SAFE PRACTICE


What to Expect from the Upcoming OSHA Penalty Increases


DARREN J. HUNTER AND JASON HIGGINBOTHAM, ROONEY, RIPPIE & RATNASWAMY LLP, CHICAGO O


n August 1, civil penalties for violations identified by the U.S. Occupational Safety


and Health Administration (OSHA) increased by 78%. Te Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act), which was enacted on November 2, 2015, directed federal agencies to adjust their civil penalties to account for inflation. Te Infla- tion Adjustment Act included an initial “catch-up” adjustment that was intended to bridge the inflationary gap for civil penalties that have not been recently adjusted. OSHA’s civil penal- ties have not been adjusted since 1990. Te Inflation Adjustment Act is,


in part, a response to prior legislation. Te Federal Civil Penalties Inflation Adjustment, which was enacted in 1990 and amended in 1996 by the Debt Collection Improvement Act (collectively prior Inflation Act), was intended to ensure penalties were properly adjusted to maintain their deterrent effect. Te prior Inflation Act provided a methodology for calculating inflation adjustments for civil penalties; however, it was difficult to understand and inconsistently ap- plied. Further, the prior Inflation Act expressly disallowed adjustments to OSHA penalties. On July 1, the U.S. Department of


Labor (DOL) published an interim final rule (IFR), in which it identi- fied and explained the adjustments to OSHA’s civil penalties that will become effective on August 1. DOL explained that these adjustments could be imple- mented because the Inflation Adjust- ment Act removed the prior Inflation Act’s disallowance of adjustments to OSHA penalties and also revised the method of calculating adjustments. Te IFR also explained that the


Inflation Adjustment Act imposed a 150% increase cap on adjustments calculated under the catch-up provi- sion. Terefore, in order to calculate the 2016 adjustments, DOL compared


the percent change between the year of the last adjustment—in this case 1990—and the October Consumer Price Index for the year 2015. It then compared the amount of the penalty adjustment against the 150% cap and added the lower of the two to the existing penalty to compute the new penalty. Te result is a 78% increase. Te August 1 adjustments will


increase the maximum penalties for se- rious and other-than-serious violations from $7,000 per violation to $12,471 per violation. Te maximum penalty for violations of posting requirements will also increase from $7,000 per violation to $12,471 per violation. Te maximum penalty for failing to abate a viola- tion will increase from $7,000 per day beyond the abatement date to $12,471 per day beyond the abatement date. Te maximum penalty for willful or repeat- ed violations will increase from $70,000 per violation to $124,709 per violation, and the minimum penalty for willful violations will increase from $5,000 per violation to $8,908 per violation. Importantly, the new civil penal-


ties only apply to penalties that are assessed after August 1, but apply retroactively to violations that occurred after November 2, 2015. Accordingly, any penalties assessed before August 1, even for violations occurring after November 2, 2015, will be subject to the pre-adjustment penalties. Te catch-up provision in the


Inflation Adjustment Act is intended to counteract the prior Inflation Act’s disallowance of inflationary adjust- ments for nearly 26 years. However, after August 1, OSHA’s civil penalties will be adjusted on a yearly basis to ac- count for inflation. Terefore, despite the significant increase in penalties for the year 2016, employers can anticipate more moderate increases in future years. Te goal of the yearly inflationary adjustments is to ensure that the penalties maintain their ef- fectiveness. As with its determination of the adjustments under the catch-up


provision, OSHA will refer to the Consumer Price Index to determine the yearly inflation adjustments. OSHA has been lobbying Con-


gress for penalty increases for years, as OSHA believes higher penalties will deter employers from violating the Occupational Safety and Health Act (OSH Act) and its standards. Before Congress passed the Inflation Adjust- ment Act, OSHA had taken steps to increase penalties by adopting policies that gave OSHA a basis to assess pen- alties on the higher end of the existing penalty regime. In 2010, for example, OSHA adopted its Severe Violator Enforcement Program (SVEP). One of the many ramifications for employ- ers that fall within the scope of the SVEP is higher penalties. In 2012, OSHA issued a gravity-based penalty policy identifying aggravating factors to justify higher penalties. While OSHA emphasizes the


deterrent effect of higher penalties, the reality is many employers strive to comply with the OSH Act regardless of the size of the penalty, as there are well understood business consequences for employers that have a poor safety record, including the inability to enter into contracts with certain vendors, loss of customers, strained labor rela- tions and increased insurance costs. Employers, therefore, already have a strong built-in incentive to comply with OSHA’s standards. It remains to be seen whether the increased penal- ties will have a greater deterrent effect. Te end result, though, is that the higher penalties will impact employers where it counts – the pocketbook.


Darren Hunter is a partner and an experienced OSHA practitioner in the Chicago law firm of Rooney Rippie & Ratnaswamy LLP. Jason Higginbotham is an associate in the energy and litigation practice groups at Rooney Rippie & Ratnaswamy LLP. Tis column does not consti- tute legal advice or the formation or proposal of an attorney-client relationship to or with any person or entity. Darren can be contacted at darren.hunter@r3law.com or at 312-447-2818. Jason can be contacted at jason.higginbotham@ r3law.com or at 312-447-2814.


August 2016 MODERN CASTING | 43


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