I. Posting of Public Comments

Please note that all comments received are considered part of the public record and made available for public inspection online at www.regulations.gov. Such information includes personally identifiable information (such as your name, address, etc.) voluntarily submitted by the commenter.

If you want to submit personally identifiable information (such as your name, address, etc.) as part of your comment, but do not want it to be posted online, you must include the phrase “PERSONALLY IDENTIFIABLE INFORMATION” in the first paragraph of your comment. You must also locate all the personally identifiable information you do not want posted online in the first paragraph of your comment and identify what information you want redacted.

If you want to submit confidential business information as part of your comment but do not want it to be posted online, you must include the phrase “CONFIDENTIAL BUSINESS INFORMATION” in the first paragraph of your comment. You must also prominently identify confidential business information to be redacted within the comment. If a comment has so much confidential business information that it cannot effectively be redacted, all or part of that comment may not be posted on http://www.regulations.gov.

Personally identifiable information identified and located as set forth above will be placed in the agency's public docket file, but not posted online. Confidential business information identified and located as set forth above will not be placed in the public docket file. If you wish to inspect the agency's public docket file in person by appointment, please see the For Further Information Contact paragraph.

The Immigration and Nationality Act (INA) provides that aliens appearing before an immigration judge “shall have the privilege of being represented, at no expense to the Government, by counsel of the alien's choosing who is authorized to practice in such proceedings.” INA sec. 240(b)(4) (8 U.S.C. 1229a(b)(4)); see also INA sec. 292 (8 U.S.C. 1362). In order to represent an alien before EOIR, a representative must file a Notice of Entry of Appearance with the Immigration Court or the Board of Immigration Appeals (Board). See 8 CFR 1003.17, 1003.3(a)(3). A representative who enters his or her appearance before the Immigration Court is the representative of record for the alien in all of the alien's proceedings, including removal or deportation proceedings and, if the alien is detained, custody and bond proceedings. To the extent a representative wishes to represent an alien solely in custody and bond proceedings, and not in any other proceedings before the Immigration Court, he or she must file a motion to withdraw representation after the alien's custody and bond proceedings conclude. Cf. Matter of N-K- & V-S-, 21 I&N Dec. 879, 880, 881 n.2 (BIA 1997). Whether to grant or deny that motion is within the sole discretion of the immigration judge presiding over the particular case. See 8 CFR 1003.17(b).

Over the past several years, EOIR has seen a substantial increase in the number of aliens appearing before its Immigration Courts. At the end of fiscal year (FY) 2013, there were 350,330 cases pending at the Immigration Courts, marking an increase of 22,901 cases pending above those at the end of FY 2012. See 2013 EOIR Stat. Y.B. W1, available at http://www.justice.gov/eoir/statspub/fy13syb.pdf. 1

Moreover, a significant number of aliens appeared before EOIR without representation. Forty-one percent of the aliens whose immigration proceedings were completed in FY 2013, or 71,653 aliens, were unrepresented. See 2013 EOIR Stat. Y.B. F1. Non-detained aliens are much more likely to be represented before the Immigration Courts, as are aliens who have been released from detention. Of the 265,708 initial case completions for detained aliens from FY 2011 to FY 2013, 210,633 aliens, or 79 percent, were unrepresented. By contrast, of the 214,506 initial case completions during the same timeframe for aliens who were never detained, only 50,075 aliens, or 23 percent, were unrepresented. Similarly, of the 90,316 initial case completions during the same timeframe for detained aliens who were released, only 25,426 aliens, or 28 percent, were unrepresented.

Immigration proceedings involving unrepresented aliens often require more time than those involving represented aliens. For instance, immigration judges may need to spend additional time to ensure that unrepresented aliens understand the nature and purpose of the removal process, as well as their rights and responsibilities. An unrepresented alien may also ask for a continuance (or continuances) of his or her proceedings to obtain counsel. By contrast, aliens who are represented are likely to have discussed their proceedings, including their rights and responsibilities, with their counsel in advance of a hearing, and thereby avoid additional delays of the kind that may occur with respect to aliens who lack representation.

In order for a representative to enter an appearance solely for custody and bond proceedings before the Immigration Courts, EOIR is proposing to amend its regulations to specifically allow separate appearances in such proceedings. Permitting such separate appearances is expected to encourage more attorneys and accredited representatives to agree to represent aliens who would otherwise appear pro se at their custody and bond proceedings, which, in turn, will benefit the public by increasing the efficiency of the Immigration Courts.

Providing for separate appearances in custody and bond proceedings has been of significant and longstanding interest to public stakeholders. On September 28, 2012, EOIR published an advance notice of proposed rulemaking (ANPRM), which requested the public's input on potential amendments to the EOIR regulations pursuant to the Department of Justice's Plan for Retrospective Analysis of Existing Rules (Plan). 2 See Retrospective Regulatory Review Under E.O. 13563, 77 FR 59567 (Sept. 28, 2012). The ANPRM included notification that EOIR planned to evaluate whether to propose a rule providing for separate appearances in bond proceedings. See 77 FR 59569. 3 In response to the ANPRM, EOIR received comments from the public in support of permitting such appearances. Specifically, commenters noted that permitting separate appearances would increase the level of representation of aliens in custody and bond proceedings and improve the efficiency of those proceedings.

These comments echoed statements made previously by public interest groups that have indicated that more attorneys would be willing to represent detained aliens, including as pro bono counsel, if they were able to enter an appearance exclusively for custody and bond proceedings. For example, since 2007, the American Immigration Lawyers Association (AILA), in public meetings with EOIR, has continuously appealed to EOIR to amend its rules to allow representatives to enter a separate appearance on behalf of an alien for custody and bond proceedings, without such appearance also constituting an appearance for removal and deportation proceedings. Specifically, AILA has stated that separate appearances “encourage pro bono representation and provide greater flexibility for attorneys and clients to agree on the scope of representation based on the client's needs and resources.” EOIR/AILA Liaison Meeting Agenda Questions and Answers, March 29, 2012, at 10. 4

In light of the anticipated benefits and public support detailed above, EOIR has decided to promulgate this separate rulemaking proposing to amend its regulations at 8 CFR 1003.17 to explicitly allow for separate appearances in custody and bond proceedings. Under EOIR's regulations, such proceedings are separate and apart from removal and deportation proceedings. See 8 CFR 1003.19(d); Matter of Guerra, 24 I&N Dec 37, 40 n.2 (BIA 2006); Matter of R-S-H-, 23 I&N Dec 629, 630 n.7 (BIA 2003). This proposed rule effectuates that separation by requiring Notices of Entry of Appearance to be filed separately for different types of proceedings. Specifically, an attorney or representative who appears on behalf of an alien in his or her custody and bond proceedings will not be held responsible for appearing, filing documents, receiving notices, or any of the other duties enumerated in 8 CFR 1292.5(a) in the alien's other proceedings, unless and until the attorney or representative files a Notice of Entry of Appearance in such proceedings.

The Board has held in a precedential decision that a representative of record cannot enter a “limited” appearance in immigration proceedings. See Matter of Velasquez, 19 I&N Dec. 377, 384 (BIA 1986). In Matter of Velasquez, the Board cited to the regulations in effect at the time, 8 CFR 292.1, 292.4 and 292.5(a) (1986), 5 which identified who was eligible to appear as a representative, the form a representative needed to file to enter an appearance, and the notice requirements. Those regulations did not include a provision for limited or separate appearances. This proposed rule leaves intact the holding in Matter of Velasquez, as a separate appearance in custody and bond proceedings would not be considered a “limited” appearance, which is generally understood to refer to a limit in the scope of representation required by a representative. 6 By contrast, this proposed rule would require a representative of record to represent an alien in all aspects of each separate type of proceeding, unless the Immigration Court grants a motion to withdraw or substitute counsel.

Under the current regulations, representatives are already required to file a Notice of Entry of Appearance on Form EOIR-28 in any proceedings before an immigration judge. See 8 CFR 1003.17. Under this proposed amendment to EOIR's regulations, representatives will continue to be required to file a Form EOIR-28 in custody and bond proceedings as required by 8 CFR 1003.17. However, the Form EOIR-28 will be amended to require a representative to indicate if he or she is entering an appearance for custody and bond proceedings only, any other proceedings only, or for all proceedings.

