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Understanding the True Cost of Non-Compliance: Lockout Tagout

dateDecember 07, 2021

The Occupational Safety and Health Administration (OSHA) Lockout Tagout standard (29 CFR1910.147) mandates criteria for de-energizing equipment during servicing and maintenance operations to prevent unexpected energization or start-up of machineries.

The Lockout Tagout standard requires that, "The employer shall establish an energy control program consisting of energy control procedures, employee training and periodic inspections, to ensure that before any employee performs any servicing or maintenance on a machine or equipment, where the unexpected energizing, startup or release of stored energy could occur and cause injury, the machine or equipment shall be isolated from the energy source and rendered inoperative."

The law confirms, compliance is mandatory for every organisation, establishment and every single company that directly or indirectly involves handling of Hazardous energies.

Many employers and companies neglect their compliance duties because they believe that OSHA’s activities can easily be curtailed under the Administrative pressure. This is where they go wrong! In fact, in 2017, OSHA inspections have increased and will prevail with increasing penalties in time to come.

Not only that, but the penalties are growing. In 2016, OSHA penalties increased by 78% to make up for 26 years of not adjusting for inflation. Since then, the penalties have increased every year.

If you talk of OSHA Violations in 2018-

In terms of industry-specific violations; the construction, manufacturing and fabricated-metal industries saw the most citations and penalties over the years and Lockout Tagout, being one of the major issues.

In 2018, in construction, there were a total of 25,294 citations as a result of 10,291 inspections. The total penalties resulted in $73,660,506, bringing the average penalty to just over $2,900. The most-cited standard violations were in regards to general requirements, LOTO, eye-and-face protection, ladders, fall protection, and training requirements, etc. As for the metal manufacturing industry, there were a total of 938 inspections, resulting in 3,436 citations and $8,730,209 in penalties. The average cost of a penalty was $2,541. Respiratory protection, Hazard communication, general requirements for all machines, control of hazardous energy (lockout tag-out), and powered industrial trucks were the most frequently cited standard violations.

 Issues Not-Reported:

Investigation and documentation reports, reveal a number of problems that have not even been reported. OSHA hasn’t been lax in its prosecution of organizations that have had health and safety practice and reporting deficiencies.

A Georgia-based company, for example, was fined over $700,000 for a combination of issues, including the failure to:

  • Precisely train employees when working on hazardous energy sources
  • Guard employees against thermal skin burns
  • Conduct annual energy-control inspections
  • Develop, implement and utilize written procedures to stop sudden release or startup of machinery during servicing.

While all were severe charges, the most damaging violation regarded documentation failure and directly led to an OSHA prosecution.

Another incident, this time with a Cleveland-based company, resulted in a fine in excess of $250,000. This fine was the result of 11 serious violations, including an incident where a company employee experienced severe chemical burns on the skin and the company didn't report it, as required. 

All such incidences have made government authorities, agencies and compliance officers take stringent actions, against the non-compliance of OSHA regulations.

 Here is the current schedule as of January 2, 2018:

  • For Serious, Other-Than-Serious, and Posting Requirements violations, the maximum penalty is $12,934 per violation.
  • For Failure to Abate violations, the maximum penalty is $12,934 per day beyond the abatement date.
  • For Wilful or Repeated violations, the maximum penalty is $129,336 per violation.

In addition, the number of penalties in excess to $100,000 has increased. And there are more in number yet to be added - a court ruled earlier this year that OSHA could look back more than five years to establish repeat violations, for which the penalty is 10 times higher. That gives employers even greater incentive to address safety issues now.

The Real Costs of Non-compliance:

Effect on employees:

Employees are a company’s most valuable assets, and their safety should be the priority for every company. Each and every employee working in an organization, deserves to reach back home safely everyday.

