The Occupational Safety and Health Administration (OSHA) is charged with enforcing the Occupational Safety and Health Act of 1970, which applies to virtually all private employers. To that end, OSHA has promulgated a substantial set of regulations, or "standards," with the goal of preventing workplace accidents and improving the quality of workers' day-to-day work environments.
To monitor employers' compliance with these federal
standards, OSHA conducts on-site inspections, normally without any
advance notice. Following an on-site inspection, OSHA has six
months to issue a citation and proposed penalty. The citation
typically specifies the OSHA standard allegedly violated, imposes a
penalty and sets a deadline for correcting or abating the alleged
hazard. There are five categories of violations: (1)
other-than-serious, (2) serious, (3) repeated, (4) willful, and (5)
failure to abate. Currently, maximum penalties range from up to
$7,000 for each violation that is other-than-serious, serious, or a
failure to abate (per day after the abatement deadline) and up to
$70,000 for each repeated or willful violation.
Companies have 15 business days from receipt of the penalties and
citations to comply, request an informal conference with OSHA's
area director, or formally contest the alleged violations and/or
penalties before the independent Occupational Safety and Health
Review Commission (OSHRC). Citations, penalties, and abatement
dates that are not contested or settled become a final order of
OSHRC. At that point, the cited condition must be abated by the
prescribed date and any proposed penalty must be paid. Interest,
administrative charges, and additional costs may be assessed for
non-payment of OSHA penalties under the Debt Collection Improvement
Act of 1996. If the company wishes to further contest the citations
and/or penalties, it may also file a petition for review in a Court
of Appeals.
Until recently, OSHA penalties were among the few statutory
penalties exempted from annual inflation adjustments under the
Federal Civil Penalties Inflation Adjustment Act of 1990 (the
Adjustment Act). As part of the federal budget enacted on November
2, 2015, the Federal Civil Penalties Inflation Adjustment Act
Improvements Act of 2015 (the 2015 Act) amended the Adjustment Act
to include OSHA penalties, requiring them to come up to current
inflation levels and keep current with annual adjustments going
forward.
Specifically, the 2015 Act requires OSHA to make a one-time
catch-up adjustment, through interim final rulemaking effective no
later than August 1, 2016, based on the percentage difference
between the Consumer Price Index ("CPI") for October 2015
and October 1990, the last year OSHA penalties were increased.
Because this initial adjustment will be via interim final
rulemaking, it will be effective upon publication and need not go
through the usual public notice-and-comment period associated with
federal agency rulemaking. Under the new rule, after the initial
increase, OSHA must adjust its penalties annually based on the CPI
in October of each year.
This catch-up adjustment of penalties will have a sudden and huge
impact upon employers receiving citations. The October 2015 CPI
exceeded the October 1990 CPI by approximately 78.16%. Therefore,
OSHA's maximum penalties can be expected to change as
follows:
ยท Serious, Other-Than-Serious or Failure to Abate violations
(per day after the abatement deadline) will increase from $7,000 to
approximately $12,471 per violation
" Repeated or Willful violations will increase from $70,000 to
approximately $124,712 per violation
The 2015 Act permits OSHA to limit the amount of the initial
catch-up adjustment 1) by determining through formal
notice-and-comment rulemaking that the required increase would have
a negative economic impact or that its social costs would outweigh
the benefits, if 2) the Office of Management and Budget concurs
with that determination. Given that Assistant Secretary of Labor
for OSHA Dr. David Michaels has called the level of allowable civil
penalties the most serious obstacle to effective OSHA enforcement,
it is almost certain that the agency will not follow this penalty
mitigation procedure.
This stunning penalty increase is consistent with OSHA's
aggressive efforts to make its enforcement more targeted and
impactful, as we previously reported on
here. The agency is, in no uncertain terms, trying to get all
employers to pay attention to workplace health and safety
compliance, by making an example, through imposing heavy financial
penalties and publicizing through the press those found not to be
on top of OSHA compliance. This is so not only with respect to
violations directly implicated worker accidents but for prevention
of unsafe conditions by drawing attention to OSHA's detailed
workplace standards about which many employers are not well versed.
Once the increased penalties become effective, employers will soon
realize that even "technical" recordkeeping and notice
posting violations will be too expensive to be considered simply
"the cost of doing business." For smaller employers,
receiving citations at the new level of penalties could put them
out of business. Finally, although this increase in penalties
applies only to penalties issued by OSHA, because pursuant to
OSHA's state deferral scheme in place in nearly half the
states, state enforcement of parallel occupational safety and
health plans must be at least as effective as the federal
requirements. Therefore, state agencies may soon follow suit by
increasing civil penalties under those programs. Employers that
have not had a recent self-audit for compliance with OSHA's
highly detailed standards would be wise to do so before OSHA
appears at their facilities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
