August 2016

In this months edition of G&G’s news letter, lets talk about the increase in OSHA fines. For the first time in 25 years, OSHA fines are increasing. The Bipartisan Budget Bill signed by President Obama on November 2, 2015, requires OSHA to raise its penalties. Since 1990, OSHA has been specifically exempted from a law that required federal agencies to raise their fines to keep pace with inflation. That exemption was eliminated in the 2015 budget bill.

The law now requires OSHA to implement an initial penalty “catch-up adjustment,” which must be in place by August 1, 2016. The catch-up adjustment is tied to the percentage difference between the October 2015 and October 1990 Consumer Price Index, which is forecasted to be approximately 80 percent. This means the current maximum fine for a Repeat or Willful violation could grow from $70,000 to as much as $125,000 for each violation. Similarly, the maximum penalty for a serious violation could be increased from $7,000 to $12,500 for each violation.

OSHA is required to pass an interim final rule making to finalize the catch-up adjustment. However, the budget bill provides for the increase be issued as an interim final rule.  This means that OSHA does not have to issue a proposed rule, which would be subject to a public notice and comment period before finalized. Instead, the rule will become effective immediately.

OSHA does have the option to implement a lower catch up adjustment than the maximum allowable if (1) the agency determines increasing penalties by the maximum amount would have a “negative economic impact” or the “social costs” of the increase outweigh the benefits, and (2) the Office of Management and Budget agrees with the agency’s determination.  However, because the Assistant Secretary of Labor for OSHA, Dr. David Michaels, has been a vocal proponent of increased penalties, it is likely that OSHA will implement the maximum increase. In addition, the new law specifies that a lesser penalty must go through full notice and comment rule making   Full rulemaking would delay OSHA from increasing fines, making it less likely that the agency will institute a lesser penalty.

OSHA is required to announce the initial increased penalty amounts by July 1, 2016, with the changes taking effect by August 1, 2016.  After that, OSHA will be required to implement annual cost of living increases by January 15 of each year, with the adjustment tied to the year over year percentage increase in the Consumer Price Index.

Employers should be aware that state-plan OSHA states, including Minnesota and Iowa, will be required to adjust their state penalties so that they at least match those imposed under the federal standards. To best protect against potential exposure to the new penalties, employers should conduct internal audits to determine their compliance with OSHA standards.

With all this said, my best recommendation to eliminate potential fines are. Remain or become proactive within your companies safety program, train employees on hazard recognition, Identify and eliminate hazards prior to starting new projects, address safety hazards and concerns with existing projects, conduct weekly safety audits at minimum, to address day to day activities.