Common Legal Issues Affecting the Refining Industry

As discussed in the May/June issue of Inspectioneering Journal, some involvement with legal issues is inevitable for individuals and companies in the refining, manufacturing, transportation, and energy industries. Many operators and their personnel are often lulled into complacency when litigation or enforcement actions have been rare at their facilities. They fail to remain cognizant of the fact that acceptance of the status quo is not sufficient protection from future legal risk and liability. In order to best protect the public, your personnel, your company, and the industry, you must continually scrutinize your operation to ensure you are evaluating and minimizing the potential for legal liabilities.

To protect legal problems from surfacing, it is important that one appreciates how and from whom certain liabilities may arise. All may trigger the need for legal support in various areas of business. While contract disputes and employment law actions seem to be the most often encountered and considered, regulatory proceedings by state or federal agencies resulting from an incident or government inspection or investigation must also be high on the radar of those in industry, with an understanding of the potential civil or criminal litigation which may follow.

Contract disputes often arise due to utilization of overly lengthy and difficult to understand documents. Clarity and simplicity should always be the twin aims of contract drafting. However, it is often difficult to be clear in simple and concise terms, particularly when the other party to the document desires more detail. Understand that detail in the contract is necessary to effectuate the intent of the parties to the agreement, but verbose clauses may lead to the uncertainty that each side seeks to eliminate through explanation and lengthy provisions that often result in confusion and complexity. The recitals as to each party’s intent and the definitions of the terminology utilized in the agreement are often the best place to eliminate the uncertainty. Explanation in those areas promotes brevity in the terms of the agreement, thereby minimizing risk of future uncertainty regarding the subject matter of the contract.

Employment or human resources litigation can arise from hiring, firing, and discipline issues as well as training, record keeping and OSHA concerns. In addition to a culture of equal treatment of all employees to minimize charges of discrimination, one must also seek to provide an effective training program for all segments of the company’s operation. Effective training is a cornerstone of the minimization of legal risk and liability. Because you work in or with a highly regulated industry, you are almost certainly receiving continual training. However, many in the industry fail to appropriately document that training. In the face of legal action or regulatory inspection, it is of the utmost importance that all training be documented. As far as the regulatory agencies and the judge in a lawsuit are concerned, if it is not documented then it did not happen. All training records should include what the training covered, what materials were provided to the attendees, who participated, and whether the materials were understood (i.e., follow-up testing).

Inspections by the state or federal government (e.g., EPA, OSHA, DOT, or the Coast Guard) may occur routinely or as a result of an incident or complaint. If as a result of an incident, civil or criminal litigation may also ensue. Regardless of the cause of the visit from the government, the first thing that will be requested – even during incident response – will likely be company policies, procedures, and facility testing records, as well as employee and contractor training records. The importance of routine review of company policies and procedures to ensure continued compliance with ever-changing industry regulations and employee and contractor training on the same cannot be understated. Again, documentation of this training is invaluable, particularly in the face of enforcement actions and litigation resulting in death or harm to the public or environment. It is much easier to offer an explanation for both a routine and an unthinkable circumstance if your personnel have been well trained and prepared to work and respond to both normal and abnormal operating conditions. While all legal risk cannot be removed and liability (or accusations of potential liability) cannot be avoided, preventative measures and a well-documented, robust training program will better position you and your company to address issues related to government inspections or enforcement actions, civil or criminal litigation, tragic incidents, and acts of God.

In the next issue of Inspectioneering Journal, some foundational issues regarding compliance will be covered; specifically, the factors used to determine if your organization has the necessary policies, procedures, and programs to detect and prevent regulatory violations.

Work hard. Work smart!