Sunday, December 26, 2010

RRP and Individual Liabiliy

A number of months ago, when I was interviewed by NARI (National Association of the Remodeling Industry) radio, I was asked if a contractor could be held liable for he $37,500 fine per infraction, per day that can be enforced by the EPA for RRP violations.  It has taken me quite some time to get a clear answer to this question, but here is the response I received from the EPA recently:

The Agency has always interpreted liability under TSCA (Toxic Substances Control Act of 1976) to cover individuals, partnerships, corporations, government organizations, etc.  TSCA section 409 states clearly that it is unlawful for any person to fail to comply with any rule promulgated under TSCA Title IV.  Section 16 then says that any person who violates section 409 is liable for a civil penalty.  We have always interpreted "person" under TSCA to apply to both natural persons (individuals) and statutory or judicial persons (corporations).  Thus, any individual who violates a provision of the RRP rule is liable for a penalty, as is the firm that the individual works for.  We don't typically take enforcement actions against individuals, as we prefer to act against the individual's employer, but that doesn't mean that we can't assess a penalty against an individual.

Now if the question raised has more to do when a corporate entity is named in a complaint and subsequently found liable for a penalty, but the corporation doesn't have assets to pay the penalty, can the CEO, who is a natural or individual person, be held liable for that penalty?    This seems to be a question of Corporations Law that the private attorney will need to research and answer for her client.

So, as a contractor, if you violate the Renovation, Repair and Painting Rule, you could be held individually accountable for your actions.  If you are a contractor or run a construction company, the rules are:

1.  Obey the law!  If you do renovation work on pre-1978 homes, become certified, get trained, hand out the Renovate Right booklet and protect yourself and the homeowner by sealing off the area, using respirator masks and HEPA vacuums.

2.  Maintain corporate practices.  Keep your corporation separate from your individual assets.  Maintain separate bank accounts, sign your contracts as a representative of your corporation, file corporate documents and follow all corporate formalities.

3.  Protect your personal assets.  Consult a lawyer about the best way to protect your home and other large assets.

The best way to avoid liability under RRP is to simply comply with the law.  However, there are additional steps one can take to protect assets.  If you follow the rules, you should be fine.