[Federal Register Volume 76, Number 251 (Friday, December 30, 2011)]
[Rules and Regulations]
[Pages 82117-82129]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32880]
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DEPARTMENT OF LABOR
Office of Workers' Compensation Programs
20 CFR Part 701
RIN 1240-AA02
Regulations Implementing the Longshore and Harbor Workers'
Compensation Act: Recreational Vessels
AGENCY: Office of Workers' Compensation Programs, Labor.
ACTION: Final rule.
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[[Page 82118]]
SUMMARY: This final rule contains regulations implementing amendments
to the Longshore and Harbor Workers' Compensation Act (LHWCA) by the
American Recovery and Reinvestment Act of 2009 (ARRA), relating to the
exclusion of certain recreational-vessel workers from the LHWCA's
definition of ``employee.'' These regulations clarify both the
definition of ``recreational vessel'' and those circumstances under
which workers are excluded from LHWCA coverage when working on those
vessels. The final rule also withdraws a proposed rule that would have
codified current case law and the Department's longstanding view that
employees are covered under the LHWCA so long as some of their work
constitutes ``maritime employment'' within the meaning of the statute.
DATES: This rule is effective January 30, 2012.
FOR FURTHER INFORMATION CONTACT: Gary A. Steinberg, Acting Director,
Division of Longshore and Harbor Workers' Compensation, Office of
Workers' Compensation Programs, U.S. Department of Labor, Room S-3524,
200 Constitution Avenue NW., Washington, DC 20210. Telephone: (202)
693-0031 (this is not a toll-free number). TTY/TDD callers may dial
toll free 1-(800) 889-5627 for further information.
SUPPLEMENTARY INFORMATION:
I. Background of This Rulemaking
On August 17, 2010, the Department issued a Notice of Proposed
Rulemaking (NPRM) under the LHWCA, 33 U.S.C. 901 et seq., proposing
rules implementing amendments to LHWCA section 2(3)(F) governing
recreational vessels. 75 FR 50718-30 (Aug. 17, 2010). The Department
reissued the proposal on October 15, 2010, to implement a technical
amendment to the title of 20 CFR chapter VI and to allow an additional
30 days for public comment. 75 FR 63425-27 (Oct. 15, 2010). The comment
period closed on November 17, 2010.
As explained in the NPRM, 75 FR 50718-19, LHWCA section 2(3)
defines ``employee'' to mean ``any person engaged in maritime
employment, including any longshoreman or other person engaged in
longshoring operations, and any harbor-worker including a ship
repairman, shipbuilder, and ship-breaker * * *.'' 33 U.S.C. 902(3). The
section then lists eight categories of workers who are excluded from
the definition of ``employee'' and therefore excluded from LHWCA
coverage. 33 U.S.C. 902(3)(A)-(H). Section 2(3)(F) in particular
excluded from coverage ``individuals employed to build, repair, or
dismantle any recreational vessel under sixty-five feet in length,''
provided that such individuals were ``subject to coverage under a State
workers' compensation law.'' 33 U.S.C. 902(3)(F).
Section 803 of Title IX of the American Recovery and Reinvestment
Act of 2009, Public Law 111-5, 123 Stat. 115, 127 (2009), amended the
section 2(3)(F) exclusion. That provision now excludes ``individuals
employed to build any recreational vessel under sixty-five feet in
length, or individuals employed to repair any recreational vessel, or
to dismantle any part of a recreational vessel in connection with the
repair of such vessel,'' and retains the state-workers'-compensation-
coverage proviso. 33 U.S.C. 902(3)(F), as amended by Pub. L. 111-5
section 803, 123 Stat. 115, 187 (2009) (emphasis added).
The Department's proposed rules were intended to implement amended
section 2(3)(F) and clarify its application in several respects. The
proposed rules set standards for when the amendment applied, refined
the definition of ``recreational vessel,'' clarified what types of
recreational-vessel work may result in an individual being excluded
from the definition ``employee,'' and revised the current regulatory
definition of how recreational-vessel length is measured. The proposal
also codified the Department's longstanding view that employees are
covered under the LHWCA so long as some of their work constitutes
``maritime employment'' within the meaning of the statute. Finally, the
Department included a summary of its initial regulatory flexibility
analysis.
The Department received many written comments in response to the
NPRM from a variety of sources connected to the recreational-vessel
community. The commenters included Longshore claimant and employee
groups, recreational vessel manufacturers, marina owners and operators,
repair shop owners, insurance-industry members, members of Congress,
and the Small Business Administration's Office of Advocacy. The
Department has found these comments very helpful and, in several
important respects, has revised the final rule in response.
II. General Response to Significant Comments and Explanation of Major
Changes
A. The LHWCA ``Situs'' Test
As an initial matter, the Department notes that several comments
responding to the NPRM appear to be based on the fundamental
misunderstanding that these rules eliminate the LHWCA's ``situs''
requirement. For example, one commenter uses a hypothetical landlocked
vessel manufacturing facility to illustrate how in its view the
proposed rules would be unworkable. Similarly, several landlocked
vessel manufacturers commented that the proposed rules would add to
their costs of doing business, potentially resulting in a loss of jobs.
Neither the proposed nor the final rules eliminate the LHWCA's
situs requirement for recreational-vessel workers. As explained in the
NPRM, 75 FR 50723-24 (Aug. 17, 2010), the LHWCA imposes both a
``situs'' and a ``status'' requirement. Northeast Marine Terminal Co.
v. Caputo, 432 U.S. 249, 256-265 (1977) (describing history of
``situs'' and ``status'' tests). The situs test considers whether the
injury occurred on ``the navigable waters of the United States
(including any adjoining pier, wharf, dry dock, terminal, building way,
marine railway, or other adjoining area customarily used by an employer
in loading, unloading, repairing, dismantling, or building a vessel.''
33 U.S.C. 903(a); Caputo, 432 U.S. at 279. The status test considers
whether the worker was ``engaged in maritime employment'' and therefore
a covered ``employee'' when injured. 33 U.S.C. 902(3); Caputo, 432 U.S.
at 265.
Because the ARRA amendment revised the definition of ``employee,''
the proposed rules chiefly pertain to the status test. But the
regulations in no way eliminate the situs requirement. Thus, workers at
completely landlocked recreational vessel manufacturing facilities,
repair shops, boat dealers and the like (i.e., facilities that do not
meet the situs test) are not covered by the LHWCA, regardless of the
section 2(3)(F) exclusion for recreational-vessel workers.
B. Exclusion for Marina Workers
A significant number of marinas and a marina trade association
submitted comments in response to the NPRM. Most of these commenters
expressed concern that the proposed rules would require marinas to
purchase LHWCA insurance in addition to state workers' compensation
insurance. The Department notes, however, that the LHWCA excludes from
the term ``employee'' those ``individuals employed by a marina and who
are not engaged in construction, replacement, or expansion of such
marina (except for routine maintenance),'' provided the worker is
subject to a state compensation law. 33 U.S.C. 902(3)(C).
[[Page 82119]]
This exclusion has rarely been tested in litigation, and the LHWCA does
not define the term ``marina.'' Whether any particular facility is a
marina and whether its workers are excluded under the terms of section
2(3)(C) is a highly fact-bound question. See generally Keating v. City
of Titusville, 31 BRBS 187 (1997). But at least some of these marinas'
workers would likely be excluded from LHWCA coverage under section
2(3)(C).
C. Definition of ``Recreational Vessel''
The Department received many comments addressing the proposed
``recreational vessel'' definition and has made several important
changes to the final rule. The proposed definition incorporated the
Coast Guard's standards for categorizing vessels as recreational and
non-recreational. While the Department has retained those standards,
the final rule contains two additional provisions designed to make the
definition easier to apply. First, the final rule provides that
manufacturers and builders may determine whether a vessel is
recreational by the nature of the vessel's design rather than the end
use of the vessel. And second, the rule includes within the definition
of recreational vessels non-military vessels that are recreational by
design and owned or chartered by federal, state or municipal
governments. Both of these changes are explained in detail below. The
Department believes that these changes answer many of the concerns
raised by the commenters.
D. Walking In and Out of Qualifying Maritime Employment
The Department has decided to withdraw proposed Sec. 701.303. This
rule codified both the Director's longstanding position and controlling
case law that the LHWCA covers a maritime employee if he or she
regularly performs at least some duties that come within the ambit of
the statute as part of his or her overall employment (i.e.,
``qualifying'' employment). 75 FR 50722 (Aug. 17, 2010). The rule also
clarified that LHWCA coverage does not depend on whether the employee
is performing qualifying maritime work or non-qualifying work at the
time of injury. In discussing the proposal, the Department conducted an
exhaustive review of the governing Supreme Court case law and noted the
Court's ``bedrock principle that `maritime employment' for LHWCA
purposes is a unitary concept: Coverage is established whether or not
the employee was performing a particular covered activity when injured
so long as his overall employment includes `some' qualifying maritime
employment.'' 75 FR 50723, quoting Caputo, 432 U.S. at 265, 273. The
Department viewed the rule as important to advising the regulated
public of the LHWCA's coverage. 75 FR 50722.
