The maximum civil monetary penalty for a serious violation of an OSHA regulation will increase on August 1 from $7,000 to 12,471. Congress directed this and other changes to OSHA’s penalty as part of the Bipartisan Budget Act of 2015. The penalty amounts of other Labor Department agencies are also being updated. For willful and repeat violations of OSHA regulations, the minimum and maximum penalties are $8,908 and $124,709, respectively.

It’s been more than two decades since the agency’s penalty maximums were adjusted for inflation. The last time was in 1990 pursuant to the Omnibus Budget Reconciliation Act (Pub. L. 101-508.)

I’m hoping that news about the penalty update sends a little shock wave through the business community. Labor Secretary Tom Perez said the revisions:

“can level the playing field responsible employers who should not have to compete with those who don’t follow the law.”

This update is certainly needed, but we need to put the new maximums in perspective. Currently, the national average penalty for a serious violation is just $1,598 despite the current allowable maximum of $7,000. If I exclude the states that operate their own OSHA programs—many of which assess much lower penalties—-average for the 29 states under federal jurisdiction is $2,237. That’s still far off from the current $7,000 maximum.

Why and how OSHA’s current average penalties are well below the allowable maximum is explained in a new report by the Center for Progressive Reform (CPR). “OSHA’s Discount on Danger” describes the statutory and budget constraints that have resulted in the agency’s longstanding practice of reducing penalties to settle cases with employers. The authors examined penalty data from several types of OSHA inspections, including worker fatalities and complaints, and report the magnitude and nature of the penalty reductions. The report is only 10 pages long but it packs a punch. It describes, for example, OSHA’s usual practice of reducing a proposed penalty for an employer who simply agrees to comply with the law—the law that they should have already been abiding. The authors write:

“[OSHA] should demand that employers do more than simply abate hazards if employers want to bargain for reduced penalties, extended penalty payment plans, or other concessions. OSHA should not reward employers during settlement negotiations for agreeing to spend money to do what they were already required to do—comply with the law and ensure safety and health working conditions.”

Two of the report’s authors are long-time legal observers of OSHA: Tom McGarity of the University of Texas’s School of Law and Sid Shapiro of Wake Forest University School of Labor. My first introduction to their scholarship was their 1993 book Workers at Risk: The Failed Promise of the Occupational Safety and Health Administration and I’ve continued to admire their work. They acknowledge the limitations in the 46-year old OSH Act, but they haven’t given up on identifying ways to make the most out of OSHA’s existing authority. In the case of OSHA penalties, McGarity and Shapiro, along with law professor Martha McCluskey and Katie Tracy, JD recommend steps such as the following:

• Giving workers and their representatives a voice in settlement discussions;
• Analyzing the amount of money saved by the employer for not complying with a standard(s) and taking a penalty reduction off the table if non-compliance exceeded the proposed penalty; and
• Avoiding penalty reductions in cases involving violations of inexcusable hazards, such as unshored trenches.

From this point forward, OSHA penalties will be adjusted regularly to account for inflation. It was a loophole in the law that’s now been fixed. If Labor Secretary Perez, however, is serious about leveling the playing field, he should work with OSHA chief David Michaels to address what CPR has called “OSHA’s Discount on Death.”