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DOL Increases Civil Money Penalties, Effective August 1
Practical Law Legal Update w-002-7339 (Approx. 13 pages)
DOL Increases Civil Money Penalties, Effective August 1
by Practical Law Employee Benefits & Executive Compensation
| Published on 05 Jul 2016 • USA (National/Federal) |
The Department of Labor (DOL) issued an interim final rule to adjust the amounts of civil penalties assessed in its regulations, as required under the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act). This interim final rule increases penalties imposed under the Employee Retirement Income Security Act of 1974 (ERISA), Occupational Safety and Health Act (OSHA), Fair Labor Standards Act (FLSA), and the Family and Medical Leave Act (FMLA), among others.
On June 30, 2016, the Department of Labor (DOL) issued an interim final rule to adjust the amounts of civil penalties assessed in its regulations, as required under the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act). The Inflation Adjustment Act significantly revises the method of calculating inflation adjustments for penalty increases, including by providing an initial "catch-up" adjustment that may result in a more substantial initial penalty increase.
This interim final rule increases penalties imposed under the Employee Retirement Income Security Act of 1974 (ERISA), Occupational Safety and Health Act (OSHA), Fair Labor Standards Act (FLSA), and the Family and Medical Leave Act (FMLA), among other laws.
The adjusted civil penalty amounts apply to civil penalties assessed after August 1, 2016, whose associated violations occurred after November 2, 2015. The interim final rule affects penalties enforced by:
- The Employee Benefit Security Administration (EBSA) (see EBSA Penalties).
- The Wage and Hour Division (WHD) (see WHD Penalties).
- The Occupational Safety and Health Administration (OSHA) (see OSHA Penalties).
EBSA Penalties
Section F of the preamble to the interim final rule addresses the civil monetary penalties (CMPs) administered by EBSA to enforce Title I of ERISA (see Practice Note, Title I of the Employee Retirement Income Security Act (ERISA): Overview). Section F explains how the DOL determined the date each CMP was last adjusted by law or regulation and the catch-up adjustment for each CMP.
The below table provides the statutory cite, a general description of the violation leading to the penalty, and the amount of the catch-up CMP that will be due for penalties assessed after August 1, 2016 for violations occurring after November 2, 2015.
ERISA Penalty Statute | Description of Violation | Catch-up CMP |
ERISA § 209(b) | Failure to furnish certain reports (such as pension benefit statements) or to maintain records | $28 |
ERISA § 502(c)(2) | Failure or refusal to file annual Form 5500 or failure of a multiemployer plan to certify endangered or critical status (see Practice Note, Multiemployer Pension Plans) | $2,063 |
ERISA § 502(c)(4) | Failure to (i) notify participants of certain benefit restrictions or limitations under Internal Revenue Code (Code) Section 436(f); (ii) for multiemployer plans, provide (A) certain financial and actual reports and (B) estimates of withdrawal liability; and (iii) furnish automatic contribution arrangement notices (QACA notices) (see Standard Document, Safe Harbor Notice for Qualified Retirement Plans with Optional QACA Provisions) | $1,632 |
ERISA § 502(c)(5) | Failure of a multiple employer welfare arrangement (MEWA) to file certain reports | $1,502 |
ERISA § 502(c)(6) | Failure to provide information requested by the Secretary of Labor under ERISA Section 104(a)(6) | $147 not to exceed $1,472 |
ERISA § 502(c)(7) | Failure to provide a required blackout notice and of right to divest employer securities (see Standard Document, Blackout Notice) | $131 |
ERISA § 502(c)(8) | Failure of multiemployer plan in endangered status to adopt a funding improvement plan (or if in critical status, a rehabilitation plan) Failure also applies to an endangered status plan (that is not a seriously endangered status plan) that fails to meet its benchmark by end of funding improvement period (see Practice Note, Multiemployer Pension Plans) | $1,296 |
ERISA § 502(c)(9)(A) | Failure by an employer to inform employees of CHIP coverage opportunities under ERISA Section 701(f)(3)(B)(i)(l) | $110 |
ERISA § 502(c)(9)(B) | Failure by a plan administrator to timely provide to any state information required to be disclosed under ERISA Section 701(f)(3(B)(ii) | $110 |
ERISA § 502(c)(10) | Failure by any plan sponsor of a group health plan, or any health insurer offering coverage in connection with the plan, to satisfy ERISA's requirements regarding genetic information (multiple subparts) | $110/$2,745/$16,473/$549,095 |
ERISA § 502(c)(12) | Failure of CSEC plan sponsor to establish or update a funding restoration plan | $100 |
ERISA § 502(m) | Prohibited distribution under ERISA Section 206(e) | $15,909 |
ERISA § 715 | Failure to provide required summaries of benefits and coverage (SBC) (see Practice Note, Summaries of Benefits and Coverage Under the ACA) | $1,087 |
WHD Penalties
Sections A and D of the preamble to the interim final rule address the CMPs administered by WHD to enforce the:
- Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
- Immigration and Nationality Act (INA).
- Fair Labor Standards Act (FLSA).
- Employee Polygraph Protection Act (EPPA).
- Family and Medical Leave Act (FMLA).
Sections A and D explain how the DOL determined the date each CMP was last adjusted by law or regulation and the revisions to each CMP administered and enforced by WHD.
Below, we provide the statutory and regulatory cite, a general description of the violation leading to the penalty, the prior maximum CMP, and the new maximum CMP that will be due for violations of the above statutes occurring after August 1, 2016.
