The Federal Civil Penalties Inflation Adjustment Act Improvements Act was passed by Congress in 2015 to maintain effectiveness of civil penalties enforced by the Department of Labor (DOL).
“Civil penalties should be a credible deterrent that influences behavior far and wide. 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,” said U.S. Secretary of Labor Thomas E. Perez.
Each agency will be responsible for adjusting their fines each year using a straightforward inflation calculation. Respectively, the agencies must also publish “catch-up” rules this summer that will make up for the many years of stagnant fines. The maximum initial increase will be capped at 150 percent of the existing penalty. This will generate a new baseline, which will then be adjusted for future inflation. The new penalty amounts will only be applicable to penalties assessed after August 1, 2016 for violations that occurred after November 2, 2015.
The agency’s rationale for the increase is that some fines have lost their impact on employer behavior because of inflation. For example, the last increase to the Occupational Safety and Health Administration, (OSHA) penalty was in 1990. The new maximum penalty for serious violations will rise to $12,471 compared to the previous $7,000 fine (a 78% increase). The new fine for willful and repeated vioaltions will be $124,709 compared to $70,000. The agency expects that these increases will hep refocus employers on safety and compliance.
Penalties under the Fair Labor Standards Act, (FLSA) will also be increased. The new penalty for willful violations of FLSA minimum wage and overtime provisions will be $1,894 compared to the previous $1,100 fine.
Click Here to view the fact sheet from the DOL.