BILL ANALYSIS
C.S.H.B. 2473
By: Chisum
03-28-95
Committee Report (Substituted)
BACKGROUND
In order to ensure compliance with increasingly complex health
and safety and environmental laws, voluntary compliance audits can
be a useful tool for businesses to determine if their practices
conform to all applicable regulations. However, regulatory
agencies and third parties can gain access to the information from
a voluntarily conducted audit through discovery and use the
information against the business in court. Because the nature of
an audit is to discover not only if any violations inadvertently
have occurred, but also what management systems led to the
violation, sensitive personnel information is frequently included
in the audits.
This bill offers protection from discovery for information
compiled during the voluntary audit and from such information being
used against the company in court if certain conditions are met.
To ensure that the information has been derived through a good
faith audit, the privilege would not apply if it is waived, if an
audit was conducted for a fraudulent purpose, or if the entity did
not take appropriate efforts to comply with the law upon discovery
of noncompliance. Additionally, most violations voluntarily
reported to a regulatory agency could not be used as grounds for
penalizing an entity for the violation if the disclosure is made
promptly and the entity makes efforts to cooperate with the agency
to correct the violation. However, a disclosure is not voluntary
if the person making the disclosure acted with intent or knowingly
regarding the commission of the violation, or if the person's
reckless disregard resulted in off-site harm.
PURPOSE
To encourage voluntary compliance with health and safety and
environmental laws
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency or institution.
SECTION BY SECTION ANALYSIS
SECTION 1. SHORT TITLE. Designates short title as the Texas
Environmental, Health, and Safety Audit Privilege Act.
SECTION 2. PURPOSE. States legislative purpose to encourage
voluntary compliance with environmental and occupational health and
safety laws.
SECTION 3. DEFINITIONS: (a):
(1) "Audit report" means a report described by Section
4 of this Act.
(2) "Environmental or health and safety law" means a
federal or state environmental or occupational health and safety
law or rules, regulations, or regional or local law adopted in
conjunction with such laws.
(3) "Environmental or health and safety audit" means
a voluntary assessment of compliance with environmental and health
and safety laws or permits issued thereunder conducted by an owner
or operator, employee, or independent contractor; the audit can be
of a regulated facility or operation or an activity at a regulated
facility or operation.
(4) "Owner or operator" means a person who owns or
operates a regulated facility or operation.
(5) "Penalty" means an administrative, civil, or
criminal sanction imposed by the state to punish a person for a
violation, but does not include technical or remedial provisions
ordered by a regulatory authority.
(6) "Person" means an individual or any legal entity.
(7) "Regulated facility or operation" means a facility
that is regulated under an environmental or health and safety law.
(b) A person acts intentionally if the person acts
intentionally within the meaning of Section 6.03, Penal Code.
(c) For purposes of this Act, a person acts knowingly with
respect to the nature of his conduct when he is aware of his
physical acts. A person acts knowingly with respect to the result
of his conduct when he is aware that the conduct will cause the
result.
(d) For purposes of this Act, "reckless" has the meaning
assigned in Section 6.03 of the Penal Code.
(e) The term "environmental or health and safety law" shall
be construed broadly.
SECTION 4. AUDIT REPORT. Description of general components of an
audit report:
(a) Includes each document and communication produced from an
environmental or health and safety audit other than those set forth
in Section 8 of this act.
(b) Lists components that may be contained in a completed
audit report including:
(1) a report prepared by an auditor or similar person
that may include the scope of the audit, information gained and
findings and conclusions and recommendations, and exhibits and
appendices;
(2) memoranda and documents analyzing applicable
materials or discussing implementation issues; and
(3) an implementation plan or tracking system to
correct past noncompliance, improve current compliance or prevent
future noncompliance.
(c) Stipulates that types of exhibits and appendices that may
be contained in an audit include supporting information if it was
collected or developed for the primary purpose of and in the course
of an audit, including interviews with employees, field notes and
records of observations, findings, opinions, suggestions,
conclusions, notes, drafts, memoranda, legal analysis, drawings,
photographs, laboratory data, computer or electronically generated
information, maps, charts, graphs, and surveys, and other
communications associated with an audit.
