Brier Grieves January 7, 2016 No Comments

OSHA will be allowed to increase its maximum penalties in 2016 and adjust them annually for inflation starting in 2017.

  • The Bipartisan Budget Act (Act) was signed into law on Nov. 2, 2015.
  • The Act allows OSHA to increase the maximum penalties for safety and health violations.
  • The increases will become effective by Aug. 1, 2016.
  • The penalty amounts will continue to be adjusted for inflation each year.

On Nov. 2, 2015, President Obama signed the Bipartisan Budget Act of 2015 (Act), which is a two-year budget deal. One provision in the Act will allow OSHA to increase the maximum penalty amounts it imposes on employers that violate occupational safety and health standards. These increases will become effective Aug. 1, 2016.

Justification for Increased Penalties

Many government agencies have the authority to adjust their maximum penalty amounts annually to reflect the cost of inflation, as shown by the consumer price index (CPI).

However, OSHA has not been allowed to adjust its maximum penalty amounts since the penalties were enacted 25 years ago. The Act will allow OSHA to adjust the maximum penalty amounts to reflect inflation.

Catch-up Increase

The Act requires OSHA to implement the new maximum penalty amounts in two phases:

  • An initial catch-up adjustment; and
  • An ongoing subsequent adjustment period.

The initial catch-up period will take place in 2016 and will allow OSHA to make a cost-of-living adjustment to account for the previous 25 years of non-adjustment. This catch-up increase is capped at 150 percent of current OSHA penalty levels.

The Act requires OSHA to indicate the actual amount of the catch-up increase through an interim final rule. Most predictions and speculations surrounding the actual increase amounts hover around an 80 percent increase because the current CPI index is around 78.2 percent higher than what it was when OSHA’s current penalties were adopted.

However, the Act also gives OSHA the discretion to increase the current maximum penalty amounts by less than the cost-of-living adjustment if it determines that the full increase will:

  • Have a negative effect on the economy; or
  • Result in social costs that outweigh the benefits of the full increase.

The Office of Management and Budget must agree with this determination.

The Act requires OSHA to issue a proposed rule and solicit public comments if it plans to increase the penalty amounts by less than the cost-of-living adjustment. The Act requires OSHA to publish how it will implement the first inflation adjustment by July 1, 2016.  The first adjustment must become effective Aug. 1, 2016.

The table below shows the speculated 80 percent increase, the maximum increase allowed by the Act, and how those increases would affect maximum OSHA penalty amounts in 2016.

 

 

Violation Current Maximum Amount of Increase Increased Penalty Amount
80 % 150 % (max) 80 % 150 % (max)
Non-serious $7,000 $5,600 $10,500 $12,600 $17,500
Serious $7,000 $5,600 $10,500 $12,600 $17,500
Willful or Repeated $70,000 $56,000 $105,000 $126,000 $175,000
Willful (Resulting in Death) $10,000 $8,000 $15,000 $18,000 $25,000
Uncorrected $7,000 $5,600 $10,500 $12,600 $17,500


Annual Adjustments

After the initial catch-up provision takes place in 2016, the Act allows OSHA to update its maximum penalty amounts for inflation each year.

The first annual inflation adjustment will be allowed for 2017. OSHA will be required to publish annual updates by Jan. 15, 2017, to signal this increase and every year thereafter in the Federal Register.