The Department welcomes public comment on the proposed amendments to EOIR's regulations providing for separate appearances before the Immigration Court for custody and bond proceedings.

The Department has reviewed this regulation in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)) and has determined that this rule will not have a significant economic impact on a substantial number of small entities. The rule will not regulate “small entities,” as that term is defined in 5 U.S.C. 601(6).

This rule will not result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

This rule is not a major rule as defined by section 251 of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 804. This rule will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign-based companies in domestic and export markets.

The Department has determined that this rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review and, therefore, it has not been reviewed by the Office of Management and Budget. Nevertheless, the Department certifies that this regulation has been drafted in accordance with the principles of Executive Order 12866, section 1(b), and Executive Order 13563. Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits, including consideration of potential economic, environmental, public health, and safety effects, distributive impacts, and equity.

The benefits of this proposed rule include increased representation of detained aliens by permitting a representative to enter an appearance before the Immigration Court for the discrete task of securing a bond or release from detention, without requiring the representative also to represent the alien in all of the alien's immigration proceedings. The public will benefit from this amendment to the regulations, because the amendment will make it easier for aliens who may not be able to afford to hire an attorney for all of their proceedings before the Immigration Court to at least be able to be represented during their custody and bond proceedings. The Department anticipates that this rule will also have a positive economic impact on the Department, because increasing the number of aliens who are represented in their custody and bond proceedings will enable immigration judges to adjudicate proceedings in a more effective and timely manner, adding to the overall efficiency of immigration proceedings. The Department does not foresee any burdens to the public or the Department.

This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with section 6 of Executive Order 13132, the Department has determined that this rule does not have sufficient federalism implications to warrant preparation of a federalism summary impact statement.

This rule has been prepared in accordance with the standards in sections 3(a) and 3(b)(2) of Executive Order 12988.

The information collection requirement (Form EOIR-28) contained in this rule has been previously approved by the Office of Management and Budget under the provisions of the Paperwork Reduction Act. This proposed rule contains revised recordkeeping and reporting requirements. Specifically, EOIR will collect additional information on the Notice of Entry of Appearance form indicating the type of proceeding(s) for which an attorney or representative is entering his or her appearance. Accordingly, the Department submitted a copy of this rule to the Office of Management and Budget.

Accordingly, for the reasons stated in the preamble, the Attorney General is proposing to amend part 1003 of chapter V of title 8 of the Code of Federal Regulations as follows:

I. Public Participation—Posting of Public Comments

Please note that all comments received are considered part of the public record and made available for public inspection online at www.regulations.gov. Such information includes personal identifying information (such as your name, address, etc.) voluntarily submitted by the commenter.

If you want to submit personal identifying information (such as your name, address, etc.) as part of your comment, but do not want it to be posted online, you must include the phrase “PERSONAL IDENTIFYING INFORMATION” in the first paragraph of your comment. You must also locate all the personal identifying information you do not want posted online in the first paragraph of your comment and identify what information you want redacted.

If you want to submit confidential business information as part of your comment but do not want it to be posted online, you must include the phrase “CONFIDENTIAL BUSINESS INFORMATION” in the first paragraph of your comment. You must also prominently identify confidential business information to be redacted within the comment. If a comment has so much confidential business information that it cannot be effectively redacted, all or part of that comment may not be posted on www.regulations.gov.

Personal identifying information identified and located as set forth above will be placed in the agency's public docket file, but not posted online. Confidential business information identified and located as set forth above will not be placed in the public docket file. If you wish to inspect the agency's public docket file in person by appointment, please see the FOR FURTHER INFORMATION CONTACT section. Interested persons are invited to participate in this rulemaking by submitting written data, views, or arguments on all aspects of this rule. Comments that will provide the most assistance to the Department of Justice will reference a specific portion of the rule, explain the reason for any recommended change, and include data, information, or authority that support the recommended change.

For access to the electronic docket to read background documents or comments received, go to www.regulations.gov. Submitted comments may also be inspected at the Executive Office for Immigration Review, 5107 Leesburg Pike, Suite 2600, Falls Church, Virginia 20530. To make an appointment, please contact EOIR at (703) 305-0470 (not a toll-free call).

Aliens who are placed in removal proceedings pursuant to section 240 of the Immigration and Nationality Act (Act or INA), or who seek asylum under section 208 of the Act (whether or not in removal proceedings), must be provided with a list of persons who have indicated their availability to represent aliens on a pro bono basis. See INA 208(d)(4)(B) (relating to asylum proceedings), and INA 239(a)(1)(E), (b)(2) (relating to removal proceedings). In order to meet this statutory obligation, the Executive Office for Immigration Review (EOIR) publishes the Free Legal Services Providers List (List). 1 The regulations governing the List were promulgated on February 28, 1997, at 62 FR 9071, and are found at 8 CFR 1003.61-1003.65. The List is organized by immigration court location;  2 for each location, the List provides the names of private attorneys and non-profit organizations aliens in proceedings may contact for free legal services. At each location, aliens are given the portion of the List with the providers for that location. The complete List is posted on the EOIR Web site. 3 See www.usdoj.gov/eoir/probono/states.htm.

The List is central to EOIR's efforts to improve the amount and quality of representation before its adjudicators, and it is an essential tool to inform aliens in proceedings before EOIR of available pro bono legal services. However, as explained further below, concerns have been expressed to EOIR by government sources and the public about problems with the List, and EOIR believes it is important to improve the functioning of the List. Therefore, the Department of Justice (Department) is proposing to amend the regulations governing the List, as described further below.

As the List is intended to provide aliens access to pro bono representation, this proposed rule replaces the term “free legal service providers” with “pro bono legal service providers.” Replacing the word “free” with the term “pro bono” reflects the relevant statutory language ( see INA 208(d)(4)(B), 239(a)(1)(E), 239(b)(2)), describes more accurately the nature of the services provided, and will improve the integrity of the List. Further, removing the word “free” will clarify that entities and private attorneys on the List are not necessarily available to work free of charge for every alien regardless of the alien's financial means or the type of legal work involved. Rather, use of the term “pro bono” indicates that such services are for the public good, e.g., to help ensure qualified representation for those indigent aliens who do not have sufficient means to hire a private attorney.

This proposed rule also sets forth a definition of the term “pro bono” to ensure that entities or private attorneys that want to be included on the List understand the kind of services expected from them if they are included on the List. The proposed rule defines “pro bono legal services” at § 1003.61(a)(2) as “those uncompensated legal services performed for indigent aliens or the public good without any expectation of either direct or indirect remuneration, including referral fees (other than filing fees or photocopying and mailing expenses), although a representative may be regularly compensated by the firm, organization, or pro bono referral service with which he or she is associated.” This definition not only reflects the spirit of pro bono representation, but is also consistent with the common law understanding of the terms pro bono and pro bono publico. See, e.g., Black's Law Dictionary (9th ed. 2009).

Use of the term pro bono indicates that work performed should be for the good of the public from the outset and a commitment to continue such representation throughout the duration of the administrative proceeding before an immigration judge. It is inappropriate for legal service providers to subsequently count as “pro bono” those services provided to paying clients who fall delinquent in paying attorney fees. In addition, EOIR recognizes that some organizations charge reduced or nominal fees in an attempt to provide services to aliens who cannot afford private attorneys but have a modest ability to pay. However, services provided for a reduced or nominal fee do not constitute “pro bono” services under the proposed rule. Although services provided for reduced or nominal fees are not “pro bono” services, organizations that charge such fees to some of their clients are not prohibited from inclusion on the List. As set forth in § 1003.62(a) and (b), such an organization can be included on the List if it provides a requisite amount of pro bono legal services and meets the other requirements for inclusion, even though it charges fees to some of its other clients. 4

As the foregoing definition reflects, this proposed rule also adopts reference to “pro bono referral services” in place of the current reference to “bar associations.” There is no need to specifically list bar associations since any pro bono programs offered by them would either be in the form of a pro bono referral service or an organization that is eligible to be included on the List under proposed § 1003.62(a), (b), or (c). Adopting the term “pro bono referral services” also broadens eligibility for inclusion on the List to referral services that are not administered by a bar association.

