent. To bring it down to the I chose to use 
here, if my brother, as a result of his inspection at the 
workplace, decides that the knives that they're using present 
an extra hazard when they cut things up, he may have to out and 
buy new knives. That's the cost of the hazard removal.
    Just so we're on the same page with what we're talking 
about.
    Now did OSHA, in its Reg Flex analysis, take into account, 
as a cost of the rule, the cost of that hazard removal or not?
    Mr. Jeffress. We did.
    Chairman Talent. So you did not omit that cost of hazard 
removal?
    Mr. Jeffress. We did not omit that. It's taken against the 
benefits, if you will, what are the benefits to an employer of 
putting a safety and health program in place.
    Those benefits have been decreased by the cost involved in 
correcting the hazards.
    Chairman Talent. If that's the case, then my reference to 
that in my opening statement was incorrect. That's one of the 
reasons I wanted to establish the validity of Mr. Singh's 
point.
    Mr. Jeffress. I made a check here because I wanted to make 
sure that I'd done that.
    Chairman Talent. Now why does Mr. Beale in his testimony--
and this is a classic case of having so much information that 
you can't find anything here. I remember reading in Dr. Beale's 
testimony--and he'll be able, obviously, to testify on his own 
behalf--he said, ``For the purpose of assessing the economic 
feasibility of the proposed rule, it's appropriate to consider 
only the costs that are directly attributable to the rule.
    The legally correct way to do this is to assume that the 
regulated entities are already in compliance with other 
regulations, and thus to exclude costs of coming into 
compliance in instances when they in fact are not already in 
compliance.
    Thus, for the purpose of assessing economic feasibility of 
a regulation costs of hazard control required by other 
regulations are properly omitted, and OSHA did so.''
    Was he just wrong in saying that?
    Mr. Jeffress. In terms of offsetting the costs and 
benefits, we did offset those costs, so the benefits are 
reduced by the amount of those costs in terms of attributing--
and that's in the cost/benefit analysis, but in analyzing the 
costs and in analyzing the benefits, we did reduce the benefits 
by those costs.
    Chairman Talent. But you just didn't have a separate line 
item that includes the net. When you say benefits, you mean net 
benefits?
    Mr. Jeffress. That's correct.
    Chairman Talent. The costs of replacing steak knives, et 
cetera?
    Mr. Jeffress. In terms of the costs of this rule, Dr. Beale 
is right. Those costs are in fact theoretically attributable to 
the other rules that already exist.
    I don't want to double count the costs but we did reduce 
the benefit of this rule because our presumption is that these 
employers who have these violations, who have these hazards, 
and are not correcting them, will now correct them as a result 
of this rule.
    But, you know, we need to attribute those costs. They need 
to correct them because of the previous specifications. They 
just won't do that. My suspicion is they won't do it until this 
rule is put into place.
    Chairman Talent. I just want to make sure I know, as a 
matter of fact, what you did. You understand why I'm going into 
this?
    So when you say the costs of hazard control required by 
other regulations are properly omitted from your Reg Flex 
analysis, that's just not correct as a matter of fact. You did 
not omit that from your Reg Flex analysis.
    Mr. Jeffress. We did not attribute to this rule those 
costs, but we did claim them, as benefits for this rule. We 
reduced the benefits claim for this rule by those amount of 
costs.
    Chairman Talent. So you didn't include them, but you 
included them in netting out the benefits, and I don't care how 
you did it.
    Mr. Jeffress. We didn't claim them as Dr. Beale said. We 
did not show them as a cost of this rule, but we reduced the 
benefits because those are going to be incurred.
    Chairman Talent. Now I will tell you this. I read the Reg 
Flex analysis, but did not read it in the detail that staff 
read it, it's not really evident from it that you did net that 
out.
    I accept you, since you say you did.
    Mr. Jeffress. I think that was pointed out in the SBREFA 
final process as well. We'll make that clearer.
    Chairman Talent. I think it also makes it more difficult to 
review whether you were correct in computing the total costs 
when you don't have a separate line item.
    What I'd like to do is prepare a series of questions for 
you about your Reg Flex analysis based on Mr. Singh's review of 
it, put those to you in writing, and I hope that you will 
respond in depth.
    Mr. Jeffress. We will.
    Chairman Talent. It's important to me, observing Reg Flex, 
which was passed by the Congress and signed by the President, 
is as important for OSHA as enforcing the OSHA law, which was 
passed by the Congress and signed by the President.
    And so I will expect detailed and to-the-point responses. I 
don't want to have to do this in another hearing. So if you do 
it in writing, it would make a big difference.
    Mr. Jeffress. We will respond.
    Chairman Talent. I think I'll save my questions about the 
economic analysis for the economists when they get up here.
    Unless anybody else has a question?
    [No response.]
    Chairman Talent. Thank you, Mr. Jeffress for being here.
    I'll ask the second panel, and just for the convenience of 
the members, the second panel is going to be Dr. Beale and Mr. 
Singh. Then we will have a third panel with the other two 
people.
    I know we're changing this, but I think it's the right way 
of packaging it.
    [Pause.]
    I will not go through the bios of these two distinguished 
witnesses. They each have long records of experience in their 
relevant fields.
    I do thank both witnesses for coming. We're looking forward 
to their testimony and their dialogue.
    Without any further comment, I'll just introduce Mr. 
Jasbinder Singh, currently the president of Policy Planning & 
Evaluation, Inc.

STATEMENT OF MR. JASBINDER SINGH, PRESIDENT, POLICY PLANNING & 
                 EVALUATION, INC., HERNDON, VA

    Mr. Singh. Thank you, Mr. Chairman.
    I will read my written testimony, not verbatim, but 
concentrating on some of the tables that I've presented.
    And then perhaps come back into the written testimony as I 
go along.
    I should say thank you for inviting me. It's my privilege 
to be here to present a summary of our report.
    This report, as you know, was prepared for SBA's Office of 
Advocacy to assist it during the SBREFA process.
    I'd like to correct that a little bit. Actually, we've 
presented a lot of the analysis presented in the report during 
the SBREFA panel process, but the report actually came I think 
about 45 or 60 days later.
    We reviewed the draft rule and the accompanying documents 
to determine whether the benefits outweigh the costs of the 
rule for certain categories of small business, and whether 
regulatory flexibility can be provided to small business 
without comprising the goals of the rule.
    My company, Policy, Planning & Evaluation, Inc. has 
prepared such independent reports on more than 15 other federal 
rules over the last four years, most of them under the SBREFA 
process.
    In addition, we have prepared numerous economic analyses 
reports on behalf of federal agencies over the last 20 years.
    Our report, as you know, is very critical of the 
preliminary initial regulatory flexibility analysis developed 
by OSHA as justification for the Safety & Health Program rule.
    In my view, and I say that because even now I would say 
that, after reading Dr. Beale's testimony this morning quickly, 
that OSHA did not make a good faith effort in analyzing costs 
and benefits of the Rule, as discussed below.
    OSHA has largely ignored the impacts of the rule on small 
businesses. Moreover, its depiction of total costs and benefits 
is highly deficient.
    I believe OSHA's analysis does not exhibit due diligence. 
I'd like to add that, in my 15 years, I have never seen any 
analysis like this.
    I'd like to turn your attention to page 5 to this table, 
which represents--it's not MSD incident rates--this is rates of 
injury analysis with days away from work.
    This is the data taken from the Bureau of Labor Statistics. 
What we find that is if you go across the establishment-size 
group of one to ten, this data are divided into four quartiles.
    Basically, you take all the businesses in any industry and 
divide them into four categories, for quartiles of equal size, 
and then take the average incidence rate in each of those 
categories.
    This analysis that I've listed comes from the Bureau of 
Labor Statistics. As you can see, the incidence rate in the 
employee size category 0 to 10 is zero for, 1 to 10 is zero for 
the first three quartiles.
    And then in the fourth quartile, it is 6 injuries per 
hundred workers.
    In 11 to 49, it's zero for the first two quartiles, namely 
50 percent of the establishments, and in the 50 to 249 
category, it's zero in the first quartile or 25 percent of the 
businesses.
    For other businesses in the third quartile, you can see the 
highest rate is .5 injuries per hundred workers per year, which 
means that if you take a firm of I suppose 50 employees, they 
will experience an injury rate of .4 injuries per hundred 
workers per year, which amounts to almost one injury every five 
years.
    So there are this large number of businesses that have 
very, very low injury rates and they will be asked to comply 
with this rule.
    And I'm taking, in this presentation, the incidence rates 
from the manufacturing sector, which is traditionally 
considered the highest high hazard sector.
    I also would like to spend a couple of seconds on the 
fourth quartile, which means the 25 percent of the businesses 
that have a fairly high rate of injury. And I believe that it 
is this sector to which the health and safety program rule, or 
for that matter, any of the rules should be addressed or 
directed.
    A firm, maybe a thousand-person firm in the fourth quartile 
will have like 86 injuries per year.It makes sense to have some 
sort of a rule or some sort of a systematic way to reduce those 
injuries.
    I believe the fourth quartile here represents many 
industries or includes data from many industries that have very 
high hazard rates, as documented by OSHA.
    And I would like to go back to my report and just sort of 
read out some of the industries that we know are small, have a 
large number of small businesses.
    For example, I'd like to say ductile iron foundries, 
automobile stamping, steel springs, all of these industries 
have incidence rates as high as 25 injuries per year per 
hundred workers.
    I believe it's those kinds of industries that OSHA should 
focus on in order to reduce the injuries.
    What the data in this table imply is that the vast majority 
of the small businesses will incur the costs of the rule but 
derive really no benefit, because the benefit really comes from 
reduction of injuries, and then from reduction of Workmen's 
Compensation premiums. That's where the benefit really comes 
from.
    Mr. Jeffress has testified to the effect that a very large 
number of the fatalities occur in small businesses. And indeed, 
if you reduce those fatalities, there would be benefits from 
reduction of those fatalities.
    But what is missing perhaps in that is that if you have 30 
percent of the fatalities in very small businesses of one-to-
ten employee firms, there are millions and millions of those 
firms.
    In any one individual firm, it's unlikely that the 
fatalities will occur quite often.
    I want to go back also to the 49-employee firm that I said 
there's one injury every five years. So if you take OSHA's 
assumption about the fact that the injuries were reduced, due 
to this rule, by 20 to 40 percent, even if I take 20 percent, 
what we find, using OSHA's estimates of benefits, that that 
company will save $460 per year.
    I believe the cost of the rules, regardless of all the 
controversies that there are about benefits and costs, will be 
far more to that small firm than $460 per year.
    I have also heard that the injury rates in the BLS data are 
not adequate because the injuries are under-reported in small 
businesses.
    My response to that would be that tell us how much under 
reporting is it. Is it a 100 percent, 200 percent, 300 percent. 
Whatever the under-reporting might be, I would submit to you 
that for these 75 percent of the businesses, the cost of the 
rule will far outweigh the benefits of the rule, especially for 
the first three quartiles of the businesses.
    Let me go to the benefits of the program rule. If I may ask 
you to turn your attention now after page 5, there's no, on the 
next table, Table 2, OSHA, as I said, the benefit of the rule 
is directly proportional to the reduction in injury in the 
businesses.
    OSHA assumes here again that the rule will reduce injuries 
by 20 to 40 percent, and we talked about that, you all talked 
about that before.
    Well, what we did, and I should say that we were brought 
into the SBREFA panel process, we were given this assignment, 
and we have no more than maybe 30 days to do our work, whereas 
the Agency has taken two years, perhaps five years, to develop 
the rule.
