OSHA change could save businesses thousands of dollars. Here's what it means.

Shared from Pittsburgh Business Times

The Department of Labor is expanding the number of small businesses that could see big cuts in their Occupational Health and Safety Administration fines.

New guidance from the department would expand a series of fine-reduction measures from businesses with 10 or fewer employees to businesses with up to 25 employees. That includes a penalty reduction of 70%, as well as a 15% penalty reduction

for businesses that take immediate steps to address or correct a hazard.

"All employers should be offered the opportunity to comply with regulations that help maintain a safe working environment,” said Deputy Secretary of Labor Keith Sonderling, in a statement outlining the new guidance. “Small employers who are working in good faith to comply with complex federal laws should not face the same penalties as large employers with abundant resources.”

The updated policy also expands the penalty reduction for employers without a history of serious, willful, repeat or failure-to-abate OSHA violations. That means employers that have never been inspected by federal OSHA or an OSHA State Plan, as well as employers that have been inspected in the previous five years and had no serious, willful, or failure-to-abate violations, are eligible for a 20% penalty reduction.

The new policy, which is effective immediately, does not apply to any penalties issued before July 14. Those are still assessed under the previous penalty structure. 

“OSHA’s updated guidance reflects a meaningful shift in how the agency approaches enforcement," said Josh Ortega, vice president of safety, sustainability and procurement at risk-management firm Veriforce. "In the past, its penalty structure did not differentiate much between large corporations and smaller employers, often placing an outsized burden on small businesses.”

Ortega stressed that OSHA fines can be substantial for smaller businesses.

Last year, OSHA fines were up to $16,131 for serious violations and up to $161,323 for willful or repeated violations. As of January this year, those amounts increased to $16,550 and $165,514.

“With the 70 percent size-based reduction, a serious violation fine could drop from $16,550 to around $4,965. And when you factor in additional reductions of 15 percent for prompt abatement and 20 percent for a clean inspection history, the same fine could be reduced to roughly $3,129. That is a meaningful difference for any small employer trying to do the right thing,” Ortega said in an email.

He said the changes make safety more accessible by allowing businesses to reduce their fines by fixing issues right away. The changes also let companies take money that would normally go toward fines and apply it instead toward risk reduction. 

“Perhaps most importantly, the overall tone has shifted from being strictly punitive to being more supportive," Ortega said. "There is now a stronger focus on helping small businesses strengthen compliance efforts rather than penalizing them after the fact."

A major shift for OSHA

OSHA does not perform a huge number of inspections relative to the number of businesses in operation — about 33,000 per year, or less than 1% of businesses. Some industries, such as construction, see a higher concentration of inspections than others.

But when businesses do get inspected, it almost always results in a violation, said Jim Tormey, CEO at safety and compliance company Sentry Road. Not saddling a company with a heavy fine is a major shift for OSHA.

“OSHA’s own stats show that most inspections result in at least one violation, often due to paperwork gaps or inconsistent training. This new policy reduces the fear factor for small employers and encourages faster, voluntary compliance,” Tormey said. “That’s a real savings for small employers working on thin margins.”

The OSHA changes and to a line of legislative and policy adjustments coming to small businesses this summer. Others include a raft of tax changes, courtesy the sweeping reform legislation passed into law earlier this month. That includes business property, research and development, and business interest credits. It also creates carve-outs for tips, overtime wages and deductions for business meals.

A revamp to the Opportunity Zone program is also included, with a new set of terms and conditions.