House Bill Adds $2.7B in Employer Fines and Extends Personal Liability of Corporate Officers

As passed this morning, H.R 5376 (the “Build Back Better Act” or “BBBA”) is designed to collect an additional $2.76 billion of revenue through increased monetary penalties on employers who violate labor laws. While we have not been able to review all 1,684 pages of the BBBA, revenue generating portions appear to assess increased financial penalties for common violations of the National Labor Relations Act, the Fair Labor Standards Act, and the Occupational Safety and Health Act (“OSH Act”).

Notable examples include a new fine assessed under the National Labor Relations Act to any employer who commits an unfair labor practice (the employer need not have a collectively bargained workforce) not to exceed $50,000 per violation. If the employer has been found to have “committed” another unfair labor practice which has resulted in discharge or “serious economic harm” to an employee, the fine is doubled (not to exceed $100,000 per violation). BBBA also creates personal officer or director liability if the person had actual “or constructive” knowledge of, and authority to prevent, the violation and did not do so.

For violations of the Occupational Safety and Health Act, employers who have “willfully” violated the OSH Act are subject to a fine of up to $700,000 for each violation (up from $70,000), but not less than $50,000 for each violation (up from $5,000). Employers receiving a serious citation are now subject to a fine of $70,000 per violation (up from $7,000). And the fine for failing to correct a violation has been increased to $70,000 per occurrence (up from $7,000).

For violations of the Fair Labor Standards Act, the fine for violating child labor laws is increased from $11,000 to $132,270. If such labor causes a serious injury, the fine is increased from $50,000 to $601,150, which may be doubled if the violation is repeated or willful. For employers who willfully (a very low threshold to meet) violate minimum wage or overtime rules, the fine is increased to $20,740 (up from $1,100). Fines for violating the tip sharing rules are increased from $1,100 to $11,620 per violation. For agricultural employers, the penalty for any violation of the Migrant and Seasonal Agricultural Protection Act is now $25,790 per violation (up from $1,000).

To ensure collection of the $2.76 billion of new revenue through enhanced fines, the BBBA provides the Occupational Safety and Health Administration (“OSHA”) with additional funding of $707,000,000, the Wage and Hour Division of the Department of Labor $405,000,000, and the National Labor Relations Board with new funds of $350,000,000. The Equal Employment Opportunity Commission (“EEOC”) is also provided with additional enforcement funding of $321,000,000. The need for revenue collection tethered with funds for enhanced enforcement requires all employers to carefully review their labor, employment and workplace safety policies. A large reclassification of “independent contractors,” which is not covered by insurance, could bankrupt an employer.

In the 1960’s, Everett Dirksen, the Republican senator from Illinois, quipped on the Tonight Show, “A billion here, a billion there, and pretty soon you’re talking real money.” The BBBA seems to have added new seriousness to Senator Dirksen’s joke.

Employers with questions related to the Build Back Better Act and increased monetary penalties, or other questions related to employment law, should contact Philip Toomey.

Philip Toomey is Chair of the firm’s national Employment & Labor Practice Group, where he also leads the Public Sector Employment Group. He can be reached at 424.738.4400 or ptoomey@leechtishman.com.