Increased OSHA Penalties All But Certain In 2016

November 20, 2015Articles Law360

Reprinted with permission from Law360. (c) 2015 Portfolio Media. Further duplication without permission is prohibited. All rights reserved.

As a result of the Bipartisan Budget Act of 2015, employers could be facing significantly higher penalties from the Occupational Safety and Health Administration. The increased fines could change how employers consider dealing with OSHA citations.

A provision in the budget bill titled the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 will allow OSHA to increase its monetary penalties by almost 80 percent. Unlike other federal agencies, OSHA’s penalties have remained the same since 1990 and have not been adjusted for inflation. The catch-up adjustment will be based on the difference between the Consumer Price Index in October 2015 and October 1990. We could see the increases take effect by August 2016. After the initial catch-up adjustment, OSHA will be required to adjust penalties annually based on the Consumer Price Index.

Currently, the types of violations that may be cited range from de minimis violations with no monetary penalty, to other-than-serious and serious violations with penalties of up to $7,000, and willful and repeat violations with penalties of up to $70,000 for each violation. If OSHA decides to allow for the full catch-up adjustment, the maximum penalty for a serious violation would increase to over $12,000 and the maximum penalty for willful and repeat violations would reach almost $125,000 per violation. For small employers and employers facing multiple OSHA citations, the financial impact could be significant.

Although, the penalty provision contains an exception which allows OSHA to limit the initial adjustment “by less than the otherwise required amount” if the increase would have a negative economic impact or the social costs of increasing the penalties by the required amount would outweigh the benefits, OSHA is expected to seek the maximum allowable adjustment. In recent testimony before a federal subcommittee, OSHA’s assistant secretary, David Michaels, stated that “the most serious obstacle to effective OSHA enforcement of the law is the very low level of civil penalties allowed under our law …” He went on to say that “OSHA penalties must be increased to provide a real disincentive for employers accepting injuries and worker deaths as a cost of doing business.”

Even if OSHA seeks the maximum allowable adjustment, it does not mean that OSHA will begin immediately issuing penalties at the maximum amount. In determining penalties, OSHA will continue to consider multiple factors including the size of the employer, its history of violations and its good faith effort to implement an effective workplace safety and health management system. OSHA will reduce fines for employers with less than 25 employees by as much as 60 percent. Employers with 26 to 100 employees could receive a 30 percent reduction in penalties. In addition, an employer who has been inspected by OSHA within the previous five years and has no serious, willful, repeat or failure-to-abate violations will receive a 10 percent reduction for its good safety history. Of course, those employers with a poor safety record can expect no such reduction, and may even receive increased penalties, up to the statutory maximum.

An employer’s initial reaction to an OSHA inspection may also have an impact on the penalty. Statistics show that those employers who deny OSHA inspectors initial access or otherwise contest the government’s right to inspect their property receive, on average, more citations and larger proposed fines than those employers who cooperated from the outset of the inspection. This is not to suggest that an employer should never oppose a government inspection or require that the government comply with its statutory obligations to obtain warrants and subpoenas. Rather, the numbers suggest that considering cooperation initially may shorten the inspection and result in fewer and lesser penalties.

Even if OSHA decides to issue a citation and proposed penalty, the opportunity to address a possible penalty reduction is not lost. When issued a citation and notice of proposed penalty, an employer may request an informal meeting with OSHA’s area director to discuss issues raised in the citation and the proposed penalty. The area director is authorized to enter into settlement agreements that revise citations and penalties to avoid prolonged legal disputes. It is almost always advisable to request such an informal meeting. The meeting will allow for an open discussion about the issues raised in the citation and matters possibly overlooked during the OSHA inspection. Information presented by the employer during the meeting may result in a further reduction or even elimination of a proposed penalty.

If the informal meeting does not result in a resolution, an employer has the right to challenge the citation and penalty before OSHA’s Review Commission. Beware, however, that an employer who wishes to make such a challenge, must first submit a written objection to OSHA within 15 working days from the date the citation and penalty were received. Failure to do so will result in the citation and penalty becoming a final order without further appeal. The written objection, called the “Notice of Contest,” must clearly identify the employer’s basis for filing an objection to a citation, a penalty, an abatement period or any combination thereof. Once before the Review Commission, an employer will have further opportunity, through litigation, to address the proposed penalty.

So what does all of this mean for employers? It is all but certain that OSHA fines will be going up beginning in 2016. The budget bill along with OSHA’s stated policy objectives make this abundantly clear. For some employers, this means that receiving OSHA penalties may no longer be just a cost of doing business. The potential financial impact of fines of up to $125,000 is real and should be taken seriously. However, with the proper planning and advice combined with good faith efforts to address workplace safety and health, employers should be able to minimize exposure. Employers would be wise to use the time before implementation of the new penalties to review their safety and health program and prepare for a possible visit from OSHA.

Reprinted with permission from Law360. (c) 2015 Portfolio Media. Further duplication without permission is prohibited. All rights reserved.