Audit, Compliance and Risk Blog

Regulatory Compliance: Do These Penalties Seem Larger To You?

Posted by Jon Elliott on Mon, Nov 25, 2013 laws include penalty provisions, for assessment against people who fail to comply with legal responsibilities created by the laws. Back in 1996, Congress noticed that inflation was steadily reducing the deterrent effects of the penalties set forth in statutes, and that Congress itself was not reliably adjusting the maximum penalties assessable by enforcement personnel. Rather than burden itself with a responsibility to amend laws to keep up with inflation, Congress enacted the passed Debt Collection Improvement Act (DCIA) of 1996 to assign that responsibility to administrative agencies. DCIA requires most federal agencies to issue rules at least every 4 years, adjusting most penalties for inflation. In the ensuing 17 years, most agencies have made these periodic adjustments—larger in times of high inflation and lower in times of low inflation.

How Does It Work?

As noted, the DCIA adjustments provide maximum per-violation penaltiesbut as with investment company advertisements “individual results may vary.” A single act or omission may produce multiple violations; for example, an unauthorized discharge to a sewer may violate an existing Clean Water Act permit, and may also violate separate monitoring, record keeping, and reporting requirements. And an ongoing activity may produce liability for each violation for each day; for example the Clean Water Act hypothetical in the preceding sentence might mean 4 violations per day which means 120 violations per month. Agencies have extensive penalty policies to guide enforcement personnel in deciding how many violations to charge, and whether to charge the maximum level or some lower level.

Leaving aside these important practical considerations, DCIA requires agencies to follow these steps when setting the maximum per-violation level:

  1. Determine the Cost-of-Living Adjustment (COLA) since the last adjustment.

  2. Calculate the Raw Inflation Increase.

  3. Apply DCIA’s Rounding Rule to the Raw Inflation Increase. The agency rounds any increase to the nearest multiple of: $10 for penalties of $100 or less; $100 for penalties more than $100 but no more than $1,000; $1,000 for penalties more than $1,000 but no more than $10,000; $5,000 for penalties more than $10,000 but no more than $100,000; $10,000 for penalties more than $100,000 but no more than $200,000; and $25,000 for penalties greater than $200,000.

  4. Add the Rounded Inflation Increase, if any, to the Current Penalty Amount.

After multiple rounds, maximum penalty amounts therefore vary within and across statutes. Many are presently between 150% and 200% of their statutory base levels.

What Are Recent Examples?

Each agency makes these adjustments on its own schedule, and not all agencies have met their responsibilities to act at least once every four years. However, readers of the Federal Register will frequently see one or more agencies acting. Recent examples include:

  • Effective December 6, 2013, the US Environmental Protection Agency (EPA) adjusted 20 of the 88 civil penalty provisions the agency administers (the rest remain unchanged because the calculation methodology above did not justify increases). With these adjustments:

    • Most penalties with statutory maxima of $25,000 per violation per day have now been escalated to $37,500 per violation per day (a total of 50% since 1996)this covers most basic violations of the Resource Conservation and Recovery Act, Clean Air Act, Clean Water Act, etc.

    • Higher penalties have seen comparable escalationsthe highest is $1,150,000 for tampering with a public water system in violation of the Safe Drinking Water Act.

  • Effective November 2, 2013 the Department of Transportation’s (DOT’s) Pipeline and Hazardous Materials Safety Administration (PHMSA) adjusted a number of baseline penalties (i.e., as applicable before applying exculpatory and inculpatory factors) by 25%, and also reshuffled a number of penalty ranges for different types of offenses involving transportation of DOT-regulated hazardous materials.

Self-Assessment Checklist

Most environmental health and safety (EH&S) personnel spend their times complying with requirements, so success means that your organization doesn’t become subject to any of these penalties, whether escalated or not. That’s clearly the most appropriate approach to take. However:

  • Does my organization take adequate measures to apply with all applicable federal requirements?

  • Does my organization provide internal informational and/or training materials that identify potential civil penalties for violations?

    • If so, is the listing of these penalties and their maximum amounts up-to-date?

Where Can I Go For More Information?

  • EPA’s recent notice of revisions (in Federal Register) 

  • PHMSA’s recent notice of revisions (in Federal Register) 

  • A dated but comprehensive review of the DCIA process and agencies involved, from the Government Accountability Office (GAO) (Civil Penalties: Agencies Unable to Fully Adjust Penalties for Inflation Under Current Law (GAO-03-409) (March 2003)) 

Specialty Technical Publishers (STP) provides a variety of single-law and multi-law services, intended to facilitate clients’ understanding of and compliance with requirements. These include:

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About the Author Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 25 years. He was involved in developing 16 existing products,including Workplace Violence Prevention: A Practical Guide to Security on the Job and Directors' and Officers' Liability.

Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).

Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).

You may contact Mr. Elliott directly at:




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Tags: Corporate Governance, Business & Legal, Environmental risks, Environmental, EPA