Lenny and Goliath: A Modern Fable

The potential for competition has come to product safety, says MET’S Len Frier. It took only three lawsuits, two court orders, and 25 years.

Editor’s Note: Today’s vibrant product safety testing industry in the U.S. is due in no small part to the efforts of Leonard Frier of MET Laboratories. The following article, which was originally published in Compliance Engineering Magazine in 1995, chronicles Frier’s 25 year battle with the U.S. Occupational Safety and Health Administration (OSHA) to expand the agency’s Nationally Recognized Testing Laboratory (NRTL) program. As a result, more than 15 testing laboratories across the U.S. are currently authorized under the NRTL program to certify the safety of electrical products used in the federally-regulated workplace.

This article is being reprinted here with the kind permission of UBM. Copyright 2017. UBM. 128301:0317SH

Figure 1: After 15 years, MET receives its recognition from OSHA `s head, but the battle is still far from over.

Figure 1: After 15 years, MET receives its recognition from OSHA’s head, but the battle is still far from over.


I
n the beginning there was Underwriters Laboratories, and not much else.

Today, an exodus from that era may have begun. More than l0 laboratories can now claim the mantle “Nationally Recognized Testing Laboratory,” having been authorized by the federal government to certify at least some electrical products for use in the nation’s work places. Underwriters Laboratories remains the industry’s giant, holding at least 80% of the market for “listings” (that is, certifications) of electrical appliances and utilization equipment, and well over 90% of the market for components. Nonetheless, applicants for certification now enjoy advantages they have rarely seen before: they can get quotes from multiple certification vendors, costs have come down, and lead times have dramatically improved.

All this is thanks in part to product safety’s most enduring iconoclast, MET of Baltimore, MD, and its champion, Leonard Frier (Figure 1). The now 60-year-old Frier had not even graduated from high school when he started as an electrician’s helper at the age of 16. Self-educated, he became a registered Professional Engineer and founded MET in October 1959. The company had one employee: Leonard Frier. Frier went to work “field-testing” electrical power equipment, mostly at the behest of the state of Maryland.

The 1970s: OSHA Requires Approval of Electrical Equipment

In 1970 Frier decided to move into the business of certification, where he would have to compete with Underwriters Laboratories. But it was tough going even to get started.

That same year, Congress had created the Occupational Safety and Health Administration (OSHA) to “assure so far as possible every working man and woman in the nation safe and healthful working conditions.” Assuming jurisdiction over the nation’s work places from states and localities, the new agency claimed a vast constituency, as a “workplace” was deemed to exist virtually wherever there was an employer/employee relationship. Soon after its creation, OSHA published its regulation 1910.308(d), which provided that electrical equipment would be held acceptable “if it is accepted or certified, or listed, or labelled or otherwise determined to be safe, by a Nationally Recognized Testing Laboratory, such as, but not limited to, Underwriters Laboratories Inc. and Factory Mutual [Research] Corporation.” MET thus had the burden of proving that it was an entity “such as” UL, though as Frier and others pointed out, OSHA had provided no means by which it could do so.

In 1973, OSHA published its regulation 1907, specifying a method by which organizations such as MET could become Nationally Recognized Testing Laboratories. But before MET could get OSHA to act on its request, the agency reversed itself and called for 1907’s revocation; it had received more than 130 comments on the regulation, many of them critical. An advisory committee was to be formed to consider drafting new rules, but none was ever appointed.

OSHA’s failure to act didn’t sit well with another arm of the federal government. In 1976 the Federal Trade Commission complained about the situation to Morton Corn, then OSHA’s man in charge. Corn responded by saying that “clearly, OSHA has no interest in limiting competition.” He closed his letter by stating that OSHA was committed to making a careful and thorough study of the problem.

A year went by with no further action on OSHA’s part. The FTC complained again, this time to Eula Bingham, the agency’s new chief. Referring to the fact that only Underwriters Laboratories and Factory Mutual were authorized to certify electrical equipment for use in the nation’s workplaces, the FTC insisted, “some action to open the market to all competent testing laboratories…should be taken immediately.” Bingham wrote back to assure the Commission that an “equitable solution can be reached in a matter of months.”

But still nothing happened, nor would it for five more years.