    They had adequate time to present their analysis, to 
document where the benefits are, or for that matter, the costs 
are. I know Dr. Beale will probably criticize us here, but give 
us a little break here, if we did make a mistake or two, we had 
only 30 days and we had to cover a lot of ground.
    And even in preparation for this hearing, I spent a very 
substantial amount of time on the Workers' Compensation 
program, and I'll comment on that a little later.
    If we look in Table 2, if I may turn your attention back to 
that, I will pick Minnesota as an example here.
    Chairman Talent. Let me say, Mr. Singh, if I could 
interrupt you for just a second. Why don't you explain Table 2, 
which I think, as I understand it, part of the heart of your 
analysis.
    Then we'll go ahead to Dr. Beale, because I think the 
questions that are going to come from the Committee members are 
going to bring out the other points of the analysis.
    If they don't, we can go back later and get them. Since we 
have votes coming up, I want members to be certain and have a 
chance.
    Go ahead and explain Table 2, then we'll go to Dr. Beale, 
if we could.
    Mr. Singh. This is the data we could get during the 30-day 
exercise.
    We have the state plans states in which similar program 
rules have been implemented. And then the non-state programs 
where such programs are similar to the federal rules, and have 
not been promulgated. And then there's the sort of national 
average, and these are the states that we picked up.
    What I would like to show is that in Minnesota, and this is 
why I think that a proper comparison should be made, in 
Minnesota, in 1991, the injury rate was 8.1. When the program 
rule went into effect in 1992, it was 8.6. It went up, and in 
1993, it went up again. In 1994--sorry, it stayed at the same 
level. In '95 and '96, it came back down a little bit but it's 
still well above 1991.
    What this says is that it doesn't mean that whatever health 
and safety program rules they did promulgate increased 
injuries. It doesn't mean that. It just means that a lot more 
analysis needs to be done to look at the factors behind why the 
rates went up and whether in fact the health and safety rule 
was effective, if at all.
    The second thing we did was we also took five years after 
these rules were promulgated, to see what effect they had. And 
indeed, in our little sample, the rates did go down 17 percent 
or so during this five-year period.
    But then you take a look at the non-state plans here. We 
also find in the limited sample again that we had the rates did 
go down again by about 12 percent or so. And in fact, the other 
study that the Chairman cited, in that they found that in fact 
they went down even more than the program rule states.
    So really making this comparison or taking this data, just 
this data, doesn't mean that these health and safety rules will 
be effective.
    But if you go back now, if I may go back in 1985 onward, 
what you find, if you take a look at the Workmen's Compensation 
programs and how they have changed, the Workmen's Compensation 
premium increased very, very rapidly in the early 80s and mid-
80s, essentially due to the medical costs.
    And again this is my quick read. I should say that I am 
quite certain when the medical premium is reached, there was a 
concerted effort made by the employers and by the insurance 
companies to reduce those premiums and put great restrictions 
on people in who could qualify for the Workmen's Compensation 
benefits.
    There was a lot of control over which doctors are going to 
be selected by insurance companies to be able to provide 
whatever help can be provided, so there were a series of 
restrictions brought which I believe has led to the reduction 
in the injury rate eventually.
    And I've come across at least five different documents that 
deal with that particular issue.
    So I think even the article that you cited deals with that 
issue.
    If I may just take a couple of more minutes here. OSHA also 
assumes here that rates nationally will decrease by 20 to 40 
percent. The states that have implemented the program, if this 
is true, have already realized that reduction, which means that 
in the other 25 states, it must go up by 40 to 80 percent to 
come up with this average, 20 to 40 percent.
    There is nothing in any of this data that would support 
that.
    Chairman Talent. Why don't you wrap up because we're going 
to have questions, and this stuff will come out, I assure you.
    Mr. Singh. The other thing I should say is that Workmen's 
Compensation rules, what you find is, in four percent of the 
cases that go to litigation and are settled, they are very 
large settlements, and those settlements are the ones that skew 
these results of sort of the average compensation claim with 
OSHA has then used to calculate the benefits.
    It's not quite clear to me that this rule will reduce 
fatalities, that this rule will reduce those lawsuits, or that 
the lawsuits' settlements will be smaller.
    I'd like to say a couple of things about the cost of the 
rule itself. We find that a lot of the assumptions that OSHA 
made were unsubstantiated and apparently unreasonable.
    For example, the average cost to correct the median-to-
high-hazard priority hazard is only $437. I don't want to make 
a joke of it, but the last time I changed two toilets in my 
home, it cost more than $500.
    Come on, give me a break. This is something that we looked 
at every aspect of those assumptions and saying, is this real.
    Chairman Talent. I understand your concerns and I shared 
them when I looked at the Reg Flex analysis.
    Let's see what Dr. Beale says.
    [Mr. Singh's statement may be found in the appendix.]
    Chairman Talent. Dr. Henry Beale, who is the principal 
economist for Microeconomic Applications, Inc.
    Dr. Beale.

    STATEMENT OF DR. HENRY B.R. BEALE, PRINCIPAL ECONOMIST, 
                MICROECONOMIC APPLICATIONS, INC.

    Dr. Beale. I've reviewed the report by PPE. That is 
principally what I have done.
    I am not intimately familiar with the details of OSHA's 
analysis. I went into it in sufficient depth to double check 
whether the PPE report made sense or not, and I also have some 
background that I can comment generally.
    And the general comment would be that OSHA's analysis was 
far more sophisticated than you would have found several years 
ago.
    I find the PPE report to be highly counterproductive to the 
whole SBREFA process. The SBREFA process, as I understand it, 
should bring OSHA and industry together at a very early stage 
in the development of a regulation, so they can share their 
ideas, their concerns, their analytical first cuts on what a 
proposed rule will do.
    These SBREFA with respect to Reg Flex adds a third and 
earlier analysis and initial to what was in the previous Reg 
Flex Act. So that what OSHA did was quite preliminary. It also 
was not as clear as it might have been, which is an issue.
    But the SBREFA process allows a lot of discussion back and 
forth. To be effective, the process should be open, collegial, 
and collaborative. And the PPE report intrudes into this 
process like an attack dog at a Quaker meeting. Its tone is 
hostile, its analysis is abysmal, its perspective is purely 
partisan, and it's ready at the drop of a footnote to point the 
finger of blame.
    The implications and conclusions it draws are misguided, 
misleading or mistaken. And this is not helpful to the SBREFA 
process or, for that matter, to this Committee.
    At a stage where one would want OSHA to share drafts and 
preliminary analyses while they're still malleable, the PPE 
report constantly complains about incomplete documentation and 
information.
    And I can assure you that when you do, it's about a 340-
industry-by-seven-size-class analysis, the results are 
voluminous, and not easily written up and summarized.
    And if you may be changing things, you don't necessarily 
write them up and summarize. It's incumbent upon a commentator 
to talk, and find out what's going on.
    But PPE talks as if complete and final results should have 
been set before them. Had complete and final results been set 
before them at that earliest stage, there would have been 
legitimate grounds to complain that all the decisions had 
already been made.
    So it's a Morton's Fork situation for OSHA. At best, the 
criticisms that PPE makes are premature. However, the 
misrepresentations of OSHA's analysis are so pervasive that 
it's difficult to conclude that PPE tried very hard to 
understand what OSHA did, and it's possible to conclude that 
they didn't want to understand. And this isn't helpful to the 
SBREFA process or to this Committee either.
    The PPE report completely ignores OSHA's efforts at 
regulatory flexibility alternatives. And one of the issues 
that's been discussed here is simply doing a performance 
standard. That's regulatory flexibility.
    The report then advocates two regulatory alternatives of 
its own, and in discussing the first of these, the PPE report 
is so intent on tearing apart OSHA's analysis that it does not 
seem to notice that it has demolished its own case for the 
alternative.
    The alternative in question was a voluntary program, and 
PPE spends the whole first part of its report in attack mode, 
trying to show that programs don't work.
    And Table 2, which was shown to you, is a perfect example 
of what I mean by misrepresenting OSHA's analysis. OSHA picked 
four states with programs that met two criteria. They were 
comprehensive, and they'd been in place for five years.
    PPE started off by completely misrepresenting that by 
saying that OSHA's analysis was based on 25 states with 
programs. No. It's different.
    Mr. Singh has pointed out to you Minnesota, which was not 
one of OSHA's four states. While I'm not familiar with 
Minnesota or some of the other states with less complete 
programs, I would point out that some of the reasons that the 
programs were not considered by OSHA included exemption of 
small businesses and exemption of large numbers of industries.
    In fact, the only state in here that OSHA picked was 
Washington, and these data start after the five-year period for 
Washington.
    North Carolina was another state that OSHA rejected on the 
grounds that it had only three years of data. But you will 
notice that the three years of data show a decline.
    The reason for picking five years was, when you look at the 
data, that's when it starts leveling off.
    So this is a complete misrepresentation of what OSHA did by 
way of analysis.
    Furthermore, OSHA based its full range not only on the 
states, which figured in the bottomend, but on industry studies 
and case studies, a great deal of data which the PPE report does not 
even mention.
    They move that out and spend pages criticizing OSHA for 
basing a range of things on something OSHA did not use at all.
    This is not helpful.
    Then, there's the other little issue, the other 
alternative, which is small businesses, exempt small 
businesses. Now, in discussing this, PPE essentially assumed 
its conclusion and ignored all other possibilities, as well as 
basic probability theory.
    I draw your attention to the other table. PPE concludes, 
from this table, that three-quarters of the industries don't 
have a problem. That's a complete misunderstanding of the data, 
which are survey data for a year.
    And if you make an assumption that small businesses have 
the same rate as larger businesses, and in my written 
testimony, I took a thousand workers and divvied them up two 
ways: into four firms of 250 employees, and into 250 firms of 
four employees, which is about the average for the under-ten 
size class.
    At a six percent injury rate, the expected value of 
injuries is 60 on 1000 employees.
    Now, in those small firms, you know that at least 190 of 
them aren't going to have an injury that year, if 60 injuries 
occur.
    Now this is with the assumption that the injuries are 
randomly distributed and equal for all workers, and thus for 
all firms of a given size class, you can't draw the conclusion 
that Mr. Singh draws, that there are lots of these industries 
that have no risk.
    You can get this table by assuming precisely the contrary. 
That's not good analysis. It's a statistical artifact which 
leads to another conclusion of looking at the firm as the unit, 
when in fact the injury data deal with individuals, and for 
that matter, the OSH Act protects individuals, okay.
    That analysis is not helpful to the SBREFA process nor is 
it helpful to this Committee.
    In its discussion of OSHA's cost methodology, the PPE 
report bases most of its criticisms on fundamental legal and 
conceptual errors about the regulatory analysis of cost.
    And since I know the Chairman has a question about that, I 
won't say more here.
    The PPE report's most consequential criticism of OSHA's 
benefits methodology is based on a conceptual error in 
statistical methodology. When do you use a mean and when do you 
use a median?
    It is proper here to use a mean, not a median as the PPE 
report insists.
    There is a key issue that's identified, for which more 
analysis is wanted. And that is that you really should look at 
the effects of a safety and health program, and not start 
making assumptions about whether it's going to have the same 
effect or a proportional effect to the pattern of injuries as 
they occur now.
    But PPE is every bit as guilty of making an assumption as 
OSHA that it criticizes.
    Again, that is not helpful to the SBREFA process.
    So the PPE report adds nothing useful to the SBREFA 
process. It promotes trench warfare in a process where flexible 
give-and-take of discussion is the most productive approach.