EOIR has strongly supported various local efforts to provide pro bono legal services to aliens appearing before the immigration judges, the Board of Immigration Appeals (Board), and the Office of the Chief Administrative Hearing Officer (which adjudicates certain immigration-related civil penalty actions). In April 2000, EOIR established a national pro bono program to improve the development and coordination of these services and, in March 2008, EOIR issued formal policy guidance to immigration judges and immigration court staff on facilitating pro bono legal services. See “Office of Legal Access Programs,” www.usdoj.gov/eoir/probono/probono.htm; “Operating Policies and Procedures Memorandum 08-01: Guidelines for Facilitating Pro Bono Legal Services,” Mar. 10, 2008, www.usdoj.gov/eoir/efoia/ocij/oppm08/08-01.pdf (Last visited July 15, 2014]).

EOIR encourages organizations and private attorneys to publicize their willingness to provide pro bono legal services to aliens appearing before immigration judges by being included on the List. 5 The EOIR Committee on Pro Bono, which was formed in response to Directive 22 of Attorney General Alberto R. Gonzales' “Measures to Improve the Immigration Courts and the Board of Immigration Appeals,” Aug. 9, 2006, http://www.justice.gov/ag/readingroom/ag-080906.pdf (Last visited July 15, 2014), reviewed issues and concerns regarding the need for additional safeguards for the List. In its recommendations to expand and improve EOIR's pro bono programs, the EOIR Committee on Pro Bono (Committee) recommended that EOIR publish new regulations to strengthen the requirements for placing organizations and private attorneys on the List. See “EOIR to Expand and Improve Pro Bono Programs,” Nov. 15, 2007, www.usdoj.gov/eoir/press/07/ProBonoEOIRExpandsImprove.pdf (Last visited July 15, 2014). Specifically, the Committee recommended that private attorneys not be included on the List unless they could demonstrate their inability to provide pro bono legal services through or in association with local pro bono organizations or referral services. The Committee also recommended that the List be monitored periodically to ensure that listed organizations and individuals were indeed providing free legal services.

Since the creation of the List, EOIR has increasingly received complaints from numerous government sources and the public that certain private attorneys may be using the List to advertise or solicit for paying clients, and do not provide legal representation to a significant number of aliens on a pro bono basis or for any particular amount of time. For instance, a private attorney who has declared his or her willingness to represent indigent aliens on a pro bono basis may provide pro bono representation to only one alien and otherwise cease to provide pro bono representation. It is, unfortunately, common for aliens who contact private attorneys on the List to be informed that these attorneys are not available to accept any more pro bono cases, and are only available to represent the aliens for a fee. Though there may be different reasons why attorneys may find themselves unable to accept new pro bono cases at a particular time, there is reason for concern that at least some attorneys may not be using the List for its intended purpose and may be misleading EOIR, the public, and aliens as to their true willingness and availability to provide pro bono services.

EOIR has not received similar complaints regarding organizations or pro bono referral services on the List. This may be because, unlike private attorneys, organizations and pro bono referral services are primarily non-profit operations and are formed specifically to assist indigent and low-income individuals. Thus, although there may be similar potential for abuse, there is less incentive for such entities to use the List improperly. Further, attorneys and accredited representatives who provide pro bono services on behalf of organizations or referral services are typically supervised, unlike some private attorneys on the List.

Finally, the regulations do not currently require organizations or private attorneys who are included on the List to represent any minimum number of indigent aliens on a pro bono basis over a given period of time. Requiring “an attorney to accept a specific number or percentage of cases on a pro bono basis in order to be included on the list of free legal services providers” was considered in promulgating the 1997 rule. 62 FR 9072 (Feb. 28, 1997). At that time, EOIR determined that it was not necessary to include such a requirement. Id. However, the rule also stated that “this issue is subject to further review if necessary to eliminate any abuses.” Id.

The proposed rule seeks to prevent in five ways the potential for abuse by all organizations and private attorneys on the List, explained in greater detail below. First, the proposed rule requires that private attorneys on the List, and attorneys and accredited representatives providing pro bono legal services before EOIR on behalf of the organization on the List, not be subject to an order of disbarment under § 1003.101(a)(1) or suspension under § 1003.101(a)(2). Second, the proposed rule provides that attorneys must seek to provide pro bono legal services through or in association with an organization or pro bono referral service if possible. Third, it requires every organization or individual on the List to provide a minimum of 50 pro bono hours a year in each immigration court location where the provider intends to be included on the List. Fourth, this proposed rule allows for and encourages public participation in the application process of an organization, referral service, or private attorney seeking to be included on the List. Finally, once a provider's name is included on the List, the provider must declare under penalty of perjury every three years that the provider is qualified to remain on the List.

The following is a description of the five ways the proposed rule seeks to limit the potential for abuse by the organizations and private attorneys on the List.

The new eligibility requirements aim to ensure that private attorneys on the List, and attorneys and accredited representatives who provide pro bono legal services for organizations on the List, satisfy EOIR's professional conduct standards. 6

The proposed rule requires that private attorneys on the List, as well as attorneys and accredited representatives who provide pro bono services before EOIR on behalf of an organization on the List, not be subject to an order of disbarment under § 1003.101(a)(1) or suspension under § 1003.101(a)(2). See proposed § 1003.62(a)(3) (pertaining to organizations recognized under § 1292.2), (b)(4) (pertaining to organizations not recognized under § 1292.2), (d)(1) (pertaining to attorneys). When applying to be included on the List, an attorney must submit a written declaration that he or she is not the subject of an order of disbarment under § 1003.101(a)(1) or suspension under § 1003.101(a)(2). See proposed § 1003.63(d)(7). Similarly, an organization, whether or not recognized, must submit a written declaration that no attorney or accredited representative who will provide pro bono legal services on behalf of the organization before EOIR is the subject of such an order of disbarment or suspension.

Each of the declarations to be made by private attorneys under proposed § 1003.63(d), or organizations under proposed § 1003.63(b), must be made “under penalty of perjury.” Use of this term is consistent with language used in the declarations on Forms EOIR-28 (Notice of Entry of Appearance as Attorney or Representative Before the Immigration Court) and EOIR-27 (Notice of Entry of Appearance as Attorney or Representative Before the Board of Immigration Appeals), which must be signed and filed each time an attorney or representative enters his or her appearance in a matter before the immigration judge or the Board. See § 1003.17(a) (requiring the filing of Form EOIR-28 with the immigration court); § 1003.2(g)(1) (requiring the filing of Form EOIR-27 with the Board); § 1003.3(a)(3) (same).

The proposed rule contains no requirement pertaining to other disciplinary actions. Such actions include public or private censure under 1003.101(a)(3) and admonition under § 1003.104(c). An attorney can be included on the List even if he or she was recently subject to such a disciplinary action, and an organization can be included on the List even if an attorney or accredited representative providing pro bono legal services on its behalf before EOIR was recently subject to such an action.

The new eligibility requirements for private attorneys further aim to ensure that only those attorneys who are genuinely interested in and capable of providing pro bono services are included on the List.

Many immigration court locations are in areas with developed pro bono programs that are sufficiently capable of assessing the legal claims and financial resources (“intake” and “screening”) of large numbers of aliens in immigration proceedings and coordinating pro bono representation with local private attorneys. These programs often provide private attorneys with specialized legal training, ongoing mentoring, and other assistance in their pro bono cases as a recruitment incentive. Thus, where sufficient local organizations or pro bono referral programs are available to identify aliens in need of pro bono legal services, as well as recruit and assist private attorneys interested in providing these services, private attorneys are able to provide pro bono services through or in association with such local organizations or referral programs. In such a situation, there is little to no need for private attorneys to be included by name on the List.

However, EOIR recognizes that in some instances, especially for immigration court locations in rural areas or small cities, private attorneys may be the only available and willing sources of pro bono legal services. For instance, some areas may have no pro bono organizations or may have organizations that lack programs to recruit and support pro bono attorneys. In addition, some pro bono organizations offer a limited range of immigration services, and do not offer referral programs for all types of cases before the immigration court.