1982: A Suit and a Settlement

In 1982 MET sued, and OSHA settled. In a settlement agreement dated April 22, 1983, OSHA stated that it “believes that it is necessary to eliminate the anti-competitive effects unintentionally created by references to UL and FM and by the agency’s failure to implement…1907.” Further, OSHA professed itself to be “greatly concerned about the special status given to UL and FM.” To remedy the situation, the agency agreed to develop a rule deleting the terms “UL” and “FM” wherever they appeared in applicable regulations and to “create a workable procedure for the designation of enterprises whose approval of products will be accept able by OSHA.” A schedule drawn up as part of the settlement called for the final rule to be published by March 9, 1984. OSHA agreed that once published, the rule would be “expeditiously implemented by OSHA without unreasonable delay.”

OSHA then began the complex process of creating new regulations. In January 1984 it published a “regulatory analysis” in which it admitted that 1907 had not been implemented in part because it would have cost OSHA too much. UL and FM had also been given a special status, and that was wrong. “Requiring that certain equipment be tested [and] certified by ‘a Nationally Recognized Testing Laboratory’ such as Underwriters Laboratories, [or] Factory Mutual Research Corporation,” OSHA conceded, had “effectively established an OSHA-sponsored equipment testing duopoly for UL and FM. In fact, this duopoly may be a monopoly because some of the equipment is tested by only one of these two labs.”

From that time until mid-1984 all seemed to proceed smoothly. Then, inexplicably, everything stopped. March 9, 1984, the date on which OSHA had promised to have new regulations in place, came and went with no further activity.

1987: MET’s Day in Court

MET filed suit for the second time in 1987. The government moved to dismiss the suit and wound up in front of an angry Judge Joseph Young of the Federal District Court for the District of Maryland.

The Court: “I am sure OSHA would take the next five years, given the chance to do so, to litigate this case. They are not going to do it in my court anyhow. I’m really a bit irritated at [OSHA’s] position in this case of first having been dragging their feet in 1982, then having agreed to a settlement in 1983, having delayed it until 1984, and here we are in 1987, almost 1988, and they have done nothing about it. They will get no consideration out of this Court, as far as I am concerned.

Mr. Bernstein (attorney for the government): “Well, with all due respect to the Court, I can’t say [OSHA] has done absolutely nothing during this time period. There are priorities—”

The Court: “It hasn’t been resolved, the issues that were required to be resolved by the [settlement agreement].”

Mr. Bernstein: “That’s correct. And…the Court’s original response was [OSHA’s] done nothing. And the fact is, [OSHA] has done something and has attempted to promulgate this standard.

“Your Honor, keep in mind that what OSHA has to do is promulgate standards to protect workers in the workplace. There are other issues that need to be resolved that, with all due respect to [MET], are a little more important than protecting some competitive interest in the business community.”

The Court: “I understand that. But then why not resolve those issues? Why keep [MET] hanging, twisting in the wind for-well, actually, it goes back to ‘74… Doesn’t there have to come an end to this, [with OSHA’s doing] something to resolve the issue?”

Mr. Bernstein: “Absolutely, your Honor.”

The Court: “Well, where are the equities in this case?”

Mr. Bernstein: “Well, your Honor, the equities in the case are that [MET] is entitled to a standard to allow [it] to attempt to be accredited in order to approve this electrical equipment…”

The Court: “And when are they entitled to it? After they go out of business because they have not been able to do it? … I am simply criticizing [OSHA] for taking every step they can to thwart the implementation of an agreement they agreed upon five, three, four years ago. As far as I am concerned, they have no equities in this case.”

Mr. Bernstein: “I’m sorry, Judge?”

The Court: “They have no equities in this case… The continuing process of foot dragging has to stop…and if anybody has to stop it, I’ll be willing to do it.”

Finally getting the message, the OSHA lawyers offered up a new agreement according to which the regulation was to be promulgated within 120 days. Then Mr. Bernstein, attorney for the government, did something remarkable: he indicated to the Court that his client, OSHA, might continue to drag its feet if it was able to see any way to get around the Court’s new order.

Mr. Bernstein: “Your Honor, I’m just told that the [Court’s new] Order should state specifically the rule-making process must be completed in 120 days.”

The Court: “That’s all I’m saying.”

