Safety professionals who have been seeking a stronger financial incentive to help make workplace safety a top priority now have one. In the wake of a steady stream of workplace safety violations, the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015, (hereafter The 2015 Act, outlined here), places a heavy thumb on the scale in favor of workplace safety by enabling OSHA to increase the cost of citations to employers for safety violations.
Let’s look at how The 2015 Act may affect your business and what you can do to avoid the new penalties.
What are the Specific Citation-Related Changes?
Employer costs incurred by both serious citations and willful violations will be affected by The 2015 Act in two ways. According to the Federal Office of Management and Budget memorandum of February 24, 2016, “The 2015 Act requires agencies to: (1) adjust the level of civil monetary penalties with an initial "catch-up" adjustment through an interim final rulemaking (IPR); and (2) make subsequent annual adjustments for inflation.”
That’s right. Employers cited by OSHA for either type of violation will see citation-related monetary penalties skyrocket by about 78 to 80 percent in August 2016. That is the so-called “catch-up” adjustment. After the initial spike in these penalties, they will continue to rise annually along the lines of inflation adjustments.
Here's how OSHA’s penalties are changing: a serious citation of $7,000, (the current maximum fine), may now be $12,471 per violation and a $70,000 willful violation, (the current maximum fine), may now be $124,709 per violation.
And, that’s only until the next annual adjustment.
Why the New Penalties?
The 2015 Act accomplishes two things: it enhances the financial incentive for employers to make workplace safety a priority at the company and it gives OSHA the ability to raise penalties annually.
The Federal budget bill, signed into law in November of 2015, included The 2015 Act, largely because OSHA’s violation penalties had not been allowed to increase since 1990. The 2015 Act allows OSHA to do what many federal agencies have had the power to do—institute annual cost-of-living increases for fines.
OSHA's David Michaels has advocated for this power before as a way to incentivize those employers whom he referred to as “unscrupulous”—those who look narrowly at their bottom lines, rather than consider workers’ safety—to improve their safety records.
When Will the New Increased Penalties Kick In?
OSHA reports that the new fines start August 2, 2016, with details to be released in an Interim Final Rule by July 1 in the Federal Register.
- Note that you are not necessarily protected from the increased fines just because OSHA’s visit took place prior to August 2. Since OSHA may take up to six months after an inspection to issue fines, businesses may pay the larger fines if the fines are issued on or after August 2.
How Will New Increased Penalty Costs Affect Employers?
OSHA’s new citation-related costs will affect every business, regardless of size or state. OSHA adds that, “States that operate their own Occupational Safety and Health Plans are required to adopt maximum penalty levels that are at least as effective as Federal OSHA's.”
How Might a Business Avoid the New Penalties?
Savvy employers understand the two-pronged case for workplace safety:
- On the one hand, there is a vital need to protect workers, who are generally the company’s largest asset. Not only is it the right thing to do, but it is also required to comply with OSHA's safety requirements.
- On the other hand, faulty workplace safety affects the company’s bottom line. As we have reported in our blog, there are significant direct and indirect costs associated with ignoring workplace safety.
Add together the new "catch-up" hikes in fines and both the direct and indirect costs of ignoring workplace safety, and the business case for protecting the health and safety of your employees becomes weighty indeed.
Compared to the costs of injuries, damaged property, and the new increased violation penalties, an investment in work place safety is the much smarter financial choice. Not only does it keep your business in compliance with OSHA’s guidelines, but it also ensures the financial sustainability of your enterprise.
Contact us at Wise Businessware for efficient, cost-effective, and current best practices for workplace health and safety programs, scaled to suit your business needs.