Under section 223 of SBREFA, agencies must establish a policy or program "to provide for the reduction, and under appropriate circumstances for the waiver, of civil penalties for violations of a statutory or regulatory requirement by a small entity. Under appropriate circumstances, an agency may consider ability to pay in determining penalty assessments on small entities." The agency policy or program must have conditions or exclusions.
Office of the Secretary (OST)
On April 1, 1997, OST published a Policy Statement on the rights of small entities in OST enforcement cases, specifically the criteria for the reduction and waiver of civil penalties. The policy closely tracks the requirements of Section 223, setting forth the factors that we will be considering in assessing penalties against small entities (e.g., ability to pay or whether the violation is corrected quickly). It applies to our aviation economic and Program Fraud Civil Remedies Act enforcement cases.
United States Coast Guard (USCG)
The USCG already evaluates when small entities should be subject to reduced civil penalties and mitigates the penalties based upon the violator's ability to pay. On July 16, 1997, it published in the Federal Register its policy on the rights of small entities in USCG enforcement actions. USCG has expanded its program so that its civil penalty hearing officers solicit from alleged violators, at an early stage, information that will help the USCG identify which violations were committed by small entities and thereafter determine whether a penalty should be waived or reduced under SBREFA. Before they can apply the waiver program, hearing officers must hear evidence from the violator to confirm that they corrected the violation, and that the violation did not pose a significant threat to health, safety, or the environment. The USCG authorizes its personnel to issue warnings, rather than impose penalties, for minor violations that are corrected promptly. It also initiated a "pollution ticket" program that offers a significantly reduced penalty for first and second time minor violations of some environmental requirements.
Federal Aviation Administration (FAA)
Generally, when determining the amount of a civil penalty, the FAA takes into consideration ability to pay. It plans to continue this policy. It also has policies that, in some cases, result in the waiver of civil penalties for some businesses that voluntarily report violations and take immediate corrective action. In addition, in settling civil penalty cases, it sometimes forgives part of the penalty on the basis of a company's investment in safety or security measures that exceed the minimum requirements of the regulations. The FAA is coordinating a specific SBREFA policy with its other enforcement policies.
The FAA is adding a section to its sanction guidance outlining in one place the considerations that are available to small entities and how they can comment on the enforcement activity conducted by agency personnel.
Federal Highway Administration (FHWA)
FHWA has a memorandum establishing its enforcement policy with respect to small businesses. The policy, which tracks SBREFA, reiterates FHWA's existing policy. The Office of Motor Carriers (OMC) has a Motor Carrier Administrative Training Manual (MCATM), which provides that the enforcement official should take into consideration the violator's size, gross revenues, resources, and FHWA's existing standards in determining whether to charge the maximum potential assessment. After the claim is issued, the violator may submit evidence reflecting on its ability to pay the assessment, or to continue in business if payment is required. This evidence may be considered in mitigation and settlement of the amount claimed.
In addition, OMC uses "Uniform Fine Assessment" software in enforcement proceedings to ensure fair, consistent penalties on a national basis. An entity's gross revenue (i.e., its size) is the most prominent factor used in the software to determine appropriate civil penalties. By generating penalties that are proportional to the size of the carrier, relief is provided to approximately 90 percent of the carriers who are small businesses.
Nearly two-thirds of the prosecutable violations found during the approximately 10,000 compliance reviews of motor carriers that FHWA and the States conduct each year are resolved administratively without penalties being assessed. The FHWA generally uses its enforcement authority as a tool of last resort, in cases involving chronic noncompliance or acute safety violations. The FHWA is now making additional efforts toward reducing penalties in those instances where a small entity has provided timely evidence of corrective actions. The FHWA is amending its Rules of Practice to incorporate this policy.
Research and Special Programs Administration (RSPA)
Office of Pipeline Safety (OPS) regional offices coordinate all civil penalty enforcement actions with its Compliance Officer prior to issuing a notice letter to a pipeline operator. This ensures consistent penalties for similar violations. The Compliance Officer will consider statutory criteria from both its governing statute and SBREFA (i.e., the nature, circumstances and gravity of the violation; the degree of the operator's culpability; the operator's enforcement history; the operator's ability to pay a civil penalty; the effect of a civil penalty on the operator's ability to continue in business; and any other mitigating or compounding matters) prior to proposing, reducing or waiving a penalty. The Compliance Officer recommends the penalty to be assessed based, in part, on the referral penalty amount, decreased by any penalty reduction for mitigating factors.
