civil penalties

Federal OSHA Penalties 101: Stuck in a time warp

cmonforton — Wed, 28 Mar 2012 14:00:00 +0000

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.]

cmonforton Wed, 03/28/2012 - 10:00

Federal OSHA Penalties 101: A look at high-dollar cases

cmonforton — Mon, 26 Mar 2012 16:00:00 +0000

Federal OSHA Penalties 101: A look at high-dollar cases

In October 2009, the Labor Department's Occupational Safety and Health Administration (OSHA) made national headlines when it proposed a record-setting $87 million penalty against BP Products North America Inc. for the company' failure to correct serious safety hazards at its Texas City, Texas refinery. Ten months later, OSHA announced that it reached a settlement with BP regarding some of those violations and penalties, with the firm agreeing to pay $50.6 million.

It's not unusual for the penalty amounts proposed by OSHA to be reduced significantly to a figure eventually paid by the employer. OSHA informally settles many cases with employers by reducing the penalty amount in exchange for the firms' agreement to promptly correct the hazardous conditions.

Some employers prefer to formally contest OSHA's findings and have their cases heard by administrative law judges with the independent Occupational Safety and Health Review Commission (OSHRC) rather than negotiate with OSHA. Through this proceeding a proposed penalty amount may also be modified. (Under the OSH Act, the independent Occupational Safety and Health Review Commission (OSHRC) actually assesses the monetary penalties; OSHA proposes an amount based on parameters set forth in the statute, but the ultimate penalty amount is considered a final order of the OSHRC, not OSHA. Those parameters include a $7,000 maximum for a serious violation, and a $70,000 for a willful or repeated violation.)

Federal OSHA offers on its website, a list of 25 cases with the highest proposed penalty amounts. At the top of the OSHA list is the 2009 case mentioned above involving BP Products North America. It also includes cases from Louisiana, Georgia, Connecticut, Maine, and eight other States. Like the BP case, many of these employers ultimately paid millions of dollars less than the amount initially proposed by OSHA. I've replicated the listing from OSHA's website and created a new document, with a column showing the penalty amount ultimately paid by the employer. The exceptions are three cases that remain in litigation. Of the $230,050,440 million proposed in these 25 high-dollar cases, the penalty amount paid to-date is just under $114 million.

Looking at these record-setting OSHA penalty cases made me curious about the outcome of more typical federal OSHA cases in which monetary penalties are assessed. I requested data from OSHA for all federal inspection cases in which a monetary penalty was proposed in 2006. I asked for the penalty amount proposed, the adjusted penalty (after settlement or OSHRC decision,) amount remitted, and dates for debt collection activities. I decided to use the year 2006 for two primary reasons. First, to allow enough time to pass so that cases contested by the employer would have made their way through the OSHRC litigation process with a decision made on a final penalty amount; and second, to account for employers who arranged with OSHA multi-year payment plans to pay off their penalty. (In a recent fatality case in my hometown, Jetka Steel will be making installment payments on its OSHA penalty through June 2014.)

The raw data of the federal OSHA penalty data for 2006 (as of January 2012) is posted here. [Be forewarned, its a spreadsheet with more than 70,000 entries.] In brief it reveals the following:

There were 25,328 inspections by federal OSHA in which a monetary penalty was proposed in 2006. Those proposed penalties totaled $119,840,965.18.
Through informal and formal settlements and administrative law decisions, the penalty amount owed was reduced to $75,668,973.19, or about 63% of the amount initially proposed.

To-date, $63,514,340.66 (or 84% of the amount owed) has been paid to the U.S. Treasury.

The total penalty amounts paid in 2006 ranged from as little as $1 (in a worker-fatality case) to $2.41 million. The $1 penalty was assessed to Duron and Duron Concrete Construction of Corpus Christi, TX following the fatal injury incident on April 26, 2006 of one of the firm's owners. The $2.41 million penalty was paid by BP North American Products for violations at its facility in Oregon, Ohio.

More on the $119.8 million in penalties proposed by OSHA in 2006 in a future post. Look later this week for part two of "Federal OSHA Penalties 101: Stuck in a time warp.

cmonforton Mon, 03/26/2012 - 12:00