OSHA Enhances Penalty Reductions and Payment Plans for Small Businesses

Quick Hits 

• OSHA announced a significant expansion of the definition of small businesses eligible for penalty reductions, now allowing employers with twenty-five employees to qualify, up from employers with ten employees.
• New OSHA guidelines offer small employers up to a 25 percent penalty reduction for effective safety management systems.
• Small businesses can now benefit from flexible payment plans and substantial penalty reductions under revised OSHA rules.

Small employers benefit from significant penalty reductions based on their workforce size. For most violations, employers with up to twenty-five employees are eligible for a maximum 70 percent reduction in penalties. For willful-serious violations, the reduction can be as high as 80 percent for those with twenty or fewer employees, with a sliding scale for those with up to fifty employees. Under the prior guidance, the small-employer penalty reductions were available only to employers with ten or fewer employees.

The employer’s size is determined by the maximum number of employees at all workplaces nationwide during the previous twelve months, ensuring that reductions are targeted to genuinely small businesses. Thus, the calculation does not involve each individual employee, but the maximum number of employees on any given day during the preceding twelve months.

Under the FOM revisions, small employers can receive up to a 25 percent penalty reduction for demonstrating effective safety and health management systems, even if not fully documented in writing, for those with one to twenty-five employees. A 15 percent reduction is available for systems with only minor deficiencies.

A 20 percent reduction is available for employers with a clean inspection history over the past five years, or that have never been inspected. However, the 20 percent reduction can be withheld at the area director’s discretion in certain cases, such as recent serious violations.

Small employers can take advantage of a 15 percent penalty reduction if they immediately and permanently correct hazards identified during an inspection. This incentive is available for other-than-serious, low-gravity serious, and moderate-gravity serious violations, but not for high-gravity, willful, or repeated violations.

On the other hand, small employers are not eligible for good faith reductions in cases of high-gravity, willful, repeated, or failure-to-abate violations. For repeat violations, only the size reduction applies, and penalties are multiplied based on the number of employees and prior violations. For willful violations, reductions are limited to size and history, with statutory minimums strictly enforced.

Small employers that are unable to pay penalties in full may request installment plans, subject to area director approval. Area directors are responsible for guiding small employers through payment options, including electronic payments and alternative methods if necessary. This is not a new policy or practice, but the revisions to the FOM suggest a greater emphasis on payment plans for these small employers.

Key Takeaways

These revisions reinforce OSHA’s commitment to proportional enforcement for small employers. The FOM now provides substantial penalty reductions, recognizes informal safety efforts, and offers payment flexibility, all while maintaining strong deterrents for serious, willful, or repeated violations. These changes aim to balance the need for workplace safety with the operational realities faced by small businesses, encouraging compliance through both incentives and clear consequences.

Ogletree Deakins’ Workplace Safety and Health Practice Group will continue to monitor developments and provide updates on the Workplace Safety and Health blog as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ New Administration Resource Hub.

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