Mr. Bernstein: “No, it’s a language problem. Counsel advised me we’ll have a much easier time getting our client [OSHA] to complete it within the scheduled time period if, number one, it’s an order, and, number two, it says the rule making process must be completed” emphasis added.

The Court: “The Order would say the Defendant be and hereby is ordered to complete the rule-making process within 120 days.”

This time, OSHA complied: on April 12, 1988, it promulgated its new rules for the recognition of Nationally Recognized Testing Laboratories.

1988: New Rules of the Game

OSHA’s new Rule 29 CFR 1910.7 specified that “third party (or independent) testing for safety [would be] necessary” in order for certain equipment and materials to be deemed acceptable for workplace use, with that testing having to be performed “in duly accredited laboratories.”

The new rules set out four “specific and exacting” requirements that every NRTL had to meet. First, it had to be capable of performing testing: NRTLs were expected to do most of their testing in-house, subcontracting work out only in the case of “unique or special needs.” Second, a control procedure must be implemented for the listing or labeling of products, including production-line inspection during manufacturing. The third requirement called for organizational independence: historically, OSHA said, electrical authorities “have required the use of third party or independent testing laboratories for fire/electrical safety testing.” Finally, the NRTL had to have an appeals procedure in place.

This left the problem of how to deal with UL and FM. For their benefit, OSHA adopted the following provision in the appendix to its new rules: “Notwithstanding all the other requirements and provisions of 1910.7 and this Appendix, [Underwriters Laboratories and Factory Mutual Research Corporation] are recognized temporarily as Nationally Recognized Testing Laboratories by [OSHA] for a period of five years beginning June 13, 1988, and ending July 13, 1993.”

As expected, MET was the first organization to apply for recognition as an NRTL. OSHA conducted a stringent review, which determined that, among other things, no officer of MET owned stock in any company whose products MET listed. MET’s application for recognition was granted under the terms of a “Letter of Recognition” from OSHA. Among the conditions were the laboratory’s obligation to notify the agency of “any change of ownership or key personnel” and its proscription from operating any product-safety certification program in which quality-systems registrations under ISO 9000 replaced factory inspections.

Other laboratories soon followed MET’s lead, including UL’s chief competitor in the United States, ETL of Cortland, NY.

UL’s “Special Status”

Its new status as an NRTL allowed MET to grow quickly, from one product-safety-certification employee to 25 by 1992. But the possibility of any real competition with UL now seemed to lie beyond its reach, due in large measure, claimed MET, to the unfortunate period of “temporary recognition” afforded UL and FM by OSHA.

The main problem was that UL and FM were exempted from all of the requirements that applied to the other, duly recognized NRTLs. For example,

MET’s OSHA recognition was limited to a few dozen specifically enumerated standards, whereas UL could use any standards it liked. If MET wanted to expand the scope of its recognition by adding new standards or changing old ones, it had to apply to OSHA and wait for approval, a process that could take months, even years, as OSHA attempted to determine whether the new standard was “substantially equivalent” to the old. UL, for its part, was not bound to notify OSHA of standards changes, and could begin using a new standard immediately. Since a number of product-liability cases have held that manufacturers have a duty to use the most current standards, MET feared that the delays it was experiencing in getting new standards approved might drive customers back to UL.

MET chafed under other restrictions as well. Because its recognition covered only its Baltimore facility, it couldn’t transfer any of its increased business to its Burlington or Pittsburgh operations without first going through the lengthy OSHA approval process. UL, in contrast, was free to expand at will and opened up new facilities in Hong Kong, Taiwan, Japan, and Camas, WA.

Then, too, UL could and did institute new and innovative programs, among then the Client Agent Program (CAP), which allowed certified agents to perform testing on products for UL’s review and possible acceptance. That these agents did not have to be NRTLs seemed to MET to fly in the face of OSHA’s requirement that testing be performed only in “duly accredited laboratories” except where “unique and special needs” existed. UL’s Client Test Data Program went so far as to suggest that UL would agree to accept test data generated by the manufacturers themselves-a practice that for MET raised questions regarding independence. The Compliance Management and Product Assurance Program (COMPASS) further delegated testing and evaluation to UL’s customers. Finally, there was the Total Certification Program (TCP), where by customers could “work with UL to jointly evaluate product construction conformance, test products and analyze test results, prepare UL style reports and with UL’ s authorization, distribute updated [reports] to the company’s manufacturing facilities.” A UL press release boasted that “through TCP, [the customer] now administers a significant portion of the compliance evaluation process internally and can therefore expedite obtaining UL authorization.”

