Responding to Government Inspection

Federal, state and local governments routinely conduct on-site inspections of all types of facilities under the major environmental statutes. Such inspections are prompted by a variety of causes: agency compliance monitoring programs, citizen or employee complaints, administrative plans of enforcement, accidents or publicity.

They may involve a lone inspector performing a routine inspection or a "SWAT team" of government specialists intent on conducting a "multimedia" inspection to ferret out criminal conduct.

Governmental enforcement activities are a fact of life for the business community. These inspections represent a considerable challenge for the regulated community. Companies must be prepared for unannounced and close scrutiny of their operations.

How a company handles an inspection bears a direct relationship to whether enforcement action is taken and what sort of action is taken.

Inspections also present a company with an opportunity. They provide a chance to develop a better rapport with agency representatives. A good continuing relationship with a facility's inspector(s) can prevent needless enforcement actions, promote trust between the regulator and the regulated facility and provide insights into economical pre-enforcement compliance.

One of the first response strategies a company can develop is establishing a relationship with an inspector that is based on professionalism and courtesy.

In order to deal effectively and professionally with an inspection, there is no substitute for a firm knowledge of what is expected from both the facility and the inspection. Toward that goal, the following materials are intended to help ensure that a company is prepared for inspections and that the inspection itself is properly conducted.

No paper can cover all possible types of governmental inspections that might occur at any facility. This paper will focus on one of the more common types of inspections, environmental inspections by the federal or state government, but many of the principles set out here also apply to other types of government inspections, such as those done by the Occupational Safety and Health Administration ("OSHA").

Inspection Authority

The provisions of the various environmental statutes authorizing inspections by the Environmental Protection Agency ("EPA") and state governments differ significantly. Some statutes contain very specific provisions, while others are more vague. For example, some statutes require written notice along with a statement as to the reasons for the inspection before EPA may enter a facility or review records.

Others contain no notice provision. Similarly, one statute may authorize EPA's officers, employees or representatives to inspect a facility, while another may authorize only officers and employees. Moreover, the statutes that do permit inspections by "representatives" do not define whether that term includes consultants hired by the agency.

Due to the wide variation among statutes authorizing inspections, a business must review the applicable environmental statute when there is doubt as to what inspection authority may be exercised in a particular circumstance.

This problem is compounded by EPA's use of "multimedia" inspections where the inspectors focus on a whole spectrum of possible violations under RCRA, CAA and the Federal Water Pollution Control Act (FWPCA).

Search Warrants

Although EPA is authorized to inspect facilities in order to enforce the various environmental statutes, that power is subject to certain Fourth Amendment constraints, including the requirement to obtain a search warrant.

The Supreme Court has held that "[t]he Warrant Clause of the Fourth Amendment protects commercial buildings as well as private homes ," and therefore a warrant is required before a business can be compelled to allow a government agency entry to inspect. But there are limitations to this requirement.

Federal environmental inspections do not require the presence of criminal "probable cause," i.e., probable cause to believe that a crime has been committed and that evidence of the crime is currently located in the place to be searched.

Instead, only "administrative" probable cause is required. To establish a basis for a warrant in this context, there need only be an inspection program supported by "reasonable legislative or administrative standards" or specific evidence of an existing violation.

To obtain a search warrant, EPA must have evidence of a violation or the search must be part of a general neutral administrative inspection scheme. As a matter of practice, a search warrant based upon administrative probable cause may be based upon an employee complaint, a citizen complaint, prior inspections of a facility, reports submitted by the facility or simply a regulatory program that identifies likely targets for inspection.

Consent Given

A search warrant is not necessary if consent is given. The standard for consent is, like the probable cause requirement, less stringent than that required for criminal searches. Consent need not be express, and the failure to object to a search constitutes consent.

The failure to warn the company managers of their right to insist on a warrant does not render the consent unknowing or involuntary. Consent to an inspection may be given by any competent management official. Consent to inspections has been upheld where the consent has been given by a plant manager, a foreman or even a "senior employee."

