Effective risk management can help you reduce fines.

Effective risk management can help you reduce fines.

According to the United States Department of Labor (DOL) Bureau of Labor Statistics (BLS), inflation can be defined as the overall general upward price movement of goods and services in an economy.

I’m sure we all understand this concept to some degree, so my economics lesson will be short, but I’ll go ahead and define inflation in layman’s terms anyway: inflation is what hap-pens when things cost more and dollars don’t stretch quite as far.

Why am I writing about this in a column devoted to risk management? Well, to put it simply, because not managing your risk appropriately will cost you more than it ever has before. As a result of inflation, OSHA fines just got a whole lot more expensive. In fact, the maxi-mum penalties for OSHA violations have increased a whopping 78 percent, which is right in line with the statement U.S. Secretary of Labor Thomas E. Perez released regarding the in-crease.

“Civil penalties should be a credible deterrent that influences behavior far and wide,” Perez said in a June 30 DOL news release. “Adjusting our penalties to keep pace with the cost of living can lead to significant benefits for workers and can level the playing field for responsible employers who should not have to compete with those who don’t follow the law.”

You might recall that back in November of 2015, Congress passed the Federal Civil Penal-ties Inflation Adjustment Act Improvements Act of – referred to as the “2015 Inflation Adjustment Act.” The 2015 Inflation Adjustment Act was part of the Bipartisan Budget Act of 2015, and the new law directs agencies to adjust their civil monetary penalties for inflation every year.

To help the public understand exactly what is happening with the 2015 Inflation Adjustment Act, the Department of Labor created a fact sheet, which explains it quite comprehensively.

According to the fact sheet, Congress often adds penalties to laws to encourage greater compliance. But Congress also realizes that these penalties are less effective when they haven’t been raised – in some cases for decades – to keep up with inflation. To address this, Congress passed a law in 1990 directing agencies to adjust their civil monetary penalties to keep up with inflation, at the time defining a civil monetary penalty as “a penalty for a specific amount, or maximum amount, set by Federal law that is assessed or enforced by a Federal agency.”

However, a low cap on these monetary increases, together with complicated rounding rules, kept many penalties from accomplishing Congress’s stated goal of keeping up with inflation over time. Furthermore, some agencies, such as the Occupational Safety and Health Administration (OSHA), were exempt from the 1990 law. Perhaps the real head-line is that OSHA’s penalties have not actually increased since 1990. Congress’s solution to this problem was to pass the 2015 Inflation Adjustment Act to begin annually adjusting penalties using a more straightforward method than the 1990 law.

The 2015 Inflation Adjustment Act directs each agency across the federal government to determine the last time their penalties were increased (other than under the prior inflation act) and to publish interim final rules to adjust their penalties for inflation from that date. However, the amount of the increase, no matter when the last one took effect, may not exceed 150 percent of the existing penalty amount.

So what does all this mean? Well, two things for sure:

  1. The top penalty for serious violations rose from $7,000 to $12,471.
  2. The top penalty for willful or repeated violations rose from $70,000 to $124,709.

And don’t forget that other agency fines are going to increase as well: e.g., the Mine Safety and Health Administration (MSHA), the Environmental Protection Agency (EPA), the Department of Transportation (DOT), etc.

At NBIS, we believe that risk management should be proactive and ongoing, and that it shouldn't simply be a task you tend to only when you absolutely must. That said, when laws like the 2015 Inflation Adjustment Act are passed, it’s a good time to hit the pause button and take an inventory of your risk management efforts – to see if there are any areas you might be able to work a little harder and do a little better. Ask yourself the following ques-tions:

1. Are your training methods meeting current standards?

2. Do you have the right documentation for your training?

3. Do both your training and the related documentation meet OSHA requirements?

4. If OSHA walked in your door today, could you provide them the documentation they will surely ask for?

5. Are your employees aware of the increased penalty structure?

6. Do you have the right process and records in place to use “employee miscon-duct” as a defense against an OSHA citation and fine?

If you answered ‘No’ to any of these questions, you’ve got some work to do. Even if you’ve got to spend some money to get current, it’s likely that the cost you spend now will be far less than the expense you would incur later as a result of a fine.

One thing that NBIS recommends you start with is pretty simple: a self-audit. And there are several online resources you can use that will include, at the very least, the following key areas:

• Machine Guarding

• Lockout/Tagout Procedures

• Compressors & Air Receivers

• Compressed Gas Cylinders

• Hoist & Auxiliary Equipment

• Industrial Trucks, Forklifts

• Tire Inflation

• Environmental Controls

• Flammable & Combustible Materials

• Hazardous Chemical Exposure

• Hazardous Substances Communication

Most of the self-audit checklists you will find follow OSHA guidance as well as any state-specific labor requirements for construction work areas and job sites.

Another good resource to start with is the OSHA website, which offers a useful 7-step online resource they call the “Compliance Quick Start” that can be used to determine opportunities within your workplace and jobsites.

(https://www.osha.gov/dcsp/compliance_assistance/quickstarts/construction/index_construction.html)

By visiting the website you can click deeper into the content and find a variety of useful tools on the following subjects:

1. Review OSHA Requirements Related to Leading Hazards at Construction Sites

2. Other OSHA Requirements That May Apply to Your Jobsite

3. Survey Your Workplace for Additional Hazards

4. Develop a Jobsite Safety and Health Program

5. Train Your Employees

6. Recordkeeping, Reporting and Posting

7. Find Additional Compliance Assistance Information

You can also find more hazard descriptions and solutions are in the OSHA Worker Safety Series Packet Guide, OSHA 3252-05N 2005.

When it comes down to it, I’m sure avoiding additional penalties from OSHA is on top of everyone’s list. After all, we work far too hard for our money to just give it away. Don’t wait. Make sure your safe, compliant and prepared.

The NBIS Risk Management Team is dedicated to the crane, rigging and specialized trans-portation industries, and is proud to have been the exclusively endorsed provider of prop-erty and casualty insurance and risk management solutions for over 20 years. Please con-tact our Risk Management team for more details on how to protect your business or learn more about OSHA best practices by calling 877-860-RMSS (7677).

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