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Employers whose workplace safety incidents are currently being investigated by the U.S. Occupational Safety and Health Administration are likely to face sharply higher fines even though the agency's penalty structure doesn't officially change until Aug. 1.
The Bipartisan Budget Act of 2015, signed by President Barack Obama in November 2015, required all federal agencies with civil monetary penalties covered by the statute, such as OSHA, to update their fines.
Starting Aug. 1, OSHA's civil penalty structure will increase to reflect the change in the consumer price index since the last pre-1996 update to the structure up to October 2015, with the agency required to adjust its penalties annually based on the index.
The bill permits OSHA to increase maximum fines by up to 78%, meaning that the existing $70,000 cap for repeat and willful violations could increase to $124,709, while the top fines for serious and other-than-serious violations could rise to $12,471 from the current $7,000 maximum.
However, employers inspected before the Aug. 1 effective date but receiving OSHA citations after that date will be subject to the adjusted civil penalties, according to the agency. This means employers being investigated as far back as Feb. 1 could face the higher fines because OSHA can take up to six months after the start of an inspection to issue citations and propose penalties, experts say.
“The employers who will be most caught off guard are the ones who are currently being inspected but may receive citations in August or thereafter,” said Nickole Winnett, Reston, Virginia-based principal, Jackson Lewis P.C.
OSHA will likely apply the higher penalties to these current inspections, given that David Michaels, assistant secretary of Labor for Occupational Safety and Health, advocated strongly for the revised penalty structure to send a message that workplace safety incidents are not just a cost of doing business and that employers are going to suffer a financial impact for their violations, experts say.
“I do believe that they have full intentions of issuing the higher penalties once the final rule is implemented, even though inspections might be going on currently that aren't technically subject to that rule yet,” Ms. Winnett said.
“OSHA has always felt they're kind of behind the times in terms of penalty structure,” especially in comparison to other federal agencies such as the U.S. Environmental Protection Agency, which may assess civil administrative penalties of up to $37,500 per day per violation, said Patrick Joyce, Chicago-based associate attorney with Seyfarth Shaw L.L.P.
A meaningful increase to the financial penalties “makes sense because what was $7,000 in 1990 doesn't have the same impact in 2016,” said Wes Scott, director of consulting services at the National Safety Council in Itasca, Illinois.
Mr. Scott expressed concern about future adjustments based on the CPI if the index falls rather than increases, but Ms. Winnett said it is unlikely that the fines would be lowered in that scenario.
“In theory it could, but I've never known the government to decrease penalties even during a significant downturn in the economy,” she said. “I think likely what would happen in that situation is there just wouldn't be an increase.”
Employers currently undergoing inspections cannot force OSHA to complete its examinations faster to avoid the higher penalties, but they should respond as quickly as possible to any agency requests for documentation, interviews and site visits, Ms. Winnett said.
“If you take three or four weeks to respond, you're just pushing that timeline further back,” she said.
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