(d) Each document in an audit report should be labeled
"COMPLIANCE REPORT: PRIVILEGED DOCUMENT" or other similar language;
failure to label does not constitute a waiver of audit privilege or
create a presumption that the document is or is not privileged.
SECTION 5. PRIVILEGE. (a) This section outlines when an audit
report is privileged.
(b) Gives any part of an audit report privileged status which
will not be admissible as evidence or subject to discovery in a
civil action, criminal proceeding, or an administrative proceeding,
except as provided by Sections 6, 7, 8, and 9 of this act.
(c) Provides that a person cannot be compelled to testify or
produce a document related to an audit if:
(1) the testimony or production would disclose any item
listed in Section 4 is disclosed which was made as part of the
preparation of an audit report and is addressed in a privileged
part of an audit report; and
(2) the person conducted any portion of the audit but
did not personally observe the physical events, the person learned
of the information under Section 6, or the person is a custodian of
the audit results.
(d) Prohibits a state agency from requesting, reviewing, or
using an audit report in any inspection of a regulated facility or
operation.
(e) A person asserting an audit privilege carries the burden
of proof that the privilege applies.
SECTION 6. EXCEPTION: WAIVER. (a) The privilege does not exist
if it is expressly waived by the owner or operator who prepared, or
caused to be prepared, the audit report.
(b) Disclosure of a report or related information does not
waive the privilege if the disclosure is made:
(1) to address or correct a matter raised by the audit
and is made only to an employee or contract employee, a legal
representative, an officer or director of the regulated facility or
a partner of the owner or operator, an independent contractor
retained by the owner or operator;
(2) under the terms of a confidentiality agreement
between the person for whom the report was prepared or the owner or
operator of the regulated facility and:
(A) a partner or potential partner of the owner or
operator of the regulated facility;
(B) a present or future transferee of the facility
of operation;
(C) a present or future lending institution;
(D) a governmental official of a state or federal
agency; or
(3) is made under a claim of confidentiality to a
governmental official or agency by the person for whom the audit
report was prepared or by the owner or operator.
(c) A party to a confidentiality agreement under (b)(2) of
this section who violates the confidentiality agreement is liable
for damages caused and for any penalties stipulated in the
agreement.
(d) Information disclosed to the government under (b)(3) of
this section is not subject to the Open Records Act; if a public
official, entity or employee of the government discloses such
information, a Class B misdemeanor is committed.
SECTION 7. EXCEPTION: DISCLOSURE REQUIRED BY COURT OR
ADMINISTRATIVE HEARINGS OFFICIAL. (a) Allows a court or
administrative hearings official to conduct an in camera review and
allow disclosure of a portion of an audit report in a civil,
criminal or administrative hearing if the determination is made
that the privilege is asserted for a fraudulent purpose, the report
is not subject to the privilege under Section 8 of this Act, or the
portion of the audit shows evidence of noncompliance and
appropriate efforts to achieve compliance were not promptly
initiated after noncompliance was discovered.
(b) The party seeking disclosure under (a) of this section
carries the burden of proof.
(c) Provides for an appeal from an administrative hearings
official's decision in (a) of this section to a court of competent
jurisdiction.
SECTION 8. NONPRIVILEGED MATERIALS. (a) The privilege in this Act
does not apply to information already required to be collected of
reported under a federal or state environmental or health and
safety law, information obtained by a regulatory agency through
observation or sampling, or information obtained from a source not
involved in the preparation of the audit report.
(b) Allows a person to agree to conduct and disclose an audit
report.
SECTION 9. COURT REVIEW AND DISCLOSURE. (a) Allows an attorney
representing the state to obtain an audit report by criminal
subpoena, discovery, or search warrant if there is reasonable cause
to believe that a criminal offense has been committed under
applicable law.
(b) Requires the attorney representing the state to seal any
audit report received and prohibits review or disclosure of the
contents.
