[Federal Register Volume 66, Number 236 (Friday, December 7, 2001)]
[Rules and Regulations]
[Pages 63501-63503]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30364]



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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/dol/esa/public/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

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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

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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