The Department received many comments on the proposed regulation. A
great number of these commenters saw proposed Sec. 701.303 as an
unwarranted expansion of the LHWCA's coverage and expressed great
concern over the additional costs employers would incur if required to
carry LHWCA insurance. Most of these comments focused on the nature of
the facility (e.g., repair shop, manufacturing plant) where
recreational vessel work is performed or the identity of the employer,
rather than on the nature of an employee's work at those facilities.
The commenters stated that it would be difficult to ascertain when a
particular facility or employer conducted sufficient LHWCA-covered
operations to trigger LHWCA coverage for the entire facility. Stating
that the ``some'' standard was too vague and would lead to litigation,
the commenters urged the Department to adopt a bright-line rule that
would be easy to administer and set a high threshold for coverage to
comport with the purpose of the recreational-vessel exclusion. Most
commenters proposed an 80%-20% split: So long as less than 20% of a
facility's or employer's work was on commercial vessels and the
remainder on recreational vessels, all work at the facility would be
excluded from LHWCA coverage.
The comments misconstrue both the section 2(3)(F) exclusion and the
import of proposed Sec. 701.303. Some of the exclusions from the
definition of ``employee'' in LHWCA section 2(3) focus on the nature of
the employer. For instance, section 2(3)(B) excludes ``individuals
employed by a club, camp, recreational operation, restaurant, museum,
or retail outlet.'' 33 U.S.C. 902(3)(B) (emphasis added). See Boomtown
Belle Casino v. Bazor, 313 F.3d 300, 303-04 (5th Cir. 2002) (holding
that plain language of section 2(3)(B) exclusion turns ``on the nature
of the employing entity, and not on the nature of the duties an
employee performs''). But section 2(3)(F) excludes individuals based
solely on the type of work they do: It excludes ``individuals employed
to build * * * repair * * * or to dismantle * * * in connection with
the repair'' of a recreational vessel. 33 U.S.C. 902(3)(F) (emphasis
added). Cf. Boomtown Belle Casino, 313 F.3d at 303-04 (contrasting
section 2(3)(B)'s recreational exclusion with section 2(3)(C)'s
exclusion for certain marina employees based on their job duties).
Thus, for recreational vessel workers, the statute focuses exclusively
on the kind of work the employee performs and not on the identity of
the employer or the type of facility where the work is performed. Those
comments urging the Department to adopt an 80%-20% rule based on the
nature of the work performed by a particular employer or at a
particular facility as a whole are inconsistent with the statute's
plain language.
Moreover, as noted, proposed Sec. 701.303 was not intended to
expand LHWCA coverage. Rather, the rule codified the Supreme Court's
interpretation of the LHWCA. The Department stands by its analysis of
the governing case law. Thus, even in the absence of a regulation, a
worker who regularly performs at least some duties that come within the
ambit of the LHWCA as part of his or her overall employment is covered
under the LHWCA, even if the injury occurs while the worker was not
performing qualifying maritime duties. Caputo, 432 U.S. at 273. So too
is a worker who is injured while performing qualifying maritime duties,
regardless of his or her other job duties, so long as that employment
is not excluded under section 2(3). See, e.g., Chesapeake and Ohio Ry.
Co. v. Schwalb, 493 U.S. 40, 47 (1989) (``It is irrelevant that an
employee's contribution to the loading process is not continuous or
that repair or maintenance is not always needed. Employees are surely
covered when they are injured while performing a task integral to
loading a ship.'').
Nevertheless, the Department has elected to withdraw the proposed
rule. The Department appreciates the difficulties recreational-vessel
employers and facilities face in determining whether their workers are
performing LHWCA-covered activities in order to purchase the
appropriate insurance. Further investigation into the industry's needs
is warranted. Moreover, even though this rule would have an impact on
the entire longshoring industry, the Department received only a few
comments from individuals or groups with interests extending beyond the
recreational-vessel segment of that industry. This result is not
surprising because the NPRM chiefly involved implementation of the
section 2(3)(F) exclusion for recreational-vessel workers. Given the
rule's broad application, however, the Department is reluctant to
promulgate the rule without input from the greater longshoring
community.
[[Page 82120]]
E. Date of Injury Rules
In response to a number of persuasive comments, the final rule
makes several changes and one addition to proposed Sec. 701.504. This
rule sets out standards for determining the date of injury, which
governs whether the section 2(3)(F) amendment applies. The final rule
makes the date of harmful or causative workplace exposure--rather than
the date of death or manifestation--the date of injury for determining
whether the amendment applies in cases of occupational disease, hearing
loss, and death. The rule also adds a new section addressing date of
injury for cumulative trauma, which fixes the date of injury as any
date on which a workplace trauma worsened the individual's condition.
III. Section-by-Section Explanation
701.301
The Department proposed only technical revisions to this section to
accommodate other substantive additions. In particular, the Department
moved this section's lengthy definition of ``employee'' into a new
Sec. 701.302. No comments were received, and the rule is promulgated
as proposed.
701.302
Proposed paragraph (c)(6) updated the paragraph in the definition
of ``employee'' pertaining to the recreational vessel exclusion, which
currently appears at Sec. 701.301(a)(12)(i)(F), to incorporate the
amended section 2(3)(F) language and cross-reference new Sec. Sec.
701.501-701.505. No comments were received, and the rule is promulgated
as proposed.
701.303
As discussed above, the Department has decided to withdraw this
proposed regulation.
701.501
(a) The Department proposed an updated and refined definition of
``recreational vessel.'' The Department explained that the current
regulations, promulgated in 1984, adopted the definition of
recreational vessel from a statute administered by the Coast Guard. 75
FR 50721 (Aug. 17, 2010). That statute, and the Department's current
regulations, define ``recreational vessel'' as a vessel ``manufactured
or operated primarily for pleasure, or rented, leased or chartered by
another for the latter's pleasure.'' 20 CFR 701.301(a)(12)(iii)(F)
(2009). See 46 U.S.C. 2101(25); 51 FR 4273 (Feb. 3, 1986). Prior to the
ARRA amendment, this definition was limited by length: Section 2(3)(F)
excluded only those individuals who worked on recreational vessels
under sixty-five feet in length. Because the ARRA amendment removed the
vessel-length limitation for workers who either repair recreational
vessels or dismantle them for repair, the Department noted that both
employers and employees could more frequently encounter difficulties
determining which vessels were recreational. 75 FR 50721. The
Department also wanted to ensure that individuals who perform repair
work on vessels that have a significant commercial purpose were not
improperly excluded under amended section 2(3)(F). 75 FR 50721.
To accomplish these goals, the Department proposed using Coast
Guard vessel categories to define a ``recreational vessel.''
Essentially, the Coast Guard deems the following to be recreational:
Any unchartered passenger vessel used for pleasure and carrying no
passengers-for-hire (i.e., paying passengers); and any chartered
passenger vessel used for pleasure with no crew provided and with fewer
than twelve passengers, none of whom is for hire. All other passenger-
carrying vessels fall into one of the following three non-recreational
categories: Uninspected passenger vessel; small passenger vessel; and
passenger vessel. 46 CFR 2.01-7; Navigation and Vessel Inspection
Circular No. 7-94 (Sept. 30, 1994).
The Department noted that these categories were used in boating
safety and environmental contexts, and thus would be generally known to
the recreational boating community. Id. The categories also provided a
clear, objective basis by which employers and employees could readily
ascertain whether a vessel being repaired was a ``recreational vessel''
for LHWCA coverage purposes. The Department received many comments
regarding this proposed rule and has made several significant changes
to the final rule in response.
(b) Many comments state that the proposed ``recreational vessel''
definition is ambiguous. Some of the more specific criticisms state
that the proposed definition would be difficult to apply in cases where
a boat has multiple uses or is in-between uses, and where, over the
course of its operations, the boat falls within different Coast Guard
inspection categories. Some believe that the Coast Guard definitions
are unfamiliar to boat builders and repairers.
The Department has revised the rule to clarify that the time for
evaluating the vessel's use is when the vessel is being built, repaired
or dismantled. But the final rule continues to use the Coast Guard
classifications to identify recreational vessels. In general, the
comments did not offer any constructive alternatives to using the Coast
Guard classifications except to leave the ``recreational vessel''
definition unchanged. As set forth in the NPRM, the Department believes
that the definition needs greater clarity so that employers and
employees may properly evaluate both their obligations and their rights
under the LHWCA.
