OSHA Penalties to Increase for the First Time in 25 Years

On November 2, President Barack Obama signed into law the Bipartisan Budget Act of 2015. This means that employers receiving OSHA citations relating to workplace health and safety infractions can expect heftier fines. The new Bipartisan Budget Act contains provisions that will see an OSHA penalty increase, something that hasn’t happened since 1990. Section 701, “Adjustment Act of 2015” requires OSHA to start indexing the penalty limits to inflation.

Serious and other-than-serious violations can be raised $7,000 to about $12,477 per violation. On the other hand, the current $70,000 penalty limit set by OSHA for willful & repeat violations might be increased to about $124,765 per violation

A one-time “Catch Up Adjustment” will be done in 2016 with penalties rising up to a staggering 150%. These increases will be computed using Consumer Price Index (CPI) between October 1990 and October 2015. The adjustment will be based on the difference between the two CPIs.

Considering the fact that October 2015 CPI will only be available on and after November 17, 2015, the exact percentage increase is yet to be known. However, using the recent CPI trends, the increase is most likely to range between 70% and 80% over current penalty amounts. Additionally, OSHA still has to pass an interim irrevocable rulemaking in order to finalize the “catch up adjustment” increase.

Significant OSHA Penalty increases

The Adjustment Act of 2015 (2015 Penalties Act) catch up provisions mean the current $7,000 penalty limit that was set by OSHA in 1990 for serious and other-than-serious violations can be raised to about $12,477 per violation. On the other hand, the current $70,000 penalty limit set by OSHA for willful & repeat violations might be increased to about $124,765 per violation. This is where an interim rulemaking will come in, and must be done on or before August 1, 2016.

In 1990, Congress passed Omnibus Budget Reconciliation Act of 1990 and Penalties Act of 1990. Omnibus Budget Reconciliation Act increased OSHA penalties from $1,000 to $7,000 for any serious violation as well as from $10,000 to $70,000 for any willful & repeat violations. On the other hand, Penalties Act of 1990 created a yearly reporting obligation on any US President to assess the penalty amounts in line with federal laws, dates the penalties were set and the amount each penalty should be increased to so as to factor in inflation. It also included a listing of changes to a Federal law that were necessary to effectuate such a penalty increase. Six years later, Debt Collection Improvement Act of 1996 enabled the Congress to make amendments on 1990 Penalties Act. One of the requirements was that the agencies should adopt the adjusted penalty increases in line with inflation. However, it excluded penalties that were under the OSHA Act of 1970.

OSHA’s Chief Dr. David Michaels has for long been advocating for an increase in penalties.

The 2015 Penalties Act has not made such exemptions and explains how all agencies ought to account for any lost time. The Act also provides a mechanism through which an agency can limit the penalty increase below the required amount. The agency can do so by making a determination that the penalty increase will have a negative economic impact or the benefits of increasing the penalty is outweighed by social costs of doing so.

The possibility of OSHA seeking a reduced increase and the current data unavailability for October 2015 CPI are two factors that make the calculations here just “approximates”. However, OSHA’s Chief Dr. David Michaels has for long been advocating for an increase in penalties. This makes it most likely that the Agency will seek for the maximum increase rather than reductions. The other element that should be noted is that the monthly CPI changes are small compared to the CPI increase for the past twenty-five years.

Reasonable  Increase Estimates

Using data for September 2015 CPI instead of the unreleased October 2015 CPI data, we can estimate that approximately 80% increase will be witnessed. The CPI for all the items in October 1990 was 133.5 while that of September 2015 was 237.945. This represents a 78.236% increase. Therefore, the current $7,000 limit yields $12,476.52 when multiplied by 1.78236. Since 2015 Penalties Act requires adjustments to be rounded off to the nearest dollars, the new maximum will be $12,477. On the other hand, the current $70,000 penalty limit for any willful & repeat violations yields $124,765.17 when multiplied by 1.78236. This means it will be $124,765 when rounded off to the nearest dollars.

These changes only apply to all the states under OSHA jurisdiction. However, state-plan states are most likely to follow suit. Additionally, the 2015 Penalties Act will now mandate yearly inflation increases for all OSHA penalties. This is the case with EPA at the moment.

Are The Penalty Increases Justified?

What are your thoughts on the potential OSHA penalty increase from $7,000 to about $12,477 for serious violations as well as from $70,000 to about $124,765 for repeat and willful violations? Is it justifiable to have such changes and why? Should OSHA recommend lower penalties than these? Do you think that increasing penalties will result in lower accident rates?