Federal OSHA Penalties 101: Stuck in a time warp

[Update below (7/14/14)]

In 1991, Dan Quayle was US Vice President, General Norman Schwarzkopf led the 100-hour assault known as Operation Desert Storm, and Phil Collins had the record of the year. It was the last (and only) time that the US Congress amended the Occupational Safety and Health Act (OSH Act) to update the monetary penalty amounts that could be assessed to employers who violate worker safety regulations. These changes were just a tiny part of the massive Omnibus Budget Reconcilation Act of 1990, but were significant in that they increased OSHA's maximum penalty amounts seven-fold.

What was missing from that improvement however was authorization for OSHA to regularly update for inflation these penalty amounts. The maximum OSHA penalty for a serious violation in 1991 was $7,000; in 2011, it remains $7,000. In contrast, other agencies, such as the Mine Safety and Health Administration (MSHA), EPA, FCC, are were required beginning in 1996 to adjust every four years their penalty amounts to the Consumer Price Index (CPI). OSHA penalty amounts (and the IRSs) were intentionally excluded from this requirement.

It's difficult to think of any product or service price, or fee that isn't adjusted for inflation. This includes annual salaries for Members of Congress which have increased by 80% since 1991 (from $96,600 to $174,000.) OSHA penalties are an anomoly. They are stuck in a 1991 time warp. A bill introduced by Congresswoman Lynn Woolsey (D-CA) would update OSHA's penalty amounts and require the every four-year adjustment based on the CPI.

Penalties paid by employers for OSHA citations are deposited in the general fund of the U.S. Treasury. As I mentioned in part one of Federal OSHA Penalties 101, about $63 million in penalties assessed in 2006 were paid to the U.S. Treasury. Had that amount simply been adjusted for inflation, that could have been nearly $92 million deposited in the Treasury toward deficit reduction. These dollars are not a mandatory tax, or a cost-of-doing business. No, they are paid to penalize a business for lawbreaking. I'd prefer those dollars as a piece of a national deficit reduction plan, than the one proposed by Cong. Paul Ryan (R-WI) that puts the burden on children and the poor.

Worker safety advocates have long recognized the inadequacy of OSHA penalties to deter employers from violating well-recognized safety regulations like machine guarding, fall protection, and shored trenches. Without a change to the OSH Act itself, there are only modest steps the OSHA director can take to increase the penalty amount proposed by the agency. The law sets, for example, a maximum penalty amount of $7,000 for a serious violation, but also requires that the size of the business, the gravity of the violation, the history of previous violations and the employer's good faith be taken into consideration. As a result, and because of other policy decisions made by OSHA, the average penalty amount proposed in 2010 for a serious violation was $1,052. A far cry from the $7,000 statutorily allowed maximum.

Nearly two years ago, OSHA chief David Michaels announced that the agency was implementing some policy changes to modify the way the penalty amounts are calculated. Despite the constraints of the $7,000 statutory maximum , he expected the average penalty amount for a serious violation to increase at least three-fold.

I'll be one of the people looking closely at the release next month of the AFL-CIO's annual "Death on the Job Report," for its breakdown of OSHA's penalties proposed. The figure for average federal OSHA penalty for a serious violation should reflect a year of experience under the agency's revised penalty calculation policy. These changes may in fact result in a substantial increase in the average penalty proposed, but as Dr. Michaels noted, it is "no substitute for the meaningful and substantial penalty changes" such as those sponsored by Congresswoman Woolsey. He added: "OSHA inspections and penalties must be large enough to discourage employers from cutting corners or underfunding safety programs to save a few dollars."

And I'd add the following: It's Congress' job to pull OSHA penalties out of their time warp, and make them high enough to force an employer to think twice before putting his workers' lives at risk.

[Update (7/14/14):  In FY 2009, before the revised penalty calculation policy was put in place, the average penalty issued by federal OSHA for a serious violation was $960.   The average in FY 2013 was $1895.]



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"These dollars are not a mandatory tax, or a cost-of-doing business. No, they are paid to penalize a business for lawbreaking. I'd prefer those dollars as a piece of a national deficit reduction plan, than the one proposed by Cong. Paul Ryan (R-WI) that puts the burden on children and the poor."

YES!! This is the same issue that comes up with speed cameras: People complain that local governments are balancing their budgets on the backs of drivers, forgetting that if they don't break the law they won't get a ticket. Of course, the local governments need to assume that speed-camera revenue will fall over time as drivers learn to slow down -- but they can see savings from reduced emergency response and medical costs from fewer car crashes. And that's in addition to fewer traffic fatalities, which is the main goal.