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Hidden Costs of an OSHA Citation for Manufacturers

Manufacturing employees are involved in significant physical labor or with potentially hazardous material, and manufacturers are one of the most common targets of Occupational Safety and Health Administration (OSHA) investigations, citations, and penalties. While OSHA often offers to settle penalties quickly, manufacturers should consider carefully whether accepting is in their best interest.

Congress surprised employers when it hiked penalties nearly 80 percent in 2016 and permitted OSHA to adjust penalty amounts to track inflation. Today, a “serious” violation can cost up to $13,494, and a “willful” or “repeat” violation can cost up to $134,937. Citations often include multiple items, which can multiply these amounts.

When OSHA sends serious citations to manufacturing companies or other industrial employers, it often offers an informal conference during which it may suggest a large monetary penalty reduction in settlement. While it may sound like a good deal, but saving several thousand dollars and moving on quickly can cost an employer much more over the long term.

For many employers, the greatest hidden cost is the loss of business opportunity. Many companies bid to prequalify or perform work for federal or state agencies. These agencies commonly require prospective contractors to report serious citations they have received. When a prospective contractor exceeds a preset threshold of serious citations, the agency awards the work to another, sometimes costing the contractor hundreds of millions of dollars of work.

In addition, large energy, chemical, and manufacturing companies can have demands much like those of federal and state agencies and will not do business with contractors with too many serious violations on their records. These companies also may judge applicants on their Experience Modification Ratios, 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 also can set up an employer for a potential “repeat” violation, which can lead to potential tenfold increases if OSHA finds a repeat 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. Generally, they are the employers that receive penalties exceeding $1 million. What might have seemed like a good deal can turn into a trap for a much bigger penalty four years later.

A “serious” violation may prove more costly than the few thousand dollars saved by early settlement. Taking a critical look at the legal merits of a citation — and considering a contest if a viable defense is available — is often worth the effort.

Jackson Lewis P.C. © 2020

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About this Author

Courtney Malveaux, OSHA Lawyer, Employment, Richmond, Virginia, Jackson Lewis Law Firm
Principal

Courtney Malveaux is a Principal in the Richmond, Virginia, office of Jackson Lewis P.C.

Mr. Malveaux represents employers cited by the Occupational Safety and Health Administration and other regulatory agencies. He also advises and represents employers in employment law matters, including retaliation claims, employment discrimination, unemployment benefits and wage claims. Mr. Malveaux also represents business associations in state and federal legislative and regulatory matters.

Mr. Malveaux represents industry on the Virginia Safety and...

804-212-2862
James M Stone, Litigation Attorney, Negotiator, Jackson Lewis Law Firm
Office Managing Principal

James M. Stone is Office Managing Principal of the Cleveland, Ohio, office of Jackson Lewis P.C. With more than 25 years of experience in labor and employment law, he has conducted more than 120 negotiations with unions, defended hundreds of employment discrimination, wrongful discharge, and other claims in court and before administrative agencies such as the EEOC, NLRB, and Department of Labor.

Mr. Stone has defended companies against a broad range of challenges including wrongful discharge claims, wage and hour actions, large multi-plaintiff discrimination claims, as well as counseling large, middle market, and smaller clients in a wide variety of employment and labor law matters. Several recent matters handled by Mr. Stone and his colleagues have been reported in the national media, including major cases involving the use of neutrality agreements in the automotive industry in Michigan.

216-750-4307
James Verdi employment litigation lawyer Jackson Lewis
Associate

James Verdi is an Associate in the Cleveland, Ohio office of Jackson Lewis P.C. James focuses his practice on representing employers in employment litigation and labor relations matters including collective bargaining, unfair labor practice charges, unlawful discrimination, accommodation, and leave issues.

Prior to joining Jackson Lewis, Mr. Verdi worked for the United States Postal Service, the nation’s second largest employer, where he first-chaired more than 20 administrative employment hearings and national arbitrations. He provided advice on various...

216-750-0404