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OSHA to Increase Fines in 2016

Tuesday, November 10, 2015

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Federal workplace regulators will soon impose stiffer penalties on contractors and others who run afoul of health and safety laws.

In a move that caught many workplace safety experts by surprise, the U.S. Department of LaborOccupational Safety and Health Administration has been authorized to raise the price of its penalties for the first time since 1990—a change likely to reflect an 80 percent jump in fines.

The recent Bipartisan Budget Act of 2015, signed into law by President Obama on Nov. 2, included mandates that OSHA increase its civil penalties following a one-time “catch-up adjustment” in 2016, The National Law Review noted Wednesday (Nov. 4).

iStock.com / Brasil2
© iStock.com / Brasil2

OSHA has been authorized to raise the price of its penalties for the first time since 1990—a change likely to reflect an 80 percent jump in fines.

The civil monetary penalties required in Section 701, “Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015,” of the bill will be adjusted through an interim final rulemaking, and the adjustment will come into effect by August 2016.

Following the “catch-up,” the maximum penalty amounts will keep pace with the inflation rate going forward.

How Much Will the Increase Be?

While the increases, calculated on the Consumer Price Index (CPI) between 1990 and 2015, will be capped at 150 percent, most reports indicate that the amount of the increase will more than likely be around like 80 percent.

In a Legal Alert, JD Supra Business Advisor explained that the “catch-up” makes up for the lack of increases over the past two and a half decades. Therefore, it cannot exceed the inflation rate measured by the CPI. That figure is expected to be about 82 percent.

As an illustration of the impact, JD Supra said the current maximum $70,000 fine for the most severe violations would grow to about $125,000, and the $7,000 maximum fine for other serious violations would increase to around $12,500.

The maximum fines may turn out to be lower than that, however, based on the final rulemaking, reports say.

istock.com/Susan Chiang
© iStock.com / Susan Chiang

The adjustment will come into effect by August 2016, and after that the maximum penalty amounts will keep pace with inflation rates.

Although this is a significant jump in the U.S., the fines will still be relatively small when compared to those coming from other agencies, like the Environmental Protection Agency, The Wall Street Journal reported, or other countries like Europe.

“It’s progress,” Peg Seminario, who manages workplace-safety policy for unions under the AFL-CIO, said. “It’s bringing the penalties for worker-safety violations up to date.”

According to the AFL-CIO, the average fine last year for an incident involving a death was $7,000, which might be reduced to $5,050 in settlement talks.

Keeping up with the Times

According to the WSJ, OSHA was one of just a few federal agencies exempted from a 1990 bill requiring federal agencies to keep their fines in line with inflation. However, some workplace-safety professionals, though surprised by the announcement, can’t argue with the increase.

“It’s very difficult to defend the present penalty structure,” Baruch Fellner, an attorney with experience representing industry interests on OSHA issues told the paper.

“If you look at OSHA penalties in the context of other programs, they are in fact for individual items minuscule comparatively speaking,” he added. “For larger corporations it can be a cost of doing business.”

He is hopeful that by implementing higher fines per citation, OSHA might be less likely to combine “more nitpicky” citations in order to achieve higher penalty amounts, making enforcement easier for businesses.

istock.com / albanwr
© iStock.com / albanwr

According to the AFL-CIO, the average fine in 2014 for an incident involving a death was $7,000, which might be reduced to $5,050 in settlement talks.

With the impact on small business in mind, others plan to use the rulemaking process to fight the increase.

“This has the potential to have a pretty significant impact,” Rob Matuga, who directs labor policy for the National Association of Home Builders, told the WSJ. “Our housing industry is just making a comeback.”

According to the paper, business groups have successfully fought back bills to institute increases like this over the past decade. However, those bills included higher penalties for violations that led to a death.

Timeline and Expectations

The Federal Office of Management and Budget (OMB) will issue guidance on implementing the bill's provisions by Jan. 31, 2016, according to JD Supra.

Raising the maximum fines in line with the CPI for the one-time adjustment means OSHA must publish its interim final rule by July 1, 2016, enabling the adjustment to go into effect by Aug. 31. Most reports indicate the rule will take effect by Aug. 1 at the latest.

Although the act includes an exception allowing a federal agency to make a lesser adjustment on civil monetary penalties if certain provisions are met and approved by the OMB, the Law Review says this seems an unlikely.

The legal journal quoted a statement Dr. David Michaels, Assistant Secretary of Labor for OSHA, made last month before the Committee on Education and the Workforce, Subcommittee on Workforce Protections:

“Simply put, OSHA penalties must be increased to provide a real disincentive for employers accepting injuries and worker deaths as a cost of doing business.”

   

Tagged categories: Citations; Enforcement; Government; Health and safety; Inspection; OSHA; Workers

Comment from Robert Munn, (11/10/2015, 7:07 AM)

OSHA is an organization that is not seriously pursuing their stated mission, and as such, the amount that they fine contractors will not have any salutary effect in that mission. If OSHA was actually interested in reducing injuries and accidents, one simple common sense measure would dramatically reduce job-site accidents and injuries, namely to fine the party responsible for the cited violation. If the worker is most responsible for the violation, fine the worker. And this is not intended in any way to reduce responsibility of the employer to train and provide for a safe workplace. And, in union environments, why not include the union as a responsible party to job site safety? Until these common sense reforms are made, OSHA is just another government agency that is working against the common good, an adversarial entity with immense power, which it often wields in an extra-legal way to selectively cudgel contractors who may have offended local labor sensibilities. The methods used to implement enforcement are patently dishonest and are very easily abused, which often they are.


Comment from Richard Atkins, (11/10/2015, 12:25 PM)

When OSHA first came into existence the company that I worked for had just built a new facility. To make sure they where doing the right thing they contacted OSHA and requested a "Walk thru" to aid them in providing a safe environment. At the end of the day they had made some recommendations, and said that the FINE would ONLY be $10,000. My suggestion to any small business would be to let the sleeping dog lie. For if you make him aware of you, he will BITE you.


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