The Coast Guard categories set a bright-line rule for determining
whether any particular vessel is recreational. Presumably, a vessel's
owner or operator is familiar with its use and whether the vessel is
inspected or uninspected under the Coast Guard standards. An employer's
simple inquiry may be all that is necessary to resolve the question.
Further, as noted in the NPRM, some outward indicia point to a vessel's
non-recreational status. For instance, passenger vessels and small
passenger vessels must display certificates of inspection, and
uninspected passenger vessels are subject to certain safety
requirements and must have a licensed operator. These indicia of non-
recreational status will make it easier for employers and employees to
recognize vessels that should not be considered ``recreational
vessels'' for purposes of the section 2(3)(F) exclusion.
(c) One commenter suggests simplifying the rule by describing the
vessel categories excluded from the definition of ``recreational
vessel'' rather than cross-referencing the Coast Guard statutes. The
Department has not adopted this suggestion. Outside of the
manufacturing and building context, a vessel's use at the time the
repair or dismantling led to the compensable injury determines its
recreational status. Using the general Coast Guard categories will
allow the definition of ``recreational vessel'' to remain current and
consistent with the term as used in the recreational boating industry.
The Department has made a technical revision to the language in
proposed Sec. 701.501(c) to simplify it. No change in meaning is
intended by this revision.
(d) Many comments state the proposed definition would unduly burden
employers by requiring them to investigate their customers' vessel
usage in order to determine whether the boat is recreational. Another
comment urges a rule that uses the intent of the owner in buying a
vessel instead of its actual use. Others question the feasibility and
fairness of holding employers to account
[[Page 82121]]
for usage of a boat when off their premises.
The Department does not believe a change in this requirement is
necessary. Since 1984, the regulatory ``recreational vessel''
definition has required employers to determine whether a vessel is
``manufactured or operated primarily for pleasure.'' 20 CFR
701.301(a)(12)(iii)(F) (2009). To the Department's knowledge, making
this inquiry has not proved to be problematic. In fact, two commenters
stated that for insurance purposes, they track how much work they do on
commercial vessels and how much on recreational vessels. That would
only be possible by evaluating whether the vessels they service are
used for pleasure. Moreover, using a standard other than usage could
lead to the improper exclusion of workers from LHWCA coverage. As one
commenter pointed out, vessels manufactured to recreational-vessel
standards may in fact be used entirely for commercial purposes. See,
e.g., Munguia v. Chevron U.S.A. Inc., 999 F.2d 808, 809-10 (5th Cir.
1993) (noting that employer maintained a fleet of small vessels,
including Lafitte skiffs, Boston whalers, and Jo-boats, solely to allow
its employees to service an oil-production field located on water).
Retaining the ``primarily for pleasure'' touchstone and looking to the
vessel's use avoids the problem of improperly excluding a worker from
LHWCA coverage.
(e) Several comments from recreational-vessel manufacturers object
to defining a recreational vessel by the vessel's end use because a
manufacturer typically does not know it. Instead, manufacturers usually
build to recreational-vessel standards established by the Coast Guard
and market their products through retail sales channels. These
commenters ask the Department to adopt a specific rule defining
recreational vessels for manufacturers building new vessels or doing
warranty work along the following lines: ``recreational vessel * * *
means a vessel which by design and construction is intended by the
manufacturer to be operated primarily for pleasure * * * (rather than
for commercial or military purposes).'' In a related vein, one comment
urges the Department to hold the manufacturer responsible for producing
evidence regarding the relevant percentage of end-user purposes to
establish that its purported intent is legitimate.
The Department has revised the final rule to accommodate the
manufacturers' concerns. A recreational-vessel manufacturer or builder
is usually in a different position than entities that service, repair
and dismantle vessels while in use because the manufacturer may not
know either the purchaser's identity or the vessel's actual use. Thus,
the final rule provides that a vessel being manufactured or built
(including warranty service) is a recreational vessel when intended,
based on design and construction, to be for ultimate recreational use.
The final rule also places the burden on the manufacturer or builder to
prove that the vessel or vessels under construction are built in
accordance with applicable recreational-vessel standards. Because
recreational-vessel manufacturing facilities are typically landlocked,
the Department does not expect this change in the final rule to have a
significant impact on the number of employees covered by the LHWCA.
(f) Some commenters urge the Department to base the recreational-
vessel definition on a vessel's design or construction for repairers as
well as for manufacturers, because repair work on vessels that are
recreational by design is less hazardous than other maritime work
covered by the LHWCA. The statutory language does not support this
result. In setting forth section 2(3)(F), Congress described the
vessels subject to its exclusion simply as ``recreational,'' a term
which naturally denotes a form of usage. Manufacturers receive the
benefit of a different definition solely because of the impracticality
of a usage-based definition. Indeed, the statute from which the current
regulatory definition is derived, 46 U.S.C. 2101(25), offers a
bifurcated approach under which some vessels may be recreational if
they are ``manufactured'' for pleasure, and others if they are
``operated'' for pleasure, thus suggesting that the definition might
vary depending on the setting. In a repair setting, where a vessel's
operations are ascertainable, usage is the more appropriate approach.
(g) One comment states that paragraphs (a) and (b) of the proposed
definition are in tension because a vessel used ``primarily for
pleasure'' may still have incidental use as a passenger vessel or other
commercial purpose that renders the vessel non-recreational under the
Coast Guard categories set forth in paragraph (b). This commenter
suggests that the regulation be rewritten so that incidental non-
recreational use does not make the boat non-recreational for purposes
of the section 2(3)(F) exclusion. While agreeing that a bright line may
be necessary to determine recreational status, the commenter suggests
looking to Coast Guard registration or state registration, whether a
vessel is routinely engaged in various forms of commercial activity,
and whether it falls within the Coast Guard definition of a non-
recreational vessel less than 20% of the time. Other commenters echo
this incidental use concern.
The Department agrees that occasional non-recreational use does not
alter the vessel's core recreational purpose and should not take a
vessel outside of the ``recreational vessel'' definition. To clarify
this point and to resolve the tension the commenter notes between
paragraphs (a) and (b), the final rule provides that a vessel remains
recreational unless it falls within the designated Coast Guard vessel
categories on a more than infrequent basis during the time the vessel
is in operation.
(h) A few comments note that some repairers work on a small number
of government-operated boats which resemble recreational vessels in
design aspects. Examples given of government-owned vessels serviced
include fish and wildlife enforcement boats, public-safety boats, and
recreational vessels used by police in undercover operations. The
commenters observe that they would have to discontinue this work (which
they often perform at a discounted rate as a service to their
communities) if repairing this small number of vessels would bring them
under LHWCA coverage.
The Department agrees that servicing publicly owned or bareboat-
chartered vessels that would otherwise be considered recreational
generally should not be considered commercial work subject to LHWCA
coverage. The final rule changes the definition of ``recreational
vessel'' to accommodate this approach.
The final rule reflects a framework used in maritime and
environmental statutes to define public vessels. See 33 U.S.C. 1321(4)
(definition of public vessel for environmental protection statute); 46
U.S.C. 2101(24) (definition of public vessel for Coast Guard statute);
Blanco v. U.S., 775 F.2d 53, 57-60 (2d Cir. 1985) (discussing ``public
vessels'' as defined in various maritime statutes). This definition
requires that the governmental entity own or charter the vessel and use
it for a non-commercial and non-military purpose. It encompasses the
various kinds of government vessels that the commenters seek to have
excluded from LHWCA coverage: Firefighting vessels, police vessels,
some Coast Guard vessels, sheriff's office vessels, and state natural-
resource-department vessels. But to ensure the definition is not over-
expansive, vessels owned or chartered
[[Page 82122]]
by a governmental entity that are not of conventional recreational
vessel construction or design, or that perform a traditionally
commercial service (such as ferrying passengers), or that are military
in nature are not considered public vessels.
To identify the governmental entity that must own or operate a
vessel in order for it to be eligible for ``public vessel'' status, the
final rule uses the phrase ``the United States, or by a State or
political subdivision thereof.'' The Department intends this phrase to
be construed broadly, and to include entities such as a State's
municipalities that meet the well-established factor-based inquiry for
determining whether a public entity is a subdivision. See Wheaton v.
Golden Gate Bridge, Highway & Transportation District, 559 F.3d 979,
981-82 (9th Cir. 2009).
701.502
(a) The Department proposed this rule to clarify what types of
recreational-vessel work were covered both before and after the ARRA
amendment. 75 FR 50721-22. The rule also made clear that the amendment
did not have retroactive effect and that its application was based on
the worker's date of injury. The section further defined the terms
``length,'' ``repair'' and ``dismantle.'' Finally, the rule cross-
referenced Sec. 701.303 and provided that workers who engaged in both
excluded recreational vessel work and qualifying maritime work were
covered by the LHWCA.
