For the first time in a quarter century, Occupational Safety and Health Administration (OSHA) is expected to increase its fines for safety violations. This increase in OSHA fines is the result of the Bipartisan Budget Act of 2015 (H.R.1314), signed by President Obama on November 2, 2015. A section of the budget bill—entitled the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015—contains the language that permits OSHA to adjust their civil penalties for safety violations.
The Federal Civil Penalties Inflation Adjustment Act of 1990 gave most federal agencies the authority to review and adjust their civil penalties once every five years in order to keep pace with inflation. But OSHA was excluded from this legislation at the time, leaving OSHA fines stagnant for over two decades. Now OSHA will be required to make inflationary increases to its penalties every year putting the agency in line with other federal agencies like the FDA, EPA and EEOC.
The law permits a “catch‐up adjustment”. The catch‐up adjustment is tied to the percentage difference between the October 2015 Consumer Price Index (CPI) and the October 1990 CPI. The October CPI was released in November 2015 and came in at 237.838. Based on the October 1990 CPI of 133.500, the maximum catch‐up adjustment will be approximately 78.16%. The catch‐up adjustment will take effect no later than August 1, 2016. Thereafter, employers should expect to see OSHA fine increases by January 15th of every year as the agency makes adjustments based on the annual percentage increase in the CPI.
After the initial adjustment, OSHA will be required to implement annual cost‐of‐living increases, with the adjustment tied to the increase in the CPI. Adjustments must be made by January 15 each subsequent year.
Maximum Penalties
Although OSHA must go through the rulemaking process to finalize the penalty increases, the budget directs that the increase be issued as an interim final rule. This means that OSHA does not have to issue a proposed rule, which would be subject to a public notice and comment period before finalized. Rather, the rule will become effective immediately upon publication.
The bill calls for the adjustment to “take effect not later than August 1, 2016.” Assuming OSHA will impose the 78.16% catch‐up adjustment, which will take effect upon the interim rule’s publication no later than August 2016, the new maximum penalties for OSHA safety violations would be as follows:
- Other than serious violations: $12,471
- Serious violations: $12,471
- Willful violations: $124,712
- Repeat violations: $124,712
Although the agency is not required to take the full penalty increase, it probably will. OSHA has tried for years to convince Congress to increase the civil penalties the agency can impose when an employer is cited for a violation. In the bigger picture, if this maximum increase were applied to OSHA fines for all safety violations in fiscal year 2014, then this past year’s total OSHA nationwide penalties of $143.6 million would have increased to $261.4 million.
The budget changes go into effect July 1, 2016 and the increased penalties will take effect by August 1, 2016 in all states regulated by Federal OSHA. The law does not automatically apply to states regulated by State Plans, but since State Plan programs must be at least as effective as Federal OSHA, State Plans are likely to increase civil penalties as well.
Is it possible that OSHA won’t assess the maximum penalties allowable under the law? Inflation is fluid, that’s for sure, so the increases may be worse some years than others. And after the catch‐up year, they certainly won’t be as dramatic from year‐to‐year. But given OSHA’s stated goal to place even more pressure on employers to keep workplaces safe, we wouldn’t expect the agency to lower fines at any time or to shy away from maxing them out.
Recommended Action Steps for Employers
This potentially huge increase in the cost of OSHA fines in 2016 makes it even more important to shore up your safety programs and continue to stress a culture of safety throughout your organization. For companies with a healthy safety culture, the fear of increased penalties should not be a factor in influencing employees to work safely. Employees should be working safely not to avoid OSHA citations but to avoid the pain and stress that too often accompanies incidents. The safety of your employees should be a core value, exclusive of regulatory oversight, and should infiltrate every area of operations.
Employers are well‐advised to:
- Ensure that safety programs are comprehensive and up to date.
- Ensure that employees receive all necessary safety training, can demonstrate that they understood the material covered in the training, and that all training is well documented.
- Assess the workplace for hazards and address any identified hazards as quickly as possible.
- Monitor your safety management system to make sure it is working.
- Make sure employees are accountable for safety on a continuous basis. Healthy safety cultures have employees who take accountability for safety rather than being held accountable for safety.
By taking these steps, employers will demonstrate their commitment to safety and help reduce the possibility of receiving what soon will be very costly OSHA citations.
Philadelphia, PA, 19102
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