On November 2, 2015, President Barack Obama signed the Bipartisan Budget Act of 2015. Obscured within the lengthy bill is a provision that not only mandates a current increase in the penalties for violations of standards established under the Occupational Safety and Health Act, but that also suggests penalties will be indexed to annual changes in the Consumer Price Index (CPI). As a result, OSHA fines are likely to continue to go up each year for the foreseeable future.
The Bipartisan Budget Act contemplates two key changes to the maximum civil penalties imposed by OSHA. First, the Act calls for an initial “catch-up” adjustment for current OSHA penalties to reflect the inflationary increase since the last time OSHA penalties were adjusted in 1990. The amount of this catch-up adjustment will be measured by the difference between the CPI in 2015 and the CPI in 1990. That difference is forecasted to be as much as 82 percent, meaning the current maximum fine for a Repeat or Willful violation would grow to as much as $125,000 for each violation. Similarly, the maximum for a Serious violation would be increased from $7,000 per violation to $12,500 for each occurrence. But the Act does not stop there. After the one-time catch-up adjustment is implemented, OSHA will then be able to annually increase the maximum penalties at a rate equal to the amount of inflation for the prior fiscal year.
The Act does include a potential exception to these increases. OSHA is allowed to forego the guidelines if “increasing the civil monetary penalty by the otherwise required amount will have a negative economic impact [on the country]” or “the social costs of increasing the civil monetary penalty by the otherwise required amount outweigh the benefits.” OSHA thus has considerable flexibility to apply these fines, and those within the regulatory community are left to assume the worst and hope for maximum fines that are less severe.
Shortly before the Bipartisan Budget Act passed, Assistant Secretary of Labor for Occupational Safety and Health, Dr. David Michaels, provided insight into OSHA’s reasoning for seeking the penalty increases. Michaels told a House subcommittee that the “most serious obstacle to effective OSHA enforcement of the law is the very low level of civil penalties allowed under our law, as well as weak criminal sanctions.”
Employers should also be aware that state-plan OSHA states will be required to adjust their state penalties so that they at least equal those imposed under the federal standards. OSHA is required to announce the initial , increased penalty amounts by July 1, 2016, with the proposed changes to take effect by August 1, 2016. After that, OSHA is required to adjust the penalties by January 15 of each year by incorporating the CPI.To best protect against potential exposure under the new penalties, employers should prepare by conducting an internal audit under attorney-client privilege to determine the level of compliance with OSHA standards.