Federal agencies are increasing civil monetary penalties for the violation of numerous federal laws for the first time since the 1990’s. Of particular concern to government contractors are recent interim final rule changes issued by the U.S. Departments of Justice (“DOJ”) and Labor (“DOL”) that have increased the maximum penalties for violation of the False Claims Act and Anti-Kickback Act by a whopping 96%, and increased the maximum penalties for certain OSHA violations by an equally astounding 78%. The changes are effective August 1, 2016.
DOJ and DOL have applied these substantial “catch up adjustments” to civil penalties based on a formula provided by Congress in the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the “2015 Act”) which was signed into law on November 2, 2015. The new DOJ guidelines increase the maximum penalty for False Claims Act and Anti-Kickback violations from $10,781 to $21,563 per occurrence. The new OSHA penalties are as follows: (1) maximum penalties for Serious, Other-Than-Serious, and Posting Requirement violations increase from $7,000 to $12,471 per violation; (2) maximum penalties for Failure to Abate violations increase from $7,000 per day beyond the abatement date to $12,471 per day beyond the abatement date; and (3) maximum penalties for Willful of Repeated violations increase from $70,000 per violation to $124,709 per violation. The new penalties are effective August 1, 2016 and will cover any new citation or observed violation that occurs or occurred after November 2, 2015.
The 2015 Act also set forth a statutory formula to calculate annual adjustments beginning in January 2017, so we should expect to see regular (though less significant) increases going forward. We also expect to see an uptick in constitutional challenges to the new penalty regime. The Eighth Amendment prohibits the imposition of excessive fines, and because penalties are assessed per occurrence, there is a significant risk that exorbitant fines could be assessed for numerous violations that result in very low actual damages. Prime Watch will closely monitor developments as the new regulations go into effect.
 These increases follow similar action by the Railroad Retirement Board which Prime Watch reported on earlier this year. See New Regulations Results In Doubling Up False Claims Act Penalties (May 10, 2016) available athttp://www.primewatchgovernmentcontracting.com/new-regulation-results-in-doubling-up-false-claims-act-penalties/.
 See Memorandum for the Heads of Executive Departments and Agencies (“Donovan Memo”) re: Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb. 24, 2016) available athttps://www.whitehouse.gov/sites/default/files/omb/memoranda/2016/m-16-06.pdf.
 See DOJ’s Civil Monetary Penalties Inflation Adjustment Interim Final Rule with Request for Comments available athttps://www.gpo.gov/fdsys/pkg/FR-2016-06-30/pdf/2016-15528.pdf.
 See OSHA Penalty Adjustments to Take Effect August 2016 available at https://www.osha.gov/penalties.html.