The Department has designed the proposed rule to allow private attorneys in such circumstances to continue to be included on the List. Accordingly, this rule proposes to amend § 1003.62(d) to state that, to be included on the List, an individual attorney must demonstrate that he or she cannot provide pro bono legal services through or in association with an organization or referral service because: (i) Such an organization or referral service is unavailable; or (ii) the range of services provided by the existing organization(s) or referral service(s) are insufficient to address the needs of the community. Under the “Applications” section at § 1003.63(d)(3), an attorney is further required to submit a written declaration that describes the good-faith efforts he or she made to provide pro bono legal services through an organization or pro bono referral service at each immigration court location where the private attorney is willing to provide pro bono legal services.

This rule proposes a new requirement that, once on the List, an attorney or organization perform at least 50 hours of pro bono legal services annually at each immigration court location where the attorney or organization intends to be included on the List. See proposed § 1003.62(a)(1), (b)(2), (d)(2). This requirement aims to ensure that only those organizations and private attorneys genuinely interested in providing pro bono services are included on the List. This requirement applies to organizations as well as private attorneys. As noted above, some organizations charge reduced or nominal fees in an attempt to provide services to aliens who cannot afford private attorney rates but have a modest ability to pay. However, services provided for a fee—even a nominal fee—are not pro bono services, and therefore do not count toward the 50-hour requirement. This requirement does not apply to pro bono referral services; there is no minimum annual amount of pro bono legal services that a referral service must provide.

Only pro bono legal services provided in cases before the immigration court location identified in the attorney's or organization's application count toward the 50-hour requirement. See proposed § 1003.63(a)(3), (b)(1), (d)(1). If an attorney or organization identifies more than one immigration court location, then the attorney or organization must provide at least 50 hours of pro bono legal services in cases before each location. For instance, a provider who seeks to be listed as providing pro bono services before the Arlington Immigration Court and the Baltimore Immigration Court must provide 50 hours of pro bono services before the Arlington Immigration Court and 50 hours of pro bono services before the Baltimore Immigration Court each year. This is intended to ensure, to the maximum extent possible, that attorneys and organizations listed as available to provide pro bono legal services at a particular immigration court location are actually able to provide pro bono services at that location. 7 However, a provider is not required to provide 50 hours of in-court pro bono service per year. Rather, all time spent providing pro bono legal services in cases before a particular immigration court location, including out-of-court preparation time, counts toward the 50-hour requirement.

Due to the new requirement that private attorneys must first seek to provide pro bono services through an organization or referral service, the Department does not believe that this 50-hour requirement will overly burden an individual attorney's ability to provide pro bono services. The individual attorney might commit to provide any number of pro bono hours through an organization or referral service on the List. An individual attorney associated with an organization on the List would not be required to provide 50 hours per year. Rather, the organization as a whole would commit to providing at least 50 hours of pro bono representation per year before each immigration court location identified in the organization's application.

This 50-hour annual minimum is intended to provide a clear measure of the amount of pro bono representation that is acceptable in order for an organization or private attorney to be qualified to be included on the List. A number of state bar associations and private law firms use 50 hours as the recommended annual minimum for pro bono work and this number is also found in the American Bar Association's (ABA) Model Rules of Professional Conduct. 8 The Department believes this prevailing standard strikes the balance between private attorneys whose primary practice is the business of fee-generating clients but who are genuinely interested in providing pro bono services, and organizations that are primarily formed to assist indigent and low-income individuals. The proposed rule also provides that failure to provide the 50-hour annual minimum subjects attorneys and organizations to removal from the List under new § 1003.65.

The Department also recognizes, however, that a particular minimum may be burdensome for some or result in a de facto maximum standard that undermines the purpose of the List. Accordingly, the Department is soliciting comments on whether this 50-hour annual minimum is an acceptable measure of how much pro bono representation an organization or private attorney should provide in order to remain on the List. In particular, the Department welcomes comments on the following questions:

Question 1. Would a 50-hour annual minimum be too demanding for private attorneys who manage a fee-generating practice, but also want to engage in immigration-related pro bono work and cannot provide pro bono service through or in association with an organization or referral service?

Question 2. Conversely, is a 50-hour annual minimum not enough for organizations that seek to be included on the List?

Question 3. Should the standards for organizations and private attorneys differ from one another in any other way? For example, should the rule require that each attorney or accredited representative performing legal services on behalf of an organization perform a certain amount of pro bono work per year, as opposed to requiring that the organization as a whole perform a certain amount of work?

Question 4. Are there alternative standards that would be more appropriate measures of the level of pro bono representation that an organization or a private attorney should provide in order to be included on the List, e.g., the number of cases accepted or the types of cases accepted?

This proposed rule also would require at § 1003.64(b)(2) that, every three years from the date the application to be included on the List is approved, each provider must declare that the provider continues to be qualified to remain on the List under paragraphs (a), (b), (c), or (d) of § 1003.62. As part of the declaration, the provider must include alien registration numbers of clients in whose cases the provider rendered pro bono legal services under EOIR's regulations, representing at least 50 hours of pro bono legal services each year since the provider's most recent such declaration, or since the provider was included on the List, whichever was more recent. This continuing certification puts a reasonable responsibility on providers to keep EOIR informed of their willingness to provide pro bono legal services and their qualifications to be included on the List. The current rule provides no means by which EOIR remains informed that providers continue to provide pro bono legal services once their names are included on the List. Unless EOIR is specifically notified that a provider is no longer providing pro bono legal services, it is difficult for EOIR to ascertain whether a provider should remain on the List. Under the proposed rule, however, EOIR will remove a provider from the List at the next quarterly update if the provider fails to comply with the continuing certification requirement. 9

For providers whose applications to be included on the List are approved before the date of publication of the final rule, a new application must be filed in compliance with the new qualification and eligibility requirements set forth in this rule as follows: organizations and pro bono referral services, within one year of the date of publication of the final rule; attorneys, within six months of the date of publication of the final rule. See proposed § 1003.63(e). These time periods strike a balance between allowing both providers and EOIR sufficient time to phase in these new requirements and addressing the public's need for an updated list of available, local pro bono legal service providers. The time period for attorneys is shorter than for organizations and pro bono referral services because, as noted above, the complaints EOIR has received primarily relate to attorneys. While the List already comprises well over 100 providers, the allotted time periods should be sufficient for these providers to reapply and be subject to the 15-day notice and comment period under § 1003.63(f).

Another means by which the proposed rule aims to improve the integrity of the List is by engaging the public in the application process under § 1003.63(f). The proposed rule requires EOIR to publicly post for a 15 day period the names of applicants, whether organizations, pro bono referral services, or individuals, who meet the regulatory requirements to provide pro bono services to aliens in proceedings in order to allow the public an opportunity to send comments to EOIR and the applicant. The names of applicants will be posted on EOIR's Web site, and may also be posted at the immigration court location where the applicant intends to provide pro bono services. Under the proposed rule, any individual or organization may forward its comments or recommendations for approval or disapproval of the publicly available applications to the Director. The rule will require that such comments also be served on the applicant so that the applicant has an opportunity to respond.

This proposed rule also states, at § 1003.65(d)(1)(iii), that a provider shall be removed from the List for improperly using the List for the primary purpose of soliciting, or advertising to, potential paying clients since doing so is clearly contrary to the List's intended purpose. Current regulations do not explicitly impose a removal requirement for use of the List for these purposes. Unfortunately, EOIR has received numerous complaints that aliens who contact private attorneys on the List are commonly informed that the private attorneys are not available to accept any pro bono cases and are only available to represent the aliens for a fee. As noted above, though there may be different reasons why attorneys are not able to accept additional pro bono cases at a particular time, this gives rise to concerns that at least some private attorneys may be using the List as free, government-supported advertising for fee-generating services. This may be misleading to aliens who would not have otherwise contacted the private attorney and who may also mistakenly believe that private attorneys on the List are in some manner endorsed by the government. These issues are of particular concern as aliens in immigration proceedings are often unfamiliar with the legal system in the United States and may have limited English proficiency.