MET did not complain about any of this; it all seemed to be part of the deal. UL and FM were grandfathered in for temporary recognition, and while they enjoyed that status, they could do things others could not. The grace period was scheduled to end on July 13, 1993; the shock came when, four days prior to that date, OSHA announced that the temporary recognition might be extended indefinitely. The rules provided for the grandfathering to continue until OSHA took final action on UL’s and FM’s applications to become formally recognized NRTLs. How long that process would take, nobody knew, but MET had a feeling it could be a very long time indeed–after all, MET itself had first filed for accreditation on May 1, 1974, and had not been recognized for 15 years.

1994: The Third Case of MET v. OSHA

For MET, OSHA’s July 1993 backpedaling was too much to take, and it filed suit for a third time in January 1994. The suit charged, in part, that a period of indefinite “temporary recognition” favoring UL and FM was a continuation of the “special status” that the settlement agreement had bound OSHA to eliminate. OSHA, said MET, was in breach of its agreement.

In response, the government filed its usual motion to dismiss, which ran to 23 pages this time. It insisted it had complied with all the terms of the settlement agreement, and besides, it claimed, MET was in the wrong court at the wrong time. The new NRTL rules were not really rules at all but rather “standards” adopted under Section 6 of the Occupational Safety

and Health Act of 1970, and as such could be challenged only in the Federal Court of Appeals, not in Judge Young’s Federal District Court. Furthermore, “standards” had to be challenged within 60 days of their issuance, and the 60-day period in this instance had expired in 1988.

Judge Young, speaking for the Federal District Court, threw out the government’s motion to dismiss. In its settlement agreement, he said, OSHA had pledged to undo the “anti-competitive effects” created by its regulations. Although a year had now passed since the scheduled expiration of their temporary recognition, UL and FM continued to function as NRTLs, but without the constraints that applied to the others. “Unlike the other NRTLs,” Judge Young said, “UL and FMRC are not subject to OSHA on-site reviews nor publication of their capabilities in the Federal Register… This differential treatment of UL and FMRC perpetuates the same governmentally prescribed competitive advantages that this Court’s Orders and the Settlement Agreement were intended to eliminate.” As to the government’s claim that MET was in the wrong court, the judge replied that the company was challenging the government’s breach of the settlement agreement, not the “standards” themselves, and held that the District Court had jurisdiction over such breaches.

Confident that OSHA would now act expeditiously on UL’s and FM’s applications, MET proposed settlement talks, but to no avail: the government filed a motion for the Court to reconsider its decision on the motion to dismiss, on the new grounds that OSHA had never had the authority in the first place to agree to remove UL’s competitive advantage. Judge Young gave the matter little thought, dismissing the government’s arguments by writing “Motion denied in the margin.

Having once more beaten back the government’s efforts to have the case thrown out, MET now pressed for a quick resolution. Perhaps anticipating an unwelcome outcome, UL intervened. Now there were three parties: MET, OSHA, and UL. UL swiftly seized on the government’s most recent argument, that OSHA had over stepped its bounds in promising to eliminate the competitive advantage enjoyed by UL and FM;

OSHA’s authority, it said, was limited to the provision of a safe and healthful workplace. Its brief read, in part, “OSHA has no authority to repair general unfairness [to competitors]. Simply stated, MET’s alleged ‘unfair situation’ has nothing to do with achievement of a safe and healthful working environment.”

MET countered that while OSHA was not generally responsible for ensuring equitable competition, it did have an obligation to rectify any problem that it either caused or perpetuated. UL’s position, MET maintained, was comparable to that taken by a corporation that “negligently injured a person and then claimed that to compensate the injured party would be an [act beyond its authority].”

Key Issue: Did UL Comply?

