OSHA Violations Are About to Become Much More Costly to Employers
By Carlos R. Pastrana, Gonzalez Saggio & Harlan LLP
The Bipartisan Budget Act of 2015 (“the Budget Act”) was signed by President Obama on November 2, 2015. Section 701 of the Budget Act requires the Occupational Safety and Health Administration (“OSHA”) to increase proposed penalties for alleged violations and, going forward, begin adjusting its penalty limits to inflation.
Specifically, Section 701 directs OSHA to make a “catch-up adjustment” dating back to 1990, when maximum proposed penalties were last increased, on the basis of Consumer Price Index (“CPI”). Since 1990, the CPI has risen by 82%, and the bill allows OSHA to increase maximum penalties for all citations by that same percentage. The practical effect of this is that the existing $7,000 penalty limit for other-than-serious and serious violations under OSHA that has been in place since 1990 could be increased to as much as $12,477 per violation, and the existing $70,000 penalty limit for willful and repeat violations could be increased to approximately $124,765 per violation.
By way of background, in 1990 Congress passed the Federal Civil Penalties Inflation Adjustment Act of 1990, which created a reporting obligation on the President to annually evaluate the penalty amounts pursuant to federal laws, the dates that such amounts were set, and the amount to which penalties should be increased, to account for inflation. In 1996, under the Debt Collection Improvement Act of 1996, which required that the agencies adopt the inflation-adjusted penalty increases by regulation, penalties under the Occupational Safety and Health Act were expressly exempt from automatic increases. The new Budget Act eliminates this exemption to bring OSHA and its maximum proposed penalties in line with the proposed penalties of other federal agencies (including the Equal Employment Opportunity Commission, the Environmental Protection Agency, and the Federal Communications Commission).
Under the Budget Act, the White House’s Office of Management and Budget (“OMB”) must publish guidance on implementation on or before 1-31-16, and by 7-1-16, OSHA must publish any maximum penalty adjustment it decides to make, which would take effect no later than 8-1-16.
Prospectively, OSHA will increase the maximum penalties by the percentage increase in the CPI for the previous fiscal year. The Act provides a mechanism allowing OSHA to limit the increase “by less than the otherwise required amount,” if it makes a determination that increasing the penalties would have a “negative economic impact” or “the social costs of increasing [the penalties] outweigh the benefits.” However, OMB would have to approve this determination. Given this factor, as well as OSHA’s reiterated desire to increase penalties, this is very unlikely to happen, at least in the short-term. In fact, OSHA will likely be issuing the maximum penalty increase as soon as possible.
Employers should be extra mindful of any potential workplace safety violations, given the much larger exposure created by the Budget Act.