Such practice not only degrades the integrity of the List, but may also violate § 1003.102(f)(1), 10 state bar rules or the ABA's Model Rules of Professional Conduct. 11 Use of the List by a private attorney to induce aliens into contacting the attorney for pro bono legal services when these are not commonly provided may also raise questions about whether such conduct might amount to impermissible solicitation by the private attorney for fee-generating legal services. Improperly soliciting clients is grounds for discipline under § 1003.102(d) and is prohibited by various state bar rules, and the ABA's Model Rules. In order to safeguard the integrity of the List and promote aliens' interests in obtaining pro bono legal services, § 1003.65(d)(1)(iii) of the proposed rule states that a provider is subject to removal from the List for improperly using it primarily to advertise for or solicit clients for compensated legal services. Additionally, § 1003.65(d)(5) states that removal from the list pursuant to § 1003.65(d)(1)(iii) shall be without prejudice to the authority to discipline an attorney or representative under EOIR's rules and procedures for professional conduct for practitioners listed in part 1003, subpart G.

The Department recognizes that circumstances may arise where an individual attorney or organization on the List may legitimately be unable to continue accepting additional pro bono cases for a certain period, such as a full case load or reaching the annual limitation on pro bono hours by an attorney practicing in a law firm. In that instance, the provider can request removal from the List as set forth in § 1003.65(b)(1). Under § 1003.65(b)(2), any provider granted removal from the List may thereafter seek reinstatement upon written notice and submission of a new eligibility declaration, as specified in section 1003.63(b), (c), or (d). However, reinstatement, like initial inclusion, is subject to the discretion of the Director. Also, reinstatement will not affect the continuing qualification requirement set forth in § 1003.64(b)(2), which requires providers to submit a new declaration of eligibility every three years from the date of the original application's approval.

The proposed rule also requires at § 1003.63 that when applying to be included on the List, providers specify whether there are any limitations on the pro bono legal services they provide. Currently, § 1003.63 only requires the application to indicate whether a provider will represent “indigent aliens in immigration proceedings pro bono. ” § 1003.63(d)(1)(ii). Yet, it is common practice for providers on the List to specify not only if they will represent aliens in specific types of proceedings (e.g., asylum, VAWA), but to state other limitations on the services they are willing to provide. For instance, some providers are unwilling to represent detained aliens. However, immigration court locations often use the same List for both detained and non-detained aliens, even though many providers on the List for a particular court are unwilling or unable to provide pro bono legal services to detained aliens. This practice can create confusion and unnecessary frustration for both detained aliens and the local court.

Accordingly, this proposed rule codifies the already existing practice of specifying any limitations that may exist on a provider's willingness to provide pro bono legal services. For example, if a provider only provides pro bono representation for asylum seekers, or does not represent aliens in detention, this must be specified. Sections 1003.65(d)(1)(i) and 1003.66 of the rule also subject a provider to removal from the List for failing to notify EOIR of any changes to these limitations. This rule will assist both EOIR in assembling the List for each immigration court location, as well as aliens in directing their search.

The proposed rule transfers from the Chief Immigration Judge to the Director of EOIR responsibility for maintaining the List, exercising authority and discretion to approve or deny an application, and removing a provider from the List. The Director may delegate such authority to any office or official within EOIR. See proposed § 1003.61(a)(1)(b).

Under the proposed rule, there are four ways a provider can be removed from the List.

First, under § 1003.65(a), an attorney can be automatically removed from the List if the Director determines that the attorney is the subject of an order of disbarment under § 1003.101(a)(1) or suspension under § 1003.101(a)(2). Automatic removal applies only to private attorneys, and not to organizations or referral services.

Second, under § 1003.65(b), a provider can voluntarily request to be removed from the List.

Third, under § 1003.65(c), if EOIR receives complaints that a particular provider may no longer be providing pro bono services, EOIR can inquire, in writing, into the provider's pro bono practices. This will allow the provider to become aware of the receipt of complaints, and to provide an appropriate response. In appropriate cases, if in fact the provider is no longer in a position to provide pro bono services, the provider may request voluntary removal from the List. Where the provider fails to respond, EOIR may choose to remove the provider from the List.

Fourth, paragraph (d) of 1003.65 provides formal procedures for removing a provider from the List in circumstances not covered by paragraphs (a), (b), or (c) of that section. Under § 1003.65(d), the Director can initiate procedures to remove a provider from the List if the Director determines that a provider has: Failed to comply with § 1003.66 (change in address or status), filed a false declaration in connection with an application filed pursuant to § 1003.63, improperly used the List primarily to advertise or solicit clients for compensated legal services, or failed to comply with any other requirements under subpart E.

If the Director decides to initiate procedures under § 1003.65(d), the Director must promptly inform the provider in writing of the Director's intention to remove the provider from the List. The provider then has 30 days to submit a written response establishing, by clear and convincing evidence, that the provider continues to meet the qualifications for inclusion on the List. The response must include a declaration under penalty of perjury as to the provider's continued compliance with the eligibility requirements, including individual examples of specific alien registration numbers of clients in whose cases the provider rendered pro bono legal services, representing at least 50 hours of service each year since the provider's most recent declaration under § 1003.64(b)(2), or since the provider was included on the List, whichever was more recent. See proposed § 1003.65(d)(3). If the provider submits a response, the Director will consider the response before deciding whether to remove the provider from the List. See proposed § 1003.65(d)(4).

The proposed rule provides additional clarification by rearranging some of the sections and section headings. For instance, the proposed rule renames the heading of § 1003.62 as “Eligibility” (presently titled “Qualifications”), as the new heading better describes the requirements set forth in that section. Proposed new § 1003.61(c) (“Qualification”) sets forth the criteria that make an entity or individual “qualified” to be included on the List, including that the entity or individual meet the eligibility requirements under § 1003.62.

Moreover, the proposed rule specifies at § 1003.64(a) that the approval and denial of applications to be included on the List are discretionary determinations by the EOIR Director. The proposed rule also eliminates the right to appeal to the Board, as currently provided in § 1003.64 and § 1003.65(a), the denial of an application to be included on the List, as well as a determination to remove a provider from the List. These changes are made for two reasons. First, the List is designed specifically to benefit aliens and not the providers listed. As application for placement on the List is completely voluntary and does not confer any rights or benefits to providers, there are no due process concerns with denying an application to be included on the List or removing a provider from the List. Second, applicants to be included on the List, as well as providers who are removed from the List, may reapply through the normal application process, or may seek reinstatement in the limited circumstance where the Director previously granted removal at the request of the person or organization, as set forth in § 1003.65(b)(2).

Finally, with regard to the denial of an application under § 1003.64 or a decision to remove a provider from the List under § 1003.65, the proposed rule states that when serving documents on an applicant, the Director shall comply with the definition of “service” in § 1003.13.

As noted above, section 208(d)(4)(B) of the Act requires that asylum applicants be provided “a list of persons . . . who have indicated their availability to represent aliens in asylum proceedings on a pro bono basis.” For aliens in asylum proceedings before the Department of Homeland Security (DHS), U.S. Citizenship and Immigration Services (USCIS), USCIS currently complies with this requirement by providing a modified version of EOIR's List. Specifically, USCIS reorganizes EOIR's List around the geographic area served by each of USCIS's eight asylum offices; the providers in the area served by each office are listed under that office. Separately, U.S. Immigration and Customs Enforcement (ICE) with DHS provides EOIR's List to aliens subject to expedited removal as aggravated felons who are not lawful permanent residents, and in certain instances involving detained juveniles. See §§ 236.3(g) (detained juveniles), 238.1(b)(2)(iv) (expedited removal).

The new requirements of this proposed rule are focused solely on pro bono providers who wish to be included on EOIR's List because they are providing pro bono legal services before the immigration courts; these requirements and limitations are not intended to account for pro bono representation of aliens before DHS.

Thus, this proposed rule does not limit whether and how pro bono providers may represent aliens before DHS, nor does it limit how DHS notifies aliens of the availability of pro bono legal services. Under this proposed rule, DHS can continue to provide EOIR's List to aliens who are in proceedings before DHS, and can continue to modify the List as DHS deems appropriate. As explained above, under the proposed rule, only pro bono services in cases before EOIR, specifically at the immigration court location or locations identified in a provider's application, will count toward the 50-hour annual requirement. This is to ensure, as much as possible, that pro bono providers listed for a particular immigration court location are actually available to provide pro bono services there. But the 50-hour annual requirement under this proposed rule does not apply with respect to providing pro bono services before DHS. Thus, in modifying EOIR's List, if DHS wishes to add providers EOIR did not include—for example, those who practice exclusively or mostly before DHS—then DHS may do so. EOIR recognizes the importance of its List in assisting DHS to notify aliens of pro bono legal service providers. The Department believes that this proposed rule is appropriate in that it responds to concerns regarding pro bono representation before EOIR, while not limiting DHS's ability to modify EOIR's List as it chooses, or otherwise to inform aliens of pro bono legal service providers in the manner DHS deems best.