(c) Gives the owner or operator 30 days to request an in
camera review to determine if all or a part of a report received
under (a) of this section is privileged; after 30 days any
privilege is waived.
(d) Under a request pursuant to (c) of this section, the
court shall schedule an in camera review within 45 days, and
authorize the attorney representing the state to review the report
subject to appropriate limitations specified in the court order to
protect against unnecessary disclosure.
(e) Allows the attorney representing the state to consult
with enforcement agencies regarding the contents of a report as
necessary to prepare for in camera review.
(f) Information used under (e) of this section is
confidential, may not be used in an investigation or legal
proceeding, and is not subject to the Open Records Act.
(g) States that (f) of this section does not apply to
information a court finds to be subject to disclosure.
(h) Requires a court or an administrative official to
suppress evidence offered that arises from or is derived from
review, disclosure or use of information obtained under this
section if not authorized under this section; a party failing to
comply with this section has the burden of proof that the evidence
offered did not arise from and was not derived from the
unauthorized review, disclosure, or use.
(i) Allows the parties to stipulate whether information is or
is not privileged.
(j) Allows a court to compel disclosure only of parts of an
audit report which are relevant to issues in dispute.
(k) and (l) A person commits a Class B misdemeanor offense if
the person discloses information in violation of (b) or (f) of this
section, or knowingly discloses information provided to the person
in violation of this section.
(m) Allows a court to find any person disclosing information
in violation of this section in contempt and to order appropriate
relief.
SECTION 10. VOLUNTARY DISCLOSURE; IMMUNITY. (a) Except as
provided as follows, a person making a voluntary disclosure of a
violation of an environmental or health and safety law is immune
from administrative, civil, or criminal penalty for the violation
disclosed.
(b) A disclosure is voluntary only if the disclosure was made
promptly after the information was obtained, the disclosure is in
writing to the appropriate regulatory authority by certified mail,
the violation was not independently discovered by an agency with
enforcement jurisdiction before the disclosure was made, the
disclosure arises out of a voluntary audit, the person making the
disclosure takes appropriate efforts to achieve compliance by
pursing an effort with due diligence and correct the noncompliance
within a reasonable time, and the person making the disclosure
cooperates with the appropriate agency in an investigation of the
issues in the disclosure.
(c) Any disclosure is not voluntary if it is a report to a
regulatory agency required solely by a specific condition of an
enforcement order or decree.
(d) The immunity under (a) of this section does not apply and
an applicable administrative, civil, or criminal penalty may be
imposed if:
(1) the person who made the disclosure intentionally
or knowingly committed or was responsible within the meaning of
Section 7.02 of the Penal Code for the commission of the disclosed
violation;
(2) the person making the disclosure recklessly
committed or was responsible within the meaning of Section 7.02 of
the Penal Code for the commission of the disclosed violation and
the violation resulted in substantial off-site harm to persons,
property, or the environment.
(3) the offense was committed intentionally or
knowingly by a member of the person's management and the person's
policies or lack of prevention systems contributed materially to
the occurrence of the violation.
(4) the offense was committed recklessly by a member
of the person's management, the person's policies or lack of
prevention systems contributed materially to the occurrence of the
violation, and the violation resulted in substantial off-site harm
to persons, property, or the environment.
(e) Any penalty imposed under (d) of this section should be
mitigated by factors such as voluntariness of the disclosure,
efforts to conduct audits, remediation, cooperation with government
officials investigating the disclosed violation, relative lack of
harm or economic benefit, or other relevant considerations.
(f) In an action brought against a person for a violation for
which the person claims to have made a voluntary disclosure, the
person claiming the immunity has the burden to establish a prima
facie case that the disclosure was voluntary; after a prima facie
case of voluntary disclosure is established, other than a case in
which, under subsection (d) of this section immunity does not
apply, the enforcement authority has the burden of rebutting the
presumption by a preponderance of the evidence or in a criminal
case by proof beyond a reasonable doubt.