The Office of Hazardous Materials Enforcement (OHM) forwards enforcement referrals to the Chief Counsel's Office, along with each civil penalty enforcement action, listing a recommended penalty for each violation. Recommended penalties are the baseline penalty amount shown in the hazardous materials civil penalty enforcement guidelines plus any penalty increase for aggravating circumstances. OHM assesses any pre-referral evidence of corrective action and recommends penalty reductions accordingly. OHM, in determining the propriety of reducing a civil penalty proposed against a small entity, considers "ability to pay," and may further condition penalty reduction upon factors such as corrective action, a "good faith" effort to comply with the regulations, and the impact of the violation on safety, as well as other matters as justice may require. The Chief Counsel's Office determines the penalty to be assessed based, in part, on the referral penalty amount, decreased by any penalty reduction for mitigating factors. Penalties for violations of the Hazardous Materials Regulations may not be waived for small entities, as provided under SBREFA, because Federal hazardous materials law mandates a minimum $250 penalty for each violation found. However, RSPA has established a ticketing program for violations that do not have a direct or substantial impact on safety; under the program, a penalty is reduced by 50 percent from the baseline amount in RSPA's penalty guidelines. OHM estimates that 88 percent of the hazardous materials industry is comprised of small businesses.
St. Lawrence Seaway Corporation (SLSDC)
The only civil penalty provision available to the SLSDC for pilotage law violations in the Great Lakes applies only to individual pilots, not small businesses.
Federal Transit Administration (FTA)
FTA does not levy civil penalties. When an FTA recipient is not in compliance with a term or condition of its grant agreement, FTA may withhold grant funds.
Federal Railroad Administration (FRA)
On August 11, 1997, FRA published its new enforcement policy. FRA considers a variety of factors in determining whether to take enforcement action against persons, including small entities, who have violated the safety laws and regulations. In addition to the seriousness of the violation and the entity's history of compliance, FRA inspectors consider "such other factors as the immediate circumstances make relevant." In the context of violations by small entities, those factors include whether the violations were made in good faith (e.g., based on an honest misunderstanding of the law) and whether the small entity has moved quickly and thoroughly to remedy the violation(s). In general, the presence of both good faith and prompt remedial action mitigate against taking a civil penalty action, especially if the violations are isolated events. On the other hand, violations involving willful actions and/or posing serious health, safety, or environmental threats should ordinarily result in enforcement actions, regardless of the entity's size.
Once FRA has assessed a civil penalty, it collects at least the statutory minimum amount ($250 for hazardous materials violations and $500 for all others). However, civil penalties may be reduced from the initial assessment based on the consideration of a variety of criteria found in the railroad safety statutes and SBREFA: the severity of the safety, health or environmental risk presented; the existence of alternate methods of eliminating the safety hazard; the entity's culpability; the entity's compliance history, the entity's ability to pay the assessment, the impacts an assessment might exact on the entity's continued business; and evidence that the entity acted in good faith.
FRA staff attorneys regularly invite small entities to present any information related to these factors, and reduce civil penalty assessments based on the value and integrity of the information presented. Staff attorneys conduct conference calls or meet with small entities to discuss pending violations, and explain the merits of any defenses or mitigating factors presented that may have resulted or failed to result in penalty reductions. Among the "other factors" FRA considers is the promptness and thoroughness of the entity's remedial action to correct the violations and prevent a recurrence. Such long-term solutions to compliance problems are given great weight in FRA's determinations of a final settlement offer.
Finally, under FRA's Safety Assurance and Compliance Program (SACP), FRA identifies systemic safety hazards that continue to occur in a carrier or shipper operation, and in cooperation with the subject business, develops an improvement plan to eliminate those safety concerns. Typically, the plan provides small entities with a reasonable time frame in which to make improvements without the threat of civil penalty. If FRA determines that the entity has failed to comply with the improvement plan, however, it initiates enforcement action.
The Bureau of Transportation Statistics (BTS)
BTS endeavors to be flexible whenever appropriate, taking into account individual circumstances before taking enforcement action.
Motor Carrier Data Collection Program
This program emphasizes the carrot over the stick, encouraging compliance by providing (1) a multi-level system of informal compliance reminders and grace periods before formal enforcement action; (2) assistance to carriers seeking compliance information; and (3) electronic report forms. Policies tailored toward helping small entities comply with reporting requirements include:
• Reducing reporting burden on small entities by tailoring the reporting requirements to the size of their operations.
