If the cost of doing business includes responding to and resolving periodic environmental and worker safety enforcement matters, the price goes up on August 1. The EPA is raising statutory civil penalty amounts for the many statutes the agency administers, from the Clean Air and Water Acts to TSCA, RCRA, and CERCLA. The new maximum penalties, which in some instances will be increased by over 100%, will be assessed as of August 1, 2016 for violations that occurred after November 2, 2015. The adjustment is made in accordance with the Federal Civil Penalties Inflation Adjustment Act (“the 2015 Act”), which requires all agencies, including OSHA, to adjust civil penalty maximums to account for inflation. Following the initial increase, penalties will be adjusted annually by January 15, beginning in 2017.
The adjustments follow the formula dictated by the 2015 Act. The new penalties are set by one of two means, whichever is less. The inflation adjustment is calculated by multiplying the civil penalty amount originally established or last adjusted by statute by the “cost-of-life multiplier” which is the difference between the Consumer Price Index for all Urban Consumers (CPI-U) for October 2015 and the CPI-U of October of whichever year the most recent adjustment occurred. This becomes the new maximum penalty amount unless it exceeds the November 2, 2015 penalty level by more than 150%, in which case that 150% number becomes the new penalty. For example, under the new rule the statutory civil penalty for a violation of discharge permit limitations under the Clean Water Act will increase from $25,000 to $44,539.
The interim rule and the penalties adjusted by the EPA can be found in a table included in the Federal Register which will be incorporated into the Code of Federal Regulations at 40 CFR 19.4. EPA notes that the increased maximum monetary fines will not necessarily change the amount of penalty they will seek under their civil penalty policy, which considers case-specific factors such as seriousness of the violation, good faith compliance efforts, economic benefit gained from a violation, and ability to pay. There is no question, however, that the new penalty amounts authorize the agency to significantly increase proposed fines and penalties. Resolving enforcement matters under the new penalty provisions undoubtedly will become more costly and challenging.
Thanks to my colleague Tavo True-Alcala for his contributions to this post. Tavo is an analyst in our Environmental & Utilities Practice Group.