For its part, OSHA now argued that whatever the merits of MET’s legal claims, UL and FM were not in fact using the rules to their advantage: “It is not true, as MET asserts, that UL and FM can gain competitive advantage by failing to maintain proper equipment and facilities. This assertion ignores the reality of the product testing business and assumes that UL [does] not care about [its] reputation.” MET was incensed: why was UL deemed to “care about its reputation” and MET not? To support the government’s argument, UL filed an affidavit stating that it operated within OSHA regulations, leaving it to MET to prove otherwise.

MET attempted to obtain documents relating to OSHA’s inspections of UL, but the government initially refused to release them, claiming “deliberative process privilege.” One of these “privileged” documents turned out to be a memo from Lead Auditor Kenneth P. Klouse to OSHA, in which Klouse states that following a review of UL’s Client Test Data Program (CTDP), Compliance Management and Product Assurance Program (COMPASS), and Total Certification Program TCP, he was forced to conclude that “UL Inc. operates organizational programs that appear to be beyond the scope of the October 22, 1993 ‘Interpretations Used in Evaluating an NRTL’ s Capabilities’ and may require review by OSHA legal personnel.” Thus, even as the government was insisting that UL would not dare operate outside OSHA’s rules, the agency’s lead auditor was confiding something very different to his superiors.

In announcing its decision on February 3, 1995, the Court reiterated its authority to enforce settlement agreements, not-withstanding the variable classification of 1910.7 as a “regulation” or a “standard.” The Court ordered OSHA expeditiously to complete its review of UL’s and FM’s applications.

OSHA’s Capitol Dilemma

Now the government had a real problem on its hands, since its own audits had established that many of UL’s programs, affecting billions of dollars’ worth of commerce, might not meet OSHA’s rules. Shutting down UL was hardly an option, however, and in any case, there was no proof that any of UL’s programs actually endangered the health or safety either of workers or of the public. Under a Court order to act expeditiously, OSHA could see only one solution. If Mohammed can’t come to the mountain, bring the mountain to Mohammed; if UL couldn’t comply with the rules, the 1993 answer was simple: change the rules.

But that wasn’t as easy as it sounded. The Administrative Procedure Act required a complicated rulemaking process that often took years to complete–and years was a lot longer than Judge Young was likely to be willing to wait.

Fortunately for OSHA, it had seen this one coming. In September 1994, five months before the Court’s decision, the agency had put one of its best, Solicitor Dan Jacoby, on the case. Jacoby had interviewed the various parties and felt he could prepare an “interpretation” that would expand the rule’s envelope to encompass what UL was already doing.

That interpretation was released on March 9, 1995, just about a month after the entry of the Court’s order. In it OSHA cited the four elements that defined an NRTL. As to the first of these, the “capability to test and evaluate equipment,” OSHA explained that the fact that the capacity existed didn’t mean it had to be used in all cases. As to the third requirement, “independence” likewise didn’t preclude testings being carried out by a manufacturer: “As long as an NRTL, which is not economically affiliated with a manufacturer, had the ultimate authority and responsibility for approval… the needs of independence would be satisfied.” True, the 1988 rules stated that testing was to be performed only in “duly accredited laboratories” except in the presence of “unique or special needs,” said OSHA, those rules also judged it “reasonable that product testing systems already in place should be able to continue their operations without Agency rulemaking on the testing standards, methods and procedures that they are now using and have successfully used in the past.”

OSHA further defined the scope of what NRTLs could do: they could–but were not required to–accept data from other NRTLs, and under specified circumstances could sign off on testing data and product evaluations supplied by other entities, including manufacturers. Still, certain other procedures were pronounced unacceptable, among them “manufacturers’ self-declaration, client self-certification, and similar procedures that permit non-NRTLs to determine conformance with product standards, i.e., certify the product.”

Goliath Complies

The way was now cleared for OSHA’s accreditation of UL, which was announced in the Federal Register on June 29, 1995.

By that date, more than 20 years had passed since MET filed its first application to become an NRTL. Now, at very long last, the federal government had put in place procedures that not only permitted the accreditation of laboratories but treated all of them equally. That was all Len Frier had wanted from the beginning. But even in a free country, he had learned, such things take time, and money.

Nonetheless, due in large part to MET’s founder’s efforts, manufacturers and others seeking product safety certifications will now find the going easier. More choice will mean lower prices and faster access to the market. For that we have many to thank, including Len Frier. It was he who cast the first stone.

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