RISK INSIGHT: OSHA Penalties to Rise in 2016

Property & Casualty, Risk

On November 3, 2015, President Obama signed the Bipartisan Budget Act of 2015.  This piece of legislation is a two-year budget deal to fund the federal government.  One provision in the Act allows the Occupational Safety and Health Administration (OSHA) to increase the maximum penalty amounts it imposes on employers that violate occupational safety and health standards.  These increases are scheduled to take effect by August 1, 2016.

Changes to OSHA Penalties

Section 701 of the Budget Bill directs OSHA to annually adjust their penalties for citations with the federal consumer price index (CPI).  OSHA has not adjusted their penalty schedule since 1990 and this bill calls for a “catch-up adjustment” to update the schedule.

While CPI has grown approximately 82 percent since 1990, the initial catch-up period calls for a maximum catch-up amount that “shall not exceed 150 percent of the amount of that civil monetary penalty on the date of enactment of the Act.RI-1115_OSHAPenaltiesTable

This language has created multiple legal opinions of how much OSHA could raise the penalty; with 50 and 82 percent being the two predominant interpretations. The table shows how a 50 and 82 percent increase would respectively affect the current OSHA penalties.

The Act does give OSHA the discretion to increase the current maximum penalty amounts by less than 50 percent if it determines that a full increase will:

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

If OSHA plans to adjust less than the legally allowable percent, it must offer a proposed rule and solicit public comments. Any change from the scheduled increase must then be agreed upon with the Office of Management and Budget. In subsequent years, OSHA will be allowed to adjust maximum penalty amounts for the rate of annual CPI inflation.

Implementation in 2016

The Act requires OSHA to publish how it will implement the first inflation adjustment on or before July 1, 2016.  The first adjustment must be effective by August 1, 2016.

Key Takeaway

Whatever route OSHA takes in implementing the new “catch-up adjustment”, the likelihood is that OSHA penalties will see a sharp increase from their traditional levels in August of 2016.  Employers should continue to monitor and address safety risks and standards throughout their operations.  If you have questions or concerns, we encourage you to contact your M3 Account Team for assistance on this issue.

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