ML20062L584

Nuclear Regulatory Commission Issuances for October 1993. Pages 169-186

ML20062L584
Person / Time
Issue date:	12/31/1993
From:	NRC OFFICE OF ADMINISTRATION (ADM)
To:
References
NUREG-0750, NUREG-0750-V38-N04, NUREG-750, NUREG-750-V38-N4, NUDOCS 9401030180
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l NUREG-0750 Vol. 38. No. 4 Pages 169-186 m..

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l NUREG-0750 Vol 38, No. 4 Pages 169-186 NUCLEAR REGULATORY COMMISSION ISSUANCES October 1993 This report includes the issuances received during the specified period 4

I from the Commission (CLI), the Atomic Safety and Licensing Boards (LBP), the Administrative Law Judges (ALJ), the Directors' Decisions (DD), and the Denials of Petitions for Rulemaking (DPRM).

The summarios and headnotes preceding the opinions reported herein are not to be deemed a part of those opinions or have any independent legal significance.

l U.S. N'UCLEAR R5GULATORY COMMISSION 1

Prepared by the Division of Freedom of Information and Publications Services Office of Administration U.S. Nuclear Regulatory Commission Washington DC 20555-0001 (301/492-8925) i i

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1 COMMISSIONERS Ivan Selin, Chairman Kenneth C. Rogers Forrest J. Remick E. Gail de Planque

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- i B. Paul Cotter, Jr. Chief Administrative Judge, Atomic Safety and Licensirg Board Panel J

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CONTENTS 1ssuances of the Nuclear Regulatory Commission 1

FIVli STAR PRODUCTS, INC. and i

CONSTRUCTION PRODUCTS RESEARCH. INC.

i 01 Docket 1-93-027R MiiMORANDUM AND ORDER, CLI-93-23. October 21, 1993-.

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I Cite as 38 N 3C 169 (1993)

CL1-93-23 i

I UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION i

COMMISSIONERS:

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Ivan Selin, Chaim1an Kenneth C. Rogers i

Forrest J. Remick E. Gail de Planque j

In the Matter of 01 Docket No. 1-93-027R i

FIVE STAR PRODUCTS,INC.

and CONSTRUCTION PRODUCTS RESEARCH, INC.

October 21,1993 l

q The Commision denies Petitioners' motion to quash or modify a subpoena issued by the NRC Staff in the course of an investigation to determine if Petitioners have violated NRC regulations and to determine if safety-related problems exist at NRC-licensed facilities. The new enforcement date for the subpoena is November 1,1993.

REGUI ATIONS: INTERPRETATION AND APPLICAlllLITY (10 C.F.R. 5 50.7)

Section 50.7 of 10 C.F.R. was adopted both to implement section 211 of the Energy Reorganization Act and to incorporate into NRC regulations the Commission's authority under section 161 of the Atomic Energy Act.

NRC: ENFORCEMENT OF SUBPOENAS In general, an agency subpoena is enforceab,e if (1) it is for a proper purpose authorized by Cengress; (2) the information seught is clearly relevant to that purpose and adequately described; and (3) statutor/ procedures are followed in the subpoena's issuance.

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~ ENERGY REORGANIZATION ACT: EMPLOYEE PROTECTION

. 'Ihe philosophy underlying the adoption of section 211 of the Energy Re-organization Act and its implementing regulations is that any employee of an NRC licensee or of a firm that deals directly or indirectly with NRC licensees on nuclear-related matters and who is in a position to have information relating to nuclear safety must feel free to come to the NRC with that information.

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NRC: IIEALTli AND SAFETY RESPONSilllLITIES A defect in materials provided by a " supplier" or " vendor" can prove just as dangerous to public heahh and safety as a defect in ma" rials provided by a

" contractor" that has a more complex or long-term relationship with the NRC licensee.

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NRC: IIEALTil AND SAFETY RESPONSilllLITIES i

lhe risk to public health and safety - and the NRC's responsibility to protect that pubhc health and safety - is not measured simply by the length of time

- i in the contractual relationship between the NRC licensee and the commercial entity providing the Foods and services at issue.

3 ENERGY REORGANIZATION ACT: EMPLOYEE PROTECTION NRC: IIEALTII AND SAFETY RESPONSilllLITIES

'Ihe protection afforded to employees who may be able to provide information to the NRC regarding threats to the public health and safety cannot be measured by the length of their employer's contract with the NRC licensee.

i NRC: IIEALTil AND SAFETY RESPONSIBILITIES The risk to public health and safety, the NRC's responsibility to protect it, and the amount of protection afforded to "whistleblower" employees cannot be measured by the length of the contractual relationship between a licensee and a supplier of goods. This is especially true where the " supplier" offered goods and services that were certified to meet the NRC's requirements for installation in safety-related applications.

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NRC LICENSEES: CONTRACTUAL RELATIONSIIIPS Filling a purchase order issued by an NRC licensee by a vendor or " supplier" constitutes a contract between those two parties.

I REGULATIONS: INTERPRETATION AND APPLICAlllLITY 4

(l0 C.F.R. 6 50.7)

ENERGY REORGANIZATION ACT: EMPLOYEE PROTECTION (CONTRACTORS)

The term " contractor"in section 211 of the Energy Reorganization Act and 10 C.F.R. 6 503 of NRC regulations includes - at a minimum - employers f

such as ' vendors" or " suppliers" that manufacture and offer for sale materials that are (1) intended for use by NRC licensees and (2) certified to meet the requirements of 10 C.F.R. Part 50, Appendix U.