    I would consider it frankly an embarrassment to the SBA 
staff, for whom I have worked, by the way, whose credibility as 
advocates for small business depends on a foundation of solid 
professional analysis.
    Although there are a few, very few, valid issues raised by 
the PPE report, supporters of SBREFA should shun this report 
lest they sabotage the process. And critics of OSHA should shun 
it lest they sort of undermine their own credibility.
    At a minimum, the PPE report--well, should be taken with a 
large quantity of salt.
    [Dr. Beale's statement may be found in the appendix.]
    Chairman Talent. Thank you, Dr. Beale. The Committee always 
appreciates visual aids. [Laughter.]
    Chairman Talent. I don't know how to respond to that, but I 
will attempt it.
    Let me go into a couple of things.
    First of all, on the whole issue of whether this was 
premature as part of the process, my information is that OSHA 
finished its Reg Flex analysis, it's initial regulatory 
flexibility analysis in October and completed its initial 
SBREFA work in December, and then submitted that analysis to 
the small business community.
    And the PPE report was on January 27th. So it's not like, 
is it, Dr. Beale, that OSHA had not completed its initial stage 
of analysis? They had the initial regulatory flexibility 
analysis.
    Dr. Beale. They had completed it. That's correct.
    But one of the issues is in that little slip that you just 
made when you started to say completed its Reg Flex analysis, 
and then corrected yourself and said initial.
    Chairman Talent. But the point is----
    Dr. Beale. The point is the analysis was completed. It was 
not as well written-up as it might have been, and PPE did not 
go beyond the write-up.
    The SBREFA process gives opportunity to do precisely that.
    Chairman Talent. Did you ask for additional material, Mr. 
Singh?
    Mr. Singh. I will answer the question, but I would like to 
say that Dr. Beale says that he has not read the OSHA data.
    Chairman Talent. Let me just say to both of you, we're 
going to have some questions here, and it's really important 
that you let us ask the questions.
    Mr. Singh. I apologize.
    Chairman Talent. Probably nobody here is an expert in 
economics.
    Dr. Beale. Are you suggesting what we need is a good 
referee?
    Chairman Talent. I'll be the referee here, okay?
    Dr. Beale, what I'm telling you is the give-and-take starts 
when they release the ERFA, and they did. If the PPE report is 
wrong, then it's bad because it's wrong. It's not bad because 
it criticizes the ERFA report, even in strong terms, unless it 
criticizes it incorrectly.
    If the points they had made had been correct points, you 
wouldn't be attacking it.
    Dr. Beale. I wouldn't be attacking it in this manner, no.
    Chairman Talent. This a bureaucratic agency, this is not a 
marriage relationship where we work it out where somebody uses 
appropriate word pictures or something.
    Let me follow up with that because, you see, we've had this 
problem with OSHA too. I just learned something which, had I 
known, would have been a significant portion of my questioning 
of Mr. Jeffress.
    The Committee just found out that its estimate of 
reductions in states that had mandatory safety programs was 
based on a four-state analysis.
    The reason we didn't know it is because the ERFA, on page 
2, and I think this is the only reference they have to 
reductions in states with mandatory programs, only refers to 
the 25 states that Mr. Singh analyzed.
    He didn't know that they based this on an analysis of only 
four states, and we didn't know it either until the last day or 
two.
    Now how is the small business community supposed to respond 
to the underlying analysis if nobody knows that was the 
analysis?
    If anybody's here from Secretary Jeffress' office who wants 
to respond to this, that's fine with me. We didn't know that it 
was based on these four states, and I guess that's my fault. I 
should have ferreted through all this stuff.
    And Dr. Beale, you may not have known that they didn't 
release that to other people, but it's perfectly understandable 
to me that Mr. Singh would base his analysis on these 25 
states. Because if you read the ERFA, the only reference to the 
performance of states that have mandatory plans is to those 25 
states. That's on page 2 and 3.
    Mr. Singh. Let me just say something, Mr. Chairman. We 
asked OSHA which states had the programs already. They would 
not give us the information. We had been asking them for so 
many pieces of information and the information was never given.
    Chairman Talent. That's what the Committee was informed.
    I'm not saying that there's nothing wrong with the PPE 
analysis. I suppose there may be, but if the members will 
look--does everybody have one of these? All OSHA really says 
here is, ``the experience of states and the insurance industry 
also support safety and health programs as the single most 
effective tool available to employers to protect their workers. 
Currently, 25 states have implemented mandatory safety and 
health program requirements, either through their state 
occupational safety or health agencies, or Workers' 
Compensation systems.
    OSHA's studies of the impacts of those programs show that 
for programs covering most firms in the state, job-related 
injuries and illnesses were 17 percent lower five years after 
the implementation of rules requiring these programs than they 
were before issuance of the rules.''
    They go on in that vein, and then they talk about states 
that have voluntary programs.
    It's quite reasonable to assume that they based their 
assessment on these 25 states, isn't it?
    Dr. Beale. It is quite reasonable if that's the only thing 
you use.
    Chairman Talent. That's all we had.
    Dr. Beale. That may be all you had.
    Chairman Talent. But when did you get the four-state 
analysis?
    Dr. Beale. I have really only come into this picture in the 
last few weeks.
    Chairman Talent. Let me ask you, when were you hired to do 
this.
    Dr. Beale. I'm not being paid by OSHA to do this.
    Chairman Talent. I'm not getting into that. You're 
unbiased.
    Dr. Beale. I first saw this PPE report about a month ago.
    Chairman Talent. When did you find out about the four 
states?
    Dr. Beale. When I asked.
    Chairman Talent. Do you remember when you asked?
    Dr. Beale. Three or four weeks ago, but I was also given a 
second document, which is an economic document that is more 
detailed, and gives that information, which is several months 
old.
    Chairman Talent. Did we ask them for their economic 
analysis? I'm going to go through the questions that this 
Committee asked that Agency. This isn't for you, Dr. Beale.
    If we asked questions relating to underlying economic 
analysis that we weren't given, and then Dr. Beale asked for it 
and he was given it, I'm going to find out why.
    And whoever is still here from that Agency can take that 
back to Mr. Jeffress and tell him. I did not know this until 
about a half-hour ago. That's my fault in the hearing prep for 
this.
    This Committee is entitled to the underlying economic 
analysis and I want the underlying economic analysis. If it 
provides justification for another hearing, we're going to have 
it.
    Because if you read this ERFA, the only thing that you get 
from this is that they looked at 25 states, and in those 25 
states, the reductions in injuries and illnesses were 17.8 
percent.
    I mean, if that's all we had and that's all they gave us, 
then that explains the PPE report.
    Now let me ask a couple of other questions.
    Did they explain, in the information they gave you, why 
they chose those four states?
    Dr. Beale. Yes.
    Chairman Talent. What were the reasons?
    Dr. Beale. The reasons are, and they've been told to you 
several times, that they were states with relatively 
comprehensive programs and five years of data.
    Because, when you look at the data, five years is about 
when it starts leveling off.
    Chairman Talent. Did they go into any more detail than 
that?
    Dr. Beale. No.
    Chairman Talent. So we can presume that there weren't any 
other states. I guess we'll have to look through the 46 states 
to see if there are any others. Did they define what they meant 
by most employees who were covered?
    Dr. Beale. That I don't know precisely. But my 
understanding is that they did not have small business 
exemptions or exempt large numbers of industries.
    Chairman Talent. Did they give you any data on whether they 
analyzed what happened in states that had no mandatory safety 
and health programs?
    Did they look at states that had no mandatory safety and 
health programs in the data they gave you?
    Dr. Beale. They were looking at one. They were looking 
principally at the states that had the complete programs and 
comparing them against whatever else was going on in the 
country during the particular five years after each state's 
program was implemented.
    Chairman Talent. So they compared it to the national 
average?
    Dr. Beale. They compared it to the national average.
    Chairman Talent. Would you have done it that way without 
using a control group which had no mandatory safety and health 
programs?
    In other words, they used a control group, some of which 
had mandatory programs, some of which didn't.
    Dr. Beale. The issue isn't so much whether they have 
mandatory programs, it's whether, if they had a much earlier 
mandatory program coming in, because you're looking at the 
changes over the period of time, so it really doesn't matter if 
you had mandatory programs or not.
    The question is, what other programs were going in at the 
same time. That in fact is a conservative way to do it because 
if you had other mandatory programs going in at the same time, 
that would tend to pull the national average down during that 
period and make the program that you're looking at look less 
effective.
    Chairman Talent. But that begs the question.
    Dr. Beale. No, it doesn't beg the question.
    Chairman Talent. It assumes that the mandatory programs 
bring down the injury rates. Yes, if they bring down the injury 
rates, then including them in the other states has the effect 
oflowering that other average against which you're comparing.
    But if they don't bring down the injury rates, then it's 
not a conservative method of analysis, is it?
    Dr. Beale. Then it's neutral.
    Chairman Talent. And what we have from OSHA's own economist 
is an analysis of the states that he says--and this is OSHA's--
do not have mandatory----
    Dr. Beale. You got an analysis that I haven't.
    Chairman Talent. You didn't have that either. I don't think 
any of us know what we have or don't have, but we're going to 
find out.
    Dr. Beale. I want to emphasize something when I talk about, 
when I say premature, and that is that the SBREFA process is 
not all in writing, okay?
    So to rely only on the first stage documents and not to go 
behind that, and not to discuss it, and not to use the basis of 
discussion, I mean, it is inconceivable that PPE could have 
brought up these comments verbally in the SBREFA process 
without getting answers.
    Chairman Talent. Is there anything in the transcripts of 
the stakeholder meetings that would bear on the analysis of 
PPE?
    Dr. Beale. That I'm not sure. But I mean, that's my point. 
That's partly I say premature. Yes, you are correct in that my 
real beef is that it's wrong, but the point is to come out with 
something that says regulatory analysis of OSHA's safety and 
health program rule, when, as Mrs. Velazquez' question 
elicited, the thing hasn't even been proposed yet, this is the 
sort of rhetoric--it's partly rhetorical that we're talking 
about----
    Chairman Talent. I'm going to defer to Ms. Velazquez. Let 
me just say that we'll find out. We should be recessing for a 
vote pretty soon. If I have reacted negatively, and there's 
some explanation for this, I'll put that on the record.
    Dr. Beale. I understand. And I agree with you to the extent 
that that one document is not particularly clearly written, and 
not very illuminating as to what OSHA actually did.
    Chairman Talent. I found it that way also. It is very 
difficult to tell, for example, whether, I mean, the mistake 
you made, if it was a mistake, in saying that they omitted, 
properly omitted the cost of hazard control, was a very 
understandable mistake based on the ERFA because it doesn't 
appear from it that they did include the cost of hazard 
control.
    Dr. Beale. Well, somebody who has done a lot of regulatory 
analysis needs to understand that distinction. For the purposes 
of talking about economic feasibility, you use only the costs 
attributable directly to the regulation.
    For the purpose of assessing benefits and costs, you of 
course want to include all of the costs that are related.
    And if I can use an analogy, how do you structure your 
chapters? Do you have one chapter that says, economic 
feasibility, and another chapter that says we're balancing 
benefits and costs?
    Well, if you write it that way, that's what OSHA did, and 
that's what Mr. Jeffress described.
    Or do you put all of your costs and have one chapter 
labeled costs and one chapter labeled benefits?
    Now, what the PPE report does is to assume that it was 
structured the latter way. And to rake OSHA over the coals for 
omitting costs when in fact the only thing that happened was 
that OSHA structured its chapters differently----
    Chairman Talent. I would have been very upset if OSHA had 
included the benefits saved by removing hazards that were 
discovered as a result of the safety and health rule, and had 
not included the costs incurred.