• Establishing, for small motor carriers, procedures for requesting an extension of time to file a required report.
• Providing small carriers with a reminder letter and a follow-up letter in an informal attempt to achieve compliance, before formal enforcement action is taken. Both letters give grace periods to allow carriers to file. Again, carriers can always request a filing deadline extension.
• Tolling the filing requirement while a decision for an exemption from those requirements is pending.
Airline Data Collection Program
This program also emphasizes the carrot over the stick, with a goal of encouraging compliance by providing (1) a multi-level system of informal compliance reminders before formal enforcement action; (2) assistance to small carriers seeking compliance information; and (3) a central "on-site" location (the Alaska Field Office), that is familiar with Alaska's geographic operating conditions, as a central contact point for compliance assistance. Policies tailored toward helping small air carriers comply with reporting requirements include:
• Reducing reporting burden on small air carriers by tailoring the reporting requirements to the size and type of their operations.
• Establishing, for small air carriers, procedures for requesting an extension of time to file a required report or for a waiver from the reporting requirements.
• Providing small air carriers with a reminder letter and a follow-up letter in an informal attempt to achieve compliance, before formal enforcement action is taken.
• Conducting, in conjunction with the Office of the General Counsel, an enforcement program that allows full or partial waiver of civil penalties in certain cases involving small businesses. Within the aviation data collection program, the assessment of penalties for failure to file required reports is administered by the Assistant General Counsel for Aviation Enforcement and Proceedings. The current policy of levying fines and penalties on air carriers allows for the waiving of up to 100 percent of the assessed fines and penalties where the affected air carrier takes corrective action to improve its reporting. Full consideration is given to a carrier's corrective actions and financial condition.
Maritime Administration (MARAD)
In the past, for unintentional violations, MARAD has mitigated the forfeiture of vessels as allowed by Section 9 of the Merchant Marine Act of 1916 for violation of its provisions and granted retroactive approval of transfers without penalty, and will continue to do so in the future. In many of these actions, the violators would have been considered small under SBA guidelines. This is the one area in which MARAD has authority to administer civil penalties.
National Highway Traffic Safety Administration (NHTSA)
On July 10, 1997, NHTSA published a Policy Statement on waiver and reduction of civil penalties for small entities, including exclusions. It takes enforcement action against motor vehicle safety and fuel economy standards violations and odometer fraud. In the past, NHTSA has followed a statutory directive in the Vehicle Safety Act to consider the appropriateness of the penalty to the size of the business charged. NHTSA's Office of the Chief Counsel determines the size of the manufacturer or other violator, on the basis of the estimated number of employees, and the violator's position within its particular industry. If gross sales in the previous year are known, this information is also considered. When the Chief Counsel asks a violator to show cause why a penalty should not be imposed, the violator is informed of the statutory provision and asked to address the size of its business in its response. A statutory defense of reasonable care also is available to violators. When the agency concludes that a manufacturer has a "reasonable care" defense, it does not impose a penalty. If the violator is unable to establish that it exercised "reasonable care" in its response to the show-cause letter, the Chief Counsel proposes a penalty figure that appears appropriate under the circumstances. In addition to size, the agency also considers "the gravity of the violation" in setting this figure. The Chief Counsel sets a compromise settlement figure that is realistic given the financial capabilities of individual violators. On occasion, it has accepted an offer of a smaller sum or permitted payment of the sum in installments to accommodate the financial needs of the company. NHTSA traditionally does not impose penalties for de minimus violations that do not affect safety or when manufacturers identify and report their failure to comply to NHTSA and move quickly to remedy them.
To more fully implement SBREFA, NHTSA now includes in its civil penalty settlement letters a copy of its SBREFA policy statement and a statement that informs violators who may be small entities of the definition of "small entity." If a violator shows that it is a small entity and does not fall within any of the exclusions, NHTSA will reduce the maximum civil penalty it is entitled to impose, and will make corresponding reductions in the proposed settlement amounts and compromised penalty amounts. NHTSA also plans to defer civil penalties against small entities to give them time to comply. This deferral will last until the next time NHTSA tests their vehicles for compliance. If the small entities comply, NHTSA will not impose the penalties.