REGULATIONS: SAFETY STANDARDS i

f Cement and grout sold to NRC licensees under Part 50 Appendix B certi-fication are " basic components" whose failure could create a substantial safety hazard, as defined by 10 C.F.R. 6 213(a)(1) and (2).

i REGULATIONS: SAFETY STANDARDS A vendor or supplier who itself certifies that its products were manufactured l

and sold in accordance with Part 21 cannot reverse itself and allege that Part 21 I

does not cover the manufacture of these products.

REGULATIONS: SAFETY STANDARDS A vendor or supplier who certifies its products were manufactured and sold in accordance with Part 21 is required to " permit duly authorized representatives of the [NRC] to inspect its records, premises, activities, and basic components as necessary to effectuate the purposes of [Part 21]." 10 C.F.R. 5 21 A1.

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r ENERGY REORGANIZATION ACT: EMPLOYEE PROTECTION (CONTRACTORS)

REGilLATIONS: INTERPRETATION AND APPLICAlllLITY

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(10 C.F.R. 5 50.7) t An entity that maintains an on-going contractual relationship with a manufac.

surer to test that manufacturer's products, which are then sold to NRC licensees, i

is a " subcontractor" of the manufacturer within the meaning of section 211 of the Energy Reorganization Act and 10 C.F.R. 6 50.7.

t ENERGY REORGANIZATION ACT: EMPLOYEE PROTECTION "Whistleblowers" are protected under section 211 of the Energy Reorganiza-tion Act and 10 C.F.R. 6 50.7, regardless of the accuracy of their allegations.

ENERGY REORGANIZATION ACT: EMPLOYEE PROTECTION l

A supplier's subsequent act of ceasing to sell materials certified under 10 CER. Part 50 Appendix B does not remove an employee's protection for engaging in protected activity that occurred prior to that supplier's ceasing to.

j sell such materials.

I REGULATIONS: INTERPRETATION AND APPLICAlllLITY (10 C.F.R. N 50.7)

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For purposes of 10 C.F.R. 6 50.7, the term " contractor" is not limited to those

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persons who perform work within the protected area.

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REGULATIONS: INTERPRETATION AND APPLICAlllLITY I

(10 C.F.R. 6 50.7) lbr purposes of 10 C.F.R. 6 50.7, the NRC has jurisdiction over an employer

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i with a long history of providing materials, including safety-related materials, to

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the nuclear industry and over acts by that employer that are directly related to its transactions with NRC licensees.

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NUCI. EAR REGULATORY COMMISSION: INVESTIGATIVE 1

AUTIIORITY Congress intended, in passing the Energy Reorganization Act, that the NRC l

have the ability to conduct its own investigations under the Atomic Energy Act

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' during the pendency of a Department of Labor proceeding.

NRC: IIEALTil AND SAFETY RESPONSilllLITIES

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The rernedies provided by an arbitrator in a "whistleblower" case are similar to those provided by the Department of 14.bor in such a case - they assist the employee as an individual. Those remedies do not assist the NRC in performing the duties assigned it by Congress - protecting the rights of workers in the nuclear industry and ensuring the free flow of information to the NRC.

RULES OF PRACTICE: DISCOVERY RULINGS

- 3 1he Commission will not rule on claims of privilege in discovery disputes in the abstract.

MEMORANDUM AND ORDER P

I.

INTRODUCTION This matter is before the Commission on a motion by both Five Star Prod-ucts ("Five Star") and Construction Products Research ("CPR") (collectively

" Petitioners") to quash or modify a subpoena issued by the NRC Staff. The NRC Staff has responded in opposition to the Motion to Quash and Petitioners have submitted a motion for leave to file a reply with a tendered reply. -We have also considered a letter from Petitioners dated September 28,1993. After i

due consideration, we grant the motion for leave to file the reply, but deny the motion to quash and/or modify. We enforce the subpoena as issued. Because we held the subpoena in abeyance pending our resolution of this question, see Order in this Docket, August 27,1993, we hereby establish a new response date for the subpoena of Monday, November 1,1993, at the time and place stated m i

the original subpoena.

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I, FACTUAL, IIACKGROUND A.

Petitioners' Industry-Related Activitics Five Star Products and CPR are closely related companies; they are both owned by Babcock & King. Inc., they share the same premises in Fairfield, Connecticut, and they t. hare common officers. Ibr example, Mr. William Babcock is the president of Babcock & King, Inc., the president of Five Star, and the vice president of CPR. His father, Mr. H. Nash Babcock, is the president l

of CPR and vice-president of Five Star.

Five Star manufactures and sells grout and concrete products to the nuclear industry and has done so for about 20 years. Prior to the events that precipitated this incident, Five Star submitted these materials to CPR for testing. Ibliowing those tests, CPR issued Certificates of Conformance, certifying that the mate-riah, manufactured by Five Star meet the requirements of 10 C.F.R. Part 50, Appendix B. Under federal statute, section 206 of the Energy Reorganization Act,42 U.S.C. 5 5846, and implementing NRC regulations,10 C.F.R. Part 21, this certification signified to nuclear power plant licensees that Five Star man.

- u'actured these materials subject to special quality requirements tailored to nu-clear power plant safety applicatior.s, and subjected Five Star and CPR to safety reporting obligations to the NRC so that safety problems would be discovered and evaluated. Certified materials can be installed in " safety-related" systems without further testing by the NRC licensee that purchases them.

Based upon these certifications, several NRC licensees have purchased and installed Five Star's products in safety-related applications at various nuclear power plants in the United States over a period of years. See NRC Staff Response at 3 n.4. The Staff has also submitted an exhibit documenting the purchase by an NRC licensee of material manufactured by Five Star and certified by CPR as meeting the requirements of 10 C.F.R. Part 50, Appendix B, i.e., as safety-grade material. See NRC Staff Response at 13 n.19 and Exhibit 5.

