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A MSHA Inspector’s Reach Can Quickly Extend All the Way to Your Company’s Investors.


By Brian Hendrix

With the stroke of a pen, a single MSHA inspector can shut a mine down based on nothing more than his or her belief about the existence of a particular condition at the mine. That’s hardly new. Indeed, Congress provided that authority to MSHA more than 30 years ago. Similarly, publicly traded companies have long had an obligation to report mine or facility closures and similar events to their shareholders and the public when those events could have a material impact on their business.

Recently, however, Congress and the Securities and Exchange Commission have acted to ensure that Wall Street quickly hears about much less significant events and less serious MSHA enforcement actions.

Here’s an example: A MSHA inspector performing a regular inspection observes a miner working from an elevated position, roughly 10 ft. off the ground. He’s wearing a full-body harness, but his lanyard is just hanging from his harness, not attached to any tie-in point. The mine operator has trained the miner to wear fall protection and has thoroughly documented that training.

The operator has a policy requiring the use of fall protection, and it can show that it strictly enforces that policy. The miner is very experienced. He’s been a leader on safety issues, and he has also been a member of the union safety committee for several years.

At the start of his shift, the section foreman reminded him and the rest of the crew to wear their fall protection equipment. Together with their foreman, the crew discussed the potential hazards associated with the work that shift and how best to avoid those hazards. The foreman checked on the crew several times during the shift, and everyone was tied off. The crew was not in a hurry, and no one had previously observed him working without fall protection.

The miner readily admits that the company provided him with the requisite training and equipment, and he knew that he was required to wear it. He explains to the inspector that, after all of that, he just forgot to tie off after he started back to work after the lunch break. He hadn’t been back for long, and no one on the crew had noticed the hazard yet.

After the miner is directed to stop work, the MSHA inspector issues an imminent danger order under Section 107(a) of the Federal Mine Safety and Health Act to the operator. That is exactly what MSHA expects of the inspector; he is simply doing his job.

A year ago, this story would have ended here. The inspector almost certainly would have issued a citation to accompany the imminent danger order, and the operator would have abated it immediately, likely by providing the crew with refresher training. Today, if the mine operator in this example is also a publicly traded company or the subsidiary of a publicly traded company, the story would just be getting started.

Four Days
Today, that mine operator would have just four days to file a report on Form 8-K with the SEC publicly disclosing that it had received an imminent danger order. Indeed, publicly traded companies regulated by MSHA must publicly disclose via an 8-K the mere issuance of any imminent danger order issued under Section 107(a) within four days.

Many investors and analysts pay very close attention to such filings because the filing of an 8-K typically signals the occurrence of an event that may materially affect a company’s business, financial condition or operations, such as material layoffs or shutdowns, changes in executive management, termination of a material contract or a bankruptcy. It is not hard to see how the price of a company’s publicly traded stock could rise or fall depending on the news contained in an 8-K.

However, it is hard to see how the occurrence of an event such as the one described above could materially affect a company’s financial condition. Regardless, for reporting purposes, Congress and the SEC have already decided to treat the issuance of any imminent danger order just as they treat events that would more commonly be understood as material. Reporting of such an event is now mandatory, regardless of whether it’s actually material.

What This Means
What this means is that publicly traded companies regulated by MSHA should have a reliable process or system in place to ensure that the issuance of an imminent danger order is reported to the SEC properly and in a timely fashion. That system should also ensure the proper reporting of all the MSHA enforcement actions and related events that the SEC now requires.

For example, pattern enforcement notices and orders must be reported via an 8-K within four days of receipt, and Congress and the SEC have also required quarterly and annual disclosures of other MSHA enforcement data and information, including the number of S&S violations, failure to abate orders, unwarrantable failure orders and proposed penalties, among others.

Does your company, if it is publicly traded or a subsidiary of a publicly traded company, have such a reliable system or appropriate internal controls in place? Are you prepared to answer questions from and provide investors or analysts with additional information to help them understand the relationship between the disclosure of MSHA enforcement data and information to the overall financial health and welfare condition of the company?

If not, it is not hard to imagine how even an event as anodyne as the one described above could have a negative impact on a company’s relationship with its investors and with the agencies that regulate it.


Brian Hendrix is a partner in the Health and Safety Law practice at Patton Boggs LLP. He can be reached at 202-457-6543 or at This email address is being protected from spambots. You need JavaScript enabled to view it..