By Lindsay DiSalvo and Eric J. Conn
As of January 15, 2021, civil penalties for workplace safety and health violations issued by federal OSHA will increase by about 1.2%. This increase reflects the annual inflation adjustment to civil monetary penalties initiated back in 2016. As in prior years, though the increase seems minimal, the impact of these annual increases in the aggregate is significant, as OSHA’s civil penalty authority has nearly doubled from what it was just 5 years ago.
How the Annual Penalty Adjustments Started
Over the past several years, we have seen civil monetary penalty increases of about 1%-2% each year, but this all started with a huge spike in permissible penalty amounts through a statute covertly passed during the Obama Administration. Specifically, in an effort to avert a government shutdown, outgoing Speaker of the House John Boehner and President Barack Obama made a backroom deal that ultimately took the form of the Bipartisan Budget Act of 2015. That measure included the “Federal Civil Penalties Inflation Adjustment Improvements Act” – a significant and controversial statute that was essentially unknown (including by the folks within OSHA) and saw exactly zero seconds of debate on the floor.
The Act mandated that essentially all executive agencies increase their maximum civil penalty authority by the percent increase to the Consumer Price Index since the last time the agencies had raised their penalties. As OSHA’s civil penalty authority had been stagnant for 25 years, the “catch-up” penalty increase was the most significant at OSHA. Per the formula included in the statute, 
OSHA was required to increase its penalties on August 1, 2016 by nearly 80%.
In addition to the one-time 80% “catch up” increase that went into effect on August 1, 2016, the Federal Civil Penalties Inflation Adjustment Improvements Act required that agencies make automatic annual updates thereafter (by January 15th each year) to civil penalties based on inflation. OSHA made its first automatic annual update on January 13, 2017, just prior to President Trump’s inauguration.
2021 Civil Penalty Adjustments
Many expected that after Donald Trump became President in 2017 his Administration, along with a Republican-controlled Senate and House of Representatives, would advance a law to halt the annual automatic increases. However, to our knowledge, no such law was ever even proposed. Thus, on January 13, 2021, like each prior year during the Trump Administration, OSHA issued its latest Final Rule to execute another annual penalty increase, this time by just over 1%:
As provided by the Inflation Adjustment Act, the increased penalty levels apply to any penalties assessed after the effective date of the Final Rule. Accordingly, for citations issued on or after January 15, 2021, the higher penalty authority will apply even if the citations relate to conduct or conditions that existed before that date.
What is the Practical Impact on Employers?
The impact of the annual increases on Other-than-Serious and Serious violations has been pretty negligible outside of the initial substantial rise in 2016. Max civil penalty authority for Other-than-Serious and Serious violations only increased this year by $159, from $13,494 per violation to $13,563 per violation. The increase, however, is more meaningful for Repeat and Willful violations, for which the gross dollar increases are measured in the thousands of dollars. Repeat and Willful maximum penalties will increase by $1,585 on January 15th. All told, since 2016, the max penalty for Willful and Repeat violations has jumped by almost $70,000, from $70,000 per violation to $136,532 now.
It is important to note that these penalty increases represent the maximum penalty amounts OSHA is permitted to issue. Although we have seen OSHA exercise its discretion to issue penalties at the maximum or close to the maximum penalty amount in certain situations, more often than not, OSHA does not exercise its full penalty authority. There are numerous penalty reduction factors that OSHA can and does apply before citations and proposed penalties are issued. For example, small employers usually get a “size discount,” employers with prior “in-compliance” OSHA inspections get a “good history discount,” and employers who engage with OSHA in good faith during the inspection can get a “good faith” discount.
Thus, despite an increase in the max penalty for Serious violations from $7,000 in 2016 to $13,563 in 2021, the average penalty per Serious violation last year was only $5,427. Note, however, in 2018, the average penalty per Serious violation, which had remained in the $3,000 range even after the 80% bump in August 2016, increased to over $5,000, and has continued to climb each year since.
OSHA is much more likely to use its maximum penalty authority when it is citing large employers with a history of violations, or when there has been a serious injury or a fatality. Even in these cases, historically, it has been hard for OSHA to issue a ton of significant enforcement actions. That has changed with the new penalty authority.
In FY 2017, the first full year after the 80% catch-up penalty increase, we saw a 40% increase in OSHA citation packages with a cumulative penalty greater than $100,000. Although the number of cases has dropped in subsequent years during Trump’s presidency, particularly in 2020 (mostly due to the pandemic), we expect to see a significant uptick again during the Biden Administration.
State OSH Programs Must Also Impose Increased Penalties
The “Federal Civil Penalties Inflation Adjustment Improvements Act” did not mandate that the 22 State OSH Programs (i.e., Cal/OSHA, VOSH, etc.) increase their civil monetary penalties. But fed OSHA requires State OSH Programs be just as effective and, pursuant to this standard, notified them that it expects they adopt penalty levels at least as high as fed OSHA’s new maximum penalty levels to maintain their approved status. Specifically, OSHA gave the following guidance to the states just days before President Trump took office in its 2017 Final Rule adjusting OSHA’s civil penalties, explaining:
“OSHA-approved State Plans must have maximum and minimum penalty levels that are at least as effective as federal OSHA’s,” and OSHA expressed that this includes penalties that match the penalty amounts set by federal OSHA. “Therefore, all State Plans must increase their maximum and minimum penalty levels to be at least as high as OSHA’s initial catch-up maximum and minimum penalty levels in 29 CFR 1903.15(d), and must thereafter increase these maximums and minimums based on inflation.”
Accordingly, State OSH Programs that currently have civil monetary penalties lower than the maximums that will be used by Fed OSHA as of January 15th will be expected to raise their penalty levels. The states resistant to these changes were hopeful that the Trump Administration would reverse this requirement and permit State OSH Programs to set penalty levels independently, but no such directive was issued, and such is unlikely to come from OSHA under a Biden Administration.