The Attorney General, in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation and, by approving it, certifies that this rule will not have a significant economic impact on a substantial number of small entities. Some small entities, such as non-profit organizations or small law offices, will be affected by this rule. Organizations or private attorneys may be removed from the List of Pro Bono Legal Service Providers if they are no longer qualified to be on the List under this proposed rule. Likewise, those who wish to have their names included on this List will be affected as they will have to demonstrate their eligibility to have their names listed. However, application for placement on the List is completely voluntary and does not confer any rights or benefits on such organizations or law offices. Placement on the List does not constitute government endorsement of a particular entity or private attorney; nor is the List to be used for advertising or soliciting. Rather, the purpose of the List is to provide aliens notification that these entities or private attorneys are available to provide uncompensated legal services without any direct or indirect remuneration (other than filing fees or photocopying and mailing expenses).

This rule will not result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year and also will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1535).

This rule is not a major rule as defined by section 251 of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 804). This rule will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.

The Department has determined that this rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and, therefore, it has not been reviewed by the Office of Management and Budget. Nevertheless, the Department certifies that this regulation has been drafted in accordance with the principles of Executive Order 12866, section 1(b), and Executive Order 13563. Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health, and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Additionally, it calls on each agency to periodically review its existing regulations and determine whether any should be modified, streamlined, expanded, or repealed so as to make the agency's regulatory program more effective or less burdensome in achieving its regulatory objectives.

This rule affects the function and purpose of the Pro Bono Service Provider List. The benefits of this proposed rule include addressing long-standing problems of abuse associated with the existing List, updating the term “free” with “pro bono” legal services to reflect the proper statutory language, creating a minimum number of annual pro bono hours to ensure proper compliance with the spirit of the regulation, and creating greater agency flexibility to remove List participants who do not meet the minimum regulatory requirements. Further, the rule is intended to provide aliens with better information regarding the availability of pro bono representation before the immigration courts, thus benefitting aliens who appear in proceedings before the courts.

Burdens to the public are applicable only to attorneys and organizations making a voluntary decision to seek to be included on the list; these include requirements to apply for inclusion on the List, maintain updated contact information, perform a minimum of 50 annual pro bono hours of service at each immigration court location where the attorney or organization intends to be included on the List, and file a declaration every three years of continuing eligibility to be on the List. The regulations provide for removal from the List of a provider who can no longer meet the requirements of inclusion on the List. The Department examined these burdens to the public and has determined that the benefits outweigh the burdens. The Department believes that this rule will have a minimal economic impact on List participants because it provides List participants with flexible means of complying with the rule's requirements. Further, it will not have a substantial economic impact on Department functions, as the Department is already maintaining and updating such a List quarterly. The Department believes this rule will have a positive economic impact for aliens in proceedings before EOIR who need legal services, as the rule is intended to preserve the integrity of the List and ensure that providers on the List are actually available to provide pro bono legal services.

This rule will not have substantial direct effects on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with section 6 of Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.

This rule meets the applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988.

The Department of Justice, Executive Office for Immigration Review (EOIR), is submitting the following information collection request to the Office of Management and Budget (OMB) for review and clearance in accordance with review procedures of the Paperwork Reduction Act of 1995, Public Law 104-13, 44 U.S.C. chapter 35, and its implementing regulations, 5 CFR part 1320. The information collection is published to obtain comments from the public and affected agencies. Written comments and suggestions are encouraged and will be accepted for 60 days. If you have comments on the estimated public burden, associated response time, or suggestions, please contact EOIR as noted above.

Comments that will provide the most assistance will evaluate: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) whether the proposed collection of information enhances the quality, utility, and clarity of the information to be collected; (3) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; and (4) whether the burden of the collection of information on those who are to respond can be minimized through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of information.

There is currently no specific form or information collection instrument associated with this request. 12 Rather, this rule implements new eligibility and application requirements in order for an organization, pro bono referral service, or private attorney to be included on the List of Free Legal Services Providers (to be renamed, through this rule, the “List of Pro Bono Legal Service Providers”). Organizations and private attorneys that file an application (for which no specific form is currently required) with EOIR to be included on the List must demonstrate that they provide, or plan to provide, a minimum of 50 hours per year of pro bono legal services at each immigration court location where they intend to be included on the List. Entities and individuals must indicate “their availability to represent aliens in asylum proceedings on a pro bono basis” ( see INA 208(d)(4)(B)) and “their availability to represent pro bono aliens in proceedings under section 240” ( see INA 239(b)(2)). They must also indicate whether there are any limitations on the services they plan to provide and in which immigration court locations they plan to provide such services. Private attorneys must demonstrate that they cannot otherwise provide such services through an organization or pro bono referral service. Finally, all providers must file a declaration every three years that they remain eligible to be on the List.

As explained in this proposed rule, these additional requirements will enhance the integrity of the List by ensuring that only those who genuinely intend to provide pro bono services are included on the List. These requirements will benefit aliens in need of pro bono legal services and will also prevent the use of the List primarily for improper solicitation and advertisement with respect to potential clients for paid legal services. It is not mandatory for organizations, pro bono referral services, or private attorneys to be included on the List in order to represent aliens on a pro bono basis before EOIR. Placement on the List is completely voluntary and does not confer any rights or benefits on entities or individuals who are included on the List. Placement on the List in no way constitutes government endorsement of a particular entity or private attorney, nor is the List to be used for advertising or soliciting. Rather, the purpose of the List is to provide aliens notification that these entities or private attorneys are available to provide legal services without any direct or indirect remuneration (other than filing fees or photocopying and mailing expenses).

EOIR currently uses appropriate information technology to reduce burden and improve data quality, agency efficiency, and responsiveness to the public. Under this proposed rule, EOIR would continue to do so to the maximum extent practicable. EOIR will collect the information for any person or entity seeking to be included on EOIR's List of Free Legal Services Providers (to be renamed the “List of Pro Bono Legal Service Providers”). Under the current regulation, it is estimated that it takes a total of 17 hours annually to provide the required information (50 applicants per year at 20 minutes per application). Under the proposed rule, it is estimated that 129 applicants will file applications each year for the first two years (phase-in period) and take an average of 30 minutes for each application, resulting in an estimated total of 65 hours each year. After the first two years, it is estimated that there will be 93 applicants per year, expending an average of 30 minutes for each application, resulting in an estimated total of 47 hours each year. This would be an increase from the current estimated annual hours by 48 hours annually for the two-year phase-in period and 30 hours annually for the succeeding years.

Accordingly, for the reasons stated in the preamble, the Attorney General proposes amending parts 1003, 1240, and 1241 of chapter V of title 8 of the Code of Federal Regulations as follows:

Comments Invited

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2014-0625; Directorate Identifier 2014-NM-044-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian Airworthiness Directive CF-2014-05, dated January 20, 2014 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:

Required corrective actions include repair or replacement of the IDG power cable if any chafing is found, and replacement of any cracked or broken support bracket. You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating it in Docket No. FAA-2014-0625.

Bombardier has issued the following service information:

(1) Bombardier Service Bulletin 605-24-007, Revision 01, dated January 13, 2014 (for Model CL-600-2B16 airplanes);

(2) Bombardier Service Bulletin 604-24-026, Revision 01, dated January 13, 2014 (for Model CL-600-2B16 airplanes); and

(3) Bombardier Service Bulletin 604-0625, Revision 01, dated January 13, 2014 (for Model Cl-600-2A12 and CL-600-2B16 airplanes).

The actions described in this service information are intended to correct the unsafe condition identified in the MCAI.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.

We estimate that this proposed AD affects 95 airplanes of U.S. registry.

We also estimate that it would take about 1 work-hour per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $8,075, or $85 per product.

