With President Barack Obama's signing of the latest federal budget Nov. 2, the first increase in fines for violations of Occupational Safety and Health codes in 25 years is now law. The landmark addition to next year's budget signals a reversal of policy from the Federal Civil Penalties Inflation Adjustment Act of 1990, which prevented OSHA from increasing fines with the rate of inflation.
That and much more is slated to change next year, when the measures are set to go into effect. As noted by Construction Dive, the Consumer Price Index, which serves as an effective barometer of historical inflation, has risen about 82 percent since 1990. Since this was the last year that OSHA fines increased, that means penalties for safety violations could nearly double by Aug. 2016. This has wide-reaching implications for the construction industry, including the new need for more effective construction safety systems.
"Maximum fines could total as much as $127,400 for the most serious violations."
Industry experts surprised
According to the Wall Street Journal, business leaders from the manufacturing and skilled labor industry were "caught by surprise" by the fine increase, which could cause penalties for the worst offenses to total as much as $127,400. This is an increase from the previous maximum fine of $70,000, according to information from the National Law Review. Failure to abate penalties, which are distributed per day if an employer is found to continuously violate safety and health codes, could reach up to $12,740 daily. The previous daily maximum for this violation was $7,000. Pending a final rulemaking procedure, these fines may be reduced slightly before going into full effect in Aug. 2016. Still, many industry spokespeople are predicting detrimental effects for small contractors and the construction industry in general.
"It's very difficult to defend the present penalty structure," attorney Baruch Fellner told the Wall Street Journal. "If you look at OSHA penalties in the context of other programs, they are in fact for individual items minuscule comparatively speaking. For larger corporations it can be a cost of doing business."
While Fellner said he hoped the new provisions would reduce the practice of unnecessary heaping of multiple, small infractions on violators with the aim of achieving a larger overall dollar amount, others questioned the timing of the new fine structure.
"This has the potential to have a pretty significant impact," Rob Matuga, of the National Association of Homebuilders, told the Wall Street Journal. "Our housing industry is just making a comeback."
Support from stakeholders
A few in the industry, though, have said they are in favor of the rate increase. According to information from the U.S. Bureau of Labor Statistics, fatalities in the construction industry accounted for more than 20 percent of all worker deaths in any occupation. The average fine for incidents resulting in the death of a worker was $7,000 in 2014, although this amount was typically reduced to around $5,500 after litigation, according to labor union AFL-CIO. Under the new provisions, this average fine would increase to approximately $12,500. The union's director of safety and health, Peg Seminario, said the organization is in favor of the higher penalty.
"It's progress... It's bringing the penalties for worker-safety violations up to date," Seminario said.
"In 2014, the average fine for incidents resulting in a worker's death was $7,000."
Debate on this issue had become considerably heated, especially during hearings prior to the bill's signing. In a meeting before the House Committee on Education and the Workforce, Assistant Secretary of Labor for OSHA David Michaels said in testimony that the fine increases and tracking them with inflation were necessary to curb what he perceived as widespread and unjust business practices.
"Simply put, OSHA penalties must be increased to provide a real disincentive for employers accepting injuries and worker deaths as a cost of doing business," Michaels said. This prompted a swift rebuttal from Brian Turmail, senior executive director of public affairs for the Associated General Contractors of America, who was present at the hearing.
"There's no owner of a business that we're aware of, and certainly not our members, who would willingly put his workers in harm's way," Turmail said. Those views were echoed by Robert Poole, the safety director at HITT Contracting.
"It's not true," Poole said. "Thirty years ago I'd say that would be an accurate statement, but those days are gone. It's hard for companies to operate that way now."
Even if these fee increases are slightly mitigated in the further debate of these new regulations, the need for effective and functional construction safety products is very real and represents a huge potential for significant return on investment. Although safety and the health of every employee is always top of mind for every supervisor, contractor or manager, using the right tools can make all the difference when it comes to securing and maintaining a zero-incident workplace.