[Federal Register Volume 63, Number 248 (Monday, December 28, 1998)]
[Proposed Rules]
[Pages 71405-71408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34243]
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DEPARTMENT OF LABOR
Wage and Hour Division
29 CFR Parts 578 and 579
RIN 1215-AB20
Adjustment of Civil Money Penalties for Inflation
AGENCY: Wage and Hour Division, Employment Standards Administration,
Department of Labor.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes adjustments in the civil money
penalties that may be assessed under the Fair Labor Standards Act
(FLSA) for repeated or willful violations of the minimum wage or
overtime provisions of the FLSA, and for violations of the child labor
provisions of the FLSA. These adjustments are being made to meet
requirements of the Federal Civil Penalties Inflation Adjustment Act of
1990, as amended by the Debt Collection Improvement Act of 1996,
[[Page 71406]]
which requires that Federal agencies issue regulations that make
inflationary adjustments in their civil money penalties pursuant to a
specified formula and make periodic adjustments after the initial
increase at least every four years thereafter, in accordance with the
guidelines set forth in the amended Federal Civil Penalties Inflation
Adjustment Act.
DATES: Written comments must be submitted on or before January 27,
1999.
ADDRESSES: Submit written comments on this proposed rule to Richard M.
Brennan, Deputy Director, Office of Enforcement Policy, Wage and Hour
Division, Employment Standards Administration, U.S. Department of
Labor, Room S-3510, 200 Constitution Avenue, N.W., Washington, DC
20210. If you want to be notified that we have received your comments,
please include with your comments a self-addressed, stamped postcard or
submit your comments by certified mail, return receipt requested. As a
convenience, you may transmit your comments by facsimile (``FAX'')
machine to (202) 219-5122, which is not a toll-free number. If you
transmit your comments by FAX and also submit them by mail, please
indicate on the mailed copy that it is a duplicate copy of your FAX
transmission.
FOR FURTHER INFORMATION CONTACT:
Richard M. Brennan, Deputy Director, Office of Enforcement Policy, Wage
and Hour Division, Employment Standards Administration, U.S. Department
of Labor, Room S-3510, 200 Constitution Avenue, N.W., Washington, DC
20210. Telephone (202) 693-0745 (this is not a toll-free number). You
may obtain a copy of this proposed rule in alternative formats by
telephoning (202) 693-0745, (202) 219-4634 (TDD); the alternative
formats available are large print, electronic file on computer disk,
and audio tape.
Questions of interpretation and/or enforcement of final regulations
issued by this agency or referenced in this proposed rule may be
directed to the nearest Wage and Hour Division District Office listed
in most telephone directories under United States Government, Labor
Department.
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act
This proposed rule contains no new information collection
requirements which are subject to review and approval by the Office of
Management and Budget under the Paperwork Reduction Act of 1995 (44
U.S.C. 3501, et seq.).
II. Background
The Debt Collection Improvement Act of 1996 (Pub. L. 104-134, 110
Stat. 1321) amended the Federal Civil Penalties Inflation Adjustment
Act of 1990 (Pub. L. 101-410, 104 Stat. 890) to require Federal
agencies to regularly adjust certain civil money penalties (CMPs) for
inflation. As amended, the law requires each agency to make an initial
inflationary adjustment for all covered civil money penalties, and to
make further inflationary adjustments at least once every four years
thereafter. The adjustment prescribed in the amended Act is determined
by a cost-of-living formula equal to the amount by which the Department
of Labor's Consumer Price Index (CPI) for all urban consumers for June
of the calendar year preceding the adjustment exceeds the June CPI for
the calendar year in which the CMP amount was last set or adjusted. The
statute provides for rounding the penalty increases. Once the
percentage change in the CPI is calculated, the amount of the
adjustment is rounded according to a table provided in the Federal
Civil Penalties Inflation Adjustment Act, which is scaled based on the
dollar amount of the current penalty. A cap is then applied which
limits the amount of any increase in penalty to 10 percent of the
current penalty amount (for the initial adjustment only). Any increase
under the Act will apply only to violations that occur after the date
the increase takes effect. The Act provided that the first such
increase should have been made no later than 180 days after the date of
enactment of the Debt Collection Improvement Act of 1996, or by October
23, 1996.
Section 16(e) of the FLSA authorizes CMP assessments for the
following violations: (1) any person who violates the child labor
provisions (section 12 or section 13(c)(5)) of the FLSA or any
regulation thereunder may be subject to a CMP of not to exceed $10,000
for each employee who was the subject of such a violation; and (2) any
person who repeatedly or willfully violates the minimum wage (section
6) or overtime provisions (section 7) of the FLSA may be subject to a
CMP of not to exceed $1,000 for each such violation. In determining the
amount of any such penalty in a particular case for either type of
violation, the size of the business of the person charged and the
gravity of the violation must be taken into consideration, among other
appropriate factors.
