OSHA Authorized to Increase Penalty Limits by up to 80%

On November 2, Obama signed the Bipartisan Budget Agreement Act of 2015 after it was passed by Congress. This budget sets the overall spending limits and general funding priorities. The Budget Agreement enacted is comprehensive making it easy to slip in some language which allows OSHA to increase its penalty limits in a one-time jump and then have it indexed to inflation from there on out.

The last time the penalty limits were adjusted (for inflation) was in the early 1990s. Indexing the penalty structure to inflation, say advocates, automatically allows for inflation adjustments over time. Although, technically speaking, the Agency will have the discretion of also decreasing the penalty amounts as well. Not likely to happen under traditional circumstances, though. Nevertheless, this language being inserted into the agreement hasn't received a lot of attention, but stakeholders will certainly notice after the Agency updates its regulations next summer to reflect these penalty limit increases.

OSHA's penalty structure is expected to result in up to 80% increase in the penalty limits. The table below shows the current and expected penalty limits after the new regulation modifications are implemented next summer. Each year thereafter, the Agency will have the discretion to increase the limits according to the inflation index.

This increase is in-addition-to the Administrative Penalty Information Bulletin that the Agency implemented a couple years ago. The next effect of that administrative policy was to increase the final net penalties assessed (after "discounts" applied to the initial penalty, during the settlement process, etc). As described in the bulletin, the Agency often extends "discounts" to employers under certain circumstances.

The factors that come into play include:

1. History Reduction: a good inspection history with OSHA.

2. History Increase: a negative inspection history with OSHA.

3. Repeat Violations: cited for the same violation within the past 3-5 years.

4. Severe Violator Enforcement Program: officially labeled by OSHA as a "bad actor".

5. Gravity-Based Penalty: based on the severity of the hazard itself.

6. Size Reduction: small business.

7. Good Faith: demonstrate genuine commitment to safety and abating the hazards.

8. Minimum Penalties: sets the floor at $500 for a penalty.

9. Additional Administrative Modifications to the Penalty Calculation Policy: method for calculating the final penalty amount after the adjustments have been taken into account.

So what does all this mean?

In simple terms, OSHA will have the ability to issue even larger penalties. In most years, there is typically between 100-200 inspections where the total proposed penalty amount exceeds $100,000. Inspections which result in more than $100,000 penalty are referred to as a "significant case". With higher penalty limits, the number of significant cases will certainly increase at least proportionally. Employers are well-advised to avoid having a significant case because it will place that employer into OSHA's SVEP (Severe Violator Enforcement Program) which often also referred to as the "bad actors list". Employers in SVEP received an extraordinary amount of extra attention from the Agency by way of follow up inspections, negative press releases, etc. Not a good place to be as an employer!

Suggested next steps to avoid OSHA enforcement, expensive citations, and protect your employees:

1. Review your written safety programs to make sure that the hazards are identified and have evaluated the means to minimize the risk of injury and illness and achieve compliance

2. Review your training programs and records to ensure that the training reflects the actual hazards and conditions at your work site. Proper training is considered to be among the most effective means for minimizing injuries and illnesses.

3. Review your OSHA logs and history of injuries to identify trends and corrective measures to prevent the incident from happening again.

4. Raise the importance profile of your safety professionals on staff and demonstrate management commitment to safety.

5. Engage with a reputable third party firm to conduct an independent and robust risk assessment of your facility to ensure that your risks of an inspection - and severity of potential penalties - is minimized.

Prometrix Safety Consulting, with a staff of former senior OSHA officials, uniquely offers the services, expertise, and a cost-effective approach to demystify compliance and ensure that you are well-positioned to minimize the likelihood and severity of employee injuries and avoid expensive enforcement penalties and actions.