This can only be achieved if the employer ensures that their lockout tagout program is not only compliant, but meets the custom needs of his workforce. All of us know that non-compliance can have a serious and negative impact on the safety of employees. Workers servicing or maintaining machines or equipment may be seriously injured or killed if hazardous energy is not properly controlled. Injuries resulting from the failure to control hazardous energy during maintenance activities can be serious or even fatal! Injuries may include electrocution, burns, crushing, cutting, lacerating, amputating, or fracturing body parts, and others. 

Workers think that sparing few minutes on such simple devices will slow them down or get in the way of their normal operations. But they hardly realise that these few minutes of safety precaution can save them from big accidents.

One act of carelessness can cost you, your life. Therefore, stay compliant!

Effect on company’s productivity:

Apart from affecting the health and wellbeing of the employees, non-compliance to the OSHA regulations impact company’s productivity to the core. It not only spoils a company’s goodwill and position in market, but also hinders its financial stability.

Despite elaborate recommendations and audits, fatalities still continue to occur, and their severities range from missing fingers to lost lives and ofcourse effecting the company’s monetary constancy; as these fines can cost employers more than $894,000 in one incident.

The cost of ignorance, indifference, and non-compliance resulting to workplace accidents can be much higher and much expensive due to heavy penalties and expensive fees, additional penalties, legal fees, medical costs, lost productivity and negative media attention, potentially costing millions and millions of dollars for the company.

It's becoming more apparent that the increase in OSHA fine amounts can have a serious financial impact on companies that have non-compliance issues. Depending on the severity of the situation, as well as the size of the business, these penalties can sometimes be more than what companies can afford. Small organizations can even be faced with closing their doors if they are ever faced with such penalties.

The best way to safeguard against these eventualities is to be in line with all OSHA regulatory procedures.

Impact on Company’s Reputation -

Since 2014, OSHA has issued employers more than 10,000 LOTO citations. In addition to the penalties paid for safety violations, preventable workplace incidents involving the release of stored energy cost companies millions in lost productivity, medical expenses and insurance costs. Moreover, the company’s reputation and brand name are at stake!

It takes years for a company to build their brand image, and just one accident takes it all. Undoubtedly, the impact is adverse and extremely negative. It can have an undesirable impression on recruiting employees, investors, shareholders, stakeholders, financers, and it can also affect the company in obtaining bids and permits which is devastating to a company’s reputation.

Furthermore, there are mandatory follow-up inspections, inspections at related facilities, and corporate-wide abatements. It is definitely not a place where; any employer will ever and ever want to be! Once designated as a severe violator, there is no clear-cut method of getting out of the program. And it’s not only employers that are affected. Every other person attached to the company gets affected directly or indirectly.

Ask the Experts -

We are safety professionals, educators, trainers and pioneers in the world of Lockout Tagout safety and employee’s wellbeing. E-Square is known for its perseverance and commitment in making companies LOTO compliant. We are the LOTO professionals, who help our customers in adhering to various government and statutory laws.

After setting a record of nearly 15,000 industrial site visits, 6000+ training sessions and developing more than 7 lac Machine Specific Procedures (MSPs) in more than 98 countries; E-Square is on a mission of creating 1000 LOTO Success - Stories in 2020 - 21 by helping the industries to have a sustainable and successful LOTO SYSTEM in place.

E-Square’s contribution has been appreciated all around the globe, for empowering the future of the industrial safety by inventing and introducing the most required energy isolation lockout tagout devices.

E-SQUARE:  YOUR No. 1 ENERGY ISOLATION PARTNER!

E-Square Compliance and Education Division
About the Author

E-Square Compliance and Education Division

A team of safety professionals and educators united to enhance workplace safety with essential Lockout Tagout knowledge. We offer expertise to foster safety compliance and effective LOTO protocols across industries.

E-Square Blog: Expert Analysis and Best Practices for Isolation Safety

The E-Square blog features advice, information and support on everything related to Lockout Tagout, including best practices, industry news, latest innovations and regulatory updates.

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