A general contractor may consent to the inspection of a common worksite where a subcontractor is working. Even if consent is not given, a search warrant is not necessary for all types of inspections.

There are certain exceptions to the warrant requirement based on the proposition that the Fourth Amendment does not ban all warrantless searches, but only "unreasonable searches and seizures." For example, no warrant is necessary if the "plain view" doctrine applies.

This doctrine holds that if the condition is visible from an area open to the public, the official may lawfully note all evidence within "plain view." This exception applies to all types of governmental searches, from an EPA inspection to a traffic stop, and is based on the assumption that there is no reasonable expectation of privacy.

Pervasively Regulated Business

An exception to the warrant requirement also exists where the business is a "pervasively regulated" business such as mining, firearms dealing or the liquor industry. According to the Supreme Court, persons who choose to engage in such a heavily regulated business do so with the knowledge that the business will be subject to inspection and are "not left to wonder about the purposes of the inspector or the limits of his task."

A warrantless inspection may be permitted in a pervasively regulated industry if circumstances satisfy a three-part test:

  • First, there must be a "substantial" government interest. . . .

  • Second, the warrantless inspections must be "necessary to further [the] regulatory scheme."

  • [Third], "the statute's inspection program, in terms of the certainty and regularity of its application, [must] provid[e] a constitutionally adequate substitute for a warrant."

It could be argued that some industries covered by the environmental statutes (e.g., RCRA hazardous waste treatment storage or disposal facilities or other facilities subject to environmental permits) are "pervasively regulated" and thus no warrant is required. At this point, it does not appear that under the environmental statutes such an argument would be successful.

Pros and Cons of Giving Consent

A search warrant can normally be obtained relatively easily by EPA. The warrant can be obtained on an ex parte basis, i.e., without notice to the facility or business that will be inspected. The language of a warrant may be very broad in terms of identification of the documents that may be inspected and/or removed and areas of the facility that may be inspected.

Requesting a search warrant will normally only delay the entry into the site for a brief period of time, in some cases for as little as several hours. The potential advantage to denying access is that it provides a window of opportunity to correct problems.

On the other hand, denial of access may lead inspectors to assume that the facility has something to hide. A request for a warrant may increase the level of scrutiny by the inspectors when they finally do obtain access.

Also, if access is permitted, it gives the facility an opportunity to "manage" the inspection by limiting consent as the inspection proceeds or discussing whether certain documents should be produced or having time to produce documents.

An inspection with a warrant proceeds according to the terms of the warrant, which may be very broad or vague, and a facility runs the risk of being cited for contempt if it does not accept the interpretation of the warrant proffered by the inspectors.

Alternatively, limited consent may be informally or formally negotiated, and the employer can use this leverage to place conditions on the inspector. For example, if it is determined that the inspector is responding to a complaint about a specific condition in one portion of the facility, the company could consent to an inspection of that portion of the facility without consenting to a comprehensive inspection.

If a facility consents to the inspection, it cannot later argue that EPA should have obtained a search warrant. Moreover, while consent can be withdrawn partially through the inspection, the agency could still take actions based upon what the inspector already had observed.

Inspections

To be effective at controlling and managing exposure to environmental liabilities, a business cannot wait until an inspector or team of inspectors is in the lobby of the plant, facility or office. Inspection preparation should be viewed as any other business planning activity; it cannot be handled on an ad hoc basis.

Obviously, a company must have a plan in place to ensure environmental compliance . The development of that plan and the assignment of responsibilities is the necessary first step for dealing with an inspection. A company must have personnel familiar with:

  1. All the company facilities, activities and processes that are subject to environmental regulation;

  2. All company and facility permits, permit terms, licenses or exemptions from particular regulations;

  3. The relevant environmental statutes and associated regulations;

  4. The current status of any administrative orders or other regulatory actions and any relevant litigation; and

  5. The location, status and organization of any and all documents required to be kept under the relevant regulations.

The first step in any inspection preparation program is to designate those individuals who will respond to the inspection. These individuals may be personnel with continuing responsibility for compliance, but there may be reasons not to assign the front-line compliance personnel to an inspection.

