In an effort to make civil monetary penalties more effective, last year Congress passed the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. As part of this act, penalties under the Occupation Safety and Health Act (OSH Act), in other words those enforced by the Occupational Safety and Health Administration (OSHA), have been increased beginning Aug. 1, 2016.
To find out more about the OSHA fines increase and its implications for HVAC contractors, read on below.
WHAT OSHA FINES INCREASE IN 2016
In accordance with the Act, the Department of Labor (DOL) has adjusted penalties for its agencies to account for inflation. This includes the civil penalties that OSHA can impose, as specified in Section 17 of the OSH Act.
As of Aug. 1, OSHA penalties, which have not been raised in over 25 years, have been adjusted as follows:
• Maximum penalties for serious violations will be raised from $7,000 to $12,471 per violation.
• Maximum penalties for willful or repeated violations will increase from $70,000 to $124,709 per violation.
• Maximum penalties for failure to abate will increase in the same way as the maximum penalties for serious violations.
The adjustment in penalties constitutes a 78 percent increase which was deemed necessary because previously, despite legislative attempts, a hard cap placed on the maximum amounts stopped them from being increased or adjusted. Going forward, OSHA is expected to continue adjusting its penalties on a yearly basis, based on the Consumer Price Index.
WHY THE INCREASE?
By adjusting for inflation, the DOL expects to bring in another $140 million on a yearly basis. At the same time, this figure is a projection, since the department's main aim is by far not one of collecting more money.
The main incentive behind the Act and these adjustments is to create a more level playing field for honest employers who do not cut costs in complying with OSHA standards. It is meant to allow responsible employers to compete more successfully with those who do not care for their workers and do not abide by the law. As such, the adjustment is meant to have a deterrent effect which in turn should increase employer compliance with OSHA standards.
Or as a blog post by the DOL itself states: "As always, we at the Labor Department define success as encouraging employers to comply with the law, not by the amount of penalties we assess, so we stand ready to continue to provide technical assistance to all employers who want to do the right thing."
IMPLICATIONS FOR CONTRACTORS
Outdated penalties which have not been adjusted are problematic, because they do not reflect the current cost of living. As such, they are not taken seriously by employers who are prone to violate the law.
Much like the surety bond that contractors need for licensing, increased maximum penalties can also increase the quality of contractors’ work as well as the quality and security of the work environment they create for their workers.
Becoming bonded has often been associated with fewer contractors being careless when it comes to complying with state regulations because a claim on a surety bond can have a bad effect on one’s business. Complying with regulations is much easier than dealing with a claim.
Much in the same way, contractors and HVAC contractors who have employees may see themselves naturally applying greater scrutiny once fines are adjusted. They may become more careful to adhere to OSHA standards and altogether raise the quality of the work they provide. Potentially, this can help many contractors fill in gaps in the work process that were previously disregarded due to lack of clear incentive.
WHAT DO YOU THINK?
As a HVAC contractor or as a general contractor, what do you think of the OSHA fines increase? Do you think the increase can achieve the aim of leveling the playing field and prompting contractors to pay more attention to security details? Leave a comment below; we'd like to hear your thoughts.