(b) Proposed paragraph (a) established that with respect to
injuries before the amendment's effective date, February 17, 2009, a
worker employed to repair, build, or dismantle any recreational vessel
less than sixty-five feet in length is not an ``employee'' under the
LHWCA, provided he or she is covered under a state workers'
compensation law for such work. 75 FR 50729. On or after the
amendment's effective date, a worker employed to build any recreational
vessel under sixty-five feet in length, or repair or dismantle for
repair any recreational vessel of any length is not an ``employee''
under the LHWCA, again provided he or she is covered under a state
workers' compensation law. Id. This paragraph also establishes that the
amendment only operates prospectively from its effective date. In the
accompanying preamble, the Department noted that building recreational
vessels sixty-five feet in length or greater and dismantling
recreational vessels of any length (except in connection with a repair)
was LHWCA-covered employment post-amendment. 75 FR 50722. The
Department believed that this paragraph's provisions were consistent
with congressional intent and the rules of statutory construction.
No comments found fault with this section, and several offered
approval of some aspects of it, including the non-retroactivity of the
amendment, the state workers' compensation proviso, and the treatment
of dismantling of vessels. Accordingly, paragraph (a) is promulgated as
proposed.
(c) Proposed paragraph (b)(1) defined vessel ``length,'' notably
excluding bow sprits, bumpkins, rudders, outboard motor brackets,
handles and other similar fittings, attachments and extensions from the
vessel-length measurement. It also defined ``repair'' and
``dismantle''. 75 FR 50729. In establishing these definitions, the
Department relied on common-sense and industry-familiar definitions to
make these concepts clearer and more objective, with the goal of
avoiding future litigation. 75 FR 50722.
Several comments supported the changes to the definition of length.
There were no comments critical of these definitions. Thus, the final
rule is promulgated as proposed.
(d) The Department has made a technical change to the final
definition of ``dismantle'' in paragraph (b)(3). As explained in the
NPRM, 75 FR 50721-22, section 2(3)(F) originally excluded workers
employed to ``dismantle'' recreational vessels less than sixty-five
feet in length. This unqualified term would have excluded workers who
dismantled a vessel at the end of the vessel's life. The amended
statute, however, excludes only those workers who dismantle
recreational vessels ``in connection with the repair of such vessel.''
Given this express limitation, the Department concluded that workers
governed by the amended statute would not be excluded from LHWCA
coverage when employed to dismantle obsolete recreational vessels.
Although Sec. 701.502(a)(1) and (2) make this distinction clear,
proposed paragraph (b)(3)'s definition of ``dismantle'' does not.
Accordingly, the Department has added the language ``if the date of
injury is on or after February 17, 2009'' to paragraph (b)(3)'s last
phrase.
(e) Proposed paragraph (c) essentially reiterated the walking-in-
and-out rule that was set forth more fully in proposed Sec. 701.303,
i.e., it stated that a worker engaged part of the time in excepted
recreational vessel work and part of the time in qualifying work is
covered by the LHWCA. 75 FR 50729. Because the Department has withdrawn
Sec. 701.303, paragraph (c) has been deleted from the final rule.
701.503
This proposed rule reiterated the basic thrust of the amendment--to
amend the recreational vessel exclusion--and set forth the amendment's
effective date based on congressional intent and governing principles
of statutory construction. No negative comments were received on the
proposed rule, and it remains unchanged in the final regulation.
701.504
(a) In the NPRM, the Department defined what date constitutes the
``date of injury'' for different kinds of claims. 75 FR 50720, 50729-30
(Aug. 17, 2010). The date of injury is the date at which a legally
recognized harm occurs to a worker, giving rise to a compensation
claim. It is the relevant point in time for determining whether the
section 2(3)(F) amendment applies to a given claim: If the date of
injury is on or after the amendment's effective date, February 17,
2009, then the amendment's provisions apply to a claim; otherwise, the
pre-amendment statute governs. The NPRM set forth different rules for
traumatic injury, occupational disease, hearing loss and death claims.
(b) Traumatic injury. For traumatic injury, proposed paragraph
(a)(1) defined the date of injury as the date the worker is harmed. One
comment generally supported this provision; no negative comments were
received. Accordingly, this paragraph is promulgated as proposed.
(c) Occupational disease. For occupational disease, proposed
paragraph (a)(2) adopted the manifestation date--i.e., the date that
the individual actually became aware of a disabling, work-related
condition--to define the date of injury. The Department reasoned that
this approach was consistent with judicial precedent and other
statutory language making the manifestation date relevant for various
purposes. 75 FR 50720.
While a few comments offered general support for the proposed rule
with respect to occupational disease, other comments strongly
questioned the proposed rule's approach. Several comments pointed out
that linking the date of injury to disease manifestation
inappropriately borrows from statute-of-limitations contexts and is
otherwise unfair and contrary to the position taken by the Department
in the past. Instead, one comment urged using a rule that makes the
date of exposure to harmful stimuli the relevant date for determining
the ARRA amendment's applicability.
The Department agrees with these comments and the final rule makes
the
[[Page 82123]]
date of injurious exposure the date of injury for occupational
diseases. Such an approach is both fairer and more consistent with the
position taken by the Department in the past.
Using an exposure date is far less arbitrary than using a
manifestation date for occupational diseases. The causative
physiological harm occurs when an employee is exposed to the noxious
substance, even though the deleterious effects might not be felt until
years later; in addition, the date the disease's symptoms manifest may
vary greatly among individuals. Indeed, under a rule that makes
manifestation the date of injury, similarly-situated employees may be
treated differently: An employee who was both exposed and developed
symptoms before the amendment would be accorded pre-amendment coverage,
while one who was exposed pre-amendment but happened to develop
symptoms after the amendment's effective date would not.
And, as the comments allude to, using the exposure date as the date
of injury affords workers, insurers, and employers the benefit of their
legal expectations. Employees going to work on vessels that were
covered pre-amendment did so with the expectation that they would
benefit from LHWCA coverage for harmful on-the-job exposures,
regardless of when those exposures manifested themselves in the form of
a debilitating disease. Concomitantly, employers paid for insurance
coverage in the event of harm to an employee caused by on-the-job
exposure--whether harm from the exposure was realized immediately or in
the long-run.
As the comments also note, the Department has previously recognized
the fundamental fairness of a rule that makes the date of exposure
determinative for gauging the effective date of an amendment. Analyzing
whether the District of Columbia Workmen's Compensation Act of 1928,
D.C. Code 36-501 et seq., which extended LHWCA coverage to private
workers in the District from 1928 to 1982, should continue to apply to
claims based on employment events prior to that Act's repeal, the
Department concluded that, ``for the purpose of determining whether a
workers' compensation statute applies to such an injury (`coverage'),
the relevant legal provisions are those in effect at the time of the
employment exposure to the conditions that cause the disease.'' 51 FR
4270, 4272 (Feb. 3, 1986). The Department reasoned that ``[w]orkers'
compensation laws operate upon the employment relationship. The
occurrence of an event or events in the course of that relationship is
the foundation of any compensation-law liabilities that arise
thereafter. The insurance requirement that is a socially and
practically critical aspect of compensation legislation attaches to the
conduct of covered employment.'' Because insurers are responsible for
diseases resulting from exposure during the terms of their policies, a
manifestation rule would unfairly ``relieve[] [insurance carriers] of
liabilities they contracted to bear.'' Id. at 4272-73.
Based on this analysis, the Department has reconsidered the
reasoning it gave in the NPRM to support adopting a manifestation rule
in occupational disease claims. Although cases the Department cited
have applied the manifestation rule to determine the applicability of
the 1972 amendments to the LHWCA, which expanded the categories of
workers covered by the LHWCA, those cases relied on congressional
intent specific to those amendments. In SAIF Corp./Oregon Ship v.
Johnson, 908 F.2d 1434, 1439 (9th Cir. 1990), the court worried that an
exposure rule would be contrary to Congress' intent to maximally expand
LHWCA coverage. In order to conform to congressional intent, the court
held that the manifestation date determined the amendments' coverage,
because such a rule swept in the greatest number of workers. Id.; see
also Insurance Company of North America v. Dep't of Labor, 969 F.2d
1400, 1404 (2d Cir. 1992) (describing SAIF as holding that ``the
manifestation rule best comports with the LHWCA's `paramount goal' of
compensating workers for lost earning capacity stemming from
occupational diseases'').
