Expensive Reminder to Manage and Audit Contractors’ Joint Regulatory Liabilities – HazMat Management

Written by Patrick Larkin and Maram T. Salaheldin Clark Hill PLC

Renovating homes built before 1978 often disrupts leaded paints (LBP) and poses significant health risks, especially for children. For this reason, companies doing renovations or subcontracting must provide residents with very specific LBP written warnings and training materials. Failure to comply with these obligations can result in significant penalties for violations. The US Environmental Protection Agency (EPA) enforces these rules for all companies that “do renovations for compensation”. This means that retail sellers of renovation products (e.g. windows or woodwork) may face EPA enforcement for non-compliance even if they outsource the installation.

On December 17, 2020, the U.S. EPA and the Department of Justice (DOJ) announced a statewide settlement with Home Depot related to home renovations that took place between 2013 and 2019. The deal resolves alleged violations of the EPA’s Lead Renovation, Repair and Painting (EIA) rule for renovations carried out by Home Depot contractors across the country on homes built prior to 1978. The EPA identified hundreds of cases where Home Depot did not use certified contractors for renovations or repairs, as well as cases where Home Depot did not set up, hold or provide the necessary documentation to demonstrate compliance with the EIA rule.

The EPA’s proposed settlement with Home Depot provides for a fine of $ 20.75 million – the largest penalty to date under the Toxic Substances Control Act (TSCA).

Compliance Lessons

Companies in the construction industry and beyond can learn some important lessons from Home Depot violations, including the importance of:

  1. Understanding Your Liability: Companies that outsource regulated activities are not necessarily isolated from liability. Because Home Depot entered into a contract with customers and received compensation for home renovation before 1978, the company remained liable under the EIA rule regardless of the use of subcontractors. Home Depot was unable to actively assess and control the risk of non-compliance by itself and its subcontractors, resulting in a substantial penalty. Understanding your liability, especially in connection with subcontracting, is an important step in reducing the risk of enforcement for your company.
  2. Acting Proactively About Compliance: Another important step in reducing your enforcement risks is implementing a compliance management system to identify potential issues before they become a problem. A strategic option to reduce this exposure may be to use self-assessment / self-disclosure programs such as the EPA’s Examination Guideline. The EPA Examination Policy enables companies to reduce or eliminate the risk of regulatory violations in their facilities. In addition, under the LBP Consolidated Enforcement Response and Penalty Policy, renovators can receive a severe penalty reduction for violations of the RRP rule that qualify for such a reduction under the EPA Examination Policy. While navigating the EPA self-examination program can be challenging, the benefits for businesses can often be great. Small businesses and new business owners in particular may want to take advantage of the tailored incentives that may be available to them, including the ability for new owners to enter into examination agreements with the EPA for a positive resolution and negotiate timelines for completing corrective action.

About the authors

Pat Larkin’s practice at Clark Hill PLC is exclusively environmental law, including regulatory compliance, litigation, administrative law, and environmental advice on business transactions. Pat regularly represents industrial, transport, real estate and retail customers in the areas of air, water and waste permits, compliance advice and audits, voluntary site cleanups, official enforcement measures as well as in the preparation of official regulations and associated working groups for stakeholder and guidelines.

Maram Salaheldin is an associate in Clark Hill’s Washington DC office in the Environment, Energy and Natural Resources group. Her practice focuses on assisting environmental management and regulatory compliance for U.S. and multinational customers with an emphasis on risks and liabilities arising from environmental health and safety (EHS) laws, particularly with regard to them on the disposal of solid and hazardous waste, including cross-border movements under the Basel Convention.

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