    Dr. Beale. I would have been upset too, oh, yes.
    Chairman Talent. Mr. Jeffress now assures us that it did 
not happen.
    Dr. Beale. It did not happen.
    Chairman Talent. It's difficult to tell on the basis of the 
ERFA that it didn't happen. So I'm not going to, I'm not here 
to judge that.
    Dr. Beale. But again, that is a standard enough distinction 
in benefit cost analysis which is what underlies the legal 
distinction.
    Chairman Talent. Let me recognize the gentlelady from New 
York.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Singh, you prepared a report on behalf of the Office of 
Advocacy?
    Mr. Singh. My company did, yes.
    Ms. Velazquez. When did you submit it?
    Mr. Singh. January 27th.
    Ms. Velazquez. The title of that report is Regulatory 
Analysis of OSHA's Safety & Health Program Rules.
    Mr. Singh. That's what we titled it as. Perhaps the title 
ought to be a little different than that, but that is indeed 
the case.
    Ms. Velazquez. Don't you agree that the title is misleading 
for someone who does not know?
    Mr. Singh. Now that Mr. Beale has mentioned that, I would 
say yes.
    Ms. Velazquez. Have you had a chance to discuss the report 
with the Office of Advocacy?
    Mr. Singh. Yes.
    Ms. Velazquez. Can you share with us what has been the 
reaction to the report? Did they share it?
    Mr. Singh. I don't know whether we had reaction to the 
report itself, but when we did these tables here, when we found 
the data ourselves about what the injury rates were and what 
the data really meant, that we did discuss closely with the 
people in SBA, yes.
    Ms. Velazquez. Did the Office of Advocacy share with you 
that they thought that this report was not balanced?
    Mr. Singh. Was not balanced? Not at all.
    Ms. Velazquez. Okay.
    Mr. Beale, you are quite critical of this report prepared 
by Mr. Singh's firm.
    Would you please explain to our Committee how the report 
misrepresented OSHA's analysis in your view?
    Dr. Beale. I gave you one example, in terms of the fact 
that they omitted the other two bases on which OSHA did its 
range of 20 to 40 percent in the section where they are 
discussing whether some industries are less dangerous than 
others.
    They pretty much assert that OSHA denies this. In fact, 
that's not the issue at all. Again, it's a question of what is 
your purpose.
    If your purpose----
    Mr. Singh. Let me interrupt and respond one second.
    Ms. Velazquez. Would you please allow him?
    Mr. Singh. Somehow we attack OSHA for this. Our analysis 
here was simply an analysis of what OSHA presented in its 
analysis, period. We didn't say that this health and safety 
programdoesn't have a positive effect. We didn't do any of 
this.
    We said this is what OSHA presented. We asked them for a 
lot of data. They didn't give it to us, and we went out on our 
own to get the data and present this analysis as a part of this 
report.
    Our objective was simply to see whether OSHA had done a 
good faith effort, period. Nothing more and nothing less.
    Ms. Velazquez. Mr. Beale, please?
    Dr. Beale. In fact, OSHA is very cognizant. You heard Mr. 
Jeffress talk this morning about some industries have greater 
risks than others.
    But the point is that when you ask a question about you're 
going to start to exempt industries, OSHA is concerned with 
other things than inter-industry differences. In fact, they're 
concerned about intra-industry differences, and to sort of rake 
OSHA over the coals for something that they didn't do, which is 
ignoring the inter-industry difference, and then themselves to 
ignore OSHA's concerns I think is very seriously 
misrepresented.
    The presentation of the 25 states even is not very good. 
And again, I'm sorry, I just have a great deal of difficulty.
    I know I have worked with the analysts involved in OSHA off 
and on for 15 years. And I have a great deal of difficulty 
believing that PPE asked for explanations and didn't get them. 
I find that very hard to take.
    Ms. Velazquez. Mr. Beale, you also assert that there were 
legal and conceptual errors in PPE's analysis.
    Can you please tell us what do you mean by that?
    Dr. Beale. The legal error is the one we've been talking 
about, about the costs. This is legal in the sense that if you 
ask a lawyer about what to do, that's the advice you'll get.
    It's conceptual in the sense that from a benefit/cost point 
of view, you have to be careful to define your baseline in a 
meaningful way.
    Conceptual errors, the statistical treatment, I mean to do 
this business with the BLS survey data and ignore the basic 
probability fact that randomness produces the same result I 
think is a serious conceptual error.
    Also the issue of using the mean versus the median. This is 
about the third time the subject has come up, so as Gertrude 
Stein on her deathbed once said, or is supposed to have said, 
``what's the answer.'' And everybody standing around said, huh.
    And she said, ``well, then, what's the question?''
    And the point is conceptually, you've got to set up the 
question before you launch into something. Now when you are 
dealing with risk, when you are dealing with insurance, the 
tail, the long distributional tail of a skewed distribution is 
very much part of it.
    Workers' Compensation pays out on the basis of claims; it's 
hard data. And you use the mean. You don't use the median. And 
you don't try to stick in an argument that says, well, 
generally speaking, the median is the better representation of 
an average for a skewed distribution.
    No. That is conceptually wrong when you're talking about 
risk in insurance and that kind of thing.
    If you want, under a skewed distribution, to know what's 
typical, then you would pick the median. But it's an issue of 
what is the question.
    And not to make those distinctions I think is seriously, 
you know, I have trouble associating that with somebody of Mr. 
Singh's experience because it's pretty basic.
    Ms. Velazquez. Thank you, Mr. Beale.
    Mr. Singh, you say that OSHA offers no alternative for the 
75 percent of employers who have no reportable incidences of 
illnesses or injuries.
    This suggests that you have ideas about alternatives which 
could be offered to them.
    What are they?
    Mr. Singh. I think in our report, we basically say that 
perhaps there should be a voluntary program, but we also 
qualified with the fact that there are certain small businesses 
that there are a large number of injuries, and perhaps they 
should be regulated in some manner.
    I should say that that it is not for us, in 30 days, to do 
the entire analysis for OSHA, as Mr. Beale seems to be 
criticizing us for. It is for OSHA to do its work and present 
the analysis in its reports so we have looked, this has all 
been done very, very fast, and we have not covered all the 
areas that we could.
    But what I do say, given the data, the 75 percent of the 
people should bear more costs than they would realize the 
benefits. I don't care whether it's mean or average or whatever 
you want to take a look at.
    You look at their assumptions, you look at their data, it 
doesn't make any sense.
    And I want to go back to one more thing about the fact that 
he keeps saying there are these 1000 employee firms, 250 of 
four persons each. In one year, 60 of them will have some 
injury, whereas 190 will not have those injuries. That's 
perhaps true if you just stop right there.
    But if you go one step further, and you ask yourself, these 
60 people who had these injuries, when will they have the next 
injury? They will have the next injury perhaps ten years from 
today. But you are in the meantime incurring those costs of 
implementing it on a yearly basis.
    How do you take that into account?
    So he criticizes the data in that manner, but that's 
exactly what I said. If you have an injury every five or six 
years that you will not realize the benefits of any reduction, 
even if they're 20 percent, even if they're 40 percent. That is 
a fact of analysis.
    I don't care whether you can tone down the report. It 
doesn't matter. But the fact is those are the facts, and I 
don't know why, I'm very surprised that the OSHA people who met 
with us, my employees who were involved deeply during this 
brief process, to whom we asked those questions, are not here 
to say whether they did or did not give us the data.
    They sent Mr. Beale to you who has no knowledge of this. 
I'm a little surprised.
    And then he comes in and attacks, in an unreasonable 
manner.
    Ms. Velazquez. They didn't send Mr. Beale. I brought him 
here, not OSHA.
    Mr. Singh. Perfectly okay. I'm sorry.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Talent. I'll recognize Mr. Bartlett, I think.
    Mr. Bartlett. Thank you.
    I'd like to ask a question about the median and the mean. 
If you had a population that had a couple of members of the 
population that were fairly aberrant, where their performance, 
their data was markedly different from the others, and if you 
wanted to know what the typical member of the population looked 
like, wouldn't the median serve you better than the mean?
    Dr. Beale. For that question, yes.
    But that's not the question that's addressed here.
    Mr. Bartlett. I guess that depends on how you ask the 
question. But I just wanted to make the point that there are 
times----
    Dr. Beale. Yes, this just doesn't happen to be one of them.
    Mr. Bartlett. That may be a matter of judgment. I am not an 
expert in this area but I just wanted to make the point that 
sometimes the median is a better number to use than the mean.
    Dr. Beale. When you're dealing with Workers' Compensation 
data, the claims and the premiums are based on the whole 
distribution, including your aberrant people.
    Therefore, you should use the mean, which includes them.
    Mr. Bartlett. I guess that would depend on the question 
you're asking. The question is, what is the situation in the 
typical company?
    Dr. Beale. No. The question you're asking is what is the 
total benefits.
    Mr. Bartlett. If that's the question you're asking, you'll 
want the mean.
    Dr. Beale. Yes.
    Mr. Bartlett. But if you're asking the question of what 
does the typical company look like, and what would the effect 
of a regulation be on that typical company, wouldn't you 
preferably use the median?
    Dr. Beale. Yes. If you were trying to set up a 
representative firm to study, for example, you would try to use 
something more like the median.
    Mr. Bartlett. I'm just trying to make the point----
    Dr. Beale. No, I agree with you completely.
    Mr. Bartlett. Which one you use, sometimes it depends on 
the context in which you ask the question.
    One other observation. Because our manufacturing jobs have 
been racing overseas, and I think that OSHA's regulatory 
climate is at least partly the reason for that, since our 
manufacturing jobs are racing overseas and we're now moving to 
a service-based economy, aren't injury rates coming down no 
matter what we do, simply because the workplace has changed?
    Dr. Beale. Not necessarily.
    Mr. Bartlett. You mean it's as hazardous to sit in front of 
a computer as it is to sit in front of a stamping machine in a 
factory?
    Dr. Beale. You're talking about national rates, yes.
    Mr. Bartlett. Yes. When you're looking at whole states.
    Dr. Beale. That may be. But of course it also depends on 
what you're talking about as an injury. That's a more complex 
thing than you might suppose because if you're sitting in front 
of a computer, you might get some other types of injuries.
    But, I mean, if you think of injury as cutting your finger 
off in a machine, yes.
    Mr. Bartlett. Some of those other injuries are more 
difficult to quantify. If your finger's gone, your finger's 
gone. If you've got a cut and 14 stitches, you've got 14 
stitches.
    If you've got a backache or your eyes hurt, or you have 
some pain in moving your thumb, those are very difficult things 
to quantify.
    Dr. Beale. Not necessarily. But the point is they are 
different and they don't fit the pattern, and that has to be 
dealt with rather carefully in one's thinking.
    Mr. Bartlett. The point that I was trying to make was that 
the workplace is changing because the average job is changing 
from manufacturing to service. We would expect the kind of 
injuries that most people see as injuries to be coming down.
    That's the only point I was making.
    Dr. Beale. The traditional injury rate taken for the 
nation, yes. But in a given industry, no, not necessarily.
    Mr. Bartlett. It's not clear to me how these analyses were 
made, whether you're looking at, when you're looking at whole 
states, you're not looking at a specific injury. You're looking 
at the cross section.
    Dr. Beale. You're looking at the state rate.
    Mr. Bartlett. I would suspect that those injury rates would 
be coming down because we are changing the kind of jobs that 
people work at.
