                         IN THE SUPREME COURT OF THE STATE OF NEVADA


                  TERRA CONTRACTING, INC.,                             No. 67270
                  Appellant,
                  vs.
                  CHIEF ADMINSTRATIVE OFFICER OF
                  THE OCCUPATIONAL SAFETY AND                              FILED
                  HEALTH ADMINISTRATION,
                  DIVISION OF INDUSTRIAL
                                                                           JAN 1 4 2016
                  RELATIONS OF THE DEPARTMENT                              TRACE K. UNDEMAN
                                                                        CLERK OF SUPREME COURT
                  OF BUSINESS AND STATE OF                             BY         Ycts&2146....
                                                                             DEPUTY CLERK
                  NEVADA,
                  Respondent.

                           ORDER AFFIRMING IN PART, REVERSING IN PART
                                        AND REMANDING
                             This is an appeal from a district court order denying judicial
                  review of an occupational safety and health matter. Eighth Judicial
                  District Court, Clark County; Abbi Silver, Judge.
                              After respondent Nevada Occupational Safety and Health
                  Administration (NOSHA) discovered an employee of appellant Terra
                  Contracting, Inc., in an unprotected, excavated trench deeper than five
                  feet, working under the supervision of Terra's competent person to install
                  a concrete grease trap, NOSHA cited Terra for two serious violations,
                  based on (1) 29 CFR § 1926.651(k)(2) ("Inspections. . . . Where the
                  competent person finds evidence of a situation that could result in a
                  possible cave-in, . . . exposed employees shall be removed from the
                  hazardous area. . . .") and (2) 29 CFR §1926.652(a)(1) ("Each employee in
                  an excavation shall be protected from cave-ins by an adequate protective




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                   system. . . ."). 1 The Nevada Occupational Safety and Health Review Board
                   upheld the citations but recalculated the resulting fines, and the district
                   court denied Terra's subsequent petition for judicial review. Terra then
                   appealed.
                               When reviewing administrative NOSHA decisions, we
                   consider legal questions de novo and assess whether factual
                   determinations are based on substantial evidence. Century Steel, Inc. v.
                   State, Div. of Indus. Relations, Occupational Safety & Health Section,   122

                   Nev. 584, 588, 590, 137 P.3d 1155, 1158, 1159 (2006). Terra does not
                   dispute that NOSHA established the first three elements needed to prove
                   its prima facie case: (1) the cited standards are applicable; (2) the
                   standards were violated; and (3) Terra employees had access to the
                   violative condition. Atl. Battery Co., 16 BNA OSHC 2131 (No. 90-1747,
                   1994); see NRS 618.625(2); NAC 618.788. Instead, Terra contends that
                   NOSHA failed to prove the fourth and last factor, Terra's actual or
                   constructive knowledge of the violations. Atl. Battery Co., 16 BNA OSHC
                   2131; see NRS 618.625(2). Terra further asserts that, even if knowledge
                   was shown, Terra proved its affirmative defense of unpreventable
                   employee misconduct. See Adm'r of Div. of Occupational Safety & Health
                   v. Pabco Gypsum, 105 Nev. 371, 373, 775 P.2d 701, 703 (1989).
                   Knowledge
                               With regard to both violations, the Board found that Terra had
                   actual knowledge of the violative conditions through its competent person,
                   who was present and supervising the employees in the trench. Generally,


                         1 NRS618.295(8) provides that the federal regulations apply, as
                   Nevada has not adopted an alternative standard.

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                 the knowledge of a supervisor is properly imputed to the employer.       Id.

                 Terra argues, however, that the competent person's knowledge cannot be
                 imputed here because doing so would impose strict liability on the
                 employer, which is not permitted. Rather, Terra claims, NOSHA must
                 show that the supervisor's actions were foreseeable or preventable by
                 proving the employer's safety program inadequate.
                             The Third, Fourth, Fifth, Tenth, and Eleventh Circuit Courts
                 of Appeal have concluded that, with respect to supervisor violations of
                 federal occupational safety and health law, "employer knowledge must be
                 established, not vicariously through the violator's knowledge, but by either
                 the employer's actual knowledge, or by its constructive knowledge based
                 on the fact that the employer could, under the circumstances of the case,
                 foresee the unsafe conduct of the supervisor [that is, with evidence of lax
                 safety standards]." ComTran Grp., Inc. v. U.S. Dep't of Labor, 722 F.3d
                 1304, 1316 (11th Cir. 2013) (alterations in ConzTran Grp.) (quoting W O,
                 Yates & Sons Constr. Co. Inc. v. Occupational Safety & Health Review
                 Comm'n, 459 F.3d 604, 609 n.8 (5th Cir. 2006)); see Penn. Power & Light
                 Co. v. Occupational Safety & Health Review Comm'n,     737 F.2d 350 (3d Cir.

