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:

· 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.

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