    Dr. Beale. Again, when you make a comparison between a 
particular state or for a particular state with a program, and 
compare it to the national average in this case, anything that 
brings the national average down makes your comparison more 
conservative.
    Because if you still see your individual state dropping 
relative to the national average, then you know something's 
going on, if the national average is dropping rather than flat.
    Mr. Bartlett. That is true. It depends on which state you 
chose and where you got your averages. I am not sufficiently 
knowledgeable about the details of what you do. I come from a 
scientific background. I have a PhD. I did a lot of scientific 
work. I've got a hundred papers in the literature. So I can 
understand where you're coming from.
    I just don't know enough about the details of the protocol 
to know whether your criticism of them is a justifiable 
criticism or not.
    Dr. Beale. The short answer is that unlike many hard 
sciences and medical research, economics works in a very dirty 
laboratory, where clinical trials are just not very possible 
unless you get really lucky with the data.
    Mr. Bartlett. And it's not a hard science. There's a lot of 
judgment involved which I gather is the reason----
    Dr. Beale. There's a lot of dealing with the confounding 
factors that are still there because you can't do clinical 
trials, yes.
    Mr. Bartlett. I understand.
    So two people with the best of intentions could reach 
different conclusions?
    Dr. Beale. In some situations, yes, but not in the areas 
you're asking about.
    Mr. Bartlett. I was asking the question about the obvious 
disagreements which you and Mr. Singh have.
    Dr. Beale. I don't believe so, or I wouldn't be as forcible 
about it as I am. I think that they are things that are pretty 
fundamental.
    I mean, when you draw conclusions from data, a conclusion 
of a particular pattern from data, where randomness would 
produce the same data, I think you have no basis for that 
conclusion, and that's basic scientific methodology in 
anybody's----
    Mr. Bartlett. Does your statistical analysis determine 
that?
    Dr. Beale. Yes. It's perfectly consistent with assumptions 
that are completely contrary to Mr. Singh's conclusions.
    Mr. Bartlett. It's not clear to me that that statement is 
true. I would just like to close----
    Dr. Beale. Read the part in detail.
    Mr. Bartlett. I will do that.
    I'd like to close with one observation. It's an old, old 
saying which I think is part of the problem here, that he who 
frames the question determines the answer.
    And I think that you may have been inadvertently framing 
different questions, so that you appear to be in more 
disagreement than you are in fact in.
    Mr. Chairman, I thank you very much. I must go for a few 
moments, and I shall return shortly.
    Chairman Talent. I know Ms. Kelly has some questions.
    I want to state for the record the initial regulatory 
flexibility analysis which we received begins by saying, ``The 
Regulatory Flexibility Act, as amended in 1996, requires that 
an initial Regulatory Flexibility analysis contain the 
following elements.'' There are five stated.
    The first is a description of the reasons why action by the 
Agency is being considered.
    It goes on to state the other things they have to do in 
order to justify a rule under SBREFA.
    Now, this is the ERFA and the only reference in the ERFA to 
what's happened in other states is what I read before, a 
reference to 25 states that have implemented mandatory safety 
and health program requirements.
    And the finding that in those states, job-related injuries 
analysis went down 17.8 percent.
    There's then some discussion of what's happened in states 
that haven't had programs to encourage voluntary implementation 
of safety and health programs.
    And then OSHA's review of success stories.
    That's the only statistical data in the ERFA that we were 
given. I do not think there's other data on the basis of which 
OSHA is now justifying the rule in part on the conclusion that 
the rule, when implemented, would reduce job-related injuries 
and illnesses by 20 to 40 percent. The only statistical data in 
the ERFA offered to justify that, regarding what's happened in 
other states, is what I've just indicated--unless I'm missing 
something. I'm trying to go through it here again. So if 
there's other data based on a smaller analysis of four states, 
we weren't given it.
    Dr. Beale. The point is also that there were other analyses 
used which are voluminous, I mean, in their number. There were 
dozens and dozens of other case studies and other things that 
were referenced; that were reviewed.
    Chairman Talent. That's the OSHA review of success stories 
about programs implemented by individual employers? Is that 
what you're referring to?
    Dr. Beale. That's one of them. That's the case studies.
    Chairman Talent. They don't refer to any case studies, I 
don't think.
    Dr. Beale. I would agree with you that that particular 
document is not well-written, but I would also make the 
comment, as a general proposition, that you never, in a 
published report, find the detail that went on in the analysis.
    Chairman Talent. Shouldn't the report have included some 
reference to the statistical analysis of the four states?
    Dr. Beale. I think it probably should have. It should have 
included more than is there.
    Chairman Talent. I'm kind of hot about this, but I'm going 
to say that I'm going to continue to presume that there's some 
good faith misunderstanding on my part or the Agency's part on 
who fouled that up.
    Dr. Beale. I would agree with that. It's just very unusual 
at this stage of the game to present a completely full blown 
analysis of the sort that you would in the final Reg Flex 
analysis, according to the original Reg Flex Act, or indeed 
economic analysis, or any aspect of the analysis.
    The more preliminary you are, the sketchier it's likely to 
be. In the SBREFA process, in particular, where there is ample 
opportunity to discuss back and forth and figure things out and 
put your criticisms verbally so that you can figure out whether 
it's a justified criticism or just a misunderstanding, that's 
why I am really bothered by coming out with a document like 
this because I think that the misinformation sown by this, once 
you put this kind of stuff in writing, it gets a life of its 
own.
    And I'm sure some of these numbers and conclusions are 
going to be quoted, and plague you and other people for a long 
time, and that's really what I mean by premature.
    Putting this as a written report in as rough a stage as the 
whole process was, because it's chock full of errors.
    Chairman Talent. I think it's a pretty significant 
oversight since that's the statistical data on the basis of 
which they acted.
    Dr. Beale. Well, Mr. Chairman, let me suggest to you that I 
was once in an OSHA study where the statistical contractor 
brought the data in handcarts, and I don't think you would 
probably want to pour over even the 340 by 7 spreadsheet.
    So there is an issue as to how much of it makes a written 
report, and there is a fact that things are sketchier the 
earlier in the process you are, because who wants to put the 
work into doing something really complete when you may turn 
around and change it all as a result of the SBREFA discussions.
    Chairman Talent. We have a vote coming up. I'm trying to 
hold the hearing open for Ms. Kelly.
    Do you have any questions you want to get in?
    [No response.]
    Chairman Talent. What I'll do is excuse this panel.
    We have one more panel that I understand contains two 
lawyers. [Laughter.]
    Chairman Talent. So we'll go from the economists to the 
lawyers.
    Dr. Beale. Which may even be worse than two economists.
    Mr. Singh. Mr. Chairman, I would like to make a rebut a 
little bit here, if you'll give me a second, please?
    Chairman Talent. One more, Mr. Singh.
    Mr. Singh. I will make two comments here. One, that I will 
stand by any analysis that I have done in this report, and the 
analysis of programs by program states and non-program states 
and people in OSHA and outside are similar to what other people 
have done.
    I don't apologize for that at all.
    The incident rates in small firms are very low, and Mr. 
Beale refuses to address the summations there.
    And as far as the Workmen's Compensation concerns, the mean 
versus median issue, we were incorrect in taking median. We 
have said that before. But what is there is that all of the 
benefits data is skewed by a large number of cases that are 
litigated and that ought to be excluded.
    One last thing here is that regardless of what he says, I 
have never seen poorer analysis at any stage of the game from 
any federal agencies in my 20 years. I don't know how he can 
support that.
    Chairman Talent. I'll hold the record open and you both can 
submit additional comments in writing, if you want to.
    Chairman Talent. We'll recess for the vote.
    [Recess.]
    Chairman Talent. Mr. Halprin, I hope you brought some extra 
work with you.
    Mr. Halprin. I thoroughly enjoyed the session this morning, 
Mr. Chairman.
    Chairman Talent. You know, I don't care if anybody minds. 
We're going to go ahead with you, Mr. Halprin.
    Mr. Larry Halprin is a partner at the Washington, D.C. law 
firm of Keller & Heckman, and alsohas an impressive bio, which 
I will not go into.
    I do appreciate your patience.
    Please go ahead, Mr. Halprin.

STATEMENT OF LAWRENCE P. HALPRIN, ESQUIRE, KELLER AND HECKMAN, 
         LLP, 1001 G STREET, NORTHWEST, WASHINGTON, DC

    Mr. Halprin. Thank you, Mr. Chairman.
    I've a prepared presentation from the previous schedule 
hearing. I'd like to ask you to put that in the record. And I 
have a supplemental statement.
    Before I jump into the statement, I'd like to address a few 
points that came up, not necessarily in any logical order, and 
I apologize for that in advance.
    There was a discussion made by Mr. Beale as to OSHA's 
approach toward this entire rulemaking, and he noted this is a 
performance standard, it has a grandfather provision, and it 
explicitly exempts small business.
    As you pointed out, a performance standard that takes away 
all the traffic laws and says, ``drive safely,'' which means 
you decide your own speed limit, you decide whether to turn 
your lights on, it actually goes beyond that--the question is 
whether the car's going to have bumpers, whether the car's 
going to have lights, and we're talking about the whole ball of 
wax here--and then leaves it totally to a compliance officer to 
decide whether that is enforceable is absurd.
    So Mr. Beale is probably an outstanding statistician but I 
don't think he's ever been out in the real world of OSHA 
compliance.
    Chairman Talent. There used to be a two-attorneys problem. 
We know the old Anglo Saxon maxim of law is ``what is not 
specifically prohibited is allowed.'' This kind of rule turns 
it around. It says, ``what is not specifically allowed is 
prohibited, but we won't enforce it against everybody.''
    I don't think the Agency understands the negative impacts 
of that, and that's what you're getting at, Mr. Halprin.
    Mr. Halprin. Definitely.
    To make the points that came up, as far as cost, I attended 
several of the Small Business Panel telephone conferences, the 
comments----
    To go back a step, OSHA estimated the cost of putting the 
basic program in place would be $2.3 billion, and then said the 
cost of future compliance would be another $2.6 to $4.4 
billion.
    In the Small Business telephone conferences, one of the 
first spokespersons said, ``whoever put these numbers up is on 
another planet.''
    The final report from the panel, which was signed by OSHA, 
which understated the conclusions which were reached in an 
effort to gain consensus among its three agencies conceded that 
the cost estimates must be off by as much as a factor of ten, 
which is what the small business people said.
    So if you take the $2.3 billion and you multiply it by ten 
to get $23 billion, and then you add the costs of controls, 
then you're in the number of $25 billion for the cost of 
compliance, and only $7 to $16 in benefits, and it suddenly 
swings way the other way.
    So what we have here is this cop who's going to enforce the 
rule, which is totally unwritten, with the reasonable man test, 
I guess it's the reasonable inspector test, if there is such a 
person, and that inspector is going to enforce the law however 
they feel is appropriate.
    Mr. Jeffress made the point that OSHA has the burden of 
proof. Yes, that's true, OSHA has the burden of proof, but OSHA 
also has the right to issue a citation without making that 
burden of proof.
    So they issue a citation and, as you suggest, it costs 
thousands of dollars to defend against it. Most small 
businesses are going to pay the fine and move on.
    As far as the grandfather clause, we've talked with OSHA 
numerous times about what a grandfather clause means. A 
practical grandfather clause has some numerical limit that you 
can measure--a lost work to injury and illness rate, and if 
you're below that rate, you're out.
    That's the kind of thing that makes sense. To have a 
grandfather clause that says basically, ``if you're in 
compliance with the standard, you're in compliance with the 
standard'' is meaningless.
