Last week, we discussed OSHA’s prohibition on rate-based, safety incentive programs (e.g., a year-end pizza party for no employee injuries). According to the agency, these programs actually encourage employees to underreport workplace injuries/illnesses and should be replaced instead with behavior-based programs that provide positive incentives for reporting.

Now we are starting to see OSHA enforce its policy on rate-based programs. According to a recent formal settlement agreement, the cited employer was not only required to eliminate its rate-based incentive programs, but retain a compensation/benefits expert to evaluate “alternate safety-based provisions in its Incentive and Bonus Programs.”

According to the settlement agreement, the cited employer, Exel Inc., utilized a safety program where employee incentive payments were reduced by 20% “if there is more than one recordable injury in the area during the incentive period.” Another incentive plan identified in the agreement offered increased bonus payments based upon the number of OSHA recordables.

In OSHA’s view, both programs offer employees significant incentives to withhold injury/illness information – something that according to former Deputy Assistant Secretary, Richard Fairfax’s March 12, 2012 Memorandum could violate: (1) Section 11(c)’s prohibition on employee discrimination for reporting a workplace injury/illness, and (2) OSHA’s recordkeeping standards.

However, in addition to eliminating the programs, the employer was required to retain and consult with an incentive programs expert. According to the relevant provision, Exel, Inc. had to “retain a Compensation and Benefits Expert who is qualified by education and experience in incorporating safety and health in incentive programs to assist the company in evaluating the inclusion of alternate safety-based provisions in its Incentive and Bonus Programs.”

There’s no question OSHA has made incentive programs an important enforcement priority for the agency – earlier this year, Assistant Secretary of Labor for OSHA, David Michaels lumped them in as contributing factors that “undermine a workplace culture of safety.” And whether you agree with OSHA’s policy or not, OSHA is enforcing it. Employers should therefore consider evaluating their rate-based programs to determine whether they encourage underreporting. If so, the employer may want to consider moving towards a behavior-based program that, in OSHA’s view, provides greater incentives for reporting injuries/illnesses.