The budget deal passed by Congress and signed into law by the President on November 2 contained provisions to raise spending caps and the debt limit as well as delay major budget battles until after the presidential election. NASF members should know that the package also contained an essentially unnoticed provision that allows OSHA to increase fines starting August 1, 2016 for workplace safety violations.
OSHA Process for Increased Fines
The provision, which caught both business and labor by surprise, outlines a process that permits the agency to increase penalties for the first time in 25 years. First, the White House Office of Management and Budget (OMB) must issue guidance to implement the new law’s provision by January 31, 2016.
Second, OSHA will be allowed to increase fines to “catch up” with inflation since 1990 by issuing by next July 1, 2016, an “interim final rule,” which is typically a rulemaking process that does not require an agency to invite public comment before a final decision is made. The rule would become effective by August 1.
Third, starting in 2017, OSHA will be allowed to increase fines to keep up with inflation. The bill, importantly, does allow OSHA to select a lower fine increase if it chooses and the White House agrees. Whether this will occur, of course, remains to be seen.
The new law doesn’t say anything about the 28 states that run their own safety and health programs, and it’s early enough in the process that OSHA has not begun developing any guidance for the states. However, it’s anticipated that the new federal fine structure will be required by states so they will be at least as stringent in their own programs.
Fine Amounts Could Jump by 80 Percent
If OSHA implements the maximum increase allowed, which is the inflation rate from 1990 to 2015 as measured by the Consumer Price Index, then the penalty for violations would jump by over 80 percent. What that would mean is that fines for serious violations could increase from $7,000 to about $12,000.
The highest penalty amount – for repeat and willful violations – could increase from $70,000 to about $125,000. In the bigger picture, if this maximum increase were applied to OSHA fines for all US violations in fiscal year 2014, then this past year’s total OSHA nationwide penalties of $143.6 million would have increased to $261.4 million instead.
It’s useful to point out that OSHA is not required by the new provision to raise its penalties to the maximum, however, and the agency may use its discretion on amounts for individual citations.
Labor & Industry Views
While OSHA has been reviewing the changes, prominent labor advocates note that the agency’s new penalty adjustment authority means progress, although simply linking penalty increases to inflation won’t raise fines nearly as high as earlier legislative attempts by congressional Democrats to dramatically boost penalties for worker fatalities. They point out that the average 2014 employer fine for a worker fatality was $7,000, which was ultimately reduced on average to $5,050 upon settlement.
Some industry leaders have noted that that increased fines will undoubtedly have a serious impact on business, particularly smaller operations, and will plan to oppose OSHA efforts next year. Other workplace safety legal experts argue that boosting fines for OSHA still keeps them extremely low compared to other agencies, like EPA, which imposes such maximum penalties of $270,000 for violating the Clean Air Act and $1 million for tampering with a public water system.
Some business advocates – including NASF Washington Forum speaker Baruch Fellner of Gibson Dunn’s Washington, DC office – also argue that increasing fines on a per citation basis may be beneficial, as OSHA inspectors may be relieved from having to combine a number of “nitpicky citations” in order to reach higher penalties for employers.
NASF will be closely monitoring OSHA’s activity moving into next year and will keep members abreast of rulemaking and related developments. At this point, it’s likely that getting even a Republican-controlled Congress to block or reverse OSHA’s action next fall will be challenging, as Congress approved the language with this month’s approval of the budget bill. Stay tuned for future NASF updates.