Instead, a company may choose to assign a less knowledgeable person who is better able to cope with the potentially adverse or confrontational aspects of an inspection. Moreover, the leader of the company inspection team will be required to evaluate the requests for documents made by the inspectors.

Often it is helpful for the inspection leader to be able to indicate that he or she will consult with the custodians of the documents and then provide them to the inspector.

In addition, if the leader of the inspection team is primarily versed in the technical aspects of compliance, he or she may be drawn into a discussion of technical issues and place secondary importance on the legal aspects of the inspection.

Whatever its composition, the inspection group should be kept small (2–3 members), and the team leader should be the company official authorized to act on behalf of the company. It is preferable to have more than one person who is prepared to respond to an inspection. Although usually it is best to have only one individual deal with inspectors on a continuing basis, this is not always possible due to illness, vacation or out-of-town business trips.

It is much better to be prepared for the possibility that the team leader will not be available at a particular time than to waste the inspection preparation effort when another, unfamiliar company official must be substituted.

The company also must establish guidelines that apply when an inspector arrives at the site. At a minimum these should include:

  1. Requiring that regulatory representatives and inspectors display their credentials and sign in at the facility upon their arrival.

  2. Notifying guards and receptionists not to admit regulatory personnel beyond reception or gate areas unless the group is notified and until the inspector is accompanied by appropriate company officials.

  3. Requiring the agency personnel to sign out of the facility at the conclusion of any inspection.

  4. Determining the procedures to be followed during the inspections, including assignment of responsibilities, determination of possible routes of travel and the like.

The planning process also should involve selection of legal counsel to assist in an inspection. It is usually not preferable to have counsel participate in inspections. Presence of counsel may create a different atmosphere for an inspection or risk disqualification of counsel if he or she is later required to testify as a witness to events that occurred during the inspection.

Nonetheless, arrangements should be made to be able to consult counsel during an inspection.

The group also should develop a procedure to be followed if an inspector arrives with a warrant. In some instances, the inspector may not be willing to let the inspection proceed at a normal pace. There may not be the opportunity to have an opening conference or anything other than a rushed introduction.

The facility should have a plan in place to address this contingency, including assembly of the inspection response team, notification of counsel and accompanying the inspector.

The group should also develop a plan for response if the company receives written notice of the inspection. Such notice provides an opportunity to correct problems before the inspection. The inspection response group should inform all necessary company personnel of the date, time and scope of the inspection.

The group should visit the site or facility to be inspected before the inspection, but preferably no more than 24 hours before. After a pre-inspection site visit, the group should make sure all necessary corrective steps are taken to ensure compliance.

They should never accept someone's word or interpretation regarding the conditions of the site; they should always look at the conditions themselves.

Scope of Inspections

It is of particular importance that the inspection group determine the scope of the inspection. Inspections must be limited to the locations, equipment and information which have a direct relationship to the regulated equipment or process. At least some federal environmental inspections are announced in advance by a notice from the agency. The notice will most often describe the scope of the impending inspection.

If it does not or the agency notice is by phone, a request should be made that the inspector specify the scope of the inspection in writing. When the inspection is not preceded by advance notice, the inspection group should inquire of the inspector what he intends to inspect.

If the inspection is conducted pursuant to a search warrant, the warrant should be read to determine the scope of the inspection.

Opening Conference

When an inspector arrives on the premises, he should be asked to present his credentials to the person in charge, to explain the nature and purpose of the inspection and to give a general indication of the scope of the inspection and the records that he wishes to review, if that has not been established before the inspection.

EPA procedures do not provide for any formal opening conference procedure, such as OSHA does, but the employer can essentially create such a conference by asking the inspector for this information.

The representatives should also ask at the opening conference if cameras, video cameras or tape recorders will be used. If sampling for airborne contaminants will be done, they should ask for the specifics of how it will be done.

They should ask that any samples that are taken be split. If the inspectors will not agree to splitting any samples, then they should ask for the results of any samples.

