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The Rising Cost of OSHA Compliance

By the end of this summer, the Occupational Safety and Health Administration (OSHA) will raise fines as much as 82 percent, an increase made possible through the bipartisan budget deal signed in November 2015. 

The law also permits OSHA to recalculate its penalties annually to account for inflation, subjecting contractors to higher compliance costs every year. What should construction professionals do today to avoid future violations?

Legal background

A small provision (Section 701) in the Bipartisan Budget Act of 2015 amends the Federal Civil Penalties Inflation Adjustment Act of 1990, giving all federal agencies that can fine private sector organizations the ability to readjust their penalties each year (as opposed to every four years) for inflation.

OSHA had been one of the only federal agencies (along with the IRS) excluded from the 1990 legislation, but Section 701 specifically requires OSHA to use a “catch-up formula” to reach the current inflation level, and it allows the agency to increase fines annually in line with the Consumer Price Index.

As a result, the maximum fine for serious violations ($7,000) could jump to $12,740 this year if OSHA pursues the largest possible increase, and the maximum fine for repeat and willful violations ($70,000) could surge to $127,400. OSHA has not raised its maximum fines since the Omnibus Budget Reconciliation Act of 1990.

“Previously, OSHA had not been given that authority—whether expressed or implied,” says Bradford Hammock, an attorney for Jackson Lewis P.C., a workplace law firm. “I know a lot of people have suggested that it’s appropriate to increase the penalties, and now OSHA will have the ability to do so.”   

Organizational flaws

OSHA establishes standards to promote jobsite safety and enforces those rules to assure healthful working conditions. Many contractors, however, think the agency has become overly reliant on penalization, so the imminent escalation in fines (and the likelihood of additional hikes each year) only exacerbates their perception.

“[Penalties] only [go] so far in having a positive impact,” says Wess Galyon, president and CEO of Wichita Area Builders Association (WABA) in Wichita, Kansas. “It makes [people] more fearful of OSHA rather than approaching OSHA regularly and saying, ‘I don’t know exactly what to do; can you help me?’”

Several years ago, Galyon spearheaded an initiative through Metropolitan Community College (an OSHA Training Institute Educational Center) in Kansas City, Missouri, to create an approved OSHA satellite training center in Wichita. As a result, WABA offers local contractors invaluable courses and training sessions based on OSHA regulations.  

“We recognize that safety is an important thing that you need to practice,” Galyon says. “It not only helps you prevent people from getting hurt, it improves people being gone from work for injuries, and it promotes the development of a safety awareness culture within the organization.”

WABA even cultivated a voluntary program called Residential On Site Safety Initiative, in which members with an Experience Modification Rate—the safety rating determined by insurance companies—of 0.85 or below could earn 12 months of noninterference by OSHA if they agreed to undertake regular safety training, develop a written safety plan and pass a random inspection from the agency.

At a certain point, however, OSHA stopped participating in the program, says Galyon, who thinks the agency should become more of a consultative organization, particularly when dealing with smaller businesses. If a contractor continually violates rules, though, the penalties would be justified, he adds.   

“[The fines are] punitive to small business owners,” Galyon says. “If you look around the country, the majority of workers in the construction industry are small contractors—there are maybe two or three people working together, and they’re working on slim margins.”

WABA strives to include national OSHA representatives in its presentations to members, Galyon says, but their presence has proven to be an exception, not the norm. Dan Taddei, director of education and certification for the National Association of the Remodeling Industry (NARI), says OSHA might benefit from additional publicity of its collaboration efforts.

“Our chapters sometimes have OSHA people come out and conduct training there; at the national level, I’ve had OSHA do four webinars,” he says. “They’re willing to come and do whatever we ask them to do as far as training. They’ve never told me, ‘No.’ They’ve always been very helpful.”

Contractor opportunities

Trade groups such as NARI and the National Association of Home Builders (NAHB) can offer members a reliable source of timely information on OSHA proceedings. Contractors who join these organizations have access to a full-time staff tasked with monitoring and understanding OSHA regulations as they change and evolve.

“That’s going to be your first line of resource,” says Tim Shigley, 2016 chairman of NAHB Remodelers—the remodeling arm of NAHB—and president of Shigley Construction in Wichita, Kansas. “Many associations for contractors across the country have that information from the national [office] disseminated down to the local [level].”

OSHA maintains a comprehensive website that incorporates a bevy of news and data, but navigating the domain can be challenging for contractors, who often specialize in one of many different trades. “There’s so much information on it, sometimes people don’t know what all might apply to them,” Galyon says.

Reviewing the top 10 most-cited safety violations from the past year enables contractors to focus on the critical areas of compliance, Hammock says. “They serve as a pretty good roadmap for employers to indicate what are the types of things that OSHA looks at if they were to come onsite,” he adds.

In fact, contractors should consider arranging a sit-down meeting with their local OSHA office to introduce themselves and discuss how workplace rules and regulations affect their specific line of construction work.

“I know a lot of people view that as maybe not the best thing to do—get you on OSHA’s radar,” Hammock says. “But ultimately, a lot of enforcement and enforcement activity is local, and establishing a relationship upfront with your local OSHA compliance officers and area officers is not the worst thing to do.”

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