Department of Labor Penalties Increasing with Inflation Adjustments

The Department of Labor (DOL) announced interim final rules on June 30, 2016, to adjust its civil penalties for inflation. Increased penalties became effective on August 1, 2016, and apply to violations that occurred after November 2, 2015.

Increase Aims to Advance the Effectiveness and Deterrent Effect of Civil Penalties

The DOL issued the final rules pursuant to the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015. The DOL is required to increase its penalties to keep pace with inflation. The final rules establish initial adjustments to catch-up penalties that have not been adjusted in years or even decades. Starting in 2017, the DOL will adjust its penalties for inflation before January 15 each year.

The adjusted penalties are intended to effectively punish employers who do not comply with federal laws and to deter noncompliance. The DOL estimates the adjusted penalties could result in up to $140 million in additional penalties assessed annually against noncompliant employers.

Penalty Adjustments

The DOL’s final rules do not address every penalty assessed by the DOL. However, the majority of penalties assessed by the Employee Benefits Security Administration (EBSA), Mine Safety and Health Administration (MSHA), Occupational Safety and Health Administration (OSHA), Office of Workers’ Compensation Programs (OWCP), and Wage and Hour Division (WHD) are affected by the final rules.

A complete list of the adjusted penalties can be accessed here.

Among the increased penalties are the following:

  • OSHA Violations. OSHA’s maximum penalties increased by 78%. The penalties for “serious,” “other than serious,” and posting violations increased from $7,000 to $12,471. The minimum penalty for willful or repeated violations increased from $5,000 to $8,908 and the maximum penalty increased from $70,000 to $124,709.
  • Minimum Wage and Overtime. The penalty for willful violations of the Fair Labor Standards Act’s minimum wage and overtime provisions increased from $1,000 to $1,894 per violation.
  • Worker’s Compensation. Maximum penalties for violations of federal workers’ compensation laws more than doubled.
  • H-2B Guest Worker Program. The maximum penalty for violations of the H-2B guest worker program increased from $10,000 to $11,940 per violation.
  • ERISA Form 5500. The maximum penalty for failure to file a Form 5500 increased from $1,100 per day to $2,063 per day.
  • Notice of 401(k) Automatic Contributions. Failure to provide notice to participants of a 401(k) plan with an automatic contribution arrangement increased from a maximum penalty of $1,000 per day to a maximum of $1,632 per day.

Guidance for Employers

Many of the adjusted penalties reflect an increase in the maximum penalty the DOL could assess for a violation. Although the DOL has the discretion to impose penalties less than the maximum, noncompliant employers should expect to face increased penalties for violations occurring after November 2, 2015. Employers should review their wage and hour practices, I-9 verification policies, benefits compliance, and safety protocols to verify that they are following applicable federal laws.