The company representatives need to be careful of what they say. The inspector will not only seek general information, but may also seek specific admissions concerning conditions or knowledge of conditions.

While the company representatives should be helpful and try to make a good impression, they should be careful not to admit anything. The inspection response team should also be aware at all times that they should not misrepresent facts or lie to the inspector. To do so is a federal criminal offense.

The company representative should inform the inspector about the following:

  • Areas in the facility which contain or might reveal trade secrets; and

  • Safety or health hazards the inspector might be exposed to during the inspection.

  • Agency Procedures and Guidelines

The National Enforcement Investigations Center in Denver, Colorado has developed the Multi-Media Compliance Audit Procedures manual detailing for federal and state inspectors what to look for and how to conduct a compliance audit.

Other federal, state and local government agencies also may have inspection manuals, guidance procedures and/or program guidance manuals for their inspectors to use. Copies are often available for a nominal copying charge.

If the agencies resist, the company may request the information through the Freedom of Information Act ("FOIA") from federal agencies or the equivalent statues for state agencies.

The Walk-Around

The inspection group should accompany the inspector. One of the members of the group should be assigned to take detailed notes. Such notes should include a detailed description of what the inspector saw, especially where the inspector visibly reacted to a particular circumstance.

It is of vital importance in defending against enforcement action to know exactly what happened during the inspection. Without contemporaneous notes, it is difficult, if not impossible, to reconstruct what occurred on a step-by-step basis during the inspection.

But the inspector will be able to do so, and that testimony can be properly rebutted only by detailed and clear testimony to the contrary. Notes are absolutely essential to refresh the inspection group's recollection. If notes are taken, a copy should not be given to the inspector. These notes are for the company's use.

Another technique for maintaining a record of the inspection is to have a person lag behind the main inspection party and record a running commentary on the inspection. However, such practice does run the risk that the commentary will be overheard.

The company could also videotape the inspection, although that may be construed by the inspectors as obstructing the inspection. If the inspector utilizes a video camera, the inspection group should also do so.

The inspector is limited to the areas identified in the search warrant or to the areas consented to by the company. However, overly technical objections to an inspector viewing a particular area should be avoided. A voluntary inspection at any time may be terminated, although any information obtained to that point can be used against the company.

If the facility has a permit, the scope of the inspection may be specified in the permit. It is also good practice to avoid taking the inspector through areas which are not included within the request for inspection. Often, such a tour will result in an expansion of the scope of the inspection.

Additionally, as previously indicated, such an expansion could inadvertently result in a violation based on the "plain view " doctrine.

The inspector must take "reasonable precautions" not to cause any hazard and must also obey and comply with all of the employer's safety and health rules, practices and procedures, including the use of special clothing and equipment.

During the walk-around, the representative should stay with the inspector every minute. The representatives should say very little, because even a seemingly innocuous comment may be, and has been, used in later proceedings.

The detailed notes made during the inspection should include all remarks and questions asked by the inspector and any employees interviewed by the inspector.

The inspection group should exercise caution in explaining the operations of the facility. Many companies are justifiably proud of their operations. But great care should be exercised in showing an inspector around a facility with the intent of impressing him. He is unlikely to be impressed.

In all respects, the inspection group must take care as to what they say to the inspector. While it is not practical to refrain from saying anything, as one commentator has suggested, the implications of everything that is said by company representatives should be recognized and weighed. Probably the best approach for the inspection group to take is one of firm, and somewhat restrained, politeness.

Photographs

Inspectors will almost always take photographs of the facility and the site. A group member should take the same photographs as the inspector and should record and describe each frame. The inspector may take any photograph that does not divulge classified information or trade secrets.

If the representatives do not take duplicate photographs, they should request copies of the inspector's photographs. If there is a substantial question whether the inspector photographed materials or processes that are protected by trade secret confidentiality, the inspection group can suggest to the inspector that he or she take the pictures but that the company have them developed and review them for confidential material.

