Adjustment of Civil Money Penalties for Inflation
[12/07/2001]
Volume 66, Number 236, Page 63501-63503
[[Page 63501]]
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DEPARTMENT OF LABOR
Wage and Hour Division
29 CFR Parts 578, 579, and 580
RIN 1215-AB20
Adjustment of Civil Money Penalties for Inflation
AGENCY: Wage and Hour Division, Employment Standards Administration,
Department of Labor.
ACTION: Final rule.
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SUMMARY: This document adjusts the amount of 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 required by the Federal Civil Penalties Inflation
Adjustment Act of 1990, as amended by the Debt Collection Improvement
Act of 1996. Under the amended Federal Civil Penalties Inflation
Adjustment Act, Federal agencies must adjust their civil money
penalties for inflation pursuant to a specified formula, and make
periodic adjustments thereafter to account for inflation.
EFFECTIVE DATE: The rule is effective on January 7, 2002.
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, NW., Washington, DC 20210. Telephone (202) 693-
0745 (this is not a toll-free number). Copies of this final rule may be
obtained in alternative formats (Large Print, Braille, Audio Tape or
Disc), upon request, by calling (202) 693-0023. TTY/TDD callers may
dial toll-free 1-877-889-5627 to obtain information or request
materials in alternative formats.
Questions of interpretation and/or enforcement of final regulations
issued by this agency or referenced in this notice may be directed to
the nearest Wage and Hour Division District Office. To locate the
nearest office, telephone our toll-free information and helpline at 1-
866-4USWAGE (1-866-487-9243) between 8 am and 5 pm in your local time
zone, or log onto the Wage and Hour Division's website for a nationwide
listing of Wage and Hour District and Area Offices at: http://
www.dol.gov/esa/contacts/whd/america2.htm.
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act
This 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 initially adjust
for inflation all covered civil money penalties, and to make further
inflationary adjustments every four years thereafter. The adjustment
prescribed in the amended Act is based on a cost-of living formula
according to the amount that the Department of Labor's Consumer Price
Index (CPI) for all urban consumers for June of the calendar year
before the adjustment exceeds the June CPI for the calendar year that
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 in the Federal Civil Penalties Inflation Adjustment Act, which is
scaled based on the dollar amount of the current penalty. The statute
applies a cap that limits the amount of the first increase in penalty
to 10 percent of the current penalty amount (for the initial adjustment
only). Any increase under the Act applies prospectively to violations
that occur after the date the increase takes effect.
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 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 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 is limited to the maximum 10 percent cap
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
revised regulations become effective.
On December 28, 1998, the Department of Labor published a proposal
in the Federal Register (63 FR 71405) to amend affected sections of
parts 578 and 579 of Title 29 of the Code of Federal Regulations to
increase the specified CMP amounts as described above. No comments were
received on the proposal. Accordingly, the proposal is being adopted as
a final rule.
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.
In addition, the following technical amendments are made to correct
two typographical errors in parts 579 and 580. In Section 579.5(e) of
part 579, the reference to ``Sec. 579.6'' is corrected to read
``Sec. 580.6''. In Section 580.5 of part 580, the reference to
``Sec. 580.19'' is corrected to read ``Sec. 580.18'.
Executive Order 12866 and Significant Regulatory Actions
This rule is not a ``significant regulatory action'' within the
meaning of Executive Order 12866. The rule will adjust for inflation
the maximum civil money penalties under Section 16(e) of
[[Page 63502]]
the Fair Labor Standards Act. The adjustments and the formula for
determining the amount of the adjustment were mandated by the Congress
in the Federal Civil Penalties Inflation Adjustment Act of 1990, as
amended by the Debt Collection Improvement Act of 1996. Thus, the
Congress has required that the Department promulgate the amendments to
this rule, and provided no discretion to the Department regarding the
substance of the amendments. Moreover, for the three-year period prior
to the proposed rule, 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 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
proposal was estimated at less than $623,000 per year. CMPs for the
three most recent years are comparable in amounts. 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 was required or
prepared.
