By Rod Smith, Pat Miller, Chuck Newcom, and Matt Morrison

For the first time in 25 years, OSHA fines likely will be increasing. The change will take effect no later than August 1, 2016, and each year thereafter. A relatively obscure provision in the 2015 budget bill passed by Congress, and signed into law by President Obama on Monday, November 2, 2015, allows OSHA fines to keep pace with inflation. (Bipartisan Budget Act of 2015, H.R. 1314, Sec. 701)

Until now, OSHA was exempt from a requirement that federal agencies increase fines to mirror inflation. However, thanks to the new “Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015,” OSHA is now allowed to catch-up with the past 25 years of inflation and increase its penalties accordingly. The allowed increase is the difference between the Consumer Price Index (“CPI”) from October 1990 and the unreleased CPI of October 2015. Using the CPI for September 2015 as a guide, it can be expected that the increase will be almost 80%. This means the current maximum fine of $7,000 for “Other-than-Serious” and “Serious” violations could increase to nearly $12,500. More significantly, penalties for “Repeat” or “Willful” violations could increase from $70,000 to nearly $125,000. Final penalty amounts will be determined through a rulemaking process to be completed no later than August 1, 2016.

While the new law gives OSHA the discretion not to increase the fines along these lines, we fully expect it to do so, as the Agency has been advocating for higher penalties for years. While the importance of protecting a company’s OSHA record to avoid potential repeat citations down the road will remain, the financial impact of an OSHA citation will now become more significant, especially for small employers. For now, the new requirements only apply to states under federal OSHA jurisdiction, including Colorado.  However, states that operate their own OSHA programs, called “state plans,” are expected to follow suit. These new increases took many health and safety professionals by surprise. The proposed changes were not widely publicized and, as noted, the final bill was buried in the 1600 page federal budget. The battleground may now shift to the required rulemaking process, or even litigation. We will provide updates as they become available.

Rod Smith, Pat Miller, Chuck Newcom and Matt Morrison are part of Sherman & Howard’s Labor & Employment Law Department. They routinely appear before the federal Occupational Safety and Health Review Commission, the federal Mine Safety and Health Review Commission, and state occupational safety and health boards.

Sherman & Howard L.L.C. has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation and does not create an attorney-client relationship between any reader and the Firm.

©2015 Sherman & Howard L.L.C.                                                                                     November 4, 2015