    Chairman Talent. A grandfather clause--and I didn't state 
it eloquently enough--makes something legal because it has 
existed for a while, which would otherwise be illegal. And what 
he's saying this makes it legal if it would otherwise be legal. 
[Laughter.]
    I also could not get that through.
    Mr. Halprin. Furthermore, if those programs are effective, 
there's no reason why it should be limited to people who 
already have an existing business. A new business that comes 
into line somewhere after this rule goes into effect should 
have the same opportunity to take advantage of whatever this 
grandfathering is, and the only way that works, as I said, is 
with some numerical cutoff.
    The gist of this is the whole safety and health program 
rule is fine as a guideline but it is in no way appropriate for 
a government mandate.
    As far as the SBREFA process, my view of it is that when 
OSHA is in favor of the process, it's when there's generally a 
level of cooperation and acceptance of what it's doing.
    In the case of the safety and health program rule or 
ergonomics, I think the Agency has great distaste for the 
process and would like to think it never happened, particularly 
in the case of this rule.
    There was a draft safety and health program rule. It was 
proposed, or shall I say issued, in November of '96. There was 
extensive discussions, stakeholder meetings and comments, and 
minutes from those.
    It's not as if this thing just came out of the blue. And 
there should be some preliminary work with some preliminary 
numbers.
    The current draft is not that much different from the draft 
that came out in '96. There's basically an ideological 
difference of views as to how to achieve safety, and it's not 
going to change.
    The only thing that's going to change is, hopefully OSHA's 
going to start looking at the data.
    Chairman Talent. Mr. Halprin, there's nobody here but me. 
[Laughter.]
    Explain to me, would you, speculate for me, if you will, 
what's the real draw behind this thing?
    Mr. Halprin. I was afraid you were going to ask this.
    Chairman Talent. I was going to ask Mr. Jeffress this and I 
was going to be interested in his comments. We were on so long, 
I didn't want to keep him.
    Why are they continuing to push this?
    As far as I can tell, the interests that typically support 
aggressive OSHA action are notparticularly interested in this 
rule.
    It's not going to have--well, it could, depending on how 
they enforce it--it just seems to me to be going after people 
like my brother who nobody's really interested in, unless you 
want to go by and get a beer.
    Where's the draw? Is it just ideological?
    Mr. Halprin. I believe it's mostly that. There are a good 
number of people there who honestly believe that a government 
mandate will achieve what can only be accomplished by private 
sector incentives.
    There are others who probably realize they are in the 
Department of Labor where labor has a great influence, and this 
is a political issue. There's no question about it.
    Chairman Talent. Let me just say with regard to that, and 
we don't have them here, I'd be happy to have somebody from the 
AFL/CIO testify, I'm sure they'd testify in support of the 
rule, but I don't think this drive is coming from them. My 
sense is they are interested in other rules.
    I guess I can't ask you to speculate on what you can't 
speculate on.
    Go ahead, I'll let you testify.
    Mr. Halprin. In my view, the three fundamental principles 
we have to keep in mind, when looking at this rule are:
    First, the generally-held view that effective safety and 
health programs will significantly improve workplace safety 
does not mean that an OSHA-mandated program will have that 
effect. And in fact, there's substantial evidence to the 
contrary.
    Second, regardless of the benefits which may be derived 
from a government mandate, that mandate is impermissible if it 
entrusts constitutional due process to the whims of a 
compliance officer, which is just what we're talking about.
    And third, direct government intervention is inappropriate 
where there are alternative mechanisms which would do a better 
job in achieving the same objective.
    So with that in mind, as we've discussed this morning, we 
believe there's no persuasive evidence that the rule will 
significantly improve workplace safety and health in the United 
States, and substantial evidence that it would not.
    What is clear, by OSHA's own estimates, is it would cost 
employers billions of dollars each year for compliance costs.
    Now the reason, and Mr. Beale scoffed at the legal issues, 
but as he described it, you need to establish a baseline before 
you know what something's going to cost, which means you have 
to know what is going to be required of an employer before you 
can, in any way, estimate what it's going to cost.
    We won't know what's going to be required of the employer 
until this rule is adopted, so after the fact, OSHA's going to 
tell us what the rule means through the enforcement process, 
and then we'll know what it actually is going to cost.
    I can give you an example of that, and why this is 
different.
    The lock-out/tag-out procedure. OSHA put out a standard 
that required lock-out/tag-out procedures for equipment. The 
regulatory analysis costed out generic procedures for a 
facility. OSHA has attempted to enforce a specific procedure 
requirement which would have cost millions of dollars of 
additional man-hours per year.
    We made that case to OMB recently. OMB said, OSHA, they're 
right, that's what your regulatory analysis says. So when OMB 
put out the paperwork approval for that rule, there was a 
condition that OSHA not enforce equipment specific procedures.
    There is a situation where the rule was clear as to what 
was intended when it was written, and we could go back to OMB, 
or we could have gone to the courts to get relief.
    The same thing happened with personal protective equipment. 
OSHA put together cost data in the regulatory analysis for five 
types of PPE, and then tried to establish a hazard assessment 
and employee training requirement for every type of PPE known 
to man.
    We said you've only got regulatory data for five types, and 
they carved back the rule to those five types.
    Now we're talking about a rule with no bounds whatsoever 
except what a court might ultimately permit. No idea what it 
would cost.
    OSHA has said--let's say a VPP, the voluntary protection 
program, a star plant might be rated ten on a one-to-ten scale, 
and let's say OSHA's safety and health program rule is now 
costed out at a five.
    What will happen, if it gets through, is it will be adopted 
based on those costs, and in the real world that five will 
start climbing up. OSHA will raise the bar, and before you know 
it, we will have a VPP-type enforcement program with every 
employer in this country. And we won't be able to do anything 
about it because we didn't have a clear regulatory analysis and 
a clear guideline in the first place as to what was intended by 
this rule.
    So it's really a blank check that would be written to adopt 
a rule like this. We've got no idea what it would really mean.
    Now, as far as the data supporting this rule, as you noted 
in a study that was done not only by a senior OSHA economist 
but by one of OSHA's former directors of regulatory analysis, 
OSHA cited the decline in workplace injury and illness rates in 
25 states with mandatory programs.
    The Agency said the rates declined on average 18 percent 
during the five years after the programs were implemented. 
Assuming mandatory programs reduced injury and illness rates by 
18 percent, you would say, okay, there is something to them.
    The problem is that is not what the study shows. In the 
study that was done by the senior OSHA economist and OSHA's 
former director of regulatory analysis, they tried to determine 
why workplace safety and health injury and illness rates fell 
substantially between 1992 and 1996.
    They didn't look at the four states that OSHA was talking 
about; they looked at 45 states. Twenty-one had some type of 
safety and health program requirement; twenty-four did not.
    Although they described it as not statistically 
significant, it did show that the states with the mandatory 
safety programs had higher average injury and illness rates and 
showed less improvement in the rates than the states without 
mandatory programs.
    I think that's clear. It is consistent with the analysis by 
PPE and it shows that the Agency has not substantiated that 
there is any reason for this rule in the first place.
    Now when you get beyond the practical issue, is the rule 
going to do any good and conclude no, then you look to the 
legal side of things, and say, okay, leaving aside the 
practical aspect that OSHA can't show it's going to do any good 
in the first place, and it's going to cost $20 billion a year, 
does OSHA have the legal authority to do this?
    To that, we say no.
    First, the application of this rule to the hazards covered 
by the general duty clause is, in effect, an amendment of the 
general duty clause. If you've got a violation of the general 
duty clause, the obligation is to abate the hazard.
    If you've got a piece of machinery without a guard, you put 
the guard on. It does not mean yousuddenly go and install 
management commitment and employee involvement and training and 
education and evaluation and all those other things.
    The Agency is actually, in our view, amending the general 
duty clause, and it does not have the authority to do that.
    Then the next question is with respect to the other 
hazards. This rule doesn't address any new hazards. It's either 
the general duty clause hazards, or the hazards governed by 
other existing standards.
    So in effect, what the agency is doing, instead of going 
back, is basically saying every one of the existing standards 
we have on the book is inadequate.
    Only instead of going through the required rulemaking 
process and saying, there's a significant risk and this is how 
it'll be reduced and this is the best way to do it, and the 
most cost-effective way, it's simply saying this is a good idea 
so we're going to superimpose this rule and effectively amend 
every standard we have on the books.
    Third, as you mentioned, there's such a denial of due 
process in these numerous provisions which say, do something 
``as often as necessary,'' and for the ones that don't say ``as 
often as necessary,'' we know that's how it's going to be 
interpreted when the case actually comes before the review 
commission.
    So it doesn't say, ``as often as necessary'' or 
``adequate,'' but you can be sure that is how OSHA is going to 
interpret every one of those provisions in that standard.
    And if it says, ``communicate with employees,'' and you 
communicate once every ten years, OSHA's going to obviously 
bring a citation and say, ``that's not adequate.''
    So the whole program is laced with that kind of an 
approach.
    Fourth, the rule would inject a meddling government 
bureaucracy into the financial and labor management relations 
of every employer in the United States. That's a role for which 
it's particularly ill-suited, and I'm talking about an Agency 
that takes 20 years to get out a rule on confined spaces, and 
then fails to comply with due process when it does.
    An Agency that can't do better than that, in my mind, has 
no business trying to manage the labor management relations of 
every employer in the United States.
    So we have got the potential for citations for inadequate 
management, inadequate employee opportunity for communication 
and involvement, and in the latest edition, OSHA would have the 
authority, under this rule, to cite employers for not taking 
disciplinary action against employees for violating safety 
rules.
    You can imagine what that would mean.
    I can see one of these inspectors, with the assistance of 
the Solicitor's Office, issuing a subpoena to employers for 
confidential personnel records to check through all these 
things to see what kind of communications there have been, and 
whether there's been any disciplinary action taken.
    I just don't know how much more involved OSHA could get.
    Chairman Talent. And the smaller employers don't have to 
keep records.
    Would you advise your smaller clients to keep records to be 
able to show that the they had these meetings, or not?
    It might actually be an interesting question.
    Mr. Halprin. I would find myself in a position where I'd 
say an employer over a certain size--I'm not sure what's going 
to be meant by ``small''--would have to keep some records.
    Chairman Talent. Ten.
    Mr. Halprin. Well, that's the proposal. Everything here is 
in flux, but it seems to me that he would end up keeping some 
records to document some kind of program, although not 
necessarily every element of this.
    So the cost is going to go up substantially because, if you 
don't do that, like you said, you are going to have a 
compliance officer who comes in and says, ``well, prove to me 
that you did it.''
    Chairman Talent. You know what really happens with this, 
Mr. Halprin? There's three million small employers in the 
country who are in industries where they just don't have that 
many injuries or illnesses.
    If they hear about this, and many of them won't, if they do 
hear about it, they're not going to have enough time. It's 
going to be too low on their list of priorities, and they'll 
try and do something that doesn't take very much time.
    So they'll put out some notice or something, and then 
they'll just hope that's good enough. That's what my brother 
does.
    I hate to keep bringing him up. I'll talk about my sister. 
That's what I'll do in the future, I'll talk about my sister. 
[Laughter.]
    She's a pediatric psychologist, she has her own firm, her 
own practice. She'd be subject to this thing, so what is she 
going to do?
    She has a little playroom for kids, and there are toys in 
there. So I guess that's a hazard because her secretary could 
step on them or something.
    And what it means, of course it'll never happen, nobody 
will ever go in, but just again it's another set of laws that 
makes honest people into criminals.