Section 202 of the Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531
et seq.) directs agencies to assess the effects of Federal regulatory
actions on State, local, and tribal governments, and the private
sector, ``* * * (other than to the extent that such regulations
incorporate requirements specifically set forth in law).'' For purposes
of the Unfunded Mandates Reform Act, this rule includes only
requirements that are specifically set forth in law pursuant to the
Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by
the Debt Collection Improvement Act of 1996. In addition, the rule will
not result in increased annual expenditures in excess of $100 million
by State, local or tribal governments in the aggregate, or by the
private sector.
Executive Order 13132
This rule does not have ``substantial direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government'' under the terms of Executive Order 13132
regarding federalism. Therefore, under section 6 of that Order, we have
determined that the rule does not have sufficient federalism
implications to require consultations or a federalism summary impact
statement.
Regulatory Flexibility Analysis
This rule will not have a significant economic impact on a
substantial number of small entities. The 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. Provisions of law 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 provisions of the FLSA, or violated the child
labor requirements of the FLSA, will be affected by this rule. Based on
the average CMP amounts collected for these types of violations over a
three-year period as discussed above, 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 determined that this rule will
not have a significant economic impact on a substantial number of small
entities. The Department certified to this effect to the Chief Counsel
for Advocacy of the U.S. Small Business Administration when the
proposed rule was published. Therefore, no Regulatory Flexibility
Analysis was required. No comments were received on any aspect of the
rule or these conclusions as set forth in the proposed rule.
Small Business Regulatory Enforcement Fairness Act
This rule is not a ``major rule'' under the Small Business
Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 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.
Effects on Families
This rule has been assessed under section 654 of the Treasury and
General Government Appropriations Act, 1999, for its effect on family
well-being and we hereby certify that the rule will not adversely
affect the well-being of families.
List of Subjects
29 CFR Part 578
Employment, Labor, Law enforcement, Penalties.
29 CFR Part 579
Child labor, Law enforcement, Penalties.
29 CFR Part 580
Administrative practice and procedure, Child labor, Employment,
Labor, Law enforcement, Penalties.
Signed at Washington, DC, on this 30th day of November, 2001.
Annabelle T. Lockhart,
Acting Administrator, Wage and Hour Division.
For the reasons set forth above, 29 CFR parts 578, 579, and 580 are
amended as set forth below.
PART 578--MINIMUM WAGE AND OVERTIME VIOLATIONS--CIVIL MONEY
PENALTIES
1. The authority citation for part 578 is revised to read as
follows:
Authority: Sec. 9, Pub. L. 101-157, 103 Stat. 938, sec. 3103,
Pub. L. 101-508, 104 Stat. 1388-29 (29 U.S.C. 216(e)), Pub. L. 101-
410, 104 Stat. 890 (28 U.S.C. 2461 note), as
[[Page 63503]]
amended by Pub. L. 104-134, section 31001(s), 110 Stat. 1321-358,
1321-373.
2. Section 578.1 is revised to read as follows:
Sec. 578.1 What does this part 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 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 January 7, 2002 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.
* * * * *
PART 579--CHILD LABOR VIOLATIONS--CIVIL MONEY PENALTIES
4. The authority citation for part 579 is 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. 4-2001, 66 FR 29656; 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 Section 579.1 is revised, paragraph (b)
of Sec. 579.1 is redesignated as paragraph (c) of that section, and a
new paragraph (b) is added, to read as follows:
Sec. 579.1 What does this part cover?
* * * * *
(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. In Sec. 579.5:
a. The section heading and paragraph (a) are revised; and
b. In paragraph (e), the reference to ``Sec. 579.6'' is revised to
read ``Sec. 580.6''.
The revisions 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 January 7, 2002 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 removed.
PART 580--CIVIL MONEY PENALTIES--PROCEDURES FOR ASSESSING AND
CONTESTING PENALTIES
8. The Authority citation for part 580 is revised to read as
follows:
Authority: 29 U.S.C. 9a, 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. 4-2001, 66 FR 29656; 5 U.S.C.
500, 503, 551, 559; sec. 9, Pub. L. 101-157, 103 Stat. 938; sec.
3103, Pub. L. 101-508.
Sec. 580.5 [Amended]
9. In Sec. 580.5, the reference to ``Sec. 580.19'' is revised to
read ``Sec. 580.18''.
[FR Doc. 01-30364 Filed 12-6-01; 8:45 am]
BILLING CODE 4510-27-P
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