For the first time in a quarter century, the Occupational Safety and Health Administration will in 2016 increase its fines for safety violations.

This came as a result of the Bipartisan Budget Act of 2015 (H.R. 1314), signed by President Obama on November 2. Section 701 of the Bill, entitled the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, allows OSHA to increase its fines based on inflation, where it was previously exempt from doing so.

The Federal Civil Penalties Inflation Adjustment Act of 1990 gave most federal agencies the authority to review and adjust their civil penalties once every five years in order to keep pace with inflation. But OSHA was excluded form this legislation at the time, leaving OSHA fines stagnant for over two decades. Now OSHA will be required to make inflationary increases to its penalties every year, putting the agency in line with other federal agencies.

OSHA will first enact a one-time catch-up assessment that will increase penalties to reflect the changes in inflation from 1990 - 2015, with a cap at 150%. Current estimates using October 1990 to September 2015 CPI data (the latest data available) allow for a nearly 80% increase in OSHA fines for 2016.

This means that OSHA fines for willful or repeat violations could increase from a current maximum of $70,000 per violation to approximately $125,000 per violation. Fines for serious and other-than-serious violations could increase from $7,000 per violation to approximately $13,000 per violation.

The law allows some leeway for OSHA to avoid inflicting the maximum catch-up penalty, but the general consensus is that employers should expect the worst. According to Assistant Secretary of Labor for OSHA, David Michaels, "Simply put, OSHA penalties must be increased to provide a real disincentive for employers accepting injuries and worker deaths as a cost of doing business."

The catch-up adjustment will take effect no later than August 1, 2016. Thereafter, employers should expect to see OSHA fine increases by January 15 of every year as the agency makes adjustments based on the annual percentage increase in the CPI.

This potentially huge increase in the cost of OSHA fines makes it even more important for fleets to shore up safety programs and continue to stress a culture of safety.

Adapted from the HNI "Steal These Ideas" blog. HNI is a non-traditional insurance and business advisory firm.