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"Ihe August 1992 Safety inspection On August 19,1992, an NRC Staff inspection team began an unannounced inspection of Five Star. The inspection team viewed certificates of compliance signed by Five Star officials certifying that certain orders from NRC licenaces for concrete and grout were filled in compliance with 10 C.F.R. Part 50, Appendix B.,

and subject to 10 C.F.R. Part 21. However, the inspection team also uncovered.

nudits of Five Star's quality assurance ("QA") program performed by nuclear power plant licensees who were customers of Five Star's products. While some i

of the audits approved Five Star's QA program, other audits stated that the program was not qualified under NRC regulations because Five Star would

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i not allow the licensees access to the testing laboratory and, therefore, the i

qualifications of the QA program could not be verified.

'lhe NRC inspection team requested access to the Five Star /CPR laboratory; however, access was denied on August 18th by CPR president H. Nash Babcock.

Subsequently, Mr. Babcock again denied the NRC inspectors access to the laboratory on August 19th, and refused the inspectors' request for access to the laboratory technicians' i:otebooks. In addition, Mr. Babcock refused to allow the NRC inspectors to copy any of the records they had reviewed in the course i

i of their inspection with the exception of the current QA manual. Finally, Mr, Babcock asked the inspectors to leave the Five Star /CPR premises before they had the opportunity to review all the documents that had originally been made 3

-available to them.

Subsequently on August 25,1992, Five Star informed its current customers that it was suspending its QA program immediately and that in the future it would only supply commercial-grade products, i.e., products that were not certified for i

safety-related uses. In response, the NRC Staff issued an Information Notice

("IN") that informed all NRC Part 50 licensecs that (1) the NRC Staff had been denied access to Five Star's test laboratory and test data, and, (2) accordingly, the NRC had been unable to verify the quality of certain Five Star products used in safety-related applications. See IN-92-66 (Sept.1,1992).'

C.

The llolub Investigation On January 22, 1993, CPR terminated the employment of Mr. Edward P.

l Holub, CPR's Director of Research. The NRC Staff has now confirmed that Mr. Ilolub did indeed bring safety concerns to the NRC Staff. 'Ihese concerns related to the quality of the cement and grout that was (1) ordered pursuant to 10 C.F.R. Part 50, Appendix B, criteria by nuclear facilities licensed pursuant i

to 10 C.F.R. Part 50, and (2) tested by CPR and certified by CPR and Five Star to satisfy the requ'rements of 10 C.F.R. Part 50, Appendix B, subject to the requirements of 10 C.F.R. Part 21. See generally NRC Staff Response at 6 n.11, and 7.

On January 28,1993, Mr. Holub filed a complaint with the Wage and Hour Division, U.S. Department of Labor (" DOL"), alleging that CPR had terminated l

his employment in retaliation for his providing safety concerns to the NRC on or about June 22,1992. On April 1,1993, the DOL Wage and flour Division, New llaven, Connecticut, issued an Area Director's Finding, signed by the Assistant l

Ion septender 1.1991 the NRC staff. with de assistance of the Unned states Marshals. seized docunents relating to lhe St#3 and CPR's activines under the authority of a crmanal scardi warrani inued t'y tir United

. States Dninct Court. (Strict of Connecticut Tte NRC Staff has since returned cop es and/or originals of those docunents to Five Star and/ut cTR as appropriate.

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Area Director, which found that (1) Mr. Ilolub was engaged in protected activity within the scope and meaning of section 211 of the Energy Reorganization Act

(" ERA"),42 U.S.C. 0 5851; and that (2) discrimination as defined and prohibited i

by that statute was a factor in the actions that comprised his complaint, Five Star and CPR have appealed that decision and have requested a hearing before

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a DOL Administrative Law Judge.

As a result of the DOI. Area Director's Finding, the NRC Staff,in accordance with normal procedure, issued a " chilling effect" letter to CPR on April 30,

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1993. The NRC Staff requested CPR (1) to provide the reasons for Mr. IIolub's termination, including any supporting documentation, and (2) to describe the actions, if any, taken or planned, to ensure that Mr.11olub's termination would not have a " chilling effect" in discouraging other employees from raising perceived safety concerns regarding Five Star products sold as meeting the requirements of 10 C.F.R. Part 50, Appendix B.

On May 6,1993, CPR replied to the NRC Staff's letter. In its response, CPR refused to provide either the basis for Mr.11olub's termination or a description of any activities taken to prevent a " chilling effect" on its other employees.

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CPR based its refusal to provide the requested information on its assertion that the NRC lacked jurisdiction over CPR. On June 6,1993, the NRC issued another " chilling effect" letter to CPR and on August 5,1993, CPR responded, again refusing to provide the information requested by the NRC, based upon an 1

assertion that the NRC lacked jurisdiction over CPR.

On June 21. 1993, the NRC's Office of Investigations ("OI") initiated investigation No. 1-93-027R into the circumstances of Mr.11olub's termination.

On August 17, 1993, the Director of 01 issued a subpoena to William N.

j Babcock, or the Custodian of Records for Five Star and CPR. seeking production of any documents " relating to the termination of employment" of Mr.

IIolub "and the deliberations, discussions and communications that resulted in j

the decision to terminate Mr. Ilolub." The subpoena defined " document" to

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include any handwritten, typed, recorded. reproduced communlcation, memoranda (whether issued or noO. draft memoranda. notes. records, teners, rnessages. bulletin board pouings, working papers, reports, summaries, opinions of consultants, notices, instructions, minutes of meet.