The child labor CMP amount was last adjusted by the Congress in
1990 pursuant to the Omnibus Budget Reconciliation Act of 1990, Public
Law 101-508 (November 5, 1990), which raised the former $1,000 maximum
child labor CMP amount to $10,000 and directed that the amounts be
deposited into the general fund of the U.S. Treasury. The $1,000 CMP
amount for repeated and willful violations of the minimum wage and
overtime provisions was established by the Congress under the 1989 FLSA
Amendments, Public Law 101-157 (November 17, 1989). Due to Inflation
since these CMP amounts were last set in law or adjusted by the
Congress, the first increase will be the maximum 10 percent initially
permitted under the Debt Collection Improvement Act amendments to the
Federal Civil Penalties Inflation Adjustment Act. The adjusted CMP
amounts will apply only to violations occurring after the proposed
regulations become effective.
III. Summary of Rule
The $1,000 maximum penalty amount in Section 578.3 for repeated or
willful violations of the minimum wage or overtime requirements of the
FLSA is increased to $1,100. The $10,000 maximum penalty amount in
Section 579.5 for violations of the child labor provisions of the FLSA
is increased to $11,000. Conforming changes are also made in other
affected sections of the regulations to discuss the inflationary
adjustment provisions of the Federal Civil Penalties Inflation
Adjustment Act of 1990, as amended by the Debt Collection Improvement
Act of 1996.
Executive Order 12866 and Significant Regulatory Actions
This rule is not a ``significant regulatory action'' within the
meaning of Executive Order 12866. The rule proposes to adjust for
inflation the maximum civil money penalties under Section 16(e) of the
Fair Labor Standards Act. The adjustments and the formula for
determining the amount of the adjustment are mandated by the Congress
in the Federal Civil Penalties Inflation Adjustment Act of 1990, as
amended by the Debt Collection Improvement Act of 1996. Congress has
required that the Department promulgate the amendments proposed in this
rule, and provided no discretion to the Department regarding the
substance of the amendments. Moreover, for the three Fiscal Years 1995
through 1997, the Department collected a total of $6,169.771 in CMPs
for repeated or willful minimum wage or overtime violations that were
assessed in 1,157 cases, for an average of $2,056,590 collected per
year (less than $5,333 per case, on average). Over the same three-year
period, the
[[Page 71407]]
Department collected a total of $12,496,180 in CMPs for child labor
violations that were assessed in 3,772 cases, for an average of
$4,165,393 collected per year (approximately $3,314 per case, on
average). With the initial increase in the maximum CMP limited to the
statutory 10 percent cap, the total economic impact of the rule is
estimated at less than $623,000 per year. Thus, this action will not:
(1) have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities; (2) create a serious inconsistency or otherwise interfere
with an action taken or planned by another agency; (3) materially alter
the budgetary impact of entitlements, grants, user fees, or loan
programs or the rights and obligations of recipients thereof; or (4)
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in Executive Order
12866. Therefore, no regulatory impact analysis has been prepared.
Executive Order 12875 and Section 202 of the Unfunded Mandates Reform
Act of 1995
For purposes of the Unfunded Mandates Reform Act of 1995, as well
as Executive Order 12875, this rule does not include any federal
mandate that may result in increased expenditures by either state,
local and tribal governments in the aggregate, or by the private
sector, of more than $100 million.
Regulatory Flexibility Analysis
This rule will not have a significant economic impact on a
substantial number of small entities. The proposed rule does no more
than ministerially increase certain statutory CMPs to account for
inflation, pursuant to specific directions of the Congress in the
Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by
the Debt Collection Improvement Act of 1996, which specify the
procedures for calculating the inflation adjustments and do not allow
variations in the calculations to minimize the effects on small
entities. Nevertheless, in each case the amount of the penalty assessed
under Section 16(e) of the FLSA must take into consideration the size
of the business of the person charged with the violations, which will
further mitigate the ultimate effects of the rule on small businesses.
Moreover, only persons who have willfully or repeatedly violated the
minimum wage or overtime provision of the FLSA, or violated the child
labor requirements of the FLSA, will be affected by this rule. Based on
the average CMP amounts that the Department has collected for these
types of violations over the three fiscal years 1995 through 1997, we
estimate that the effect of the rule will be to increase the average
CMP collected for repeated or willful minimum wage or overtime
violations by $533 per case, and increase the average CMP collected for
child labor violations by $331 per case. Accordingly, the Department
has determined that this proposed change in the rules will not have a
significant economic impact on a substantial number of small entities.
The Department has certified to this effect to the Chief Counsel for
Advocacy of the U.S. Small Business Administration. Therefore, no
Regulatory Flexibility Analysis is required.
Small Business Regulatory Enforcement Fairness Act
This proposed rule is not a ``major rule'' under the Small Business
Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. Sec. 801 et seq.)
because it is not likely to result in (1) an annual effect on the
economy of $100 million or more; (2) a major increase in costs or
prices for consumers, individual industries, Federal, State or local
government agencies, or geographic regions; or (3) significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic or export markets.
Document Preparation: This document was prepared under the
direction and control of John R. Fraser, Deputy Administrator, Wage and
Hour Division, Employment Standard Administration, U.S. Department of
Labor.
