November 3, 2015, gave employers a surprise as part of the bipartisan Federal Budget Agreement (“the Agreement”). The Agreement permitted the Occupational Safety and Health Administration (“OSHA”) to increase its civil penalties for the first time since 1990. What does this mean for construction industry employers? The budget deal could mean an increase in OSHA’s civil penalties of up to 82%.
The “Catch-Up” Increase
While this larger increase would be a one-time increase masked as a “catch-up” increase, the repercussions for the construction industry could be large. The specifics of the increase are to abide by the Consumer Price Index, but the increase is expected to be as large as 82%, assuming OSHA applies the maximum increase allowed.
Sources say that the current maximum $70,000 fine for Repeat and Willful violations could grow to a maximum of $125,438. Additionally, the maximum $7,000 fine for Serious and Failure-to-Abate violations could reach as high as $12,744 per offense.
This one-time “catch-up” increase is intended to permit OSHA to “catch up” on lost revenues it could have gained had it not been prohibited from increasing. However, after this initial increase is implemented, OSHA will also be permitted to increase maximum penalties annually based on the rate of inflation for the prior fiscal year.
These changes are set to go into effect by August 1, 2016. OSHA is required to publish an interim final rule by July 1, 2016. At that time, OSHA will disclose how much the agency is going to increase its fines based on the leeway it has been given.
Current OSHA Requirements and Fines
OSHA requires employers to furnish its employees a place of employment that is free from recognized hazards that cause or might cause death or serious physical harm to its employees. It further requires employers to comply with occupational safety and health standards that are put into effect by the Occupational Safety and Health Act of 1970.
The penalties OSHA is able to give for violations are broken out into multiple types. Serious violations can range in type, but will often result in a civil penalty of up to $7,000 for each serious violation. Other violations that carry heftier fines include those that are willful or repeat violations, such as when one is convicted of knowingly making false statements, records, or other documents or representations, resulting in a fine of $10,000. Another willful violation is when an employer willfully violates an OSHA standard as outlined in the Occupational Health and Safety Act resulting in a maximum fine of $10,000. Repeat violations along these lines can result in a maximum fine of $20,000.
When an employer fails to abate prior violations for which OSHA has required the employer remedy, the employer may face fines of up to $7,000 for each day during which the failure to fix the violation continues. When an employer has a non-serious violation, including violation of the posting requirements, or a person who gives advance notice of an inspection, can face penalties ranging anywhere from maximums of $1,000 to $7,000 for each violation.
How Will This Affect the Construction Industry?
It is important to note that OSHA fines come from various actions, and a company’s number of accidents likely wont be a sign of whether they’ll be affected by the increase. Many sources have anticipated that this fine increase is most likely to affect employers who operate in multiple locations, those in the construction industry where safety may not be as prominent, the manufacturing industry, in industries and with employers who have high turnover, and those employers who are not as sophisticated regarding safety issues.
Multi-location employers are at greater risk because the enforcement agency may be able to generalize the violations across the separate locations. Construction industry employers are at risk because of the types of work involved, and the particular focus among safety inspectors on the construction industry. Because construction workers often deal with heavy and large equipment, large sites, challenging work spaces, and performance that spans over longer periods of time, the opportunities for OSHA violations are simply multiplied. The construction industry also suffers like other industries that experience high turnover, because that turnover demands more training for replacement workers. When training is needed, time may not always seem available, especially if in the middle of an ongoing project.
The manufacturing industry is at risk because, as in the construction industry, the type of work conducted may tend to be more dangerous or hazardous, and extensive training is often necessary. Employers who lack sophistication regarding safety issues may be small business owners or even larger businesses that put safety regulations on the back burner to get the job done in an efficient manner, or those unaware of the many OSHA requirements and standards for safety in the workplace.
In anticipation of the increasing fine structure, construction companies should take this opportunity to review their safety strategies for avoiding violations. If their policies and procedures need to be re-worked, this would be the time to do so. Periodic policy reviews should be a regular occurrence, and not just a one-time thing. This increase, and Congress’ permission for OSHA to have continued increases in its fines, is just one more form of encouragement for employers to ensure their employees and their workplaces comply with OSHA standards and regulations.