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ings, and inter & intra ofnce communications."

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Subpoena at 1. Furthermore, the subpoena sought "any and all company policies,

..i pmcedures, or requirements regarding involuntary terminations" in addition to the position descriptions of three other named employees. Id. Finally, the subpoena sought Mr. IIolub's official personnel file," including any disciplinary j

warnings or actions; as. well as attendance records and compensation, salary,

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bonus and/or payroll records.,." Id.

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On August 26,1993. Petitioners filed their motion to quash or modify the subpoena. Petitioners argued that (1) the NRC Staff lacked jurisdiction over l

them and, alternatively, (2) that the subpoena sought privileged material. On August 27.,1993, we issued an order directing the NRC Staff to respond to the

' Motion to Quash by September 9,1993. The NRC Staff has now responded and the matter is before us for resolution.

r III. ANALYSIS

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Applicable Statutes and Regulations i

in section 161c of the Atomic Energy Act ("AEA") of 1954, as amended, Congress explicitly provided that the NRC is authorized.

to make such studies and investigations, otdain such information.

as the Commission may deem necessary and proper to assist it in exercising any authonry provided in this Act or in the administration or enforcement of this Act, or any regulations or orders issued thereunder. liv such purposes, the Commission is authorized,

by subpoena to require any ferrwn to appear and testify or appear and produw documents, or both at any designated place.

42 U.S.C. 5 2201(c)(emphasis added). Section 1is of the AEA, in turn, defines

" person" as *(l) any individual, corporation, partnership, firm, association, trust, estate, public or private institution, group,,

and (2) any legal successor, representative, agent or agency of the foregoing." 42 U.S.C. 6 2014(s).

In section 211 of the Energy Reorganization Act (" ERA"), as amended, Congress has provided that

[nlo employer may discharge any employee or otherwise discriminate against any employee because the employee.

(A) comnrnced, caused to be commenced, or is about to comnence or cause to be commenced.. a proceeding for t;e administration or I

enforcement of any arquirenent imposed under this Act or the Atomic Energy Act of 1954 as amended;

. or (F) ansisted or participated.. in any manner in such a proceeding

. or in any other action to carry out the purposes of this Act or the Atomic Energy Act of 1954 as anended.

j 42 U.S.C. 5 5851(a)(1). An " employer," under the ERA, includes "a contractor or subcontractor of a licensee

" 42 U.S.C.15851(a)(2)(C),

'Ihe Commission has adopted regulations implementing section 161 of the AEA and section 211 of the ERA for each area oflicensing activities.2 The regu-1seenon 50.7 was adopted not ordy 9o implenrne sechon 17111. Tnployee Prenertion' of de [ERAl." but aho Lf

. "to incorporate into the regulations de Comnminn's auttmty under acchon 161 of de IAEA) to investipte an allrged unlarul discnnmtion agains an enyloyee and to take appropnate action.

" 47 Fed. Reg 30A52 (Contined) r 177 L

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j lation implementing employee protection for activities under Part 50 is found at 10 C.F.R. t 50.7, which prchibits "[d}iscrimination by a Commission licensee, or a contractor or subcontractor of a Commission licensee.

10 C.F.R. 150.7(a). "[P]rotected activities include but are not limited to: (i)

D]roviding the Commission information about possible violations of require-ments imposed under either (the Atomic Energy Act or Energy Reorganization Act]." 10 C.F.R. t 50.7(a)(1).

In general, an agency subpoena is enforceable if(1) it is for a proper purpose authorized by Congress; (2) the information sought is clearly relevant to that purpose and adequately described; and (3) statutory procedures are followed in the subpoena's issuance. United States v. Powell. 379 U.S. 48,57-58 (1964);

United States v. Comley. 890 F.2d 539,541 (1st Cir 1989).

11.

Application 1.

Petitioners Are a " Contractor"and a " Subcontractor" Within the Meaning of the Statute and the Regulation i

Petitioners are subject to the Commission's jurisdiction under section 161 of the AEA and section 21I of the ERA.3 Stripped of its rhetoric, Petitioners' argumer,t that they are not subject to the NRC's jurisdiction under section 211 boils down to a simple assertion that each of the two entities, Five Star and CPR, is not a " contractor" or " subcontractor" within the meaning of section 211 of the ERA and 10 C.F.R. 650.7(a). Instead, Petitioners argue that they are

" suppliers" of goods and services, not " contractors."

We infer that Petitioners' argument is that the term " contractor" requires an extended relationship between the NRC licensee and the contracting party, not the individual contract that results from the filling of a purchase order. Ilowever, Petitioners cite no law whatsoever for that proposition or the proposition that a " supplier" of materials has no contract with the purchaser. Funhermore, Petitioners cite no definition of the term " contractor" in either section 211 and its legislative history or in 10 C.F.R. $ 50.7 and its statement of considerations for their position. Instead, Petitioners' only citation to any authority in support of their argument is to the definition of a contractor for purposes of the NRC's Fitness for Duty requiremer ts in 10 C.F.R. Part 26.

'Ihe NRC Staff argues that because Five Star entered into " contracts" with NRC licensees to provide concrete and groot that was certified to meet NRC e

Ouly 14.1982) Tinis, this arctmn of our regulations is adopted under hath settma 211 of the tJtA and section 161 of tie AEA.

I Clearly, Feuunnern arc

• persons as defmed in secuan lis of the AcA and we du rmt read their pleadmp to l

argue to the contrary.