SECTION 11. CIRCUMVENTION BY RULE PROHIBITED. Prohibits a
regulatory agency from adopting a rule or imposing a condition that
circumvents this Act.
SECTION 12. APPLICABILITY. This Act applies to any audit
conducted on or after the effective date of this Act.
SECTION 13. RELATIONSHIP TO OTHER RECOGNIZED PRIVILEGES. This Act
does not change any privilege already established under statutory
or common law.
SECTION 14. EMERGENCY. Emergency clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
FILED VERSION
SUBSTITUTE
SECTION 1. Includes reference
to compliance management
system.
SECTION 1. Does not include
reference to compliance
management system.
SECTION 2. Purpose section
same as filed version.
SECTION 2. Purpose section
same as filed version.
SECTION 3. (a)(1) Includes
reference to compliance
management system.
(a)(2) Defines "compliance
management system" to mean a
voluntary compliance assurance
program established with the
following requirements:
policy requiring conduct of
operations in compliance with
environmental or health and
safety laws, incentives to
encourage employees to ensure
compliance and report
violations, a definition of
responsibility for compliance,
resources dedicated to
compliance assurance
activities, training employees
geared to compliance
management, procedures for
bringing about compliance,
compliance reviews, auditing
of compliance by persons
independent of management,
ensuring prompt action to
correct noncompliance, a
mechanism for discipline
employees who intentionally or
negligently contribute to
violations, oversight of
compliance and correction of
noncompliance, and a
management review of
compliance performance to
identify needed improvements.
(a)(4) of the filed version is
the same as (a)(3) of the
substitute except the filed
version does not have language
clarifying that an audit
reviews compliance with
environmental or health and
safety laws or permits issued
thereunder.
SECTION 3. (a)(1) Does not
include references to a
compliance management system;
The substitute does not
include the definition of
"compliance management system"
in (a)(2) of the filed
version.
(a)(3) of the substitute is
the same as (a)(4) of the
filed version except the
substitute clarifies that an
audit reviews compliance with
environmental health and
safety laws or permits issued
thereunder.
(a)(5) of the substitute
includes language not in the
filed version to define
"penalty" to mean an
administrative, civil, or
criminal sanction imposed by
the state to punish a person
for a volition of a statute or
rule; does not include a
technical or remedial
provision ordered by a
regulatory authority.
SECTION 3. (CONT.)
SECTION 3. (CONT)
(c) of the substitute includes
language not in the filed
version that defines
"knowingly" for purposes of
this Act to mean that a person
acts knowingly with respect to
the nature of his conduct when
he is aware of his physical
acts. A person acts knowingly
with respect to the result of
his conduct when he is aware
that the conduct will cause
the result.
(d) of the substitute includes
language not in the filed
version stating that reckless
has the meaning assigned in
Section 6.03, Penal Code.
SECTION 4. Includes
references to a compliance
management system.
(d) of the filed version
states that failure to label a
document does not waive the
privilege or create a
presumption that a privilege
does not apply.
SECTION 4. Does not include
references to a compliance
management system;
(a) Language is included in
the substitute which is not in
the filed version that "other
than those set forth in
Section 8 of this Act,"
documents or communications
"produced from" an audit are
included in an audit report;
does not include language
which is in the filed version
that documents and
communications "arising out
of" an audit are included in
an audit report.
(c)(7) The substitute
includes language "other
analytical data" to the types
of exhibits and appendices
which may be included in an
audit report; this language is
not in the filed version;
(c)(10) The substitute
includes "other communications
associated with an
environmental or health and
safety audit" to the list of
things which can be included
in an audit report; this
language is not in the filed
version;
(d) Clarifies that failure to
label a document as part of an
audit does not create a
presumption that privilege
does or does not apply.
SECTION 5. Includes
references to a compliance
management system.
(c)(1) of the filed version
includes language not in the
substitute that a person
cannot be compelled to testify
or produce a document if it
"relates to a matter that was
the subject or within the
scope of" an audit; the
substitute does not include
this language, but rather
includes language that a
person cannot be compelled to
testify or produce a document
if it "discloses any item set
forth in Section 4 made
pursuant to the preparation
of" an audit.