The ARRA amendments present a different scenario. Under the ARRA
amendment, a manifestation rule could result in fewer LHWCA-covered
employees. But there is no evidence that Congress intended to exclude
the largest number of workers possible from LHWCA coverage. Rather, by
expanding the recreational-vessel exclusion via the ARRA amendment,
Congress primarily sought to relieve businesses from paying for
duplicative state workers' compensation and LHWCA insurance coverage
for recreational-vessel workers. See H. Rpt. 111-4, at 49 (Jan. 26,
2009). A manifestation rule does not serve that purpose. When the
harmful exposure occurred while working on a covered vessel pre-
amendment, the insurance in place at the time would cover that injury.
Any expense to businesses for pre-amendment exposures has already been
incurred, and an exposure rule does not impose any new prospective
LHWCA financial obligations. Thus, there is no basis to believe that
Congress wished to deny workers the legal remedy in place when they
were exposed to an injurious stimulus.
In the NPRM, the Department cited other provisions of the LHWCA
making manifestation the date of injury in a statute of limitations
context. 75 FR 50720. See 33 U.S.C. 912, 913. But as the comments point
out, this analogy was inapt. The definition of date of injury in a
statute of limitations context is designed to preserve the ability to
file a claim for individuals who might not have notice of their right
to compensation until manifestation. The date of injury in the context
of a statutory amendment serves a far different goal: Satisfying
congressional intent and ensuring that the legitimate expectations of
the parties with respect to coverage are met.
One comment questioned how the last-employer rule would operate
under the proposed manifestation-date rule. See generally Travelers
Ins. Co. v. Cardillo, 225 F.2d 137 (2d Cir. 1955). The commenter noted
concern about how the liable employer and insurance carrier would be
identified in claims involving exposure at both covered and non-covered
employment, and in cases with multiple employers. Because the final
rule adopts date of exposure as the date of injury, current precedent
provides clear guidance on the questions the commenter raised. The
Department adheres to the well-established rule that the employee is
eligible for LHWCA benefits if some of the exposure leading to the
occupational disease occurred while covered under the Act. See Newport
News Shipbuilding and Dry Dock Co. v. Stilley, 243 F.3d 179, 183-84
(4th Cir. 2001). In cases where the harmful exposure spans both an
employee's covered pre-amendment work and his or her exempt post-
amendment work, or spans covered commercial vessel work and exempt
recreational vessel work, the employee will be eligible for benefits
based on the covered work. The last employer for whom the employee
performed covered work and that exposed him or her to a harmful
stimulus is responsible for LHWCA benefits payable when injury results.
See generally Avondale Industries, Inc. v. Director, Office of Workers'
Compensation Programs, 977 F.2d 186 (5th Cir. 1992) (setting forth last
covered employer rule).
(d) Hearing loss. For hearing loss cases, proposed paragraph (a)(3)
adopted the audiogram date--i.e., the date that the individual received
a diagnosis quantifying hearing loss via
[[Page 82124]]
an audiogram--to define the date of injury. The Department offered
similar reasons to those offered in support of a manifestation rule in
occupational disease cases, and additionally pointed out the difficulty
of pinpointing a date of exposure in hearing loss cases.
Although some comments offer general support for the proposed rule,
other comments raise compelling questions similar to those raised
concerning the date of injury for occupational disease cases. One
commenter questions the fairness of an audiogram-date rule for hearing
loss claims. For the same reasons the Department has now adopted an
exposure rule in occupational disease cases, the Department also adopts
an exposure rule for hearing loss cases as well. Such a rule is less
arbitrary, recognizes that the genesis of the injury is when the
exposure occurs, and is fair to all parties by giving them the benefit
of an insurance contract that covers injuries based on when the
exposure occurred.
The comments suggest, and the Department agrees, that the reasoning
set forth in the NPRM for using an audiogram rule is unpersuasive.
There, the Department posited that an audiogram date was a better
measure than an exposure rule for determining the ARRA amendment's
applicability because of the difficulty in determining a precise date
of harmful exposure. However, although exposure in hearing-loss claims
typically occurs over an extended period of time, determining a single
precise date is not necessary to administration of an exposure rule,
and current law provides ample tools for handling claims involving
exposure over periods of time. If some or all exposures occurred prior
to February 17, 2009, the amendment would simply not apply with respect
to a disability resulting from those exposures. And a worker would be
eligible for full benefits if any of the exposure occurring during
LHWCA-covered employment resulted in a hearing loss. See Port of
Portland v. Director, Office of Workers Compensation Programs, 932 F.2d
836, 839-40 (9th Cir. 1991). Moreover, pursuant to the last-covered-
employer rule, the most recent employer, if any, for whom the claimant
performed LHWCA-covered work at which he or she suffered harmful
exposure would be responsible for benefits. See id.
(c) Death claims. For death claims, proposed paragraph (a)(4)
adopted the date of death as the date of injury for determining the
amendment's application. The Department based this proposal on court
precedent applying the law in place at the time of death in death
benefit cases.
Although some comments expressed general support for the proposed
rule, others urged the Department to use the date of the harmful
workplace exposure or event that ultimately led to death as the date of
injury, arguing that such a rule was more equitable. For essentially
the same reasons stated above in the discussion of occupational disease
cases, the Department agrees. Notably, as one comment suggests, in
death cases, businesses have already paid and insurers have received
the appropriate premiums to cover the death based on a causative
workplace event that occurred while a worker was in covered employment.
In the proposal, the Department relied on Insurance Company of
North America v. Dep't of Labor, 969 F.2d 1400, 1406 (2d Cir. 1992),
and similar cases for the proposition that death should be the date of
injury. However, although the court held that the time of one's death
was the date of injury for determining the applicability of the 1972
amendments, it observed that the goal of the 1972 amendments was ``an
expansion * * * of the class of persons entitled to benefits under the
Act.'' Id. Here, the core purpose of the ARRA amendment is sparing
businesses from the expense of duplicative state workers' compensation
and LHWCA insurance coverage. One simply cannot infer that Congress
sought to deny LHWCA benefits where workers were injured while covered
by the LHWCA, but died post-amendment, given that employers would have
already paid for LHWCA insurance coverage for a death resulting from an
injury while a worker was performing LHWCA-covered employment.
(d) Cumulative trauma. In the NPRM, the Department did not
specifically address the date of injury in claims involving cumulative
trauma. One comment urged that the final rule address this issue. To
avoid any confusion on this subject, the Department agrees, and the
final rule adds a new paragraph for cumulative trauma injuries. The
rule states that the date of injury is any date on which a work-related
trauma occurs that contributes to the cumulative condition. See Metro.
Stevedore Co. v. Crescent Wharf and Warehouse Co., 339 F.3d 1102, 1105-
06 (9th Cir. 2003) (a trauma that worsens a cumulative condition is
generally compensable). If, however, the injury is the result of a
natural progression of an earlier trauma, then the date of the earlier
trauma is the date of injury.
(e) Proposed paragraph (b) and (c) set out the consequences of
applying the date-of-injury to the ARRA amendment's effective date. If
that date occurs before February 17, 2009, ARRA's effective date, then
the pre-amendment section 2(3)(F) exclusion applies; if that date
occurs on or after February 17, 2009, the post-amendment exclusion
applies. The Department received no specific comments on these rules
and they are promulgated without substantive change. To make these two
paragraphs consistent, however, the Department has made a technical
change to paragraph (c). The Department has replaced the phrase
``employee's eligibility,'' which appeared in the proposed rule, with
the phrase ``individual's entitlement'' in the final rule.
701.505
The proposed rule provided that an employer may not stop paying
compensation for an injury awarded prior to February 17, 2009, the ARRA
amendment's effective date, even if that employee's work is excluded
from coverage by the amendment. The Department proposed this paragraph
in accordance with basic principles of finality and the presumption
against retroactivity. The Department has received no specific comments
on this section but has received some generally positive remarks on its
interpretation of the non-retroactive character of the ARRA amendment.
Thus, the proposed rule remains unchanged in the final regulation.
IV. Statutory Authority
Section 39(a) of the LHWCA (33 U.S.C. 939(a)) authorizes the
Secretary of Labor to prescribe rules and regulations necessary for the
administration and enforcement of the LHWCA and its extensions.
V. Information Collection Requirements (Subject to the Paperwork
Reduction Act) Imposed Under the Proposed Rule
The final rule imposes no new collections of information.
VI. Executive Order 12866 (Regulatory Planning and Review)
This rule has been drafted and reviewed in accordance with
Executive Order 12866, section 1(b), entitled ``The Principles of
Regulation.'' The Department has determined that the rule is not a
``significant regulatory action'' under Executive Order 12866, section
3(f). Accordingly, it does not require an assessment of potential costs
and benefits under section 6(a)(3) of that order. Moreover, because it
is not a
[[Page 82125]]
significant rule within the meaning of the Executive Order, the Office
of Management and Budget has not reviewed it.