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requirements for installation in safety-related applications. Five Star is a " con-tractor" within the meaning of section 211 and 10 C.F.R. 5 50.7. Furthermore, the Staff argues that because CPR " contracted" its services to Five Star for L

the purpose of enhancing Five Star's contracts with NRC licensees, CPR is a

" subcontractor" within the meaning of section 21I and 10 C.F.R. 6 50.7.

j Neither the legislative history of section 211 (then section 210) of the ERA nor the Statement of Considerations of 10 C.F.R. 6 50.7 provide any discussion l

or the definition of the terrn " contractor." Congress added section 211 to the ERA as part of t!.e NRC's Authorization for Fiscal Year 1979, pub. L No.

i 95-601. His provision originated in the United States Senate as section 7 of S.2584, the Senate version of the NRC's authorization legidation. De Senate i

Committee Report only briefly discusses the provision without discussing the t

term " contractor." See S. Rep. No.95-848 (May 15,1978) at 29-30. Because the llouse version of the authorization legislation did not contain a similar provision, the Senate version was adopted as section 10 of the final legislation. See ll.R.

3 Conf. Rep. No. 95-1796 (Oct.14.1978) at 16-17. Likewise, the Statement of Considerations accompanying the adoption of 10 C.F.R. 6 50.7 contains no discussion of the term " contractor." Sec 47 Fed. Reg. 30,452.

After considering this matter, we do not think that Congress could have intended to exclude employees at entities such as Five Star and CPR from the l

protection of section 211. The philosophy underlying the adoption of section l

211 and its implementing regulations is that any employee of an NRC licensee or of a firm that deals directly or indirectly with NRC licensees on nuclear-related matters and who is in a position to have iaformation relating to nuclear safety must feel free to come to the NRC with that information. Any attempt to " chill" this access to the NRC by harassing, intimidating, or firing employees i

who report conditions that could adversely affect the public health and safety

- violates section 211.

Quite simply, a defect in materials provided by a " supplier" or " vendor" can prove just as dangerous to public health and safety as a defect in materials l

provided by a " contractor" that has a more complex or long-term relationship l

with the NRC licensee. The risk to public health and safety - and the NRC's l

responsibility to protect that public health and safety -is not measured simply by the length of time in the contractual relationship between the NRC licensee and the comtnercia! entity providing the goods and services at issue. Likewise, j

the protection afforded to employees who may be able to provide information to the NRC regarding threats to the public health and safety cannot be measured

'q by the length of their employer's contract with the NRC licensee.

L We believe that this is especially true where - as here - the " supplier" offered goods and services that were certified to meet the NRC's requirements for installation in safety related applications. Five Star offered a product for a

-l price; and part of the product offered for purchase was the value of the certificate 179 r

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under Part 50, Appendix D, allowing installation in safety-related applications.

13ccause the cement and grout purchased from Five Star carried this certificate, NRC licensees were likely to use such materials in safety-related applications without further testing or investigation.

If an employee of a firm that manufactures such material has information regarding a defect in the material or in the method of testing that material, we

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believe that Congress cleafly intended that such an employee be protected if he or she provides that iaformation to the NRC. Any other interpretation would be contrary to the spirit of section 211 and would create a serious gap in the

. protection that Congress clearly intended to create for employees in the nuclear industry and related occupations.

Moreover, we cannot accept Petitioners" distinction between a " contractor" and a " vendor"- or " supplier." to use Petitioners' words. As the Staff notes, Five Star provided inaterials to NRC licensees by means of a contract. True, these contracts did not require an extended relationship between Five Star and the licensee and were not performed at the location of the NRC licensee's facility.

But they were still contracts in every legal sense of the word; accordingly, Five Star was a " contractor"in every legal sense of the word.'

Accordingly, we construe the term " contractor" in section 211 of the ERA and 10 C.F.R. 9 50.7 of our regulations to include - at a minimum - employers such as " vendors" or " suppliers" that manufacture and offer for sale materials that are (1) intended for use by NRC licensees and (2) certified to meet the requirements of 10 C.F.R. Part 50, Appendix B. Five Star is such an employer and therefore, is a " contractor" for purposes of 10 C.F.R. 6 50.7 and section 211 4 to a letter to the NRC $tafr, dated July 23.1993,containing an afhdmt by William N Babcock. Itutioners assened that the fillmg of a puretmse order did not consutute de establishment of a contractual relatmnship lerween hve Star and de NRC bcemce that purcinad the matenah, See Mouon to Quash at Exlubit E, Af6 davit at 3. lioutwr. it is a well-seuled pmni of contut law that in certain situations. perintneru by an offene in compliance with an offer constitutes an c.cceptance of that offer and creates a contrad. Sec e g Calamari and JYnllo, Contracts $ 31 (1970). parnswunh, Contracts il 3 I4. 3.24 (1982), Restatement (Second) of the Law of Contracts B $0 (1979) See otso Jim /ar v. Untied Staars.174 Ct. C1 209,355 F.2d 606 (1966).Radiuni Afmes.

Inc. v. finated Seases.139 Ct. Cl.144.153 F. Supp. 403 (1957). Diis concept has been adopted by article 2 of de Uniform Conmercial Code. Jer U CC 12-206(IXtt As one court has recently noted, a purchaw order is generalty presuned to be an offer knvinng acceptance by the neller. Ilarper Trucks. Inc. v. AWA Welding Syply 2 U.CE 835 (D. Kan.1986).

