Executive Summary
Overview: OSHA will increase civil penalties for the first time since 1990
Effective Date: Interim Final Rule Expected by July 1, 2016
The “Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015,” enacted as part of the Bipartisan Budget Act of 2015 (Pub. Law No. 114-74), requires the Occupational Safety and Health Administration (“OSHA”) to increase its civil penalties for the first time since 1990, first with a “catch up adjustment” and thereafter with annual inflation-adjusted increases. By July 1, 2016, OSHA must issue an interim final rule containing a one-time “catch up adjustment” equal to the difference between the Consumer Price Index (CPI) in October 2015 and the CPI in October 1990, up to a maximum cap of 150% of the current civil penalties. The catch up adjustment will become effective no later than August 1, 2016.
Although the initial catch up adjustment presently remains unknown, based on recent CPI trends, the increase could range from 75 to 80% over current penalties. So, the $70,000 maximum penalty for a willful violation could rise to about $127,000. After the initial increase, OSHA must adjust the penalties by January 15 of each year using the year-over-year percentage increase in the CPI. Therefore, employers must monitor OSHA every January to determine whether it has increased the penalties, and, if so, by how much.
OSHA also has the option of implementing a lower catch up adjustment if, after publishing a notice of proposed rulemaking and requesting comments, it determines that increasing penalties by the maximum amount would have a “negative economic impact” or that the “social costs” of the increase outweigh the benefits, and the Office and Management and Budget agrees with the determination. However, given that OSHA’s Assistant Secretary, Dr. David Michaels, has repeatedly advocated for increased OSHA penalties, it seems unlikely that OSHA would pursue this option.
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