Civil Penalties: The Rising Cost of Non-Compliance
Civil penalties are on the rise on almost every front.
The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 authorizes federal agencies with enforcement responsibilities to administratively adjust civil monetary penalties to counter the effect of inflation.
In response to this regulation, the US Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA), and US Department of Transportation (DOT) Federal Railroad Administration (FRA) and Pipeline and Hazardous Materials Safety Administration (PHMSA) have all increased civil penalties over the last year.
A Glimpse at the Regulation History
The Federal Civil Penalties Inflation Adjustment Act of 1990 required agencies to adjust maximum civil monetary penalties (CMPs) or a range of minimum and maximum CMPs by fall of 1996, then adjust the penalty amounts once every 4 years to account for inflation. The 2015 Inflation Act requires agencies to make annual inflation adjustments starting January 15, 2017.
The regulation also calls for an initial catch-up adjustment to reflect inflation-based increases from the time the civil penalty amount was most recently set, with a cap set at 250% of the highest prior established rate. It’s likely then, that the older the penalty policy, the higher the penalty rate increase, up to the 250% cap.
The new maximum civil penalties, which took effect on August 1, 2016, are to apply to violations occurring after November 2, 2015 (the date of enactment of the 2015 Improvements Act) for civil penalties assessed on or after the August 2016 effective date of EPA's interim final regulations.
Department of Transportation (DOT) Impacts
US DOT Federal Railroad Administration adjusted the minimum, maximum and aggravated maximum penalties for violations of a railroad safety statute or regulation, as well as for knowing violations of hazmat transportation laws and regulations.
The aggravated maximum penalty under the hazmat transportation laws is only applicable in the event of death, serious illness or severe injury to any person or substantial destruction of property.
While railroad violations may not impact many companies, it is important to note that US DOT requires all “hazmat employees” to complete training once every 3 years (49 CFR 172.704). While the penalty for failure to provide hazmat training to covered employees has only increased by $8 (from $463 to $471), the penalty is incurred as per day, per employee. The resulting cumulative penalties for not providing hazmat training as required has the potential to result in a significant fine.
Other FRA increases in civil penalties (per day, per violation) include:
- Minimum rail safety civil penalties increase from $839 to $853
- Maximum rail safety civil penalties increase from $27,455 to $27,904
- Aggravated Maximum rail safety civil penalties increase from $109,819 to $111,616
- Maximum hazardous materials (non-training related) civil penalties increase from $77,114 to $78,376
- Aggravated Maximum hazardous materials civil penalties increase from $179,933 to $182,877
The Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a Final Rule to revise its regulations and increase the maximum civil penalty amount for violations of Federal pipeline safety law. The maximum civil penalty for a single violation is now $209,002 for each day the violation continues, or $2,090,022 for a related series of violations of Federal pipeline safety laws. Additionally, PHMSA may impose civil monetary penalties not to exceed $1,214 for a violation concerning employee protections or $76,352 for a violation concerning Liquefied Natural Gas operations.
Environmental Protection Agency (EPA) Impacts
Adjustments to the maximum civil penalties based on the 2015 Inflation Act marks the fifth time the EPA has increased civil penalties. While the 2015 legislative mandate defines how maximum penalties are calculated, the agency can continue to consider a number of factors when determining civil penalties on a case-by-case basis. The seriousness of the violation, any good faith efforts to comply and even ability to pay may all be taken into account when determining civil penalties for violations.
Increases in maximum civil penalties for EPA violations are outlined below:
- Resource and Conservation and Recovery Act (RCRA) hazardous waste maximum civil penalty will rise from $37,500 per day, per violation to $95,284 per day, per violation
- Clean Air Act will maximum civil penalties will also rise from $37,500 to $95,284 per day, per violation
- Clean Water Act maximum civil penalties will rise from $37,500 to $52,414
- Maximum civil penalties for Safe Drinking Water Act (SDWA), Emergency Planning and Community Right-to-Know Act (EPCRA), and Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) violations will increase from $37,500 to $54,789
- Toxic Substances Control Act (TSCA) chemical management, reporting, and recordkeeping rules will have a slight increase from $37,500 to $38,114
- Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) penalties will increase from $7,000 to $19,057
See the complete list in the Transmittal of the 2017 Annual Civil Monetary Penalty Inflation Adjustment Rule Memorandum here.
Occupational Safety and Health Administration (OSHA) Impacts
OSHA’s last adjustments to civil penalties was in 1990, so the 2015 Improvements Act results in penalty increases of almost 80%. The following lists the new maximum penalties for each type of OSHA violation:
Serious Other Than Serious Posting Requirements: $12,675 per violation (previously $7,000)
Failure to Abate: $12,471 per day beyond the abatement date (previously $7,000)
Willful or Repeated Violation: $124,709 per violation (previously $70,000)
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Additional Useful Links and Guidance
- DOT Federal Railroad Administration Final Rule - click here
- DOT Pipeline and Hazardous Materials Safety Administration Final Rule - click here
- US EPA Civil Enforcement Penalty Policies website - click here
- US EPA Civil Monetary Penalty Inflation Adjustment Rule - click here
- OSHA Civil Penalties Inflation Adjustment Rule - click here
- OSHA Fact Sheet on Civil Penalty Adjustment - click here