In his Affid.svit, Mr. Babcock admits that Five Star has supplied matenals to NRC licenwes in sesponse to " blanket purchaw orders for products" See Motion to Quash at Exhibit E. Affidavit at 3. The purchase orders desenhed t y Mr Babcock constituted "offen" to buy conforstung materials. Fiw Star apparently replied by supplymg the conforming materials, sec. eg., NRC staff Rerpone at I'.shitut SE, which constituted an

" acceptance" of the offer by performance, creaung a unilateral contract. of course, if de hcensee exchanged adamonal conespondenn with Hve Star, a nere traditional bilateral contract nmy haw been estabhshed. ha, we fmd chas hve Star entered into contractual nlationships with NRC licemees when it consumated tramactions in which it supplied matenah to fill purchase orders issued by those NRC hernwes.

Tie final step in tte process wuld be for tie NRC licensee to send Hvr Star the paynent for the nunerials, the *considerstmn" for the performance of tie contract. We haw no doubt that af Psw Star had supplied the conforrrang trumenals to tte NRC becmce but de beence refused to pay 'he pnce quoted in the purcha.e order, Bw Star would have sued the licenwe for breach of contract under the t acory desenhed atue.

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of the ERA.Therefore, the Staff has authority to investigate the circumstances of Mr. Holub's termination under section 211 of the ERA, section 161 of the AEA, and 10 C.F.R. I 50.7?

Having determined that Five Star is a " contractor" within the meaning of sec-tion 21I and 10 C.F.R.150.7, we can easily find that CPR is a ** subcontractor"

- even by Petitioners' own definition. Clearly, CPR maintained an ongoing contractual relationship with Five Star to provide testing services regarding the cement and grout sold to the NRC licensees. Based upon those tests, Five Star certified that the materials meet the NRC's requirements found in 10 C.F.R. Part 50, Appendix H, subject to the requirements of 10 C.F.R. Part 21. Absent CPR's testing services, Five Star could not have issued the certificates that were an integral part of the sale of its materials to NRC licensees. Therefore, CPR is a " subcontractor" to Five Star within the meaning of section 211 of the ERA and 10 C.F.R. 6 50.7 adopted under both section 211 and section 161 of the l

AEA.

Petitioners raise three additional arguments that they are not subject to the

.l NRC's jurisdiction. All are easily rejected. First, Petitioners argue that they are not subject to our jurisdiction because they now sell only " commercial-grade" grout and cement to the nuclear industry. Motion to Quash at 7. However, Mr.

Ilolub alleges - and Petitioners do not deny - that at the time he provided r

information to the NRC, Five Star was selling materials to NRC licensees with CPR's certificates that the materials complied with the requirements of 10 C.F.R. Part 50, Appendix B.' In other words, at the time in question, Five Star was selling " safety-grade" materials, not " commercial-grade" materials.

We cannot and will not allow Five Star's subsequent act of ceasing to sell safety-grade materials to remove Mr. Holub's protection for engaging in I

protected activity. Otherwise, a contractor could protect itself from a charge of i

discrimination simply by terminating the contract when it was caught in the act 5 in tirer letter of Septender 28.1993. Peauoners alkge that ne Staff did rmt have junsdachon to conduct its August 1992 inspecuum. However, the NRC Staff clearly had jurisdiction to inspect five Star's operauons under 10 C.F.R. Part 21, which implenrnts sections 161 and 234 of de AEA and section 206 of de ERA. Bnefly, Part l

21 requirrs duit any tirm that nwmfactures a " basic component" of a facility or activiry bcensed by tie NRC, must report any known defects or noncompliances in that component that could create a substanual safety hazard, J

to the NRC as soon as those are discovered. Contrary to Petitioners

• allegabon, see Motion to Quash at Exlubit

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I' at 2, de ecment and grout manufactured by Five Star and wld to NRC licensees under Part 50 Appendix I

B cerufication, are " basic components" wtme failure could create a substanual safety huard. as defmed by 10 C.ER. 6 213(a)(1) and (21. Mmeover. Tive Suu itself certified that its products were manufactwed and sold in

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accordance with Part 21. Therefore. Five Star cannot now reverse itself and allege that Part 21 does not cover de i

rnanufanure of thene products Accordmgly. live Star was required to "pernut duly authnrized represetiratives of de (NRC). to inspect its records, premises, activines, and basic components as recessary to effectuate the grpmes of IPart 21]." 10 C F R. I 21.41.

Mr. Ilolub alleges that he provided informanon to er NRC Staff on or about June 22,1992, before five Star abnN1oned its QA program. NRC Staff Resptmse at 7. IVttuoners do not argue to the contrary.

We note diat IVtitioners have characterned Mr. Howt> s alleganon as " baseless" Monon to Quash at 2 However. Mr. Ilolub es protected under section 211 and 10 C.ER.150.7 retardicas of tie accuracy of lus aneguiion.

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l of discrimination. Again, we cannot find that Congress intended such a result in enacting section 211.

Second, Petitioners argue that they are not " contractors" because they did not perform work "mside the protected area boundary., " Motion to Quash I

at 7, citing 10 C.F.R. Part 26. Ilowever, that argument is clearly specious.

Section 26.3 defines a class of persons who are subject to random drug testing i

by urinalysis, not the class of persons who are subject to the employec-protection provisions. We defined " contractor" narrowly in Part 26 for the specific purpose of limiting the intrusive testing for illegal drugs and only for that purpose.

More importantly, we believe that Congress could not have intended to limit the NRC's ability to protect employees from discrimination to those employees who performed jobs in the protected area, and, as before, we read no such limitation in either the ERA or its legislative history. For example, such an interpretation would mean that the NRC could not protect workers who -

prefabricated portions of the reactor outside a protected area. Therefore, we conclude that the fact that the Petitioners did not actually install the materials l

in the licensees' plants does not remove them from the coverage of either the ERA or the Commission's regulations.

