By Eric J. Conn, Chair of Conn Maciel Carey’s national OSHA Practice Group

For as long as I have been practicing OSHA law (more than 15 years now), four things have remained constant:

1. The maximum per violation penalty that OSHA has been permitted by the OSH Act to assign to Serious violations has been $7,000, and for Repeat or Willful violations it has remained $70,000;
2. The Assistant Secretary of Labor for OSHA makes an annual pilgrimage to the Hill where he or she pounds on the table and demands that Congress enact OSHA reform legislation to increase the maximum penalties OSHA can assign (with common refrains like: “employers can be fined more for mistreating cattle on federal lands than for allowing an employee fatality!”);
3. There has been one iteration or another of such reform legislation (usually dubbed the “Protecting America’s Workers Act”) floating around Congress and stalling before it even gets out of Committee; and
4. OSHA proposes penalties on average at a level 50% below the maximum penalty level currently authorized.

Yet, here we are in 2015 with a Republican-controlled House and Senate, and through the backdoor comes a Congressionally-mandated increase to maximum OSHA civil penalties of nearly 80%. A bizarre parting gift by now former Speaker of the House John Boehner, no doubt part of his effort to “clear the barn” for his successor. Color me shocked.

Here are the details. The much publicized two-year bipartisan budget agreement allowed the federal government to remain open and not default on the U.S. debt, but it also contained lesser known (or completely unknown) provisions, including one that allows for a nearly 80% increase in OSHA penalties in the next year, as well as indefinite periodic increases to match the rise of the cost of living in the future.

Specifically, the “Bipartisan Budget Act of 2015” was passed by both houses of Congress and signed into law by President Obama last week (November 2^nd). Section 701 of the Budget Act, entitled “Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015,” gives OSHA the green light to increase penalty amounts to catch up with cost of living adjustments since the last time OSHA’s civil penalties were raised (1990).

The Civil Penalties Adjustment section of the 2015 budget bill was hammered out between Speaker Boehner and the White House with apparently no input from House or Senate members. It provides for a one-time “Catch-up Adjustment” that must be implemented by no later than August 1, 2016. The catch-up adjustment is tied to the percentage rise in the Consumer Price Index (CPI) from the time OSHA last increased its civil penalties in 1990 through November 17, 2015. The actual percentage increase will not be known until next week, but based on recent CPI trends, the increase is expected to be approximately 80%.

Assuming a penalty inflation adjustment of approximately 80%, OSHA will be imminently increasing the maximum civil penalty for alleged Serious violations from $7,000 per violation to approximately $12,000, and for alleged willful or repeat violations from $70,000 per violation to approximately $120,000. After the initial catch-up increase, OSHA is also authorized by the law to continue to adjust penalties upward as the CPI continues to rise year after year. The law does, however, cap the penalty increase at 150%.

The Assistant Secretary of Labor for OSHA, Dr. David Michaels, has long been a proponent of increasing OSHA penalties, expressing (often during his annual pilgrimage to the Hill):

“Unscrupulous employers often consider it more cost effective to pay the minimal OSHA penalty and continue to operate an unsafe workplace than to correct the underlying health and safety program.”

From a logistics standpoint, the bill directs OSHA to promulgate the penalty increases by way of an interim final rule, which allows the changes to become effective immediately upon publication in the Federal Register, with comments by stakeholders to be solicited after the fact. The budget bill also would allow OSHA to increase the penalty by some amount(s) less than the maximum permitted increase, but to do so, OSHA would have to follow a more traditional rulemaking approach. It is inconceivable that OSHA will not jump at the maximum allowable increase, especially given the greater rulemaking burden they would face to raise it by less than the maximum.

As a long-time OSHA defense counsel, I am truly amazed that this legislation was passed. OSHA reform has been one of those hot button issues about which the two sides of the aisle could never find common ground. Indeed, we have watched for years as the proposed Protecting America’s Workers Act legislation has floundered in Congress. Accordingly, I never expected to see a Republican-controlled Congress raise OSHA’s maximum civil penalties at all, let alone nearly doubling them.

Now it will be interesting to see what OSHA does with this new penalty authority. OSHA under the Obama Administration has been very enforcement-centric. It has all but eliminated compliance assistance in favor of enforcement programs. We have even watched OSHA implement creative policy changes to increase minimum penalties and reduce or eliminate permissible penalty reductions. Nevertheless, even with these efforts to drive up penalties, OSHA’s average penalty per Serious violation has remained than $3,000 (i.e., less than half of the maximum penalty OSHA could issue under the law).

So how and to whom will OSHA boost penalties with these new maximum penalty levels? My prediction is that we will most likely see penalties increase significantly for:

• Larger employers;
• Employers whom OSHA views as bad actors (e.g., Severe Violator Enforcement Program cases, and citation packages including multiple willful and repeat violations);
• Violations in certain high emphasis categories (e.g., amputations, temporary workers, and other topics covered by OSHA’s national and local emphasis programs).

OSHA has claimed for years that it does not have “sharp enough teeth” to influence employers’ conduct.  This law has certainly sharpened their teeth; another reason employers need to prepare in advance for an OSHA inspection.  Here is a link to an OSHA Inspection Checklist we prepared to help employers prepare for and manage an OSHA inspection.