Samples

Often, inspectors will take samples while at the company's facility. It is in the company's best interests to ask for a split sample if the sample is one that permits it. This will not only allow the company to compare results with EPA, but will also alert the company to the results before EPA responds.

If the company sample is out of compliance, the company will be looking at an administrative action by EPA, but it will also have a prime opportunity to show good faith by beginning any necessary abatement work even before EPA responds.

Any such pre-emptive abatement may result in the reduction of any penalties which may be assessed for violations based on the sampling results. It is very important to convert such negative occurrences to the company's advantage.

Owners or operators of facilities subject to RCRA and CERCLA have an absolute right, upon request, for split samples collected by regulatory personnel. Moreover, both CERCLA and RCRA require that a copy of results of any analysis made of samples obtained by EPA be provided promptly to the owners, operators or persons in charge.

The company should be prepared for such sample splitting by having available its own sterile receptacles. In order to be credible, proper chain-of-custody procedures must be followed, and the sample should be promptly analyzed by a laboratory using EPA-approved QA/QC procedures.

Arrangements with a laboratory should be in place prior to any inspection, and handling procedures acceptable to the laboratory should be followed by the team member assigned to this task.

Often, enforcement action is based upon the samples the inspector takes. It is absolutely essential that the inspection group record in minute detail the sampling procedure and equipment used by the inspector. Sampling is subject to more variability than is generally assumed.

The only way to challenge the validity of the inspector's sample is to have the detailed information necessary to evaluate whether the inspector complied with all the sampling provisions.

Documents

The important factors to be remembered in any document inspection are:

  1. show the inspector only those documents or records that he or she is legally entitled to see;

  2. always retain the original documents unless seized or subpoenaed; and

  3. ask that all appropriate documents be kept confidential.

EPA regulations require that some business information submitted to the agency be kept confidential pursuant to the company's request. To facilitate such claims of confidentiality when inspectors arrive, it would be wise to keep confidential documents in separate, clearly marked folders.

Agency regulations require that an inspector inform the company of its right to claim confidentiality and the procedures necessary to make the claim. However, the representatives should ask the inspector to explain the procedures and how the agency plans to keep the documents confidential.

If a claim of confidentiality is not asserted, it is waived. Information that is obtained through inspection may be available to the public unless it is protected in this fashion.

Records are required to be kept under a number of environmental regulations, and those are subject to production to the inspector. Recordkeeping is a frequent subject of inspection procedures for compliance, and it is relatively easy to miss some of the required documents because of the broad scope of the requirements.

Document Retention Policy and Program

An important duty for the group preparing to respond to the inspection is to develop and implement a record retention policy and program. The following factors should be considered in formulating a record control policy:

  • Certain records are required to be maintained under the several environmental laws and permits;

  • Inspectors must be allowed access to those required records;

  • Some records are required to be kept "at the facility";

  • Statutory provisions allow some required records to be kept confidential; and

  • Statutes, regulations and permits usually specify the length of time records are required to be kept and may, like CERCLA and RCRA, specify that notice is to be given to EPA before any document destruction.

The record retention program should be comprehensive but clearly written and should address procedures to identify the type of document and the length of time each document should be kept. But this area does not lend itself to a simple cut-and-dried retention policy because of the varying requirements of state and federal statutes and permits.

Also, an agency may have requested the company to preserve certain documents. Moreover, there may be retention requests that apply to certain documents outside the environmental statutes, such as OSHA's 30-year requirement for retaining environmental monitoring and biological sampling results. A company should routinely exercise caution before destroying documents that it believes should not otherwise be kept.

When investigators or inspectors ask to inspect or obtain copies of certain categories of documents, the company should have a representative observe the inspector as he or she inspects the documents.

Unless documents are seized pursuant to a search warrant or subpoena, the company should insist on retaining all original documents at the facility. The investigator or inspector should be required to mark or indicate which documents he or she wants copied, and the company should provide the copies at a later time.

Voluntarily maintained records should be physically separated from those records required by the agency to be maintained. This could include the results of environmental audits and sampling not required by the statutes.