'Ihird, Petitioners rely upon Adams v. Dole, 927 F.2d 771 (4th Cir.1991) rert. denied,112 S. Ct.122 (1991), for the proposition that their employees are not protected under section 211. Petitioners argue that the NRC can assert jurisdiction over them only if the NRC has jurisdiction over "any" employer and that the I~ourth Circuit rejected that approach in Adams v. Dole. Motion to Quash at 6. We have reviewed that case and we believe that Petitioners have misread it.

In Adams v. Dole, the Foutth Circuit held that an employee of a DOE contractor was not protected under section 211 - a decision that Congress j

legislatively reversed in enacting the 1992 amendments to section 211. In reaching its decision, the Fourth Circuit concluded that only employees of l

NRC licensees and their contractors and subcontractors were protected - not employees of DOE licensees and their contractors and subcontractors. 927 F.2d l

at '777. In the process, the Iburth Circuit rejected an argument raised by the Petitioners that the DOL had jurisdiction over "any" employer, regardless of the l

employer's relationship to an NRC licensee.7 l

In this case, we do not assert jurisdiction over just "any" employer. Instead, we are today asserting jurisdiction over an employer with a long history of i

providing materials - including safety-related materials - to the nuclear

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industry and,.nore specifical!y, over acts by that employer that are directly W

t 7 At no point during m decision did the rounh Orcun diwuu tie type of relanonship that constituted a

• tontructor for purpmes of sceuon 211.

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related to its transactions with NRC licensees. Rus, we find Petitioners' citation l

to Adams v. Dole to be inapposite.

Finally, Petitioners characterize this dispute as simply "an employment mat-ter." Motion to Quash at 9 (emphasis deleted). liowever, this dispute presents more than just a concern over the circumstances of Mr. IIolub's termination.

For approximately 20 years, Petitioners have sold products to various NRC li-l censees and those licensees have, in turn, presumably installed in safety-related

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systerns, based upon certifications from Petitioners that these products met the j

requirements of 10 C.F.R. Part 50, Appendix B, subject to the requirements of 10 C.F.R. Part 21. The NRC Staff is naturally concerned that Petitioners may base discharged Mr. Holub in violation of his rights under the ERA and the Commission's regulations because he provided safety concerns to the NRC, and, as we noted above, the staff has jurisdiction to investigate that issue.

However, another fundamental question exists: if Petitioners discriminated

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against Mr. IIolub for reporting safety concerns, did they discriminate against

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others for the same actions over the past 20 years and did such discrimination create an atmosphere in which unsafe products were sold to NRC licensees for j

installation in safety-related areas of nuclear power plants? In order to determine

'j whether an investigation is needed into that question, the NRC Staff must first make a threshold determination of w hether Petitioners discriminated against Mr.

llolub.

1 in a case almost directly on point, the Appeal Board found that the NRC Staff needed similar information related to the termination of a contractor's employee in order to determine whether to order an augmented inspection at the employer's office. See Union Electric Co. (Callaway Plant, Units ! and 2),

ALAB-527, 9 NRC 126 (1979) ("Callaway").

We find the Callaway Board's reasoning persuasive. The Staff's purpose in instituting this investigation is not to provide Mr. Holub with a remedy for the loss of his employment. Instead the NRC Staff must determine whether to initiate an investigation into (1) whether Petitioners have taken similar actions against other workers or whether Mr. Ilolub's termination may have had a

" chilling effect" on his co-workers and (2) in either case, are there any safety implications resulting from the employer's actions.

As the Staff points out, Petitioners' products have been used as support for safety-related dynatnic machinery instatted in safety-related systenu.

Grout and structural concrete are also used as support for the nuclear reactor vessel, which is part of the reactor conlant pressure boundary, and structural concrete is alm used in nuclear vesset containment walls, shielding and in the walls and floor of diesel generator roorns."

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a Staff Response at 3 rt3.* Clearly, a failure by Petitioners

• products in one of these safety-related systems could create a threat to the public health and safety.

Such a failure could occur if Petitioners

• cmployrnent practices have created a situation in which substandard material has been sold as safety-grade material.

Investigating this type of potential threat to pubhc health and safety is a purpose clearly authorized by Congress in section 161 of the AEA independent of any authorization provided for this investigation by section 211?

2.

Ihr Pendency of a DOL Proceeding Does Not Prevent the NRCfrom Acting to Protect Public Health and Safety Petitioners argue that because Mr. IIolub has initiated a proceeding before the DOL, the NRC should not pursue its own investigation into this matter as a matter of" discretion." Motion to Quash at 8-10. Specifically, Petitioners argue that Mr. Ilolub's sole remedy under both the ERA and NRC regulations is provided by the DOL and that the NRC's investigation would be " improvident."

Motion to Quash at 9. Ilowever, this argument is clearly rebutted by both the legislative history of the ERA and our prior case law.

First, it is clear that Congress intended that the NRC have the ability to conduct its own investigations during the pendency of a DOL proceeding. As the Senate floor manager of the ERA noted, "the pendency of a proceeding before the [ DOL) need not delay any action by the Commission to carry out the purposes of the Atomic Energy Act of 1954." 124 Cong. Rec. 29,771 (1978) (remarks of Senator llart). Reflecting this view, the Memorandum of Understanding ("MOU") between the NRC and the DOL clearly provides that the NRC can take action independent of the status of the DOL's proceedings.

{

See Memorandum of Understanding Between the NRC and the Department of

1. abor,47 Ped. Reg. 54,585 (Dec. 3,1982).

