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November 6, 2015Client Alert

Federal Budget Includes up to 82% Increase in OSHA Penalties—the First in 15 Years

Congressional Republicans and Democrats have agreed upon language in the Federal Budget Bill, which the President signed on November 3, 2015, that essentially directs the U.S. Occupational Safety and Health Administration (OSHA) to increase proposed penalties for alleged violations by up to 82% and ties future annual penalty increases to the Consumer Price Index (CPI). That Congress would issue such a directive, never mind by use of a budget bill, at the present time is nothing short of shocking. One safety association spokesperson articulated the concern that the law requiring the increases “comes out of a late-night political process.” It is unlikely, most Washington experts agree, that an appropriations bill rider to reverse the directive will be offered or, if offered, will pass when it comes time for Congress to fund the budget bill it now has adopted.

Section 701 of the budget bill directs OSHA to make a “catch-up adjustment” dating back to 1990, when the Agency last increased maximum proposed penalties. Since that time, the CPI has risen about 82%, and the bill allows OSHA to increase maximum penalties for all citations by that same percentage.

The practical effect is that the maximum proposed penalty for a repeat or willful citation could rise from $70,000 to $127,438 and that the maximum proposed penalty for a non-serious or serious citation could rise from $7,000 to $12,744. To understand the “big picture” impact on the business community, consider the following: Had an 82% increase applied to those penalties proposed by OSHA in FY 2015, the total of $143,600 would have been $261,400.

Under the bill, the White House’s Office of Management and Budget (OMB) must publish guidance on or before January 31, 2016, as to how the budget bill must be implemented. OSHA then, on or before July 1, 2016, must publish any maximum penalty adjustment it decides to make, to take effect no later than August 1, 2016. In following years, OSHA will simply increase the maximum penalties by the percentage increase in the CPI for the fiscal year before.

If OSHA were to determine this fiscal year that increasing the maximum penalties by a full 82% would have a “negative economic impact” or that the “social costs” of doing so would outweigh the benefits, it could implement an increase of less than the maximum. But OMB would have to approve its doing so, and it is unlikely, in the view of most commentators, that OSHA’s chief, Assistant Labor Secretary David Michaels, will decide to propose something less than the full amount. Just last month, he testified unequivocally in support of raising maximum fines, a stance he repeated several times since taking the post in 2010. Michaels told a House subcommittee on October 7, 2015, “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 our weak criminal sanctions.”

The rationale for the budget language is to bring OSHA and its maximum proposed penalties in line with other federal agencies and their proposed penalties or fines, which penalties and fines, similarly and presently, are tied to the CPI. Those agencies include the Equal Employment Opportunity Commission, the Environmental Protection Agency, the Federal Communications Commission, the Food and Drug Administration, the Federal Highway Administration, the Federal Aviation Administration and others.

In the words of the U.S. Chamber of Commerce’s Executive Director of Labor Law Policy Marc Freedman, “The likelihood of the OSHA fines increasing would appear to be 100 percent—Congress is directing the agenc[y] to do so.”

 

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