New maximum fines go into effect for OSHA in August 2016. Here are the new maximums and a review on how OSHA calculates fines:
As of Aug. 1, 2016, the new maximum amounts for OSHA fines are:
- $12,741 for serious and other-than-serious violations, up from $7,000
- $124,709 for repeat or willful violations, up from $70,000, and
- $12,741 per day for failure-to-abate, up from $7,000.
That’s a 78.2% increase to catch up with inflation since the last time OSHA maximum fines were increased in 1990.
(Repeat and willful violations also have a new minimum amount: $8,908.)
Federal OSHA can now increase maximum fines each year based on inflation. This change was included in the 2016 federal budget law.
States with their own OSHAs have six months to adopt maximum penalties that are “at least as effective” as federal OSHA.
4 factors and which one is most important
Four factors go into calculating exact fines for OSHA violations:
- gravity of the violation
- size of the company
- good faith effort to comply, and
- history of previous violations.
Gravity is the primary factor.
OSHA’s Field Operations Manual for its inspectors lays out how all of this works. The agency says it will issue an update of the FOM before the new maximum fines take effect. OSHA also has said that decreases for company size will remain. The following guidelines are based on the existing FOM.
Before any other calculations are made, the gravity of each individual violation is determined:
- high gravity violations carried the maximum amount for serious, repeat and willful violations
- moderate gravity carried penalties between 57% and 86% of the allowable maximum, and
- low gravity carried penalties of 43% to 57% of maximum.
Four years ago, OSHA increased the time frame for history of violations from three to five years. OSHA can reduce penalties by 10% for no history, and increase them by 10% for having previous fines.
A good-faith reduction of up to 25% is possible if the company has a written safety and health management system. Where people who speak limited or no English work, inspectors must consider whether the safety management system addresses the needs of those workers. If a safety management system exists but there are some deficiencies, the fine can still be reduced 15%.
Smaller businesses also can receive a break on their total OSHA fines:
- 1-25 employees: 60% reduction
- 26-100 employees: 30% reduction
- 101-250 employees: 10% reduction, and
- 251 or more: none.
Serious willful violations have slightly different reductions:
- 10 or fewer: 80%
- 11-20: 60%
- 21-30: 50%
- 31-40: 40%
- 41-50: 30%
- 51-100: 20%
- 101-250: 10%, and
- 251 or more: none.
(A company’s size is based on all of its workplaces nationwide.)
OSHA can also reduce penalties by another 15% if companies immediately correct violations, the so-called Quick Fix reduction.
OSHA calculates fine reductions serially, that is, one at a time. An example:
- Start with a moderate gravity serious violation (71% of full amount): $8,908
- Reduce 10% for no prior history: $8,017
- Then reduce 15% for good faith: $6,815
- Then reduce 15% for quick fix: $5,793
- Then reduce 30% for size: $4,055 (final fine).
There are restrictions on penalty reductions:
- Repeat violations are reduced only for company size
- Willful violations are reduced only for company size and history
- High gravity serious violations are reduced only for company size and history
- When a willful, repeat or failure-to-abate violation is issued, a good faith reduction isn’t available for any of the violations
- Quick fix reductions aren’t issued when there is a fatality or serious injury, and
- Quick fix reductions aren’t issued when blatant violations are easily corrected (examples: turning on a ventilation system to reduce exposure to a hazardous atmosphere, or putting on hard hats that are readily available at the workplace).
When any changes are announced in the way fines are calculated in the FOM revisions, we’ll let you know.
Negotiating fine amounts with OSHA can often bring the penalties even lower.
In a recent report, the Center for Progressive Reform criticized OSHA’s penalty reductions. CPR found in worker death cases, there was a 36% reduction between the initial median penalty and final median penalty. In cases involving willful violations resulting from employee complaints, final penalties were 30% lower than initial ones.
In our example from above, a 1/3 reduction in the $4,055 would reduce that fine to $2,717.
Analysis: $12,400 or $2,700?
In a U.S. Department of Labor blog post, Sharon Block, deputy assistant secretary for policy, writes the increase in OSHA penalties will “strengthen their deterrent effect.” Penalties also create “a more level playing field for responsible employers who have to compete with the minority who try to save money by evading the law,” Block writes.
Yet, if the penalty calculation guidelines in the FOM remain mostly the same as they have been, what might appear to be a $12,471 OSHA fine might wind up being a $2,717 fine.
Discussing the new maximum fines at the American Society of Safety Engineers’ Safety 2016 conference in Atlanta in June, OSHA chief David Michaels noted that his agency’s fines are relatively small compared to those of other federal agencies. He pointed to a money.com headline, “Amazon fined almost nothing for failing to report workplace injuries.” Amazon’s penalty was $7,000, certainly a drop in the bucket for the warehouse giant.
Yet, year after year, lawmakers in Congress grill OSHA representatives, asking about fines for “frivolous” violations, and claiming that OSHA is putting companies out of work.
So, which one is it? Are OSHA fines too low to deter bad-actor companies from saving money by taking safety shortcuts? Or is OSHA issuing significant fines for minor violations and putting small companies out of business?
Here’s what it comes down to: OSHA has to walk a fine line between deterrence and putting companies out of business.
And it’s sometimes said that when neither side is happy, you must be doing something right.
Last year we asked Safety News Alert readers whether OSHA fines were too high, too low or just about right: 63% chose just about right, 25% said too low and 11% said too high.
We’ve asked the same question several times in previous years and the results are usually in that neighborhood. That seems to say safety pros think OSHA has effectively straddled the line.
Time will tell whether the new, increased OSHA fine amounts will have the desired effect.
Want to weigh in on how big or small OSHA fines are? You can do that in the comments.