Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law

The Changing Landscape of OSHA Enforcement and Penalty Calculations

Josh Johnson, Gentry LockeFor this week’s Guest Post Friday here at Construction Law Musings, we welcome Josh Johnson. Josh is a friend and a litigation attorney at Gentry Locke Rakes & Moore, LLP in Roanoke, Virginia. He practices in several areas, including construction law. Josh graduated from the University of Virginia School of Law in 2005, and he has been associated with Gentry Locke since 2007. Josh has represented large and small businesses in OSHA matters in various locations in the Commonwealth, and he has represented owners, contractors, subcontractors, sureties, architects and engineers in all manner of construction litigation.

OSHA remains on the front lines of the political debate between pro-workplace safety advocates and pro-business advocates. Under the Obama administration, OSHA has received more prominence and financial support than under previous administrations. As of last Fall, OSHA’s penalty framework was revised to increase penalties. OSHA and its supporters argue that these changes were necessary to enforce compliance and to encourage worker safety; they also argue that the old penalty framework was outdated. OSHA’s detractors argue that the increased penalties and enforcement threaten jobs and hurt businesses in an already tough economy.

In February 2009, the Obama administration presented its budget blueprint, and it sought to increase funding for OSHA, “enabling it to vigorously enforce workplace safety laws.”

In 2010, OSHA indicated that it would be taking steps to create adequate incentives to increase compliance with OSHA’s requirements. OSHA determined that the best way to do so would be through higher penalties and more aggressive, targeted enforcement.

Then, effective October 1, 2010, OSHA made several changes to its penalty calculation system. According to OSHA, these monetary penalties had only been increased once in the last 40 years and those increases occurred back in 1990.

The OSHA penalty calculation system is an interesting and logical computation. When OSHA discovers a violation, it initially cites the employer with a penalty that could be decreased if the employer meets certain criteria. These criteria can have a large impact on the amount of the penalty. In the past, OSHA generally (with some notable exceptions) reduced penalties based on the following criteria:

1. History Reduction. Employers who had not been cited by OSHA for any serious, willful or repeated violations within the past three years receive a reduction of 10%.

2. Good Faith. An employer who has shown “good faith” could receive a penalty reduction of up to 25%. There are a number of factors that go into the determination of whether an employer has shown good faith.

3. Size Reduction. OSHA used to decrease its penalty by 60% for employers with 1 – 25 employees; by 40% for employers with between 26 – 100 employees; by 20% for employers with 101 – 250 employees; and no reduction was allowed for businesses with more than 250 employees.

As of October 1, 2010, OSHA made a number of changes to the above penalty adjustment factors, and they made various changes to the way that penalties are calculated

The following is a list of the 9 changes that are taken directly from OSHA’s website:

1. History Reduction. The time frame for considering an employer’s history of violations will expand from three years to five. An employer who has been inspected by OSHA within the previous five years and has not been issued any serious, willful, repeat, or failure-to-abate citations will receive a 10 percent reduction for history.

2. History Increase. An employer that has been cited by OSHA for any high gravity serious, willful, repeat, or failure-to-abate violation within the previous five years will receive a 10 percent increase in their penalty, up to the statutory maximum. Employers who have not been inspected and those who have received citations for serious violations that were not high gravity will receive neither a reduction nor an increase for history.

3. Repeat Violations. The time period for considering the classification of repeated violations will be increased from three to five years.

4. Severe Violator Enforcement Program. Where circumstances warrant, at the discretion of the Area Director, high gravity serious violations related to standards and hazards identified in the SVEP will not normally be grouped or combined, and may be cited as separate violations, with individual proposed penalties.

5. Gravity-Based Penalty (GBP). The gravity of a violation is the primary consideration in calculating penalties and is established by assessing the severity of the injury/illness which could result from a hazard and the probability that an injury or illness could occur. OSHA is adopting a gravity-based penalty structure for serious citations which will range from $3,000 to $7,000.

6. Size Reduction. OSHA will be amending its penalty reduction structure based on the size of employers, allowing for a penalty reduction between 10 and 40 percent for those with less than 250 employees. No size reduction will be applied for employers with 251 or more employees.

7. Good Faith. The current good faith procedures in the Field Operations Manual will be retained. A penalty reduction is permitted in recognition of an employer’s effort to implement an effective workplace safety and health program. Employers must have a safety and health program in place to get any good faith reduction. Good faith reductions are not allowed in the cases of high gravity serious, willful, repeat, or failure-to-abate violations.

The 15% Quick-Fix reduction, which is currently allowed as an abatement incentive program to encourage employers to immediately abate hazards identified during inspections, remains unchanged. However, the 10% reduction for employers with a strategic partnership agreement will be eliminated.

8. Minimum Penalties. The minimum proposed penalty for a serious violation will be increased to $500. When the proposed penalty for a serious violation would amount to less than $500, a $500 penalty will be proposed for that violation. The proposed minimum penalty for a posting violation will increase to $250 if the company was previously provided a poster by OSHA.

9. Additional Administrative Modifications to the Penalty Calculation Policy. Final penalties will be calculated serially, unlike the current practice where all penalty reductions are added and the total percentage of reductions is then multiplied by the gravity-based penalty to arrive at the proposed penalty. All penalty adjustment factors will be applied serially.

Although it is certainly not clear that these changes alone have caused any political backlash, it is interesting to note that on March 1, 2011, news sources report that congressional Republicans have proposed cutting OSHA’s budget by 20%. They have targeted OSHA for a $99 million dollar reduction in funding. In an article on NPR’s website, Michigan Republican Congressman Tim Walberg was quoted as stating that,

[o]ver the last two years, OSHA has not only attempted to implement several policy changes that would have profound impact on the workplace; it has become an administration more focused on punishment than prevention, . . .our goal should be to prevent workplace accidents before they happen, not simply shame an employer once a tragedy has occurred on the job site.

On the other hand, in the article, OSHA’s director has said that these proposed budget cuts would be devastating on the agency’s efforts to protect worker safety.

While the political back and forth is certainly interesting, for employers, and in particular those in the construction industry, we have to focus on the law that is in place now. These changes considerably increase employer’s potential liability for failing to comply with the OSHA regulations. As a starting point, it is always a good idea to determine whether your company is in compliance. And, if OSHA cites your business, then it is advisable to consult a construction lawyer to handle what may likely be more difficult negotiations than occurred in the past.

Although the Virginia Department of Labor and Industry (Virginia OSH) has not yet adopted these changes to the penalty calculation structure, Virginia may ultimately enforce these new changes or some variation of the changes.

Many thanks to Chris for letting me guest post here on Construction Law Musings.

Josh and I welcome your comments below. Also, please subscribe to keep up with this and other Guest Post Friday Musings.

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