Statute/Regulation | Description of Violation | Prior Maximum CMP | New Maximum CMP |
MSPA, 29 U.S.C. § 1853(a)(1) | Violation of MSPA or any of its regulations | $1,000 | $2,355 |
Violation of work contract or of H-2A visa program's statutory or regulatory requirements | $1,500 | $1,631 | |
Willful violation of work contract or of H-2A visa program's statutory or regulatory requirements, or for each act of discrimination prohibited by Section 501.4 | $5,000 | $5,491 | |
Violation of housing or transportation safety and health provision of work contract or of H-2A visa program's statutory or regulatory requirements that proximately causes worker's death or serious injury | $50,000 for each worker | $54,373 for each worker | |
Repeat or willful violation of housing or transportation safety and health provision of work contract or of H-2A visa program's statutory or regulatory requirements that proximately causes worker's death or serious injury | $100,000 for each worker | $108,745 for each worker | |
Failure to cooperate with WHD investigation into H-2A violation | $5,000 for each investigation | $5,491 for each investigation | |
Laying off or displacing a US worker employed under circumstances specified in Section 501.19(e) | $15,000 for each violation for each worker | $16,312 for each violation for each worker | |
Improperly rejecting a US worker applicant for employment in violation of the H-2A visa program's statutory or regulatory requirements | $15,000 for each violation for each worker | $16,312 for each violation for each worker | |
Violation of D-1 visa program involving crewmembers for longshore activities in US ports | $5,000 for each crewmember for whom there has been a violation | $8,908 for each crewmember for whom there has been a violation | |
Violation of H-1B visa program | $1,000 | $1,782 | |
Willful violation of H-1B visa program or discrimination against an employee | $5,000 | $7,251 | |
Willful violation that displaced a US worker within the 90 days before and 90 days after an H-1B petition was filed | $35,000 for each violation | $50,758 for each violation | |
Violation of H-2B visa program | $10,000 | $11,940 for each violation | |
Violation related to homeworkers - recordkeeping | $100 (minor) $200 (substantial) $500 (repeated, intentional, or knowing) | $198 (minor) $396 (substantial) $989 (repeated, intentional, or knowing) | |
FLSA, 29 U.S.C. § 211(d); 29 C.F.R. § 530 | Employment of homeworkers without a certificate | $200 (substantial) $500 (repeated, intentional, or knowing) | $396 (substantial) $989 (repeated, intentional, or knowing) |
Repeat or willful violation of FLSA minimum wage and overtime requirements | $1,100 for each violation | $1,894 for each violation | |
Violations of FLSA child labor provisions or regulations | $11,000 for each employee subject to the violation | $12,080 for each employee subject to the violation | |
Violations of FLSA child labor provisions or regulations that causes death or serious injury to an employee under age 18 | $50,000 for each violation (doubled to $100,000 if the violation is repeated or willful) | $54,910 for each violation (doubled to $109,820 if the violation is repeated or willful) | |
Violation of EPPA or of part 801 | $10,000 | $19,787 | |
Violating FMLA posting requirement | $110 for each separate offense | $163 for each separate offense |
OSHA Penalties
Section E of the preamble to the interim final rule addresses the CMPs administered by OSHA to enforce the Occupational Safety & Health Act of 1970 (OSH Act). Section E explains how the DOL determined the date each CMP was last adjusted by law or regulation and the revisions to each CMP administered and enforced by OSHA.
Below, we provide the statutory and regulatory cite, a general description of the violation leading to the penalty, the prior maximum CMP, and the new maximum CMP that will be due for violations of OSHA occurring after August 1, 2016.
Statute/Regulation | Description of Violation | Prior Maximum CMP | New Maximum CMP |
Repeated or willful violation of OSH Act Section 5, rules or orders under OSH Act Section 6, or applicable regulations | $70,000 for each violation (minimum of $5,000 for each violation) | $124,709 for each violation (minimum of $8,908 for each violation) | |
Serious violation of OSH Act Section 5, rules or orders under OSH Act Section 6, or applicable regulations | $7,000 for each violation | $12,471 for each violation | |
Other-than-serious violation of OSH Act Section 5, rules or orders under OSH Act Section 6, or applicable regulations | $7,000 for each day during which violation continues | $12,471 for each day during which violation continues | |
Failure to correct a violation of OSH Act | $7,000 for each day during which violation continues | $12,471 for each day during which violation continues | |
Violation of OSH Act posting requirement | $7,000 for each violation | $12,471 for each violation |
Practical Implications
Practitioners must be aware of the increased penalties under this interim final rule to properly advise clients on their potential liability for violations of the statutes or regulations impacted by the Inflation Adjustment Act. If a client is currently undergoing an audit or is in the process of being assessed for a violation that occurred after November 1, 2015, they should be aware that they may be able to take advantage of the current civil penalty amounts set out in the DOL's existing regulation, rather than the increased penalty amounts under the Inflation Adjustment Act that will apply after August 1. Unfortunately, however, the effective date of the increased penalties is less than a month away, and the DOL will have significant control over the ultimate penalty assessment date.
Going forward, the DOL has indicated that it will adjust the CMP amounts for inflation on an annual basis (and publish the adjustments in the Federal Register), meaning that many of the penalty provisions subject to the interim final rules will likely be increased more often than in the past. Moreover, the DOL has eliminated rounding rules that effectively prevented the penalty amounts from being increased on a regular basis.
The interim final rule does not expressly reference penalties under ERISA Section 502(c)(1), which can be imposed on plan administrators that fail or refuse to provide certain plan-related documents in response to a participant's or beneficiary's written request. As a result, it appears that Section 502(c)(1) penalties will not be increased under these regulations (see Practice Note, ERISA Litigation: Penalties for Failing to Provide Documents).