The Hidden Costs of an OSHA Citation
Congress took employers by surprise when it increased Occupational Safety and Health Administration (“OSHA”) penalties nearly 80 percent in 2016. Today, a Serious violation can fetch a maximum penalty of $13,260, and a Willful or Repeat violation can cost up to $132,598. Citations often include multiple items, which can multiply these figures.
When construction companies or other industrial employers receive Serious citations, they often rush into an informal conference with OSHA, without considering potential legal defenses they can raise. When the agency representative offers a large monetary penalty reduction in settlement, it can sound like a good deal. But saving several thousand dollars and moving on quickly may cost much more over the long term.
For many employers – – especially in the construction industry – – the greatest hidden cost is the loss of business opportunity. Many construction companies bid to prequalify or perform work for federal or state Departments of Transportation or other agencies. Agencies commonly ask prospective contractors to report Serious citations they have received. When a prospective contractor exceeds a preset threshold, the agency awards it to another, sometimes costing the contractor hundreds of millions of dollars of work.
Large energy, chemical and manufacturing companies can have similar demands, and will not do business with contractors with too many Serious violations on their records. They also judge applicants on their Experience Modification Ratios (“EMR”), which can be based on illnesses and injuries recorded on OSHA 300 forms.
Taking a cut on the monetary penalty while allowing OSHA to enter a Final Order with a violation on record can also set an employer up for a potential “Repeat” violation, which can lead to potential tenfold penalty increases if OSHA finds a repeated violation of the same standard or same activity, usually within a three- to five-year period. Large employers with complex operations and multiple worksites are particularly vulnerable to “Repeat” violations, and generally they are the employers that receive penalties exceeding $1 million.
A “Serious” designation may prove more costly than the few thousand dollars saved by early settlement. Taking a critical look at the legal merits of the citation – – and considering a contest if a viable defense is available – – is often the smart play.