By Bill Evans, AIC
Director of Claims at Insurance Associates, a Marsh & McLennan Agency LLC Company
In case you have run out of Tool Box Talks or ways to stress the financial impact of safety to your employees, Uncle Sam has given you a big new incentive starting in 2016.
The Federal Civil Penalties Inflation Adjustment Act of 1990 required federal agencies to raise their civil fines to keep pace with inflation. However, for the past 25 years, OSHA was one of a very few agencies who were exempt from this requirement… until now.
Section 701 of the Bipartisan Budget Act of 2015, which President Obama signed into law last month, eliminated that exemption. http://docs.house.gov/meetings/RU/RU00/CPRT-114-RU00-D001.pdf
Now, OSHA will be allowed to suddenly “catch up” on a quarter century of inflation by increasing their max penalties, up to a cap of 150%.
Max penalties will now be calculated annually based on each October’s Consumer Price Index of inflation starting with October, 2015’s CPI. Compared to 1990’s CPI of 133.5, this year’s October CPI of 237.838 represents a 78% increase in inflation over the past 25 years:
Thus, max fines are expected to increase by 78% and will continue to be adjusted each year based on updated indexes.
For example, in 2016, the maximum “Serious” penalty will go from $7000 to $12,460
while a “Willful” or “Repeat” penalty increases from $70,000 to $124,600 per violation.
OSHA and other affected agencies will be required to publish their 1st adjustment by July 1, 2016 and the new penalties will become effective by at latest, August 1, 2016.
Of course, on the bright side, this increase will not cost you a dime if you can avoid receiving a penalty in the first place.
By taking advantage of this change to justify tightening your safety programs, educating and motivating your workforce to work safely, you can harness this change to use as the positive catalyst in which it is intended. This can in turn lead to a safer workplace, fewer accidents and reduced costs, both in lost production and insurance premiums.
Most importantly this can be used as another tool to help you ensure that everyone goes home each day!
About the Author:
Bill graduated from East Carolina with a BS in Political Science before beginning his career with The Hartford as a multi-line claim rep in the Carolinas. Moving to the DC area he spent eighteen years at Travelers in multiple claim roles including Property Supervisor, Litigation Claim Handler, Construction Defect and lastly as Auto/General Liability Unit Manager in their Construction Department.
As IA, a Marsh & McLennan Agency LLC Company’s Director of Claims, BilI’s primary role is as an advocate for our clients and to manage relationships and rapport with our carriers. He is a technical resource for complex claims and disputes and also uses his experience to assist with loss control and training needs.
In his free time, Bill is passionate about rugby and has played eighteen years with his beloved DC based West Potomac RFC, up and down the Mid-Atlantic and in Europe, Canada and Taiwan. He has also been a member of the Fairfax Volunteer Fire Department for eight years.