List of Subjects
29 CFR Part 578
Employment, Labor, Law enforcement, Penalties.
29 CFR Part 579
Child labor, Law enforcement, Penalties.
For the reasons set forth above, 29 CFR parts 578 and 579 are
proposed to be amended as set forth below.
Signed at Washington, D.C. on this 21st day of December, 1998.
John R. Fraser,
Deputy Administrator, Wage and Hour Division.
PART 578--MINIMUM WAGE AND OVERTIME VIOLATIONS--CIVIL MONEY
PENALTIES
1. The authority citation for part 578 is proposed to be revised to
read as follows:
Authority: Sec. 9, Pub. L. 101-157, 103 Stat. 938; sec. 3103,
Pub. L. 102-508, 104 Stat. 1388-29 (29 U.S.C. 216(e)); Pub. L. 101-
410, 104 Stat. 890 (29 U.S.C. 2461 note), as amended by Pub. L. 104-
134, section 31001(s) 110 Stat. 1321-358, 1321-373.
2. Section 578.1 is proposed to be revised to read as follows:
Sec. 578.1 What does this regulation cover?
Section 9 of the Fair Labor Standards Amendments of 1989 amended
section 16(e) of the Act to provide that any person who repeatedly or
willfully violates the minimum wage (section 6) or overtime provisions
(section 7) of the Act shall be subject to a civil money penalty not to
exceed $1,000 for each such violation. The Federal Civil Penalties
Inflation Adjustment Act of 1990 (Pub. L. 101-410), as amended by the
Debt Collection Improvement Act of 1996 (Pub. L. 104-134, section
31001(s)), requires that inflationary adjustments be periodically made
in these civil money penalties according to a specified cost-of-living
formula. This part defines terms necessary for administration of the
civil money penalty provisions, describes the violations for which a
penalty may be imposed, and describes criteria for determining the
amount of penalty to be assessed. The procedural requirements for
assessing and contesting such penalties are contained in 29 CFR part
580.
3. The section heading and paragraph (a) of Sec. 578.3 are proposed
to be revised to read as follows:
Sec. 578.3 What types of violations may result in a penalty being
assessed?
(a) A penalty of up to $1,000 per violation may be assessed against
any person who repeatedly or willfully violates section 6 (minimum
wage) or section 7 (overtime) of the Act; Provided, however, that for
any violation occurring on or after the effective date of the final
rule the civil money penalty amount will increase to up to $1,100. The
amount of the penalty will be determined by applying the criteria in
Sec. 578.4.
* * * * *
[[Page 71408]]
PART 579--CHILD LABOR VIOLATIONS--CIVIL MONEY PENALTIES
4. The authority citation for part 579 is proposed to be revised to
read as follows:
Authority: 29 U.S.C. 203, 211, 212, 216; Reorg. Plan No. 6 of
1950, 64 Stat. 1263, 5 U.S.C. App.; secs. 25, 29, 88 Stat. 72, 76;
Secretary of Labor's Order No. 1371, 36 FR 8755; Sec. 3103, Pub. L.
101-508; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note), as
amended by Pub. L. 104-134, section 31001(s), 110 Stat. 1321-358,
1321-373.
5. The section heading of Sec. 579.1 is proposed to be revised,
paragraph (b) of Sec. 579.1 is proposed to redesignated as paragraph
(c) of that section, and a new paragraph (b) is proposed to be added,
to read as follows:
Sec. 579.1 What does this regulation cover?
(a) * * *
(b) The Federal Civil Penalties Inflation Adjustment Act of 1990
(Pub. L. 101-410), as amended by the Debt Collection Improvement Act of
1996 (Pub. L. 104-134, section 31001(s)), requires that Federal
agencies periodically adjust their civil money penalties for inflation
according to a specified cost-of-living formula. This law requires each
agency to make an initial inflationary adjustment for all covered civil
money penalties, and to make further inflationary adjustments at least
once every four years thereafter. Any increase in the civil money
penalty amount will apply only to violations that occur after the date
the increase takes effect.
* * * * *
6. The section heading and paragraph (a) of Sec. 579.5 are proposed
to be revised to read as follows:
Sec. 579.5 How is the amount of the penalty determined?
(a) The administrative determination of the amount of the civil
penalty, of not to exceed $10,000 for each employee who was the subject
of a violation of section 12 or section 13(c)(5) of the Act relating to
child labor or of any regulation issued under that section, will be
based on the available evidence of the violation or violations and will
take into consideration the size of the business of the person charged
and the gravity of the violation as provided in paragraphs (b) through
(d) of this section; Provided, however, that for any violation
occurring on or after the effective date of the final rule the civil
money penalty amount will increase to not to exceed $11,000 for each
employee who was the subject of a violation.
* * * * *
Sec. 579.9 [Removed]
7. Section 579.9 is proposed to be removed.
[FR Doc. 98-34243 Filed 12-24-98; 8:45 am]
BILLING CODE 4510-27-M
