[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]


=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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