    I don't understand why we can't get them to recognize that.
    Mr. Halprin. We're trying.
    In the meantime, there are alternatives.
    The Agency could put something out as a set of guidelines. 
I'll not deny they'll be criticized for avoiding the rulemaking 
process. That's something of their own doing because of the 
environment they've created, but nevertheless that's probably a 
better approach.
    Put those guidelines in place for several years, have 
compliance officers talk about those guidelines when they start 
an inspection, and consider them in connection with the size of 
any penalties which might be issued, or whether a citation 
would be issued in the first place. After some reasonable 
period of time, and with the data that's available, I think a 
reasonable grandfathering-type approach, which would exclude 75 
percent of industry from even being covered by a rule would go 
into place.
    Then, if it really still makes sense to catch what we might 
call the employers who don't seem to be with the program yet, 
OSHA might try putting out some sort of rule different from the 
one that's been proposed in the sense that it would have to 
comply with the law.
    Then that rule should have a clear partnership consultation 
option. So if an employer were in that program, they'd have a 
choice.
    They could apply with the safety and health program rule, 
or they could opt for a true consultation partnership program. 
I don't mean a CCP but a program that would achieve far more 
than this program that OSHA is proposing now would ever 
achieve.
    Chairman Talent. I'm going to have to interrupt because I'm 
going to go vote on the recommittal of the tax cut. So, I'm 
going to go over and vote, and then come back and we'll finish 
this.
    Mr. Halprin. As far as I'm concerned, I'm finished with my 
statement, and I'll be happy to wait for questions.
    Chairman Talent. Mr. Fellner, I'm sorry. If you'll just be 
patient a little while longer I'm going to vote and come back.
    [Mr. Halprin's statement may be found in the appendix.]
    [Recess.]
    Chairman Talent. Our next witness is Mr. Baruch Fellner, a 
partner in the Washington, D.C. Office of Gibson, Dunn & 
Crutcher.

 STATEMENT OF BARUCH FELLNER, ESQUIRE, GIBSON, DUNN & CRUTCHER 
                    LAW FIRM, WASHINGTON, DC

    Mr. Fellner. Thank you, Chairman Talent.
    It is a pleasure to be with you this afternoon. I have 
spent the last 15 years or so representing employer clients 
with Gibson, Dunn & Crutcher.
    In my prior life, however, for close to 20 years, I was 
with various federal agencies including ten years as counsel 
for regional and appellate litigation with OSHA.
    And therefore I think I bring to the deliberations of this 
Committee a kind of unique perspective, as it were, almost on 
both sides of the aisle, retaining a very deep-seated 
commitment to the purposes of OSHA but recognizing how far off 
the reservation the Agency has strayed, particularly with 
regard to this proposed standard.
    Before turning to a synopsis, and the hour is late and 
we've heard almost all of these issues in triplicate, but 
before turning to a quick synopsis of my prepared remarks, I'd 
like to make two preliminary points, if I may.
    One, there was a remarkable and illuminating colloquy 
between you, Chairman Talent, and Assistant Secretary Jeffress 
this morning.
    And that colloquy reduces itself to one, brief principle. 
If I understood Assistant Secretary Jeffress, this new proposal 
either means everything to OSHA or absolutely nothing at all.
    It either means that, as a result of the investigation, 
assessment and correction of hazards, which is at the forefront 
of the CSHP exercise, they will in effect cure every hazard 
that is in 29 CFR, so you don't need the books anymore; or it 
means that no citations will be issued under CSHP if an 
employer is in compliance with 29 CFR. In response to your 
questioning, Chairman Talent, Assistant Secretary Jeffress 
testified that if a compliance officer walks into a workplace, 
asks the employees whether or not they are being protected 
against specific workplace hazards, if he satisfies himself 
that the answer to that question is yes, there's lock-out/tag-
out, there's hazcom, there's bloodborne pathogens, there's no 
double jeopardy, there is no citation under CSHP. In other 
words, CSHP means absolutely nothing.
    Under those circumstances, I don't think that that is a 
circle that even a bureaucrat can square.
    Let me address myself to a question you posed to Mr. 
Halprin: What the drive is behind this standard. I think this 
is one of the most clever and diabolical exercises of the 
Agency in 30 years.
    This standard, at least in its initial incarnations, was to 
have been motherhood and apple pie; indeed, we've heard much 
this morning about how many companies committed to safety and 
health in fact have safety and health programs.
    It is almost de rigueur in a good workplace. And with good 
employers. There are a few who don't. But there are a variety 
of different safety and health programs, so OSHA figured that 
if they come up with a standard that simply encapsulated what 
otherwise employers have embraced over the years because it 
kind of makes good policy and good employee relations sense, 
then who is going to object to that kind of a standard? It is 
going to sail through, if I can mix my metaphors, like a knife 
through water or like a knife through butter.
    Chairman Talent. I am turning the light off on you, Mr. 
Fellner. This is quite enjoyable.
    Mr. Fellner. The diabolical aspect of this standard, I 
would suggest with respect, is the fact that I think even OSHA 
and its proponents recognize that there are certain ventures or 
adventures of the agency which might not succeed, the most 
important one of which is its exercise in ergonomics. It is an 
attempt to take junk science and foist billions of dollars of 
expenses for no benefits to employers in this country, and I 
think the agency in its heart of hearts recognized that that 
exercise is doomed. It is either doomed politically or I will 
assure this Committee we will make every effort possible to 
make it doomed in the courts.
    And if you are OSHA, you have a contingency plan, and I am 
convinced that the comprehensive health and safety program 
standard that we are looking at today is the attempt on the 
part of the agency to enact a stealth ergonomics standard in 
case a direct ergonomics standard does not succeed. And how do 
they go about achieving that objective?
    At bottom, this standard requires employers to 
systematically, and that is the operative term, to 
systematically examine their workplaces, to discover workplace 
hazards and to correct them. It is a very simple prescription 
in many respects. There are bells and whistles that we will get 
to in a minute, but that is, at rock bottom, what employers are 
required to do.
    What is the basic indication that employers have to look 
towards and that compliance officers invariably look towards in 
order to determine whether you have got a problem in the 
workplace? You check your OSHA 200s. You check your records to 
see when injuries and illnesses are prevailing in your 
workplace.
    Well, in many workplaces, because of the requirements of 
OSHA to record the aches and pains of life, there is no 
question but what ergonomic and musculoskeletal issues are 
being recorded with frequency because employers are self-
respecting, because they are following the law, not the 
science, but the law in terms of doing what OSHA is mandating, 
and as a result of that what is appearing in the lost workday 
incident statistics is a number of which is much larger than it 
ought to be and it is weighted towards ergonomics issues.
    If an employer--should this regulation pass and be enacted 
and succeed in the courts, if an employer does not actively and 
systematically look at those kinds of issues, and correct them 
in the workplace through all of the ergonomic methodology which 
OSHA has required in its general duty clause citations--and 
those methods range from taking more work breaks to slowing 
down the conveyer systems to hiring more employees, the kinds 
of things that, of course, make no sense insofar as the science 
is concerned, but, nonetheless, if those are not systematically 
pursued by an employer--the employer will be cited under CSHP.
    And this is a very simple citation. OSHA would not have the 
burden of proof of demonstrating a 5(a)(1) citation, a general 
duty clause citation, a recognized hazard. OSHA would not lose 
every case it has tried, from Pepperidge Farms to Dayton Tires, 
every case it has tried under 5(a)(1) in an attempt to 
establish ergonomics.
    Indeed, OSHA would not have the burden of proving ergonomic 
science rejected by the administrative law judges of the 
Occupational Health and Safety Review Commission. OSHA 
marshaled the best science that it could under the Daubert test 
in the Supreme Court. The judgesrejected OSHA's evidence, 
saying that science is junk science. Under CSHP, OSHA would not have 
that burden anymore. The only burden it has is to demonstrate there is 
a regulatory provision that requires a systematic analysis and a 
ridding of your workplace of discovered hazards; did you engage in 
that? And if you didn't engage in that systematic analysis, then you 
have violated that standard and you have got to abate by employing 
ergonomic measures.
    [Mr. Fellner's statement may be found in the appendix.]
    Chairman Talent. Don't you have to show that the hazard was 
a hazard under the law, though? Aren't they back to the same--
without a valid ergonomics standard, could they show that the 
employer failed to eradicate a hazard? Don't they have to have 
a standard to show that was a hazard?
    Mr. Fellner. The difference between recognized hazard and 
hazard is all the difference in the world. The threshold 
insofar as hazard is concerned may in all likelihood be met by 
numbers as long as you have got a lost workday incident rate 
that is higher than some imaginary bar which OSHA has 
established and which keeps floating. As we learned in the CCP 
litigation, a number which was 7, if you had an LWDI of 7, OSHA 
considered that to be a number which denominated the worst 
employers in the country.
    Today, OSHA is implementing its SST program, which is kind 
of the son of CCP but without the, ``voluntary aspects'' which 
the court found obnoxious and inappropriate under the APA. What 
they have now done is they have pegged their SST inspections to 
16. I mean, this is a wet finger in the air insofar as the 
assumptions and presumption that the agency is using.
    But the point, in direct response to your question, 
Chairman Talent, is that when you take the numbers alone, at 
least from OSHA's perspective, you can probably demonstrate a 
hazard simply by saying, mister employer, you have got all of 
these injuries in your workplace, now what are you doing to 
systematically eradicate them?
    So I would suggest to you that this is--there is more here 
than meets the eye insofar as this innocent-looking CSHP 
exercise. I think it is much more than the bureaucrats have 
gotten a hold of the agency and have been pushing CSHP. It is 
much more, quite frankly. Not that the usual proponents of the 
agency, organized labor, is pushing CSHP, because I don't think 
that is in the forefront of their thinking. It is very subtle, 
and I commend the agency for its creativity, if I condemn them 
for the diabolical nature of their exercise.
    Chairman Talent. You know, one of the things that is sad 
about it all is that worker safety actually gets lost in this 
whole process. Some of you here are aware of the fact that I 
have cosponsored and pushed very hard in the House the 
companion bill to Senator Enzi's bill, the ``SAFE Act,'' which 
I believe, by restructuring incentives for employers, would 
really encourage the majority of employers to attack 
vigorously, aggressively and effectively remaining hazards in 
the workplace and also then allow OSHA to concentrate on that 
layer of employers who really continue to be recklessly 
indifferent to this. And I think they are there. Mr. Bartlett 
and I may disagree on this. There may be some people who, for 
one reason or another, the fly-by-nights figure they can fool 
the workers comp insurance; and those are the kind of people 
that I want OSHA going after. But you have to have some means 
for screening those people out, separating the wheat from the 
chaff, if you will.
    As I said in my opening statement, this is a step in the 
wrong direction, because it lumps all of those people--instead 
of trying to separate them out--it basically lumps in all the 
honest people and, in fact, primarily bothers them.
    Assume for a second that you are one of these fly-by-night 
types and you don't care about worker safety. You just figure 
it will never catch up to you and there will never be a big 
accident. You are the kind of person and that is just how you 
live your life. You are going to cut the corners and figure it 
will never happen to you. So you probably have got serious 
hazards at the workplace right now--pools of acid out and 
things without guards and stuff everybody recognizes.
    The problem with a rule like this is that it overdeters the 
honest people and is of no deterrent value whatsoever on that 
layer of people. Because they are not deterred by ongoing and 
serious violations of substantive hazards, they are certainly 
not going to be deterred by the fact that OSHA is requiring 
that they meet with their employees about safety. They laugh at 
that.