VII. Small Business Regulatory Enforcement Fairness Act of 1996
As required by Congress under the Small Business Regulatory
Enforcement Fairness Act of 1996, enacted as Title II of Public Law
104-121 Sec. Sec. 201-253, 110 Stat. 847, 857 (1996), the Department
will report promulgation of this final rule to both Houses of the
Congress and to the Comptroller General prior to its effective date.
The report will state that the Department has concluded that the rule
is not a ``major rule'' as defined under 5 U.S.C. 804(2).
VIII. 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 does not include any Federal
mandate that may result in increased expenditures by State, local, and
tribal governments, or increased expenditures by the private sector of
more than $100,000,000.
IX. Regulatory Flexibility Act and Executive Order 13272 (Proper
Consideration of Small Entities in Agency Rulemaking)
The Regulatory Flexibility Act of 1980, as amended (5 U.S.C. 601 et
seq.), requires an agency to prepare a regulatory flexibility analysis
when it proposes regulations that will have ``a significant economic
impact on a substantial number of small entities,'' or to certify that
the proposed regulations will have no such impact, and to make the
analysis or certification available for public comment.
The Department believes that the LHWCA itself accounts for most, if
not all, of the costs imposed on the industry, and that this final rule
does not directly add to those costs. The primary cost of the LHWCA
lies in purchasing commercial insurance or qualifying as a self-insurer
to insure covered workers. This requirement is imposed by statute. 33
U.S.C. 904, 932. By expanding the number of recreational vessel workers
who will be excluded from coverage, the section 2(3)(F) amendment will
generally reduce the recreational vessel industry's costs for
purchasing workers' compensation insurance or, in the case of a self-
insurer, providing compensation. This final rule simply seeks to make
the potentially ambiguous language of the ARRA amendment clearer and
more easily applied, and it does not deliberately seek to expand or
contract businesses' eligibility for the recreational vessel exclusion.
Moreover, to the extent comments have raised concerns that the proposed
rule might be improved by making its provisions more easily workable
for businesses without compromising the rule's underlying objective,
the final rule, as discussed below, has accommodated such comments.
Nonetheless, because the recreational-vessel building and repair
industries include many small firms, and because the comments raise
issues concerning how the Department might maximize benefits to small
businesses via rulemaking, the Department has evaluated how the ARRA
amendment, as implemented in this final rule, might affect small
businesses. The Department prepared an initial regulatory flexibility
analysis (IRFA) before proposing this rule and included a summary of
that analysis in the NPRM. 75 FR 50725-28 (Aug. 17, 2010). The
Department incorporates those documents by reference into this final
regulatory flexibility analysis.
Need for, and Objectives of, This Rule
The primary goal of this rule is to provide a clear, workable
definition of ``recreational vessel.'' Because the ARRA amendment to
section 2(3)(F) removed the sixty-five-foot limitation on what
constitutes a recreational vessel for all purposes but construction,
the amended exclusion presents more opportunities for confusion among
vessel-repair enterprises and their workers about whether the boats
they work on are ``recreational vessels'' within the meaning of the
LHWCA. The Department determined that the current regulatory definition
of ``recreational vessel'' does not provide adequate guidance to the
industry and its employees, and therefore adopts this rule to more
clearly define the term.
This definition, in turn, serves several purposes. It gives
entities that build or repair vessels guidance regarding the
classification of vessels their employees are working on so that they
may insure themselves under the appropriate workers' compensation
scheme (i.e., the LHWCA or a state law). Similarly, the definition
provides guidance to workers who might otherwise be unsure of their
rights under the LHWCA. Finally, a clear definition reduces the
possibility of litigation over the applicability of the section 2(3)(F)
exclusion.\1\
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\1\ As expressed in the NPRM, 75 FR 50725, the Department also
anticipated that in the absence of a size limitation, more questions
would be raised regarding coverage for workers who perform a
combination of qualifying work (e.g., building a seventy-foot
recreational vessel) and non-qualifying work (e.g., repairing a
seventy-foot recreational vessel). The proposed rule sought to
clarify how the LHWCA applies to workers engaged in qualifying
maritime employment whose job duties also include tasks that do not
come within the ambit of the LHWCA. As set forth above, however, the
Department has withdrawn this proposed rule.
---------------------------------------------------------------------------
The Director, Office of Workers' Compensation Programs, has the
legal authority to issue this final rule. The LHWCA empowers the
Secretary of Labor ``to make such rules and regulations * * * as may be
necessary'' to administer the statute. 33 U.S.C. 939(a). The Secretary
has delegated her authority to the Director, Office of Workers'
Compensation Programs. Secretary's Order 10-2009 (Nov. 6, 2009). In
addition, the Department, like any other administrative agency,
possesses the inherent authority to promulgate regulations in order to
fill gaps in the legislation that it is responsible for administering.
Chevron v. Natural Resources Defense Council, 467 U.S. 837, 843-44
(1984).
Response to Significant Issues Raised by Public Comments and the Small
Business Administration's Office of Advocacy
(a) Comments from the Small Business Administration's Office of
Advocacy (SBA) and the National Marine Manufacturers Association (NMMA)
raise questions as to whether the IRFA utilized correct data to
estimate the number of small businesses affected by this rule. The
Department has fully addressed these comments in the following section
regarding the estimate of the number of small entities to which the
final rule will apply.
(b) Some commenters, including the SBA, assert that using the Coast
Guard standards for classifying recreational vessels will expand the
number of small businesses covered by the LHWCA, thereby increasing
their costs. Because the term ``recreational vessel'' has been only
generally defined in the past, it is impossible to ascertain the extent
to which the revised definition will alter the exclusion's scope and
thereby affect small entities. Moreover, the final rule retools the
definition so that it involves significantly less verification effort,
and to make the definition's scope clear so that businesses can avoid
purchasing LHWCA insurance on a precautionary basis.
[[Page 82126]]
(c) Addressing proposed Sec. 701.501, the NMMA comments that the
definition of recreational vessel and its use of the Coast Guard
standards is ambiguous and will impose additional costs on small
businesses that may not be able to determine whether a vessel meets the
definition and, as a result, may turn away important work rather than
incur the costs associated with LHWCA insurance. The NMMA also posits
that insurance firms will be less apt to write LHWCA policies on these
businesses, again increasing costs. The NMMA further encourages the
Department to adopt a different recreational-vessel definition for boat
manufacturers that focuses on the manufacturer's intent in building the
vessel rather than on its end use. The SBA similarly states that the
Department should consider this regulatory alternative. In addition, a
few small repair businesses note that under the proposed definition,
they would have to turn away public-vessel work if performing such work
made purchasing LHWCA insurance necessary.
The Department has set forth its full response to these and other
comments pertaining to the recreational-vessel definition in the
section-by-section analysis for Sec. 701.501 above. The Department has
made two important changes to the final recreational-vessel definition
in response to these comments. These changes will help small businesses
identify recreational vessels within the meaning of the section 2(3)(F)
exclusion and make informed decisions regarding their need to obtain
LHWCA insurance. First, the Department has promulgated an alternative
definition for manufacturers and builders, which allows them to assess
a vessel's recreational nature based on design and construction data
reasonably available to them. Second, the final rule carves out an
exception for public-purpose vessels so that businesses that repair
these vessels in addition to other recreational vessels will not have
to purchase LHWCA insurance.
(d) Addressing proposed Sec. 701.303, many comments expressed the
view that the Department should have considered alternative measures
for determining coverage for workers who perform both qualifying
maritime duties and non-qualifying work (walking-in-and-out of
qualifying coverage). The commenters believed the rule would force
businesses to secure expensive LHWCA insurance for their workers,
instead of less expensive state workers' compensation insurance. In
this regard, several commenters rejected the Department's suggestion
that businesses could minimize the cost implications of the proposed
rule by segmenting their workplaces into recreational and non-
recreational vessel operations. 75 FR 50728. These commenters (mostly
small businesses) noted that their staffs were too small to segregate
in this fashion. Most commenters proposed an 80%-20% split as an
alternative: So long as less than 20% of a facility's or employer's
work was on commercial vessels and the remainder on recreational
vessels, all work at the facility would be excluded from LHWCA
coverage. The SBA also suggested that the Department adopt this
alternative.
The Department has set forth its full response to these comments in
subsection D of the General Response to Significant Comments and
Explanation of Major Changes section above. For the reasons explained
there, the Department is withdrawing proposed Sec. 701.303 and has not
promulgated it in this final rule.
