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$20 Million U.S. TSCA/Lead-Based Paint Penalty: Expensive Reminder to Manage and Audit Contractors’ Joint Regulatory Liabilities

Written by Patrick Larkin and Maram T. Salaheldin  Clark Hill PLC 

Renovation of homes built before 1978 frequently disturbs lead-based paint (LBP) and poses significant health risks, particularly for children. For this reason, companies that perform or subcontract renovation services are required to provide very specific, written LBP warnings and education materials to residents. Failure to comply with these obligations can result in significant penalties for non-compliance. The U.S. Environmental Protection Agency (EPA) enforces these rules on all companies that “perform renovations for compensation.” This means that retail sellers of renovation products (e.g., windows or woodwork) can face EPA enforcement for noncompliance even where they subcontract installation to third parties.

On Dec. 17, 2020, U.S. EPA and the Department of Justice (DOJ) announced a nationwide settlement with Home Depot related to home renovations that occurred between 2013 and 2019. The settlement resolves alleged violations of the EPA’s Lead Renovation, Repair, and Painting (RRP) Rule involving renovations performed by Home Depot’s contractors across the country on homes built before 1978. EPA identified hundreds of instances in which Home Depot failed to contract renovations or repairs with certified contractors, as well as instances in which Home Depot failed to establish, retain, or provide the required documentation to demonstrate compliance with the RRP Rule.

EPA’s proposed settlement with Home Depot includes a $20.75 million penalty—the largest such penalty to-date under the Toxic Substances Control Act (TSCA).

Compliance Lessons

Companies in the construction industry and beyond can learn several significant lessons from the Home Depot violations, including the importance of:

  1. Understanding Your Liability: Businesses sub-contracting regulated activities to third parties are not necessarily insulated from liability. Here, since Home Depot contracted with customers and received compensation to perform renovations of pre-1978 housing, it remained liable under the RRP Rule, regardless of its use of subcontractors. Home Depot failed to actively assess and control risk from noncompliance by itself and its subcontractors, resulting in a significant penalty. Understanding your liability, particularly in the context of subcontracting, is an important step towards reducing enforcement exposure for your business.
  2. Being Proactive about Compliance: Another important step to reducing your enforcement exposure is implementing a compliance management system to identify potential issues before they become a problem. A strategic option to reduce such exposure can be the use of environmental self-audit/self-disclosure programs, such as EPA’s Audit Policy. The EPA Audit Policy allows companies to reduce or eliminate penalty exposure from noncompliance at their facilities. In addition, under the LBP Consolidated Enforcement Response and Penalty Policy, renovators may succeed in receiving gravity-based penalty reduction for any RRP Rule violations that qualify for such reduction under EPA’s Audit Policy. While navigating the EPA self-audit program can be challenging, the benefits can often be great for businesses. Small businesses and new business owners, in particular, may wish to take advantage of the tailored incentives potentially available to them, including the ability for new owners to enter into audit agreements with EPA to receive affirmative resolution and negotiated timelines for completing corrective actions.

About the Authors

Pat Larkin practices exclusively in environmental law at Clark Hill PLC, including regulatory compliance, litigation, administrative law, and environmental counseling in business transactions. Pat regularly represents industrial, transportation, real estate and retail clients in air, water and waste permitting, compliance counseling and audits, voluntary site cleanups, government enforcement actions, and in agency rulemaking and associated stakeholder and guidance writing work groups.

Maram Salaheldin is an Associate in Clark Hill’s Washington DC office in the Environment, Energy & Natural Resources group. Her practice focuses on providing environmental management and regulatory compliance support to U.S. and multinational clients, with an emphasis on risks and liabilities arising under environmental, health, and safety (EHS) laws, particularly with regard to solid and hazardous waste management, including transboundary movements under the Basel Convention.

U.S. EPA’s Enforcement of the Lead-Based Paint Renovation, Repair and Painting Rule

By Dianne R Phillips, Holland & Knight

On March 28, 2018, the Office of the Inspector General (OIG) of the U.S. Environmental Protection Agency (EPA) issued a Project Notification indicating its plans to begin preliminary research to evaluate the EPA’s implementation and enforcement of the Lead-Based Paint Renovation, Repair and Painting Rule (RRP Rule). The RRP Rule, which is part of the federal Toxic Substances Control Act, is intended to ensure that owners and occupants of pre-1978 “target housing” and “child-occupied facilities” receive information on lead-based paint hazards before renovations begin, that individuals performing such renovations are properly trained and certified, and that renovators and workers follow specific lead-safe work practices during renovations to reduce the potential for exposure to lead. Although use of lead-based paint in dwellings was prohibited after 1978, EPA estimates it is still present in approximately 30 million homes across the United States. The RRP Rule is intended to protect children and others vulnerable to lead exposure due to the health effects associated with lead poisoning.

Enforcement of the RRP Rule, along with the other lead-based paint rules, has been a priority of EPA. For fiscal year ending 2017, according to EPA’s Oct. 27, 2017 press release from October 2016 through September 2017, EPA finalized 121 civil settlements for alleged violations of one or more of the three lead-based paint rules–the RRP Rule; the Lead Disclosure Rule; and the Lead-based Paint Activities Rule for abatements–and filed three complaints for ongoing actions. EPA and the U.S. Department of Justice also prosecuted one criminal case involving violations of lead paint laws and finalized two Clean Air Act settlements that included lead paint abatement projects in local communities. The OIG Project Notification indicates that the “objective for this project is to determine whether EPA has an effective strategy to implement and enforce the lead-based paint RRP.” Only time will tell what is meant by that.

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About the Author

Dianne R. Phillips is an attorney in Holland & Knight’s Boston office who concentrates her practice in litigation, regulatory, energy and environmental law. As former assistant general counsel for Suez LNG North America LLC (now known as Engie North America) and its wholly owned subsidiary, Distrigas of Massachusetts LLC, Ms. Phillips was involved in all aspects of regulatory compliance for the nation’s oldest, continuously operating liquefied natural gas (LNG) import terminal located in Everett, Mass., including safety and security. Her LNG experience includes advising clients with respect to specialized regulatory compliance under 49 C.F.R. Part 193 and NFPA 59A.