    It is the honest people who do try and comply with the law 
who go home at night with a stomachache because they are afraid 
that somebody is going to come in and they may not be in 
compliance. Those are the ones that get this burden. It is 
topsy turvy, and I had seen the agency moving in the direction 
of less paperwork violations and voluntary compliance and I 
just think this moves in the opposite direction. So what you 
are saying is plausible, but I sure would be disappointed if 
this were true.
    Mr. Halprin.
    Mr. Halprin. I would like to add one more thing.
    The potential with this rule is to significantly enhance 
the agency's penalty authority. They issue one--normally, you 
have got a rule that deals with lockout or confined spaces, you 
get a citation and fine for training under that standard, and 
that is it. Now you have one standard that covers everything, 
so every time there is a lack of training or there is a lack of 
management commitment, you keep getting the same citation in 
the same section, and the next time around it is repeated. So 
we are talking about compounding fines that will magnify 
substantially the agency's enforcement authority.
    Chairman Talent. If OSHA wanted to encourage safety and 
health programs, here is what they would do. They would 
identify employers or areas of industry where there is some 
special concern, and they would let it be known that, look, if 
you will go out and hire firms to establish real safety and 
health programs, firms that we certify are approved, so we know 
you are not going out and getting--our enforcement policy is 
going to be one of not leniency, but we are not going to 
inspect you as often. And when we go in we will take that into 
account and follow that up so employers get confidence that 
that will be the case. That will encourage people to go out and 
really work on their safety and health programs. That is the 
direction the SAFE Act is trying to move in.
    And I hate the idea that the choice is between an OSHA that 
is constantly trying to establish a tyranny--that is what you 
have described--and no check on trying to. It shouldn't be all 
or nothing at all. You can have a regulatory apparatus that 
doesn't consistently abuse its power.
    Mr. Fellner. If I may, Chairman Talent, associate myself 
with the comment that you just made insofar as OSHA's 
overreaching. When I heard the testimony this morning, I turned 
to my colleague, Brian Morrison, who assisted me in my 
testimony, and I said to him, the sad part, as a person who 
used to work for OSHA, who was responsible for some of the 
initial enforcement policies of the agency dealing with very 
concrete hazards, not behavioral relationships between 
employers and employees that OSHA is attempting to regulate 
here, the kinds of touchy-feely stuff which God only knows 
whether it yields something in terms of a benefit but surely 
creates all of the difficulties in terms of enforcement that 
Mr. Halprin talks about. But the truth of the matter and the 
lament is that when an agency that was born with an 
extraordinarily important andgood purpose attempts to 
overreach, which it is doing here, it is doing in ergonomics, and let 
me alert this Committee it will do in the recordkeeping standard when 
it issues at the end of this year, it is another bite at the ergonomic 
apple. When an agency overreaches in that fashion, it endangers its own 
existence.
    And when I witnessed the bipartisan or the relatively 
bipartisan criticism of this standard this morning, it was 
remarkable. It must be to the credit of the Chairman having 
spoken so eloquently to his colleagues. But it is not often 
that we see an agency which galvanizes opinion and policy the 
way OSHA does lose or begin to lose its base. And that is truly 
a remarkable event today.
    Chairman Talent. Let me just say--and I, of course, cannot 
speak for my friends on either side of the aisle, much less on 
the minority side, but I will certainly say this, that the 
Ranking Member always brings an independent and probing 
approach to every one of the issues that comes before this 
Committee and she did so here. She and I had not discussed 
this, but certainly, on the staff level, this had happened. We 
disagree sometimes and maybe that could even be said often on 
issues like this.
    But I do think, and I said in my opening statement, there 
are certain things that nobody on either side of the aisle 
wants. That is why SBREFA passed virtually unanimously. We do 
not want small businesspeople hurt for nothing. We want some 
payoff in terms of worker safety.
    You know, as bad as what we referred to as this tyranny 
might be, if it actually did result in a 20 to 40 percent 
reduction in serious injuries and illnesses at the workplace, 
then you might say, well, if somebody is not losing an arm or 
not losing a life or going up on an electric pole and not 
getting killed, maybe we don't like doing it that way, but we 
are getting something.
    But I don't think anybody has any confidence this is going 
to happen. I don't think anybody in the room would bet $50 of 
their own money that this would reduce these illnesses or 
injuries by 20 to 40 percent. It just wouldn't happen.
    And so you go through all of this, violation of what 
everybody I think sees as the proper role of the law and all 
the practical burdens, and then yet another statement to the 
average small entrepreneur that the government basically just 
doesn't like you. And that is what these people believe, that 
the government just doesn't like them.
    My parents' generation didn't believe that in the 1950s. 
They didn't view the Federal Government as an enemy. And it is 
just wrong that you do that to people. And then you get 
nothing.
    And I don't know, we are a Committee that operates in a 
more bipartisan fashion than many do when Mr. LaFalce was the 
chairman, we often had agreement on our side of the aisle, and 
we try to continue. So on behalf of everybody I will thank you 
for your kind words but will assure you that the position that 
people like Ms. Velazquez and Mr. Pascrell and Ms. McCarthy 
take is never because I have talked to them.
    Well, is there anything else either one of you want to 
offer?
    Mr. Fellner. If I may in a couple of minutes just kind of 
briefly highlight some of the issues that have not been touched 
on by Mr. Halprin, some of the more technical issues. And that 
is, number one, I think it is important to remember, as a 
result of the Chamber of Commerce litigation just concluded in 
the D.C. Circuit, which I had the pleasure of arguing before 
the D.C. Circuit, it is very, very clear that this exercise, 
this CSHP exercise, is going to be a standard rather than a 
regulation. And, as a standard, it is going to be a health and 
safety standard. OSHA is going to have the burden of 
demonstrating significant risk of material health impairment on 
the one hand, and it is going to have the burden of 
demonstrating a cost-benefit analysis, as that has been defined 
in the D.C. Circuit, on the other hand.
    There is little doubt in my mind that OSHA will not be 
able, in any way, shape or form, to succeed in both of those 
hurdles in order to have this standard prevail in the courts.
    Chairman Talent. We are talking about this safety and 
health program.
    Mr. Fellner. That is correct.
    Chairman Talent. What about SBREFA? How will that impact?
    Mr. Fellner. Well, I think that, insofar as SBREFA is 
concerned, without getting into the economics which were 
discussed at great length, I think SBREFA is going to be a 
substantial Achilles heel insofar as this exercise is 
concerned. We have the view of the panel. I think OSHA--coming 
to grips with the economics as described in that is going to be 
very difficult and is going to provide yet another argument in 
the Court of Appeals. But I think the central challenge is 
going to be the basic hurdles that they have got.
    Chairman Talent. Substantive statutory authority?
    Mr. Fellner. As articulated in the benzene case, the 
lockout cases and the other steelworker cases in the D.C. 
Circuit, benzene in the Supreme Court, I think they are going 
to have a devil of a time in the courts; and this is one of 
those instances where the judiciary is going to serve an 
extraordinarily important purpose of keeping OSHA's feet to the 
fire because this is an inappropriate, arbitrary and capricious 
standard, just by definition at this stage, and I think the 
courts are going to see through that.
    In addition to that, we have substantial due process issues 
insofar as definitional questions are concerned. You can drive 
a Mack truck through the words that are contained in the draft 
that has circulated, and that has essentially two problems.
    One, as Justice Thurgood Marshall, no right-winger, put it, 
he said: ``Vague laws offend several important values. First, 
because we assume that man is free to steer between lawful and 
unlawful conduct, we insist that laws give the person of 
ordinary intelligence a reasonable opportunity to know what is 
prohibited so that he may act accordingly.''
    There is no way that what we have heard today gives that 
kind of information to a small businessman, to a larger 
businessman or, frankly, to the independent consultant who is 
going to charge an arm and a leg to either business in order to 
attempt to interpret what this standard means. And not only 
will employers not be able to know what this standard means, 
but, as you engaged Mr. Jeffress extensively this morning, 
his--I don't care how long he trains his compliance officers, 
they will, in good faith, adopt differing interpretations.
    Chairman Talent. Again, there is a lot of things I wanted 
to ask him. Do we as a matter of policy want OSHA to be 
spending its scarce training dollars on training these people 
about process? I want them to learn about actual hazards and 
actual industries that really affect people.
    Mr. Fellner. We want them to know where to look for the 
guards that are off the machines, the laniards that are not 
being attached. That is what we want our compliance to know--
and, fortunately, you don't have to be a rocket scientist--and 
many of them are not rocket scientists--you don't have to be a 
rocket scientist to spot real safety problems and real health 
problems. And it is those few employers who are committing 
those kinds of violations, it is their employees that we ought 
to be protecting, not the conjectural issues of aches and pains 
and trying to get into these very subtle issues of what is and 
what is not an injury. Let's go for the jugular rather than the 
capillary. And OSHA invariably goes for the capillary. And it 
is essential for us to redirect the agency, and I think this 
standard doesn't do it.
    Chairman Talent. I think one of the reasons for that, that 
is a tendency of bureaucracies, and it is for several reasons. 
One of them is a person who has got a jugular exposed, when you 
do finally get them or get on to them, it is a major effort to 
catch them and stop them. They will fight pretty hard, because 
there is a lot at stake. And you might lose.
    On the other hand, a person with just a capillary you can 
go in and build a pretty good record of enforcement by just 
nicking all of these people. It is quick. It is not as much of 
a burden on your time. And so there is a tendency that pushes 
bureaucratic enforcement organizations in that direction unless 
the top level is constantly pushing back.
    You know, it is the old story of the police officer going 
out, he has got to get his work done, he has to write so many--
he takes whatever will get him the most tickets quickly. And if 
it is rolling a stop sign in a neighborhood, he doesn't care 
whether it is protecting any safety. It just makes it easier. 
It is a constant tendency.
    I don't know that I accept your theory that they really 
are--that this is conscious. I would like to believe that it is 
more sort of the bureaucracy pushing that way. But you are more 
familiar with that.
    Mr. Fellner. I used to be part of that bureaucracy.
    Very, very briefly, Chairman Talent, and we have indicated 
in our papers that we believe that employers have a Hobson's 
Choice between either violating the National Labor Relations 
Act on the one hand, Section 8(a)(2), or violating this 
regulation should it become law on the other hand because, 
under the Federal code, the NLRB decision which we describe at 
some length, the kinds of safety committees which would be at 
the heart of the CSHP program would clearly violate Section 
8(a)(2) of the National Labor Relations Act.
    None other than Senator Kennedy, when the Democrats were in 
control in 1990 or 1991, when he introduced a different kind of 
OSHA reform bill--as you will recall, his reform bill 
accommodated and recognized the change that would be necessary 
in the National Labor Relations Act in order to achieve by 
legislation what OSHA is attempting to achieve by regulation. 
He saw that. OSHA is blind to it.
    And, with that, I would simply suggest that we have 
discussed the grandfather clause. It is nonexistent.
    One of the issues which we touch on is the notion of 
criminal penalties, and we do believe that passage of this 
regulation opens the door for an argument that criminal, 
willful violations can be based incrementally or in part on a 
violation of this regulation subject to a much easier burden to 
prove, once again as in the ergonomics counterpart, than the 
kinds of intentional conduct which is at the base of criminal 
willful and leads to so few criminal willful violations today.
    With that, thank you very much for the privilege and the 
opportunity of appearing before the Committee today.
    Chairman Talent. I appreciate your indulgence and your 
patience. I thank both of you, and I will adjourn the hearing.
    [Whereupon, at 3:21 p.m., the Committee was adjourned.]


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