US Health & Safety: Cost of Compliance vs. A Violation

Although health and safety compliance has been getting more attention year on year, many businesses still struggle to implement a safety strategy that safeguards them against prosecution. Fines for safety and health offenses increased by 80% in 2016. Under new regulations, one violation will cost between $12,934 and $129,336, depending on the type of violation.

Last year, violation fines cost businesses $69.9 million.

The US safety and health system
In the US, health and safety is regulated on a federal level. However, policies may vary from state to state, depending on whether states opt to have their own program.
Although the Occupational Safety and Health Administration, OSHA, develops new regulations and enforcement strategies, states can opt to have their own program. Independent programs differ quite drastically but need to be at least equivalent to federal requirements.

In total, 25 states have started their own programs, with some, like California and Michigan, being much more demanding than federal requirements.

Penalties are becoming more expansive
Official data from the United States Department of Labour shows that large penalties for OSHA breaches are on the rise. In 2017, 866 cases were recorded where the offender was charged $40,000 or more for critical violations.

The most extreme case last year happened when the Atlantic Drain Service in Boston was fined $1.5 million after two workers died working in a trench. There was no support system installed to protect employees from such incidents and employees didn’t have access to ladders to exit the trench.

The cause of fatal injuries
Most frequently cited OSHA violations in 2017 were due to lack of fall protection in the construction industry. A total of 5,190 fatal accidents were recorded in 2016 – a 7% increase from 2015.

Like previous years, most fatal occupational injuries were related to transportation incidents, followed by violence (including homicide) and falls, slips or trips.

A cautionary tale of non-compliance
The famous case of BP Texas City Refinery can help illustrate the reality of most extreme instances: The British company was fined $21m after an explosion that killed 15 and injured 170 employees in 2005 revealed more than 200 safety violations. A follow-up inspection in 2009 found that the previous violations had not been fixed. On top of that, BP had also committed another 439 violations, resulting in a total of more than 700 violations and a record-breaking $87 million fee.

The Center for Disease Control and Prevention estimates the average cost of a fatal injury to be about $990,000, considering the costs resulting from worker’s compensation, general medical expenses, civil liability or litigation costs and property loss. On top of that, the employer will need to consider expenses from workplace disruptions, loss of productivity, worker replacement, training, increased insurance premiums and attorney fees.

Thus, the actual cost of a workplace fatality can be estimated between $1.4m and $3m.

Making safety a priority
Research by health and safety consultant Arinite finds that small to medium-sized firms spend about $53k on health and safety compliance a year. Since on violation will end up costing the business up to $129,336, a larger case with several findings and victims can easily cost the employer multiple times the annual cost of compliance.
Businesses in the US lose about $170 billion due to occupational injuries and illnesses annually, yet, a successful health and safety management system can reduce the cost by 20% to 40%.

Studies have shown that $1 invested in injury prevention will return between $2 and $6 further down the line. An unsafe workplace will also decrease productivity, morale and overall profits which cut into a business’ earnings further.

Looking at the consequences of insufficient safety management in comparison to the returns of a healthy working environment, one would expect companies to value health and safety highly. However, research shows that 25% of micro-business employees and 17% of small business employees have never received workplace safety training.

OSHA 10 online training programs are available to employers and employees from companies like 360 Training as a means to address hazards before they pose a problem and improve workplace safety compliance.

Working towards zero accidents
While health and safety regulations are slowly becoming stricter, violations are now more expensive and cutting corners is a less economic option. Still, many companies prefer to gamble with their employee’s lives to cut the initial costs of health and safety plans. Despite all ethical reasons for establishing a healthy and secure work environment, this strategy is still not adhered to due debates over cost.

Governmental initiatives are trying to make compliance more attractive to companies by issuing higher penalties and carrying out more inspections. It is now time for the business owner to catch up with these efforts and prioritize a sustainable business strategy over quick money. The goal should not be to cut costs but to prevent accidents effectively. The only acceptable number of accidents is zero. More info at Arinite.co.uk/.

This entry was posted in Vendor News. Bookmark the permalink.
Questions - we're here to help
F&J Publications, LLC
P.O. Box 3908
Suwanee, GA 30024
P. 678.765.6550
F. 678.765.0886