We have received no definitive data that would enable us to provide cost estimates for the on-condition repair of chafed power cables or cracked or broken support brackets, as specified in this AD.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this proposed regulation :

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);

3. Will not affect intrastate aviation in Alaska; and

4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

Comments Invited

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2014-0627; Directorate Identifier 2013-NM-217-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

On April 12, 2011, we issued AD 2011-09-03, Amendment 39-16665 (76 FR 22311, April 21, 2011), for all Lockheed Martin Corporation/Lockheed Martin Aeronautics Company Model 382, 382B, 382E, 382F, and 382G airplanes. AD 2011-09-03 requires repetitive eddy current inspections to detect cracks in the center wing upper and lower rainbow fittings, and corrective actions if necessary; and repetitive replacements of rainbow fittings, which would extend the repetitive interval for the next inspection. AD 2011-09-03 resulted from reports of fatigue cracking of the wing upper and lower rainbow fittings during durability testing and on in-service airplanes. Analysis of in-service cracking has shown that these rainbow fittings are susceptible to multiple site fatigue damage. We issued AD 2011-09-03 to detect and correct such fatigue cracks, which could grow large and lead to the failure of the fitting and a catastrophic failure of the center wing.

Since we issued AD 2011-09-03, Amendment 39-16665 (76 FR 22311, April 21, 2011), analysis of in-service cracking has shown that the initial and repetitive inspection schedules for the upper rainbow fitting need to be revised to reduce the probability of failure until the rainbow fitting is replaced.

We have also revised paragraphs (i) and (k) of AD 2011-09-03, Amendment 39-16665 (76 FR 22311, April 21, 2011) to clarify the rainbow fitting is replaced with a new rainbow fitting, as specified in Lockheed Service Bulletin 382-57-82, Revision 4, including Appendixes A and B, dated May 20, 2009; and Lockheed Service Bulletin 382-57-82, including Appendices A and B, Revision 6, dated July 11, 2013.

We reviewed Lockheed Service Bulletin 382-57-82, including Appendices A, B, and C, Revision 6, dated July 11, 2013. The compliance times are reduced, but the procedures are unchanged from those described in Lockheed Service Bulletin 382-57-82, including Appendices A, B, and C, dated April 25, 2008.

We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This proposed AD would retain all of the requirements of AD 2011-09-03, Amendment 39-16665 (76 FR 22311, April 21, 2011). This proposed AD would reduce compliance times for initial and repetitive inspections of the upper rainbow fitting.

We have clarified the replacement process to more closely match the intent of the service information to replace affected fittings with new replacement fittings.

Where Lockheed Service Bulletin 382-57-82, including Appendices A, B, and C, Revision 6, dated July 11, 2013, does not specify a corrective action or states “taking appropriate corrective action,” this NPRM proposes to require repairing those conditions using a method approved by the Manager, Atlanta Aircraft Certification Office, FAA.

We estimate that this proposed AD affects 14 airplanes of U.S. registry.

We estimate the following costs to comply with this proposed AD:

This proposed AD reduces the compliance times for the upper rainbow fitting inspections and adds no additional economic burden.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

(3) Will not affect intrastate aviation in Alaska, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

This rule is being published to seek comment on DOD's updated policy for support to entertainment-oriented media productions, including documentaries. The increased and higher-level oversight is required to eliminate inconsistencies and ambiguities in guidance for and supervision of DoD activities to ensure common standards are met in providing support, and that production support is appropriate. The rule also includes two DoD Production Assistance Memoranda (PAM) as samples. These memoranda explain the terms under which DoD provides assistance to production companies for projects that have been approved for DoD support.

(a) This rule includes documentaries within the category of non-government, entertainment-oriented media productions and requires approval of production assistance for such entertainment-oriented media productions at the DoD level vice the Service level.

(b) This rule includes two sample DoD Production Assistance Memoranda (PAMs), one for documentary productions and one for all other entertainment media productions. This rule also assigns the authority for signing both types of agreements to the Assistant to the Secretary of Defense for Public Affairs (ATSD(PA)), or the ATSD(PA)'s designee.

(c) This rule addresses how military personnel may appear in entertainment media. This rule requires the written permission of the Assistant to the Secretary of Defense for Public Affairs (or his/her designee) in order for active duty military personnel to serve as actors in significant roles and in roles beyond the scope of their normal duties.

First, the support and assistance to non-government entertainment media productions will be at no additional cost to the government and taxpayers. Once DoD has agreed with a production company to provide production assistance and the parties have signed a Production Assistance Memorandum, operations, and maintenance, supply and equipment costs incurred by DoD (collectively) as a direct consequence of providing support will be reimbursed by the non-government entertainment production company. Additionally, the sample production assistance memoranda provide for the production company to indemnify and hold harmless the DoD for claims arising from the production company's possession or use of DoD property or other assistance in connection with the production. Support to non-government entertainment media may be provided based on a number of factors: whether the production presents a reasonably realistic depiction of the Military Services and the DoD, whether the production is informational and considered likely to contribute to public understanding of the Military Services and the DoD, or whether the production may benefit Military Service recruiting and retention programs.

We have consulted with the Office of Management and Budget (OMB) and determined this NPRM meets the criteria for a significant regulatory action under Executive Order 12866, as supplemented by Executive Order 13563 , and was subject to OMB review.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4) requires agencies to assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2014, that threshold is approximately $141 million. This document will not mandate any requirements for State, local, or tribal governments, nor will it affect private sector costs.

We certify this proposed rule will not have a significant economic impact on a substantial number of small entities because the entities who receive production assistance are those who affirmatively request it, and therefore, interact with DoD solely on a voluntary basis. Therefore, the Regulatory Flexibility Act, as amended, does not require us to prepare a regulatory flexibility analysis.

This proposed rule does not create any new or affect any existing collections, and therefore, does not require OMB approval under the Paperwork Reduction Act.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. This document will not have a substantial effect on State and local governments.

As contemplated by 17 U.S.C. 1201(a)(1), the U.S. Copyright Office is initiating a proceeding to determine whether there are any classes of copyrighted works for which noninfringing uses are, or in the next three years are likely to be, adversely affected by the prohibition on circumvention of technological measures that control access to copyrighted works. The Office invites submission of petitions for proposed exemptions, the requirements for which are described in part IV.B.1 below.

In 1998, Congress enacted the Digital Millennium Copyright Act (“DMCA”) to implement certain provisions of the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty. See generally Public Law 105-304, 112 Stat. 2860 (1998). The DMCA governs many aspects of the digital marketplace for copyrighted works by establishing “a wide range of rules . . . for electronic commerce” and “defin[ing] whether consumers and businesses may engage in certain conduct, or use certain devices, in the course of transacting electronic commerce.” Report of the H. Comm. on Commerce on the Digital Millennium Copyright Act of 1998, H.R. Rep. No. 105-551, pt. 2, at 22 (1998) (“Commerce Comm. Report”).

Among other things, title I of the DMCA, which added a new chapter 12 to title 17 of the U.S. Code, prohibits circumvention of technological measures employed by or on behalf of copyright owners to protect access to their works (also known as “access controls”). Specifically, section 1201(a)(1)(A) provides in pertinent part that “[n]o person shall circumvent a technological measure that effectively controls access to a work protected under [title 17].” Under the statute, to “circumvent a technological measure” means “to descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner.” 17 U.S.C. 1201(a)(3)(A). A technological measure that “effectively controls access to a work” is one that “in the ordinary course of its operation, requires the application of information, or a process or a treatment, with the authority of the copyright owner, to gain access to the work.” 17 U.S.C. 1201(a)(3)(B). In enacting this prohibition, Congress noted that technological protection measures can “support new ways of disseminating copyrighted materials to users, and to safeguard the availability of legitimate uses of those materials by individuals.” Staff of House Comm. on the Judiciary, 105th Cong., Section-by-Section Analysis of H.R. 2281 as passed by the United States House of Representatives on August 4, 1998, at 6 (Comm. Print 1998) (“House Manager's Report”).

As originally drafted, the prohibition in section 1201(a)(1)(A) did not provide for an exemption process. 1 The House of Representatives Commerce Committee was concerned, however, that the lack of such an ability to waive the prohibition might undermine the fair use of copyrighted works. Commerce Comm. Report at 35-36. The Committee acknowledged that the growth and development of the internet had had a significant positive impact on the access of students, researchers, consumers, and the public at large to information, and that a “plethora of information, most of it embodied in materials subject to copyright protection, is available to individuals, often for free, that just a few years ago could have been located and acquired only through the expenditure of considerable time, resources, and money.” Id. at 35-36. At the same time, the Committee was concerned that “marketplace realities may someday dictate a different outcome, resulting in less access, rather than more, to copyrighted materials that are important to education, scholarship, and other socially vital endeavors.” Id. at 36. The Committee thus concluded that it would be appropriate to “modify the flat prohibition against the circumvention of effective technological measures that control access to copyrighted materials, in order to ensure that access for lawful purposes is not unjustifiably diminished.” Id.