Small Entities to Which the Final Rule Will Apply
(a) In the IRFA, the Department looked to available data to
estimate the number of small entities that might be affected by the
proposed rule. 75 FR 50725-27. The IRFA estimated that, in 2007, there
were 1,102 recreational vessel building establishments, employing
53,466 workers, generating $11.1 billion in shipments, and with a
payroll of $1.9 billion; and 1,837 recreational boat repair
establishments, employing 12,203 workers, generating $1.6 billion in
revenue, and with $436 million in annual payroll. These entities were
predominantly estimated to be small businesses.
In reaching its conclusions, the IRFA recognized difficulties in
finding well-tailored NAICS categories to capture the affected small
businesses. The Department relied chiefly on two NAICS industry
categories: (1) NAICS industry 336612 (Boat Building); and(2) NAICS
industry 811490 (Other Personal and Household Goods Repair and
Maintenance). The NAICS system is described in detail in the IRFA. 75
FR 50726.
(b) Several commenters, notably the NMMA and the SBA, state that
the universe of affected small entities is larger than estimated in the
IRFA. These commenters note that the IRFA did not look to several
relevant NAICS categories in developing its profile of the small
entities affected: NAICS industry 713930 (Marinas), NAICS industry
441222 (Boat Dealers), and NAICS industry 441221 (Personal Watercraft
Dealers). These commenters also suggest that NAICS industry 811490
(Other Personal and Household Goods Repair and Maintenance) may be too
broad to be useful in assessing the number of small recreational vessel
repairers. The commenters assert that businesses falling into these
categories are mostly small under the Small Business Association's size
standards.
While there is data suggesting that the additional categories
pointed to by the commenters consist mostly of small businesses, it is
analytically impossible to determine a precise number that actually
perform work on recreational vessels. Some dealers may simply sell
boats without performing repairs, while some marinas may simply offer
docking space, but not repair services. This difficulty is compounded
by the fact that, as noted in the IRFA, 75 FR 50726 n.1, some marinas'
workers are excluded from LHWCA coverage by section 2(3)(C) of the
statute. Nonetheless, although these categories pose analytical
difficulties, the Department notes that they likely include affected
small businesses.
Based on industry surveys, the NMMA and the SBA state that in 2008,
there were approximately 33,000 retail/repair businesses employing
217,788 individuals; and 5,284 marine manufacturers employing 135,900
individuals. The vast majority of these are claimed to be small
businesses. However, this data does not distinguish businesses that
solely conduct retail sales versus those that repair recreational
vessels. The data also does not consider whether some portion of the
manufacturers are landlocked--the comments made clear that some portion
of this industry is not located on navigable waterways-and thus does
not meet the LHWCA's situs requirement.
(c) The Department fully acknowledges the data put forward by
comments, including the industry surveys and the additional NAICS
categories. However, it is impossible to state, in this informational
vacuum, the accuracy of this data relative to the Department's
conclusions in the IRFA. In any event, assuming the larger number of
affected small businesses suggested by the commenters is correct, this
final rule maximizes, to the extent consistent with sound
administration of the LHWCA, the benefit of the recreational vessel
exemption for small businesses by adopting several alternative
proposals raised by, or on behalf of, small businesses. Because the
final rule addresses these substantive concerns and ensures that small
business can take maximum advantage of the section 2(3)(F) recreational
vessel exclusion, while nevertheless protecting those employees whose
duties are
[[Page 82127]]
covered by the LHWCA, the Department believes that reaching a precise
conclusion concerning the number of affected small businesses is not
critical.
Projected Reporting, Recordkeeping and Other Compliance Requirements
for Small Entities
The final rule does not directly impose any reporting or
recordkeeping requirements on any entities, regardless of size. Nor do
the rules impose other significant costs beyond those imposed by the
LHWCA itself. The statute requires employers whose employees are
covered by the LHWCA to secure the payment of compensation either by
purchasing commercial insurance or qualifying as a Department-approved
self-insurer. 33 U.S.C. 904, 932. The ARRA amendment to section 2(3)(F)
significantly expanded the exclusion for recreational vessel workers,
thereby reducing the number of workers considered employees for LHWCA
coverage purposes. Thus, both small and large businesses that repair
recreational vessels sixty-five feet or greater in length who had
previously been required to purchase LHWCA insurance may be relieved of
that obligation. Instead, these employers generally will only be
required to purchase lower-cost state insurance for their workers who
repair recreational vessels.
In preparing the IRFA, the Department surveyed the cost of
purchasing LHWCA insurance and compared it to the cost of various
states' workers' compensation insurance. On average, LHWCA insurance is
50-100 percent more expensive than state workers' compensation
insurance. This range is based on data collected by the National
Council on Compensation Insurance (NCCI), which discloses the premium
or load that states impose on businesses that carry LHWCA insurance.
Because the premium for both LHWCA and state workers' compensation
coverage is calculated as a percentage of the employer's payroll,
regardless of payroll size, the cost for both small establishments and
larger employers is the same in relative terms.
One insurance broker who commented agreed with the Department's
cost estimate. But the SBA's comment suggests that the increase in
insurance costs will be higher than the Department's estimate, and
individual comments suggest a wide range of potential cost increases.
In positing that costs in the Maryland-Delaware-Virginia region will
increase 200 to 300 percent, the SBA states that an increase from
$20,000 to $53,000 would be a 265 percent change. By the Department's
calculations, such a change would only be a 165 percent increase.
Further, the state of Virginia imposes a 1.77 factor on each sector of
the marine industry subject to the Longshore Act, while the state of
Maryland imposes a 1.55 factor. Thus, the cost of LHWCA insurance in
these regions is 55 to 77 percent greater than the cost of state
workers' compensation insurance.
The comments, including SBA's, present anecdotal and geographically
specific assertions on cost differences for LHWCA coverage. The
Department acknowledges the possibility of such differences, including
higher cost premiums, in different locations. However, the higher cost
of LHWCA coverage, whatever it may be, is made less of a factor by the
final rule's revisions to the proposal; as noted above, these revisions
clarify the need for some businesses to carry LHWCA coverage and
maximize the effect of the recreational vessel exemption to the extent
feasible and permissible under the statute.
Several comments raise the prospect of a compliance-related burden,
in that businesses will have to determine and document the nature of
vessels they work on. But it is the statute itself that implicitly
imposes this burden if employers wish to claim their workers are
excluded from LHWCA coverage under section 2(3)(F). Moreover, the
burden is a modest and unavoidable one. The stronger point made by some
comments is that the proposed rule would make it more cumbersome to
investigate and determine a vessel's status as recreational. The
revisions made to the final recreational vessel definition should make
this determination less burdensome to businesses.
Steps Taken To Minimize the Significant Economic Impact on Small
Entities
The exemption for recreational-vessel workers is a creature of
statute. All businesses, small or otherwise, must make determinations
regarding their need to procure LHWCA or state workers' compensation
insurance. The Department has fully explained the factual, policy and
legal reasons for adopting the final rule--as well as its reasons for
rejecting other significant alternatives--in the sections above titled
General Response to Significant Comments and Explanation of Major
Changes and Section-by-Section Analysis. As already explained, the
Department adopted several alternatives suggested by the commenters
that will serve to minimize the economic impact on small entities.
List of Subjects in 20 CFR Part 701
Longshore and harbor workers, Organization and functions
(government agencies), Workers' compensation.
For the reasons set forth in the preamble, the Department of Labor
amends 20 CFR part 701 as follows:
PART 701--GENERAL; ADMINISTERING AGENCY; DEFINITIONS AND USE OF
TERMS
0
1. The authority citation for Part 701 is revised to read as follows:
Authority: 5 U.S.C. 301 and 8171 et seq.; 33 U.S.C. 939; 36 DC
Code 501 et seq.; 42 U.S.C. 1651 et seq.; 43 U.S.C. 1331;
Reorganization Plan No. 6 of 1950, 15 FR 3174, 3 CFR, 1949-1953
Comp., p. 1004, 64 Stat. 1263; Secretary's Order 10-2009; Pub. L.
111-5 Sec. 803, 123 Stat. 115, 187 (2009).
0
2. In Sec. 701.301, revise the preceding undesignated center heading
and the section heading, remove paragraph (a)(12), and redesignate
paragraphs (a)(13) through (16) as paragraphs (a)(12) through (15).
The revisions read as follows:
Definitions and Use of Terms
Sec. 701.301 What do certain terms in this subchapter mean?
* * * * *
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3. Add Sec. 701.302 to read as follows:
Sec. 701.302 Who is an employee?
(a) Employee means any person engaged in maritime employment,
including:
(1) Any longshore worker or other person engaged in longshoring
operations;
(2) Any harbor worker, including a ship repairer, shipbuilder and
shipbreaker; and
(3) Any other individual to whom an injury may be the basis for a
compensation claim under the LHWCA as amended, or any of its
extensions;
(b) The term does not include:
(1) A master or member of a crew of any vessel; or
(2) Any person engaged by a master to load or unload or repair any
small vessel under eighteen tons net.
