In 2015, Congress passed the Federal Civil Penalties Inflation Adjustment Act Improvements Act to advance the effectiveness of civil monetary penalties and to maintain their deterrent effect. The new law directs agencies to adjust their penalties for inflation each year using a much more straightforward method than previously available, and requires agencies to publish “catch up” rules this summer to make up for lost time since the last adjustments.
As a result, the U.S. Department of Labor announced two interim final rules to adjust its penalties for inflation based on the last time each penalty was increased.
“Civil penalties should be a credible deterrent that influences behavior far and wide,” said U.S. Secretary of Labor Thomas E. Perez. “Adjusting our penalties to keep pace with the cost of living can lead to significant benefits for workers and can level the playing field responsible employers who should not have to compete with those who don’t follow the law.”
The first rule will cover the vast majority of penalties assessed by the department’s Employee Benefits Security Administration, Mine Safety and Health Administration, Occupational Safety and Health Administration, Office of Workers’ Compensation Programs, and Wage and Hour Division. The second rule will be issued jointly with the Department of Homeland Security to adjust penalties associated with the H-2B temporary guest worker program.
Under the 2015 law, agencies are directed to publish interim final rules by July 1, 2016. The department will accept public comments for 45 days to inform the publication of any final rule.
The new method will adjust penalties for inflation, though the amount of the increase is capped at 150% of the existing penalty amount. The baseline is the last increase other than for inflation. The new civil penalty amounts are applicable only to civil penalties assessed after Aug. 1, 2016, whose associated violations occurred after Nov. 2, 2015.
The rules published under the 2015 law will modernize some penalties that have long lost ground to inflation:
• OSHA’s maximum penalties, which have not been raised since 1990, will increase by 78%. The top penalty for serious violations will rise from $7,000 to $12,471. The maximum penalty for willful or repeated violations will increase from $70,000 to $124,709.
• OWCP’s penalty for failure to report termination of payments made under the Longshore and Harbor Workers’ Compensation Act, has only increased $10 since 1927, and will rise from $110 to $275.
• WHD’s penalty for willful violations of the minimum wage and overtime provisions of the Fair Labor Standards Act will increase from $1,100 to $1,894.
A Fact Sheet on the Labor Department’s interim rule is available here. A list of each agency’s individual penalty adjustments is available here.