Implications of Home Depot’s lead-based paint settlement and $20 million penalty

Tom Neltner, J.D., is Chemicals Policy Director.

In January 2017, the outgoing Obama Administration undertook a criminal investigation of Home Depot for alleged violations of the Lead-Safe Renovation, Repair and Painting (RRP) Rule. Last month, the Environmental Protection Agency (EPA) signed a proposed civil consent decree with Home Depot committing the company to establishing a comprehensive set of detailed procedures designed to ensure compliance with the rules and protect customers from lead poisoning.  The company also paid a fine of more than $20 million in civil penalties – more than any other under the Toxic Substances Control Act.

A federal court will consider accepting the proposed consent decree after reviewing public comments received by January 20, 2021.

The proposed consent decree is important because it:

• Serves as a reminder that companies that subcontract work to others are responsible for complying with the RRP rule; and
• Provides a comprehensive template for other retailers and general contractors to adopt to ensure compliance.

The settlement also alerts us of troublesome implications of a new federal policy that limits violators’ ability to direct some of the fines to affected communities for activities such as lead poisoning prevention projects.

EPA’s four-year civil and criminal investigation of Home Depot

In the complaint, filed the same day as the proposed consent decree, EPA and the Department of Justice (DOJ) alleged[1] that Home Depot:

• Performed renovations without using a required lead-safe renovation firm at approximately 2,000 homes from 2013 to 2019; and
• Falsely changed its internal records for lead tests from “required” to “negative” in more than 600 homes from 2013 to 2017.[2]

We learned of the EPA’s investigation in March 2017 from trade journal coverage of Home Depot’s annual 10-K report to the Securities and Exchange Commission where the company stated that:

As previously reported, in January 2017, we became aware of an investigation by the EPA’s criminal investigation division into our compliance with lead-safe work practices for certain jobs performed through our installation services business. We have also previously responded to civil document requests from several EPA regions. We are continuing to cooperate with the EPA.

We tracked the annual reports. In April 2020, EDF, Earthjustice, the Green & Healthy Homes Initiative and the National Center for Healthy Housing sent a letter to EPA asking about the status of the case and urging the agency to take action to protect children and adults that may be harmed from ongoing violations while the investigation continues. EPA responded a month later saying it does not comment on investigations but explained that reduction of children’s exposure to lead was a critical enforcement priority.

Reminder that companies that subcontract work to others are responsible for complying with the RRP

While Home Depot may be thought of as a retailer that sells goods to do-it-yourselfers, services conducted through its Home Depot Pro program are an increasingly large part of its income as customers seek a professional to install the goods. These services include renovation, repairs and painting.

The company promotes Home Depot Pro to contractors as a way to “take the pain out of promotion, customer service and job management” by providing access to the thousands of customers who visit its stores each day. It promotes the services to customers as a way to have Home Depot handle the hassles of finding and managing a contractor.

Under the RRP rule, any company who performs, offers to perform, or claims to perform renovations on target housing must be certified by EPA (or be one of 11 states which accepted delegation for the enforcing the rule). A renovation is broadly defined as any modification of an existing structure that disturbs painted surfaces unless the effort is regulated under the more rigorous standards of abatement. In general, target housing is any housing constructed prior to 1978 and child-occupied facility is any building regularly visited by a child under six years of age.

As part of the RRP certification, the company promises to follow the lead-safe work practices in the rule – practices that have been demonstrated to protect children from exposure to lead by preventing the creation of harmful lead dust and debris and cleaning up any hazards that may have been generated. When followed, lead-safe work practices are designed to avoid leaving new leaded dust and debris behind when a project is complete.

The certification process is relatively simple – basically a form with a $300 fee that must be renewed every five years. On the form, the company certifies it will follow the rule’s provisions including its mandatory work practices and that it will have a certified renovator oversee the project and be on-site at critical stages of the work.

Under the RRP rule, Home Depot and every subcontractor that performs renovation work must be certified, and they are responsible for ensuring compliance with lead-safe work practices.

Comprehensive template for other retailers and general contractors to adopt to ensure compliance

Under the proposed consent decree, Home Depot is obligated to establish an impressive, comprehensive program to ensure compliance.  Key features include:

• For management:
  • Appoint Senior RRP Compliance Manager at the Vice-President level;
  • Use third-party software to automatically determine and upload the year of construction for each property covered by a renovation contract;
  • Add prompts in computerized selling tools to instruct sales associates what to inform customers as part of selling the renovation service;
  • Implement procedures to follow when problems arise such as missing forms or customer complaints and corrective measures if the RRP rule is not followed, including disciplinary action; and
  • Inspect at least 6,000 job sites involving pre-1978 housing during each of the three years of the proposed consent decree.
• For customers:
  • Establish a Lead-Safe Work Practices webpage for customers to explain what the company will do with a form at the top to report concerns; and
  • Educate do-it-yourself customers on lead-based work practices for at least 12 months through in-store materials in paint department, online materials on website and social media platforms, and workshops.
• For contractors:
  • Educate professionals and contractors with videos and written materials through website, direct mail, in-store materials at professional counters.
  • Use forms and checklists that subcontractors must complete including notices to parents and guardians of children in child-occupied facilities and to tenants in multi-family housing; and
  • Ensure subcontractors are certified by EPA (or state) and renew the certification in a timely manner.

We think any retailer or general contractor that provides renovation services covered by the rule should consider using the requirements as a template for compliance, especially since EPA has signed off on them.

Troublesome environmental justice implications of a new federal policy on penalties

The proposed consent decree does not include any supplemental environmental projects (SEPs) as an offset to the federal portion of the penalty – more than $19 million. For more than 35 years, SEPs have been an important tool to provide resources to help communities eliminate harmful environmental conditions that have long plagued the health and well-being of their residents. In March 2020, EPA and DOJ adopted a new policy eliminating the practice and requiring that the penalty go to the U.S. Treasury.

In contrast to the federal government, the three states – Utah, Massachusetts, and Rhode Island – are investing most of the more than $1.5 million penalty they received to projects abating environmental hazards such as lead.

In October, the Conservation Law Foundation filed a lawsuit challenging the new EPA/DOJ policy. Hopefully, they will reverse the policy under the Biden Administration. If they don’t, Congress should step in to explicitly allow SEPs. We think SEPs are appropriate especially in cases like the Home Depot proposed consent decree where the company was not permitted to reduce the penalty by investing in protecting children from lead poisoning.

Moving forward on lead-safe practices

Four years is too long to wait for EPA to investigate and resolve a civil action such as this one. But the final product is comprehensive and, if fully implemented, should be effective. Given consumers increasing reliance on retailers and online firms to manage renovation services, we encourage EPA to take a serious look at compliance in these companies as well. With the template in place, it should be able to move more quickly if it identifies a problem. And the federal government needs to reverse its policy to allow SEPs to benefit communities rather than the U.S. Treasury.

[1] As is common in these types of actions, Home Depot does not admit to any fact or law or acknowledge any liability or violations.

[2] The complaint lists violations in more than 25 states.