As we noted above NRC licensees have purchased cement and grout from Petitioners for approximately 20 years. These licensees have installed these

• IW esample. Iwe Star's pronounnal htcrature states that its grout is intended for use under apphed loadh to support a congwment, stru:ture, or piece of eqmpnent or nmchinery Tie grout provides die recessary structural support between the honorn of de supporting devne and tie trq: surface of its foundauon. and transfers de

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apphed suppret ur eqmpnrni kuinp (stabc and/or dynamic) umformly to the foundauon for wlach stress leveh j

have been analyard Thus shrinkage or expannon from the nmteriars specificauon can came unarudyred stress i

i distribucons dat may impact eqwpnent operahibry in addmun, l' ave Star states that apphcations for its Special Cmmt ife im tude raAauon shcldmg, penetradon closures, and omkar reactor foumlations, l'iftally, l' eve Star states stus its Structural Concrete h uwd pnmarily in de repair of structural concrete. Apphcations include the repair caf correte colunins. fheoni, wans. foundations. and setting of structural anchors These produas can aho be used in other saferyelard apphcations as deterrmned by the twenwe.

'Whde the NRC Staff has mformed us dat it has "deternaned that Hve Star's products diol not consutute a safety concern!T NRC Staff Responw at 6 we trad diat statenrnt to indaate that the Staff has no safety concrins ansmg out of Mr llolub's parucular allepauon We do not read that responw as nramng that de Sutri has reviewed and wahdated all sales by fwe Star to the nucicar irutustry twer its 24 year history IM i

materials in safety-related systems, relying on the certification that the purchased materials met the NRC's requirements for safety-grade materials. The Staff has

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a legitimate concern that Pctitioners' employment practices may have allowed i

substandard materials to have been sold as safety-grade materials. It is clear that Congress did not intend that the agency await the conclusion of a lengthy

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DOL hearing process before investigating such a safety-related issue.

Second, the Callaway decision speaks directly to this issue. In that case the Appeal Iloard held that the Staff had jurisdiction to investigate and take action against comractors who retaliate against their employees who bring safety concerns to the NRC, even if that employee has either contractual or statutory remedies for his discharge. Sec generally Callaway, 9 NRC at 132-39. As the Callaway lloard pointed out, the remedies provided by the arbitrator in that case

-like the DOL in this case - will only assist the employee as an individual.

%ose remedies will not assist the NRC in performing the duties assigned it by Congress; protecting the rights of workers in the nuclear industry and ensuring the free flow of information to the NRC. Eg., Ca!!mvay, 9 NRC at 138-39.

Accordingly, the NRC Staff need not await the conclusion of Mr. Holub's DOL pmecedings before conducting its investigation.*

l 3.

Petitioners Have failed to Demonstrate That the Subpoena Should lie Modified in their Motion to Quash, Petitioners urge that if we find that we have jurisdiction over them in this matter, that we should in any event modify the subpoena. Motion to Quash at 11. First, Petitioners ask that the Staff be j

directed to tell them what documents it already has so they can identify the j

documents they need to produce. The Staff has now done exactly as requested by Petitioners: it has informed the Petitioners that it (the Staff) has no documents that are requested in the subpoena. See NRC Staff Response at 18.

Second, Petitioners ask that the Commission modify the subpoena to climi-e nate the requirement to produce any documents covered by the attorney-client j

privilege or the work-product privilege. Motion to Quash at 11-12. We will not take that step at this time. The normal practice in discovery is for the party opposing discovery to identify the documents for which a privilege is claimed (as the Staff notes, Response at 18-19, by date, author, addressee, and reason i

for claiming the privilege) and submit that list to the Court - or in this case, to the Commission - for an adjudication of those claims if the parties cannot M IYtruoners argue that the NRC arcently t pposed efforts to reqmre annuhaneous invesugatmos t*y both the DOL and the NRC That statenrnt is true; the Comnnsion oppmes any effort so regwrc airrmhaneous invesugurions.

t llowever, the Commission has always maisnained that it has the dorreritin to conduct a sinwhaneous investigation in an "apreuptiate" case The NRC Starf has determined that this me in en " appropriate" case.

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t reach an agreement among themselves. We will not rule on such claims in the

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abstract."

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The involvement of the United States Attorney 7

5 Finally, Petitioners claim that the United States Attorney for the District of Connecticut appears to be involved in this case on behalf of the NRC in some manner and imply that such involvement should be grounds to quash the i

subpoena. We disagree. The Staff has not referred this case to the U.S. Attorney and says that it knows of no such involvement. NRC Staff Response at 20. If i

the Petitioners wish to understand the involvement - if any - of the Office j

of the U.S. Attorney for the District of Connecticut, they may communicate directly with that Office. This allegation is not grounds to quash the subpoena.

IV.

SUMMARY

i As we have shown above, the subpoena before us has been issued in the course of an investigation to determine if Petitioners have violated the Commission's regulations issued pursuant to section 161 of the AEA and section 211 of the ERA and to determine if any possible safety related problems exist at NRC licensed facilities. The information sought is clearly relevant to that investigation, clearly described, and Petitioners have not alleged any failure to follow statutory pr >cedures in issuing the subpoena. Thus, we find no reason to quash the subpoeua. United States v. Powell, supra; United States v. Comley,

_l supra. Accordingly, we deny the motion to quash or modify the subpoena and establish a new enforcement date for the subpoena of November 1,1993.

It is so ORDERED.n For the Commission" i

SAMUEL J. CHILK Secretary of the Commission i

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Dated at Rockville, Maryland, j

this day of 21st October 1993.

1 H in their tendered reply. IYntmoern appear to have aband<med this argunent Reply at 4 m 4.

Comnnsemwr Renuck was not present for the afhrrnation of ttus order;if te had been preaent. he would have

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appenved it 186

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