If you didn't look too closely at the 2016 federal budget
bill, which President Obama signed earlier this
month, you probably missed a small provision that could
have a giant financial impact on the construction industry. The U.S. Department
of Labor's Occupational Safety and Health Administration hasn't made an upward
adjustment of fines since 1990, and the
new budget directs the agency to raise them and, on a yearly basis, keep them
in line with the Consumer Price Index. The index has risen approximately 82%
since 1990, so the initial change could see the dollar amount of OSHA fines
skyrocket.
For example, although a violation of OSHA posting
requirements would today result in a maximum fine of $7,000, after the new
fines are implemented in August 2016, the same violation, given an 82%
increase, could cost a company as much as $12,740.
However, that is a paltry sum compared to the potential
fine for a willful violation, issued
when OSHA determines an employer either knowingly failed to comply with a legal
requirement or acted with "plain indifference" to employee
safety. The current maximum penalty for a willful violation is $70,000, but,
after adjustment for CPI, would be $127,400. Even if the fact that OSHA often reduces fines by as much as
50%-60% is taken into consideration, employers could still be looking at
an amount that all but the largest companies would have trouble paying.
Although OSHA has not yet announced the exact increase
percentage, the construction industry would see a huge impact of such a
move, as construction fatalities accounted
for 20.6% of all total private industry fatalities last year, according to the
BLS.
Industry reactions
For many industry experts, the news of the provision's
inclusion in the budget bill was unexpected.
Brian Turmail, senior executive director of public
affairs for the Associated General Contractors of America, said the
organization was aware of the possibility of a fine increase provision in the
bill, but "it was something that was agreed to at the last minute."
"We knew about it as soon as anyone else knew it was
going to be in the bill, but certainly it is something we've been working hard
to make sure our members are now aware of," he said.
There's no owner of a business that we're aware of who
would willingly put his workers in harm's way.
Attorney Lawrence Dany, partner at Sutherland Asbill
& Brennan LLP in New York, represents contractors in a variety of
safety-related issues and disputes and said the only unexpected aspect of
the increase was the timing, not the fact that the fines were going up. "I
think it's a surprise just to the extent that when something comes out without
any forewarning it tends to be a surprise, but, in the grand scheme of things,
the fact they are adjusting the penalty rate to be more in line with other
agencies is not," he said.
What has taken some in the industry aback, though, is the
tenor of OSHA discussion about contractor safety, specifically the comments of Assistant
Secretary of Labor for OSHA David Michaels in his testimony before the House
Committee on Education and the Workforce Subcommittee on Workforce Protections
in October. In his statement before the committee, Michaels said, "Simply
put, OSHA penalties must be increased to provide a real disincentive for
employers accepting injuries and worker deaths as a cost of doing business."
Turmail contested those claims and said,
"There's no owner of a business that we're aware of, and certainly not our
members, who would willingly put his workers in harm's way."
Robert Poole, safety director at HITT Contracting,
agreed: "It's not true. Thirty years ago I'd say that would be an
accurate statement, but those days are gone. It's hard for companies to operate
that way now."
Poole said most companies make safety a priority not
only because it’s the right thing to do, but because safety has become a matter
of profit. On a project with hundreds or thousands of workers, he said,
"a couple of minor incidents are going to save you a lot of money over
having a job that has (many) incidents or accidents that cost you tens, if not
hundreds, of thousands of dollars in (workers' compensation) costs."
Dany agreed and said that if an accident or
incident serious enough to incur a large OSHA fine happened on a
project, the rise in insurance costs, criminal charges and even civil
lawsuits could far outweigh the prospect of an OSHA fine. "In terms of an
event where an OSHA fine would come into play," he said, "there
are a myriad of concerns, a number of which would probably be more pressing to
the company than the magnitude of an OSHA fine."
A different approach?
Several industry safety experts expressed the belief that
OSHA's focus should be on education and outreach rather than on fines.
"If they want to collect more in fines, that's their
prerogative," Turmail said, "but let's not pat ourselves on the
back. How much you collect in fines is a measure of how much you haven't
educated the community you regulate."
Poole said he would like to see OSHA take a more
aggressive stance on education and outreach by using some of the money
collected in fines to beef up educational programs and materials for
contractors.
How much you collect in fines is a measure of how much
you haven't educated the community you regulate.
"I'd have loved for them to say 'OK, we’ll double
the fines, but, out of that, half the fines we'll use for education.' Now
I understand what you're doing here. You're trying to help businesses. You're
trying to help people learn. You're trying to help save lives by saying
something like that," Poole said. "That would have been nice to
hear."
Turmail said the AGC will continue to partner with OSHA
to help the association's member firms make their sites safer. "We'll
continue to offer to work with OSHA to proactively educate the construction
industry on how to improve safety," he said. "That's where we
all should be spending our time."
Turmail added: "In the end, it shouldn't be
about 'gotcha.' It's not cops and robbers. What we're trying to do is make
sure workplaces are as safe as possible."
What companies can
do
As to what companies can do to minimize their risk of
incurring fines, regardless of the amount, Dany said it's critical to implement
robust safety programs and incorporate them at all levels of the organization
so that employees "at the top, all the way down to your trade laborer, are
integrated into a culture of safety compliance."
He added, "It's that kind of top-down program that
is ultimately going to be successful in operating in this environment, and
they're also going to be successful as a company when seeking to have
incident-free workplaces as their goal."
Source: Construction
Dive
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