Inspections While Pursuing Litigation

The company may find itself in a situation where it is pursuing litigation with the agency over the results of a previous inspection, often performed by the same inspector. Although it is impossible to avoid all adversarial contact with the inspector in such situations, the same professional, courteous conduct should be followed.

In this unique situation, however, do not allow a current compliance inspection to become a "fishing expedition" for evidence of previous conduct. If the scope of the inspection has been agreed upon previously and the inspector goes outside of that scope, revoke the consent for that inspection, if possible, and immediately contact the inspector's supervisor.

The company should contact its attorney who is handling the pending litigation. Most often he or she can secure a protective order from the court to prevent further inspections related to the previous compliance matter.

A company may not totally avoid such "discovery" visits, but they will at least be under the supervision of the court or administrative tribunal and you will have more control over their timing and scope.

Public Disclosure

The information obtained through EPA inspections is subject to public disclosure pursuant to the FOIA. Under FOIA, an agency must make its records promptly available to any person who has reasonably described the requested records and otherwise complied with the procedures for disclosure.

FOIA sets forth nine exemptions under which certain types of information may not be made publicly available, including information specifically exempted by statute, trade secrets or financial information and geological and geophysical information.

Several of the statutes administered by EPA contain specific exemptions from public disclosure of information under FOIA, but a company must recognize that the information it provides in an inspection may be subject to public disclosure.

Inspector Misconduct

In rare instances, an inspection will involve misconduct by an inspector. While most inspectors behave professionally and are attempting simply to perform their job, on occasion an inspector will exceed the limits of his or her authority, sometimes because of zeal and sometimes simply for other reasons specific to the inspector.

There are a number of remedies for such problems, although none of them are easy or simple to accomplish. If the inspection is being conducted by consent, it can be terminated. If that occurs, it is essential that the misconduct be brought to the attention of the inspector's supervisor in as nonconfrontational a manner as possible.

Recognize that the supervisor will tend to support the inspector unless presented with facts clearly demonstrating the misconduct. If the inspection is conducted pursuant to a search warrant, the company can seek to quash the warrant in a United States District Court. Often, however, what is perceived by the company as misconduct can be remedied by a firm assertion of the company's rights to the inspector.

Exit Conferences

At the conclusion of the inspection visit, the company should always request an exit conference with the inspector. This will serve a number of purposes, including that of continuing a dialogue with the inspector that was begun before or, at least, during the inspection.

Obviously, the results of the inspection will be the focus of the exit conference. The company should request the inspector to disclose in detail any adverse findings so that the company may make an informed decision as soon as possible on how best to respond. The company should always request a copy of the final inspection report issued by the inspector or the agency.

The company also should use the exit conference as an opportunity to see what areas of the facility the inspector is most concerned with and, often, what particular areas he will look for in future inspection visits. The company should ask the inspector for any suggestions or recommendations for improvements at the facility.

By doing this, the inspector may feel he has some stake in the success or failure of the environmental control rather than simply checking for a black or white compliance condition.

Once the company is working with the inspector rather than against him or her, surprises resulting from citations may be reduced and compliance costs may become much more manageable.

Post-Inspection Response Group Meeting

The inspection response group should meet immediately after an inspection is completed to evaluate the inspection results and the company's preparation of a response and to address any necessary corrective or remedial actions. It is probably better to take the opportunity to assimilate the inspector's comments and the data collected before responding, rather than responding at the exit conference.

Conclusion

An inspection of a facility need not be a traumatic event. Planning prior to the inspection and exercise of care during the inspection will help minimize its impact. An inspection should be viewed as an information gathering exercise for the company, just as it is for the inspector.

It also should be viewed as an opportunity to impress upon the inspector the professionalism of the facility's personnel.

Planning for an inspection is a step in the compliance process that should be conducted in conjunction with other types of compliance procedures such as regular environmental audits. Such planning should be undertaken not only as an aid to avoiding liability as a result of an inspection, but also as a necessary part of reviewing a facility's compliance.

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