Legal advice for system integrators, manufacturers

Think again about legalities: Attorneys provide company-saving advice for system integrators, automation firms, and manufacturers at the 2015 Control System Integrator Association (CSIA) Executive Conference.

By Mark T. Hoske August 11, 2015

Ignorance about legalities isn’t an excuse in court; don’t bet the company and your employees’ livelihoods on trusting someone to do what you expect. Know how to legally protect your system integration firm, automation and controls company, or manufacturing company by using laws and common sense to your advantage. Pay attention to contract fine print, don’t agree to do something without knowing the details, and know the latest labor law changes.

These were among several areas of advice offered from two Faegre Baker Daniels attorneys at the 2015 Control System Integrator Association (CSIA) Executive Conference. See examples of automation legalities below.

Mark Voigtmann, CSIA attorney, and partner, Faegre Baker Daniels LLP, Indianapolis, Ind., has responded to system integrator legal emergencies for more than a dozen years and shared some of the interesting, odd, and juicy cases; names have been changed to protect the guilty.

Stuart R. Buttrick, partner, Faegre Baker Daniels LLP, Indianapolis, Ind., reviewed labor and employment law issues, including the National Labor Relations Board’s (NLRB) invalidation of common policies that are included in most nonunion employers’ employee handbooks, the Equal Employment Opportunity Commission’s (EEOC) and state governments’ prohibitions on some types of background checks, the increased federal protections for pregnant women, and the EEOC’s guidance on dress codes and personal grooming standards.

"A cat that sits on a hot stove will not sit on any stove again," Voigtmann said, adding that 75% of what he does is front-end transactional "stuff" that keeps the unhappy out of courts. His paraphrased advice follows.

Always look to insurance

Owners of a power plant alleged a system integrator delayed the completion of a facility when its work resulted in frozen pipes, creating lost generating opportunity costs in the tens of millions of dollars. A significant claim trickled down to the control system integrator (CSI) through the original equipment manufacturer (OEM) and installing contractor.

What looked like a loss on its face turned into a win after the CSI filed an insurance claim. Ordinarily, insurance does not cover business disputes, but a good attorney can find a way to trigger the coverage.

When coverage is triggered, the insurer picks up a good portion of the legal fees and experts required to defend the claim.

Two other things that helped in this case: First, the CSI went on the offense, alleging overruns and delays from extra scope added to the project, which stacked the trades and shifted a period of the work into bad weather; second, an unusual "mini-trial mediation" format was used in order to avoid court to save money. The CSI ended up making money on the litigation.

Lessons: (1) Work outside courts if possible; (2) always look at insurance, even if coverage is not obvious; (3) understand facts in detail; and (4) control the narrative to protect coverage. 

Testing for results

After 9-11, airline bags needed to be tested for explosives. A turnkey conveyor company hired a control system integrator, but testing requirements kept changing, and tests continued to be added. The CSI pursued a "customer is always right mentality," by saying something like, "Oh yeah. We’ll do that," when it would have been better to say: "Are you insane? We never agreed to that."

There were numerous problems on the project. The "goal posts" on the testing were ill-defined and kept changing. The design speed of the conveyor belts was incompatible with any control system. There was an issue regarding whether the ability to detect "butted bags" (two bags pushed together that the machines initially saw as one) was even in the project scope. The CSI admitted it didn’t have enough resources and suffered significant overruns addressing the endless testing. Ultimately, it took an aggressive, offensive mindset to turn what seemed to be a losing battle with endless testing into a partial recoupment of overrun expenses.

Lessons: (1) Factory acceptance tests (FATs) and site acceptance tests (SATs) cannot be specific enough, especially when working with untested technologies; (2) invest in understanding the facts-weigh costs against possible outcomes; (3) beware of the "customer is always right mentality;" and (4) assume all emails are public. "It’s a mighty thin pancake that don’t have two sides." 

Explosion blame sought

A gas plant became Cape Canaveral while a distributed control system (DCS) and supervisory control and data acquisition (SCADA) system were being migrated. With the project nearly completed, a CSI employee allegedly caused a power outage. An explosion resulted, launching a piece of equipment into the air. A significant demand for reimbursement of expenses was made on the CSI.

The resolution of the case turned on what level of responsibility the CSI assumed for remotely related equipment connected to its control system. Ultimately the CSI prevailed because it was determined that the migration was "like for like," (essentially excluding the checking of any underlying equipment functionality) which trumped the end user’s argument of "you break it, you buy it."