(c) Nor does this term include the following individuals (whether
or not the injury occurs over the navigable waters of the United
States) where it is first determined that they are covered by a state
workers' compensation act:
(1) Individuals employed exclusively to perform office clerical,
secretarial, security, or data processing work (but not longshore cargo
checkers and cargo clerks);
[[Page 82128]]
(2) Individuals employed by a club (meaning a social or fraternal
organization whether profit or nonprofit), camp, recreational operation
(meaning any recreational activity, including but not limited to scuba
diving, commercial rafting, canoeing or boating activities operated for
pleasure of owners, members of a club or organization, or renting,
leasing or chartering equipment to another for the latter's pleasure),
restaurant, museum or retail outlet;
(3) Individuals employed by a marina, provided they are not engaged
in its construction, replacement or expansion, except for routine
maintenance such as cleaning, painting, trash removal, housekeeping and
small repairs;
(4) Employees of suppliers, vendors and transporters temporarily
doing business on the premises of a covered employer, provided they are
not performing work normally performed by employees of the covered
employer;
(5) Aquaculture workers, meaning those employed by commercial
enterprises involved in the controlled cultivation and harvest of
aquatic plants and animals, including the cleaning, processing or
canning of fish and fish products, the cultivation and harvesting of
shellfish, and the controlled growing and harvesting of other aquatic
species; or
(6) Individuals employed to build any recreational vessel under
sixty-five feet in length, or individuals employed to repair any
recreational vessel, or to dismantle any part of a recreational vessel
in connection with the repair of such vessel. For purposes of this
paragraph, the special rules set forth at Sec. Sec. 701.501 through
701.505 apply.
0
4. Add a new undesignated center heading following Sec. 701.401 and
add Sec. 701.501 to read as follows:
Special Rules for the Recreational Vessel Exclusion From the Definition
of ``Employee''
Sec. 701.501 What is a recreational vessel?
(a) Recreational vessel means a vessel--
(1) Being manufactured or operated primarily for pleasure; or
(2) Leased, rented, or chartered to another for the latter's
pleasure.
(b) In applying the definition in paragraph (a) of this section,
the following rules apply:
(1) A vessel being manufactured or built, or being repaired under
warranty by its manufacturer or builder, is a recreational vessel if
the vessel appears intended, based on its design and construction, to
be for ultimate recreational uses. The manufacturer or builder bears
the burden of establishing that a vessel is recreational under this
standard.
(2) A vessel being repaired, dismantled for repair, or dismantled
at the end of its life is not a recreational vessel if the vessel had
been operating, around the time of its repair or dismantling, in one or
more of the following categories on more than an infrequent basis--
(A) ``Passenger vessel'' as defined by 46 U.S.C. 2101(22);
(B) ``Small passenger vessel'' as defined by 46 U.S.C. 2101(35);
(C) ``Uninspected passenger vessel'' as defined by 46 U.S.C.
2101(42);
(D) Vessel routinely engaged in ``commercial service'' as defined
by 46 U.S.C. 2101(5); or
(E) Vessel that routinely carries ``passengers for hire'' as
defined by 46 U.S.C. 2101(21a).
(3) Notwithstanding paragraph (b)(2) of this section, a vessel will
be deemed recreational if it is a public vessel, i.e., a vessel owned
or bareboat-chartered and operated by the United States, or by a State
or political subdivision thereof, at the time of repair, dismantling
for repair, or dismantling, provided that such vessel shares elements
of design and construction with traditional recreational vessels and is
not normally engaged in a military, commercial or traditionally
commercial undertaking.
(c) All subsequent amendments to the statutes referenced in
paragraph (b)(2) of this section and the regulations implementing those
provisions in Title 46 of the Code of Federal Regulations will apply
when determining whether a vessel is recreational.
0
5. Add Sec. 701.502 to read as follows:
Sec. 701.502 What types of work may exclude a recreational-vessel
worker from the definition of ``employee''?
(a) An individual who works on recreational vessels may be excluded
from the definition of ``employee'' when:
(1) The individual's date of injury is before February 17, 2009,
the injury is covered under a State workers' compensation law, and the
individual is employed to:
(i) Build any recreational vessel under sixty-five feet in length;
or
(ii) Repair any recreational vessel under sixty-five feet in
length; or
(iii) Dismantle any recreational vessel under sixty-five feet in
length.
(2) The individual's date of injury is on or after February 17,
2009, the injury is covered under a State workers' compensation law,
and the individual is employed to:
(i) Build any recreational vessel under sixty-five feet in length;
or
(ii) Repair any recreational vessel; or
(iii) Dismantle any recreational vessel to repair it.
(b) In applying paragraph (a) of this section, the following
principles apply:
(1) ``Length'' means a straight line measurement of the overall
length from the foremost part of the vessel to the aftmost part of the
vessel, measured parallel to the center line. The measurement must be
from end to end over the deck, excluding sheer. Bow sprits, bumpkins,
rudders, outboard motor brackets, handles, and other similar fittings,
attachments, and extensions are not included in the measurement.
(2) ``Repair'' means any repair of a vessel including
installations, painting and maintenance work. Repair does not include
alterations or conversions that render the vessel a non-recreational
vessel under Sec. 701.501. For example, a worker who installs
equipment on a private yacht to convert it to a passenger-carrying
whale-watching vessel is not employed to ``repair'' a recreational
vessel. Repair also does not include alterations or conversions that
render a non-recreational vessel recreational under Sec. 701.501.
(3) ``Dismantle'' means dismantling any part of a vessel to
complete a repair but does not include dismantling any part of a vessel
to complete alterations or conversions that render the vessel a non-
recreational vessel under Sec. 701.501, or render the vessel
recreational under Sec. 701.501, or, if the date of injury is on or
after February 17, 2009, to scrap or dispose of the vessel at the end
of the vessel's life.
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6. Add Sec. 701.503 to read as follows:
Sec. 701.503 Did the American Recovery and Reinvestment Act of 2009
amend the recreational vessel exclusion?
Yes. The amended exclusion was effective February 17, 2009, the
effective date of the American Recovery and Reinvestment Act of 2009.
0
7. Add Sec. 701.504 to read as follows:
Sec. 701.504 When does the recreational vessel exclusion in the
American Recovery and Reinvestment Act of 2009 apply?
(a) Date of injury. Whether the amended version applies depends on
the date of the injury for which compensation is claimed. The following
rules apply to determining the date of injury:
(1) Traumatic injury. If the individual claims compensation for a
traumatic injury, the date of injury is the date the employee suffered
harm. For example, if the individual injures an arm or leg in the
course of his or her employment, the
[[Page 82129]]
date of injury is the date on which the individual was hurt.
(2) Occupational disease or infection. Occupational illnesses and
infections generally involve delayed onset of symptoms following
exposure to a harmful workplace substance or condition. If the
individual claims compensation for an occupational illness or
infection, the date of injury is the date the individual was exposed to
the substance or condition.
(3) Hearing loss. If the individual claims compensation for hearing
loss, the date of injury is the date the individual was exposed to
harmful workplace noise or other stimulus that is capable of causing
hearing loss.
(4) Death-benefit claims. If the individual claims compensation for
an employee's death, the date of injury is the date of the workplace
event or incident that caused, hastened, or contributed to the death.
(5) Cumulative trauma. If the individual claims compensation for
cumulative trauma, in which multiple traumas contribute to an overall
medical condition, such as a neck condition resulting from repetitive
motion, the date of injury is any date on which a workplace trauma
worsened the individual's condition. A workplace event will not be
deemed a contributing trauma if a corresponding worsening of the
condition is due solely to its natural progression, rather than the
workplace event.
(b) If the date of injury is before February 17, 2009, the
individual's entitlement is governed by section 2(3)(F) as it existed
prior to the 2009 amendment.
(c) If the date of injury is on or after February 17, 2009, the
individual's entitlement is governed by the 2009 amendment to section
2(3)(F).
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8. Add Sec. 701.505 to read as follows:
Sec. 701.505 May an employer stop paying benefits awarded before
February 17, 2009 if the employee would now fall within the exclusion?
No. If an individual was awarded compensation for an injury
occurring before February 17, 2009, the employer must still pay all
benefits awarded, including disability compensation and medical
benefits, even if the employee would be excluded from coverage under
the amended exclusion.
Signed at Washington, DC, this 19th day of December 2011.
Gary A. Steinberg,
Acting Director, Office of Workers' Compensation Programs.
[FR Doc. 2011-32880 Filed 12-29-11; 8:45 am]
BILLING CODE 4510-CF-P