The Department of Labor (DOL) has issued an Interim Final Rule (IFR) that will adjust the penalty amounts for Mine Act violations. The IFR was issued pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 as amended by Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act). The Inflation Adjustment Act requires regulatory agencies to adjust the amounts of their civil monetary penalties with an initial “catch-up adjustment,” followed by annual adjustments for inflation. Agencies were required to issue an IFR prescribing the catch-up adjustments by July 1, 2016. The adjusted penalties will be effective beginning August 1, 2016.

One would expect penalties to increase across-the-board as a result of this IFR, but the method prescribed by the Inflation Adjustment Act for calculating the initial catch-up adjustment actually results in a decrease of some penalty amounts. Specifically, the initial catch-up adjustment excludes prior inflationary adjustments made pursuant to the 1990 version of the Inflation Adjustment Act. In other words, the catch-up inflation adjustment prescribed by the 2015 version of the Act requires agencies to adjust their penalties based upon the amount of each penalty at the time the penalty was last adjusted for reasons other than inflationary adjustments made pursuant to the 1990 version of the Inflation Adjustment Act. That amount is then multiplied by the inflation factor for the year in which the penalty was last so adjusted. All MSHA penalties were last adjusted outside the Inflation Adjustment Act in 2007. The inflation factor for 2007 was 1.13833. As can be seen in the discussion of specific changes to MSHA penalties below, this calculation method resulted in the decrease of some penalties.

Section 100.3: Regular Assessments

Penalties assessed pursuant to a regular assessment are calculated from a penalty conversion table based upon the number of points an enforcement action has been assigned. The range of points is currently 60 or less to 144 or more. In making its catch-up adjustments, the IFR adjusts the points range back to the points range used in 2007, which was 60 or less to 140 or more.

The maximum and minimum penalties in the Section 100.3 penalty conversion table have also been adjusted. The current maximum penalty is $70,000. The maximum penalty established in 2007 was $60,000. When $60,000 is multiplied by the 2007 inflation factor, the resulting new maximum penalty amount is $68,300. Accordingly, the IFR results in a decrease of $1,700 from the current maximum penalty amount.

The current minimum penalty in the conversion table is $112, which has not changed since it was established in 2007. When $112 is multiplied by the 2007 inflation factor, the resulting new penalty amount is $127. Accordingly, the IFR results in an increase in the minimum penalty of $15.

For each point between 60 and 140 in the conversion table, the monetary penalty amount will also be adjusted by the 2007 inflation factor. Although the maximum penalty in the conversion table has decreased, the net result of the IFR is a 13.6% increase in penalties assessed overall when the new penalty conversion table is applied to MSHA’s 2015 assessment data.

Section 100.4: Unwarrantable Failure and Immediate Notification

Section 100.4 prescribes minimum penalties for citations or order issues pursuant to Section 104(d)(1) and (2) of the Mine Act, and minimum and maximum penalties for failure to provide timely notification of a death or entrapment pursuant to Section 103(j) of the Mine Act.

The current minimum penalty for a Section 104(d)(1) citation or order is $2,000, which has not changed since 2007. When $2,000 is multiplied by the 2007 inflation factor, the resulting new minimum penalty will be $2,277. Accordingly, the IFR results in an increase in the minimum penalty for Section 104(d)(1) citations and orders of $277.

The current minimum penalty for any order issued pursuant to Section 104(d)(2) of the Mine Act is $4,000, which has also remained unchanged since 2007. Upon multiplying the 2007 and current penalty amount of $4,000 by the 2007 inflation factor, the resulting new minimum penalty will be $4,553. Accordingly, the IFR results in an increase in the minimum penalty for Section 104(d)(2) orders of $553.

The current minimum penalty for failure to notify MSHA of a death or entrapment in violation of Section 103(j) of the Mine Act is $5,000, which is unchanged from the minimum penalty established in 2007. When $5,000 is multiplied by the 2007 inflation factor, the resulting new minimum penalty will be $5,692. Accordingly, the IFR results in an increase in the minimum penalty for a Section 103(j) violation of $692.

The current maximum penalty for a Section 103(j) violation is $65,000. The penalty established in 2007, however, was $60,000. When $60,000 is multiplied by the 2007 inflation factor, the resulting new maximum penalty will be $68,300. Accordingly, the IFR results in an increase in the maximum penalty for a 103(j) violation of $8,300.

Section 100.5: Special Assessments

Section 105(c) provides the maximum daily penalty amount that can be assessed for failure to correct a violation for which a citation or order has been issued (a Section 104(b) failure to abate order). The current maximum daily penalty amount is $7,500. The maximum daily penalty amount established in 2007 was $6,500. When adjusting the 2007 maximum daily penalty of $6,500 is multiplied by the 2007 inflation factor, the new maximum daily penalty amount for a Section 104(b) failure to abate order will be $7,399. Accordingly, the IFR decreases the daily maximum penalty amount by $101.

Section 105(d) sets the maximum penalty for smoking and possession of smoking materials in an underground coal mine. The current maximum penalty is $375, but the maximum penalty established in 2007 was $275. The new maximum penalty pursuant to the IFR, arrived at by adjusting the 2007 maximum penalty for inflation, will be $313. Accordingly, the IFR decreases the maximum smoking penalty amount by $62.

Finally, Section 105(d) sets the current maximum penalty for flagrant violations under Section 110(b)(2) of the Mine Act at $242,000. The maximum penalty amount for flagrant violations established in 2007 was $220,000. To arrive at the new maximum penalty amount pursuant to the IFR, MSHA multiplied $220,000 by the 2007 inflation factor. The resulting new maximum penalty for flagrant violations will be $250,433, which is an $8,433 increase from the current maximum penalty amount.

Applicability and Net Effect

The new monetary penalty amounts will become effective August 1, 2016. The adjusted amounts are applicable only to civil penalties assessed after August 1, 2016, whose associated violations occurred after November 2, 2015 (the date of enactment of the Inflation Adjustment Act). Thus, violations occurring on or before November 2, 2015, as well as assessments made prior to August 1, 2016 whose associated violations occurred after November 2, 2015, will continue to be subject to the civil monetary penalty amounts that are currently in effect.

Additionally, because this is an IFR, the DOL is accepting comments on the rule until August 15, 2016. While the rule could still technically be amended based upon public comments, changes are unlikely.

In summary, MSHA has issued an IFR adjusting its civil penalties for inflation pursuant to the Inflation Adjustment Act, effective August 1, 2016. While some penalty amounts actually decreased slightly, it is expected that the penalty adjustments contained in the IFR will result in a 13.6% increase in MSHA civil penalties overall. Additionally, operators can expect more frequent and predictable annual adjustments of civil penalties for inflation due to a change made in the 2015 version of the Inflation Adjustment Act. Specifically, the 1990 version of the Act required adjustments to civil penalties to be rounded significantly. For instance, if an inflationary increase was greater than $1,000 but less than $10,000, the increase would be rounded to the nearest multiple of $1,000. The 2015 version of the Act requires rounding to the nearest dollar, resulting in more frequent and less drastic increases.