Lessons: (1) Pre-existing equipment needs to be addressed; (2) understand the facts, beware of joint investigations and of employees that may offer helpful speculation; (3) respond forcefully to any claims and respond to weak claims very forcefully.

Traditional purchase orders and contracts usually do not sufficiently address automation-specific risks for testing pre-existing equipment. The electronic age makes avoiding truth more difficult. There’s usually a way out. "If truth is in your favor, you will find it," Voigtmann said. 

Labor, employment law update

Buttrick covered labor and employment developments that control system integrator employers need to know and provided practical tips to ensure labor-law compliance.

Section 2 of the Best Practices and Benchmarks Manual from CSIA provides some help. Summary advice from Buttrick follows.

Faster union elections

The NLRB has instituted "quickie union" election rules that may make union organization easier.

The National Labor Relations Act (NLRA) applies to both union and nonunion employers. Organized labor used to represent more than 30% of the American workforce, but now it represents a little more than 6% of the private sector. As a result, unions are looking to organize more nonunion employers.

The NLRB announced its "quickie election" rules on Dec. 12, 2014, and the rules became effective on April 14, 2015. Although the NLRB has indicated that it believes the new rules will remove delays, Buttrick says that they create a disadvantage for nonunion employers. Typically it had taken 38 to 42 days before a union election could happen. The NLRB’s new rules shorten that timeframe to 13 to 22 days until election.

Also, the new rules require an employer who has a union election petition filed against it to turn over a list of employee contact information, including employees’ emails and cell phone numbers, if on file. Only names and addresses were required previously, he said.

Lessons: (1) Don’t ignore any petition for union election. As soon as a petition is seen, call your counsel because there won’t be much time to inform your employees about why a union is not in their best interests; (2) nonunion employers should be proactive and should continually explain to their workforce why it’s good to work without a union; (3) know how to spot signs of union organizing; and (4) conduct audits to see if your organization is competitive in the market. The U.S. Chamber of Commerce is challenging the ruling, but the quickie law is in effect for now. 

NLRB invalidation of handbook policies

Over the past several years the NLRB has been invalidating scores of common employee handbook policies. If you are ever faced with any governmental investigation, don’t turn over your whole handbook unless it is requested by the government; provide the government with only the pages relevant to the issue at hand.

Section 7 of the NLRA protects employees’ right to unionize and right to engage in other concerted activities for purpose of collective bargaining, other mutual aid, or protection.

Activity is concerted when acting with or on behalf of other employees and not solely by and on behalf of the employee himself or herself. Concerted activity also occurs where an employee is seeking to initiate, to induce, or prepare for group action.

Section 7 applies to all employees, regardless of whether the workplace has a union.

Lesson: Before you discipline or discharge an employee, consider consulting with counsel to see if the activity at issue constitutes protected concerted activity under the NLRA. 

Positive/professional policies lawful?

Can an employer require employees to represent the company in a positive and professional way?

The NLRB has ruled that many types of "positive and ethical manner" language is overly broad and ambiguous because it violates employees’ Section 7 rights.

Can an employer have a "no gossip" policy? Depending upon how it is worded, such a policy may be overly broad and violate the NLRA.

Can someone be fired for shouting profanities at the boss? It is illegal to fire an employee for swearing when complaining about group concerns.

In December 2014 the NLRB ruled that employees have a right to use work computers and email for nonwork purposes so long as they do so during nonwork time.

The EEOC recently issued guidance on use of criminal history. Employers only can use convictions when considering candidates for employment and NOT arrests (because arrest disparately impact minorities).

The EEOC has recently issued new guidance related to the Pregnancy Discrimination Act. The guidance requires employers to provide reasonable accommodation for normal pregnancy and lactation to employees who are not "disabled" as defined under the Americans with Disabilities Act (ADA). A normal pregnancy was not considered to be a disability, and now it basically is, and employers act accordingly, Buttrick said.

Legally, proceeding in good faith with automation or control system integration projects may not be enough. Think again about how law should be integrated with automation projects and manufacturing; see more advice below.

– Mark T. Hoske, content manager, CFE Media, Control Engineering,

ONLINE extras

How to get an automation project approved 

Legalities: a collection of legal advice 

Four tips on automation and control integration, with CSIA conference video