As employers look ahead to 2016, it will be important to consider the impact of Section 701 of the Bipartisan Budget Act of 2015 (H.R. 1314), which was signed into law by President Obama on November 2, 2015. This bill contained an unexpected authorization allowing the Occupational Health and Safety Administration to increase the maximum OSHA penalties for the first time since 1990.
The increase in penalties could be as much as 80% to account for the increase in the Consumer Price Index over the last quarter century. OSHA had previously been prevented from increasing penalties based on the Federal Civil Penalties Inflation Act of 1990, which gave most federal agencies the authority to adjust civil penalties every five years for inflation, but specifically excluded OSHA. With that exclusion struck in the new law, OSHA is now authorized to implement a one-time “catch-up” increase to account for inflation. An 80% increase in the current penalties would result in maximum OSHA penalties of $12,600 (up from $7,000) for an Other than Serious Violation or Serious Violation and $126,000 (up from $70,000) for a Repeat or Willful Violation.
OSHA has long lamented the fact that the maximum amount of civil penalties it could enforce was well below the amount authorized for other federal agencies. For example, the Environmental Protection Agency can impose a penalty of $270,000 for violations of the Clean Air Act and a penalty of $1 million for attempting to tamper with a public water system. According to Assistant Secretary of Labor for OSHA Dr. David Michaels, "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."
The precise timing for the implementation of increased penalties is unclear, but the Office of Management and Budget has until January 31, 2016 to publish guidance for implementing the new penalty calculation process. After that, OSHA must then publish any maximum penalty adjustment by July 1, 2016. The increase will take effect no later than August 1, 2016. The law also enables OSHA to enact annual percentage increases to the maximum civil penalty, aligning the organization with the operations of other federal agencies.
Even though the exact amount of the increase and timing of its implementation is not yet certain, what is clear is that employers must be cognizant of the impact this new regulation will have on their businesses in the near future. A careful review of the safety policies and procedures in effect will help businesses to effectively manage the increase in maximum OSHA penalties by reducing the potential for enforcement. The increased penalties will be particularly burdensome on small businesses and those that are unable to address and correct repeat violations prior to implementation of the OSHA penalty increase. The potential for significant liability for OSHA penalties is another example of the increased cost of doing business. Employers, and especially those in the manufacturing sector, must be careful to manage this increased potential liability in order to effectively manage costs into 2016 and beyond.