SECTION 5. Does not include
references to a compliance
management system;
(c) Clarifies when a person
cannot be compelled to testify
or produce a document in
applicable circumstances by
adding "related to an
environmental or health and
safety audit"; this language
is not in the substitute.
(c)(1) The substitute does
not include language in the
filed version stating the a
person cannot be compelled to
testify or produce a document
if it "relates to a matter
that was the subject or within
the scope of" an audit, and
adds language on the same
issue that "discloses any item
set forth in Section 4 made
pursuant to the preparation
of" an audit;
(c)(2) The substitute
includes language not in the
filed version clarifying that
for purposes of (c) only, a
person is someone "who did not
personally observe the
physical events" as well as
who conducted any portion of
the audit.
SECTION 6. Includes
references to a compliance
management system.
SECTION 6. Does not include
references to a compliance
management system;
(b)(2)(D) Language is included
in the substitute which is not
in the filed version which
maintains the privilege if "A
governmental official or state
or federal agency" makes a
confidentiality agreement with
an owner or operator
conducting an audit.
(b)(3) Language is included
in the substitute which is not
in the filed version providing
the privilege for reports
disclosed to a governmental
agency under a claim of
confidentiality.
SECTION 7. Includes
references to a compliance
management system.
SECTION 7. Does not include
references to a compliance
management system;
(a) The substitute allows an
administrative hearings
official to conduct an in
camera review; the filed
version does not allow in
camera review by an
administrative hearings
official.
(c) The substitute allows for
an appeal of an administrative
hearings official's decision
regarding audit disclosure
after in camera review,
without disclosure to the
administrative tribunal; no
such provision exists in the
filed version.
SECTION 8. Includes
references to a compliance
management system;
(b) of the filed version is
the same as SECTION 11 of the
substitute, except the
substitute does not reference
compliance management systems.
SECTION 8. Does not include
references to a compliance
management system;
(b) of the substitute, which
does not exist in the filed
version, includes a provision
to allow a person to agree to
conduct and disclose an audit
report.
SECTION 9. Includes
references to compliance
management systems;
(a) Includes a requirement
that an attorney representing
the state can obtain an audit
report if the attorney has
reasonable cause based on
information from a source
independent of the audit; this
requirement of an independent
source of information is not
included in the substitute.
SECTION 9. Does not include
references to a compliance
management system.
(a) Does not include the
requirement in the filed
version that an attorney
representing the state can
only obtain an audit report if
the attorney has reasonable
cause based on information
from a source independent of
the audit.
SECTION 10. Includes
references to compliance
management systems.
(b)(2) Does not include a
requirement that a voluntary
disclosure of a violation be
made in writing by certified
mail to an appropriate
regulatory agency.
(d) of the filed version does
not include a provision which
is included in the substitute
that immunity does not apply
if the violation was knowingly
committed or the person making
the disclosure was criminally
responsible within the meaning
of Section 7.02, Penal Code;
the filed version only
includes willful and
intentional violations as
those not protected by
immunity.
Subsection (e) of the filed
version is included in (d) of
the substitute with language
included in the substitute
that the immunity will not
apply to knowing behavior or
criminally reckless behavior
if off-site harm is involved.
(f) of the filed version is
the same as (e) of the
substitute, except the filed
version includes references to
a compliance management
system.
(g) of the filed version is
the same as (f) of the
substitute, except the
substitute clarifies that the
person claiming immunity has
the burden of proving a prima
facie case of immunity, as
applicable.
SECTION 10. Does not include
references to compliance
management system.
(b)(2) Includes a requirement
not in the filed version that
a voluntary disclosure of a
violation must be made in
writing by certified mail to
an appropriate regulatory
agency.
(b)(3) Includes a provision
not in the filed version that
a violation is not voluntarily
disclosed if an agency with
enforcement jurisdiction
independently detects the
violation before the violation
is reported; the remaining
subsections are renumbered
accordingly.
