Government is great about creating fictions to cover its intentions – commonly known as spin. The latest example of government spin is the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. Rather than candidly admit to the public that Congress wished to enhance bureaucratic control through massively increased penalties, it invented the fiction that they were just adjusting for inflation. Unfortunately, the legislation allows the adjustment to go back to the last time the agency had done an adjustment, leading to massive increases for violations of federal regulations.
How does this affect dealers? Let’s look at the effect of the Act on several common agencies with jurisdiction over motor vehicle dealers. For years, we have warned dealers not to engage in acts that will lead them to become signatories to consent orders with the Federal Trade Commission. Subsequent acts prohibited by a consent order could lead to FTC civil penalties of $16,000 per day. Because of the Act, that hammer now more than doubles from $16,000 to $40,000 per day per violation.
OSHA is another example. Its penalties have not been adjusted since 1990. Based on the Act’s formula, its maximum penalty for serious violations will rise from $7,000 to $12,471 and its maximum penalty for willful or repeated violations will rise from $70,000 to $124,709.
Dealers sometimes face audits of their Form I-9 compliance relating to immigrant workers and allegations of discrimination. Civil penalties for those have risen dramatically. Dealers with paperwork errors who previously faced civil penalties of a minimum of $100 to a maximum of $1,100 now face civil penalties of $216 to $2,136 per individual. Penalties for the first offense of hiring an unauthorized individual go from a minimum of $375 and a maximum of $3,200 to a minimum of $539 and a maximum of $4,313. Those penalties for third or subsequent violations go from a minimum of $4,300 and a maximum of $16,000 to a minimum of $6,469 and a maximum of $21,563.
While many decry the negative economic impact of the overregulation of our society, Congress’ solution has been to dramatically increase the power of the federal agencies to regulate economic life by a massive increase in the penalties that can be imposed on businesses.