                 1984); Mountain States Tel. & Tel. Co. v. Occupational Safety & Health
                 Review Comm'n„ 623 F.2d 155 (10th Cir. 1980); Ocean Elec. Corp. v. Sec'y
                 of Labor, 594 F.2d 396 (4th Cir. 1979); see also Century Steel, 122 Nev. at
                 589, 137 P.3d at 1158-59 (looking to federal decisional law in interpreting
                 similar provisions in the NOSHA). And here, NOSHA does not appear to
                 dispute the standard urged by Terra but instead argues that the Board's
                 knowledge finding was based on substantial evidence, pointing out that
                 Terra's competent person was in the trench, the trench took 4-5 days to
                 dig, and evidence of Terra's safety program contained little discussion on

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                trenches and no documentation of any safety inspections. Therefore, we
                conclude that the Board improperly imputed the competent person's
                knowledge of the violative condition to Terra with respect to violation 1.
                With respect to violation 2, however, the supervisor's knowledge was
                properly imputed because the supervisor did not engage in the violative
                conduct.
                            To the extent that NOSHA argues that the Board's failure to
                place the burden on it was harmless error, we disagree. As recognized by
                the Eleventh Circuit Court of Appeals under similar circumstances, such
                error is not harmless and unfairly burdens the employer with the task of
                identifying the exact evidence to rebut the agency's position without
                knowing the agency's arguments. ComTran Grp., 722 F.3d at 1318. In
                this case, NOSHA put on no evidence of foreseeability as to violation 1,
                relying solely on the supervisor's own misconduct to impute knowledge,
                and thus Terra was not even required to present rebuttal. As a result, we
                reverse with respect to violation 1 (competent person's failure to remove
                employees from unprotected trench) and, in light of the clarified standard,
                remand for further proceedings.
                Unpreventable employee misconduct
                            But imputation is permissible when it is not the supervisor's
                own conduct at issue, ComTran Grp., 722 F.3d at 1314, and thus the
                competent person's knowledge was properly imputed to Terra with regard
                to violation 2 (employee in trench). Pabco Gypsum, 105 Nev. at 373, 775
                P.2d at 703; Butch Thompson Enter., Inc., 22 BNA OSHC 1985 (No. 08-
                1273, 2009 (AU)). As a result, we must examine whether the Board's
                decision that Terra failed to prove its affirmative defense of unpreventable
                employee misconduct is based on substantial evidence. To establish the

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                 affirmative defense of "unpreventable employee misconduct," the employer
                 must prove four elements: (1) established work rules designed to prevent
                 the violation, (2) adequate communication of those rules to the employee,
                 (3) steps taken to discover any violations of those rules, and (4) effective
                 enforcement of those rules after discovering violations.    Marson Corp., 10

                 BNA OSHC 1660 (No. 78-3491, 1982); see Pabco Gypsum, 105 Nev. at 373,
                 775 P.2d at 703.
                             The Board's decision that Terra failed to show these four
                 requirements is supported by the record. Terra demonstrated that it had
                 a basic safety course that addressed trenching and which its employees
                 were required to attend and acknowledge understanding of upon
                 employment and annually thereafter. Terra further conducted weekly
                 safety meetings and asserted that it required its superintendents and
                 foremen to conduct informal and formal, documented safety inspections
                 daily, including the identification of high hazard areas, such as trenches
                 more than five feet deep, and had safety specialists perform random
                 inspections. Terra failed, however, to provide additional, targeted
                 trenching safety instruction for its employees and failed to address trench
                 safety at any of its weekly safety meetings, although the cited employees
                 did receive such specific training after the incident. Terra further failed to
                 produce written documentation, pursuant to its safety policy, of any onsite
                 inspections, and thus it is unclear whether any such inspections were
                 adequate to discover any violations of trench safety regulations.     See, e.g.,

                 Complete Gen. Constr. Co. v. Occupational Safety & Health Review
                 Comm'n, No. 03-4456, 2005 WL 712491, at *3 (6th Cir. Mar. 29, 2005)
                 (concluding that the defense of unpreventable employee misconduct was
                 not shown when the employer failed to ensure employees read safety

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                  manual, held toolbox talks that failed to cover trenching or other safety
                  material, and held supervisory safety training only annually). Thus, the
                  district court properly denied judicial review with regard to violation 2,
                  and that portion of its order is affirmed. Accordingly, we
                              ORDER the judgment of the district court AFFIRMED IN
                  PART AND REVERSED IN PART AND REMAND this matter to the
                  district court so that it can remand it to the Board for further proceedings
                  consistent with this order.




                                                              Hardesty
                                                                        A   o t 4,4;
                                                                            —




                                                                                           , J.
                                                               Saitta


                                                                                             J.
                                                               Pickering




                  cc:   Eighth Judicial District Court Dept. 15
                        Israel Kunin, Settlement Judge
                        Shumway Van & Hansen
                        Dept. of Business and Industry/
                               Div. of Industrial Relations/Henderson
                        Eighth District Court Clerk




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