(d) of the substitute includes
language in (d) and (e) of the
filed version, except the
substitute adds a provision
not in the filed version that
a criminal penalty may be
imposed if knowing behavior is
involved, if criminally
reckless behavior is involved
and substantial off-site harm
results, or if the person
making the disclosure was
criminally responsible within
the meaning os Section 7.02,
Penal Code; the substitute
does not include willful
behavior as behavior to which
immunity does not apply
(because willful is not
defined in the Penal Code),
but the filed version does
include willful.
(e) of the substitute is the
same as (f) of the filed
version, except the substitute
does not include references to
a compliance management system
and the subsections are
renumbered accordingly.
(f) of the substitute is the
same as (g) of the filed
version except the substitute
clarifies that the person
claiming immunity has the
burden of proving a prima
facie case of immunity, as
applicable.
SECTION 11 of the substitute
is the same as SECTION 8 (b)
of the filed version except
the substitute does not
include references to a
compliance management system.
SECTION 11 of the filed
version is the same as SECTION
12 of the substitute except
the filed version includes
references to a compliance
management system.
SECTION 12 of the substitute
is the same as SECTION 11 of
the filed version except the
substitute does not include
references to a compliance
management system.
SECTION 12 of the filed
version is the same as SECTION
13 of the substitute.
SECTION 13 of the substitute
is the same as SECTION 12 of
the filed version.
SECTION 13 of the filed
version is the same as SECTION
14 of the substitute.
SECTION 14 of the substitute
is the same as SECTION 13 of
the filed version.
SUMMARY OF COMMITTEE ACTION
HB 2473 was considered by the House Committee on Environmental
Regulation in a public hearing on March 21, 1995. The following
persons testified in favor of HB 2473:
Jim Awalt, President of Monarch Paint Company, representing
himself.
Dan V. Bartosh, Jr., representing American Electronics
Association-Texas Environmental Policy Workgroup.
Thomas F. Cooke, Chairman of Oil & Gas Exploration &
Production, representing himself and Texas Independent Producers
and Royalty Owners Association, North Texas Oil and Gas
Association, West Central Texas Oil and Gas Association, Permian
Basin Petroleum Association, and Panhandle Producers and
Royalty Owners Association.
Gary Gibbs, representing the Association of Electric Companies
of Texas.
Donald Legg, representing Texas Association of
Business/Chamber of Commerce.
Bud McMillan, Government Relations for General Motors Corp.,
representing himself.
Ross Wilson, representing Texas Cattle Feeders Association.
Charles Hays, with Aquila Gas Pipeline, representing himself
and Texas Natural Gas Pipeline Association.
Jon Fisher, representing Texas Chemical Council.
Karen Coffey, representing Texas Automobile Dealers
Association.
Ben Seabre, representing Texas Mid Continent Oil & Gas
Association.
Charlie Sorrells, representing Eastman Chemical/Texas Eastman.
The following persons testified against HB 2473:
Kate Kelley, representing the Travis County Commissioners
Court/Travis County Attorney's Office.
Cathy Sisk, representing the Harris County Attorney/District
Attorney.
Ken Kramer, representing the Sierra Club (Lone Star Chapter).
Leslie Fields, representing the Texas State Conference of the
NAACP.
The following persons testified neutrally on HB 2473:
Reggie James, representing Consumers Union.
John A. Riley, Director of the Enforcement Coordination and
Litigation Division of the Texas Natural Resource Conservation
Commission, representing himself.
HB 2473 was left pending without objection.
HB 2473 was considered by the House Committee on Environmental
Regulation in a public hearing on March 28, 1995. The committee
considered a complete substitute for HB 2473. Committee amendment
number 1 was offered to the substitute. Committee amendment number
1 was adopted without objection. The substitute as amended was
adopted without objection. The Chair directed the committee clerk
to incorporate the amendment into the substitute. HB 2473 was
reported favorably as substituted with the recommendation that it
do pass and be printed, by a record vote of eight (8) ayes, no (0)
nays, no (0) present not voting, and one (1) absent.