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OSHA Penalty Limits to Increase Almost 80% in the Next Year, With Annual Inflation Adjustments Authorized Thereafter

Bandza_Alexander_COLOR By Alexander J. Bandza

Numbers-money-calculating-calculationBuried in the landmark Bipartisan Budget Act of 2015 (H.R. 1314) (“2015 Budget Act”) signed by the President on Monday, November 2, 2015, Section 701 requires the Occupational Safety and Health Administration (OSHA) to begin indexing its penalty limits to inflation, much like the US EPA and other federal agencies do now.  This section, called the “Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015” (“2015 Penalties Act”), also has “catch-up” provisions, which mean that the existing $7,000 penalty limit (for other-than-serious and serious violations under OSHA, originally set in 1990) can be increased to approximately $12,477 per violation, and the existing $70,000 penalty limit (for willful and repeat violations) can be increased to approximately $124,765 per violation.  OSHA must adjust these penalties through an interim final rulemaking no later than August 1, 2016.

By way of background, in 1990, Congress passed two pieces of legislation: (1) the Omnibus Budget Reconciliation Act of 1990 (P.L. 101–508), which increased OSHA’s authorized penalties from $1,000 to $7,000 (for serious violations) and from $10,000 to $70,000 (for willful and repeat violations); and (2) the Federal Civil Penalties Inflation Adjustment Act of 1990 (P.L. 101-410) (“1990 Penalties Act”), which created an annual reporting obligation on the President to evaluate the penalty amounts pursuant to federal laws, the dates that such penalties were set, the amount that the penalty should be increased to account for inflation, and “a listing of the modifications to Federal law that would be required” to effectuate such an increase.  In 1996, under the Debt Collection Improvement Act of 1996 (Pub. L. 104–134, title III, §31001(s)(1)), Congress amended the 1990 Penalties Act to require that the agencies adopt by regulation the inflation-adjusted penalty increases, but it excluded penalties under the Occupational Safety and Health Act of 1970 from such automatic increases.

The 2015 Penalties Act eliminates this exemption and explains how agencies should account for lost time.  By August 1, 2016, through interim final rulemaking, OSHA must increase its penalties pursuant to the percentage “by which the Consumer Price Index for the month of October, 2015 exceeds the Consumer Price Index for the month of October of the calendar year during which the amount of such civil monetary penalty was established or adjusted under a provision of law other than this Act.”  However, the October 2015 CPI will not be released for a few weeks from the date that the 2015 Budget Act became law.  In addition, the 2015 Penalties Act provides a mechanism for an agency to limit the increase “by less than the otherwise required amount” if the agency makes a determination that increasing the penalty will have a “negative economic impact” or “the social costs of increasing” the penalty “outweigh the benefits.”

Because of these two uncertainties—i.e., the absence of October 2015 CPI data and the possibility that OSHA may seek a reduced increase—the calculations here are “approximate.”  However, OSHA’s Secretary has been seeking increased penalties for a long time and likely will be  issuing the maximum penalty increase, as soon as possible.  Furthermore, the month-to-month changes in CPI are small as compared to the 25-year CPI increase between 1990 and 2015. 

As an estimation, using September 2015 CPI data (instead of the yet-to-be-released October 2015 CPI data) suggests an almost-80% increase.  Here is the math:  the CPI for All Items (Series CUUR0000SA0) in October 1990 was 133.5, and the CPI for September 2015 was 237.945.  This yields a 78.236% increase.  The $7,000 current penalty limit multiplied by 1.78236 yields $12,476.52.  However, the 2015 Penalties Act requires that adjustments are rounded to the nearest dollar, therefore the new maximum penalty for serious violations of OSHA regulations will be $12,477.  The $70,000 current penalty limit for willful and repeat violations, multiplied by 1.78236 yields $124,765.17, which, rounded to the nearest dollar, is $124,765.

This change applies only to those states under federal OSHA jurisdiction, but state-plan states can be expected to follow suit.  Going forward, the 2015 Penalties Act also mandates annual inflation increases for OSHA penalties, just like EPA penalties do now.  The full text of the 2015 Budget Act, which includes the 2015 Penalties Act (§ 701), is available here.