Accordingly, the Commerce Committee proposed a modification of proposed section 1201 that it characterized as a “ `fail-safe' mechanism.” Id. The Committee Report noted that “[t]his mechanism would monitor developments in the marketplace for copyrighted materials, and allow the enforceability of the prohibition against the act of circumvention to be selectively waived, for limited time periods, if necessary to prevent a diminution in the availability to individual users of a particular category of copyrighted materials.” Id.

As ultimately enacted, the “fail-safe” mechanism in section 1201(a)(1) directs the Librarian of Congress, pursuant to a rulemaking proceeding, to publish any class of copyrighted works for which the Librarian has determined that noninfringing uses by persons who are users of a copyrighted work are, or are likely to be, adversely affected by the prohibition against circumvention in the succeeding three-year period, thereby exempting that class from the prohibition for that period. See 17 U.S.C. 1201(a)(1). The Librarian's determination to grant an exemption is based upon the recommendation of the Register of Copyrights. Id. at 1201(a)(1)(C). The Register in turn is to consult with the Assistant Secretary for Communications and Information of the Department of Commerce, who oversees the National Telecommunications and Information Administration (the “Assistant Secretary”). 2 Id. As explained by the Commerce Committee, “[t]he goal of the proceeding is to assess whether the implementation of technological protection measures that effectively control access to copyrighted works is adversely affecting the ability of individual users to make lawful uses of copyrighted works.” See Commerce Comm. Report at 37.

In keeping with that goal, the primary responsibility of the Register and the Librarian in the rulemaking proceeding is to assess whether the implementation of access controls impairs the ability of individuals to make noninfringing use of copyrighted works within the meaning of section 1201(a)(1). To do this, the Register develops a comprehensive administrative record using information submitted by interested parties, and makes recommendations to the Librarian concerning whether exemptions are warranted based on that record. 3

Under the statutory framework, the Librarian, and thus the Register, must consider “(i) the availability for use of copyrighted works; (ii) the availability for use of works for nonprofit archival, preservation, and educational purposes; (iii) the impact that the prohibition on the circumvention of technological measures applied to copyrighted works has on criticism, comment, news reporting, teaching, scholarship, or research; (iv) the effect of circumvention of technological measures on the market for or value of copyrighted works; and (v) such other factors as the Librarian considers appropriate.” 17 U.S.C. 1201(a)(1)(C). As noted above, the Register must also consult with the Assistant Secretary, and report and comment on his views, in providing her recommendation. Upon receipt of the recommendation, the Librarian is responsible for promulgating the final rule setting forth any exempted classes of works.

The Librarian has thus far made five determinations under section 1201(a)(1)  4 based upon the recommendations of the Register. 5 This notice announces the commencement of the sixth triennial rulemaking under the statutory process.

Earlier this year, Congress enacted the Unlocking Consumer Choice and Wireless Competition Act (“Unlocking Act”), effective as of August 1, 2014. Public Law 113-144, 128 Stat. 1751 (2014). 6 The Unlocking Act did three things. First, it changed the existing exemption allowing circumvention of technological measures that control access to computer programs that enable wireless telephone handsets to connect to wireless communication networks—a process commonly known as “cellphone unlocking”—by substituting the version of the exemption adopted by the Librarian in 2010  7 for the narrower version adopted in 2012. See Public Law 113-144, sec. 2(a). 8 The language of the Unlocking Act makes clear, however, that the Register is to consider any proposal for a cellphone unlocking exemption according to the usual process in this triennial rulemaking. See Public Law 113-144, sec. 2(c)(2) (referencing the possibility of a new cellphone unlocking exemption adopted “after the date of enactment” of the Unlocking Act); id. sec. 2(d)(2) (“Nothing in this Act alters, or shall be construed to alter, the authority of the Librarian of Congress under section 1201(a)(1) of title 17, United States Code.”).

Second, the legislation provides that the circumvention permitted under the reinstated 2010 exemption, as well as any future exemptions to permit wireless telephone handsets or other wireless devices to connect to wireless telecommunications networks, may be initiated by the owner of the handset or device, by another person at the direction of the owner, or by a provider of commercial mobile radio or data services to enable such owner or a family member to connect to a wireless network when authorized by the network operator. Public Law 113-144, sec. 2(a), (c). This directive is permanent, and is now reflected in the relevant regulations. 9 Accordingly, circumvention under any future “unlocking” exemption for wireless telephone handsets and other wireless devices adopted by the Librarian may be initiated by the persons Congress identified in the Unlocking Act.

Third, the legislation directs the Librarian of Congress to consider as part of this next triennial rulemaking proceeding whether to “extend” the reinstated 2010 cellphone unlocking exemption “to include any other category of wireless devices in addition to wireless telephone handsets” based upon the recommendation of the Register of Copyrights, who in turn is to consult with the Assistant Secretary. Public Law 113-144, sec. 2(b). This provision does not alter or expand the Librarian's authority to grant exemptions under section 1201(a)(1), but merely directs the Librarian to exercise his existing regulatory authority to consider the adoption of an exemption for other wireless devices. Accordingly, as part of this rulemaking, the Copyright Office is soliciting and will consider proposals for one or more exemptions to allow unlocking of wireless devices other than wireless telephone handsets.

The Office invites petitions regarding other wireless devices with the caveat that the proposals should be made with an appropriate level of specificity. The evaluation of whether an exemption would be appropriate under section 1201(a)(1)(C) is likely to be different for different types of wireless devices, requiring distinct legal and evidentiary showings. Thus, a petition proposing a general exemption for “all wireless devices” or “all tablets” could be quite difficult to support, in contrast to a petition that focuses on specific categories of devices, such as all-purpose tablet computers, dedicated e-book readers, mobile “hotspots,” smart watches with mobile data connections, etc.

In adopting the DMCA, Congress imposed legal and evidentiary requirements for the section 1201 rulemaking proceeding. Participants in the proceeding are encouraged to familiarize themselves with these requirements, which are summarized below, so they can maximize the effectiveness of their submissions.

Those who seek an exemption from the prohibition on circumvention bear the burden of establishing that the requirements for granting an exemption have been satisfied. In enacting the DMCA, Congress explained that that “prohibition [of section 1201(a)(1)] is presumed to apply to any and all kinds of works” until the Librarian determines that the requirements for the adoption of an exemption have been met with respect to a particular class of works. Commerce Comm. Report at 37. In other words, the prohibition against circumvention applies unless and until the Librarian determines that “persons who are users of a copyrighted work are, or are likely to be in the succeeding 3-year period, adversely affected by the prohibition . . . in their ability to make noninfringing uses under this title of a particular class of copyrighted works.” 17 U.S.C. 1201(a)(1)(C). This approach is also consistent with general principles of agency rulemaking under the Administrative Procedure Act (“APA”). 10 See 5 U.S.C. 556(d) (“Except as otherwise provided by statute, the proponent of a rule or order has the burden of proof.”).

To satisfy this burden, as the Copyright Office has previously explained, the proponent “must prove by a preponderance of the evidence that the harm alleged is more likely than not.” 2010 Recommendation at 10. This requirement stems from the statute, which requires a demonstration that users are, or are likely to be adversely affected by the prohibition on circumvention. 17 U.S.C. 1201(a)(1)(B) (emphases added). The preponderance of the evidence standard conforms to basic principles of administrative law. The APA provides that a rule may not be issued pursuant to formal agency rulemaking “except on consideration of the whole record or those parts thereof cited by a party and supported by and in accordance with the reliable, probative, and substantial evidence.” See 5 U.S.C. 556(d) (emphasis added); see also Steadman v. SEC, 450 U.S. 91, 102 (1981) (holding that the APA “was intended to establish a standard of proof and that the standard adopted is the traditional preponderance-of-the-evidence standard”).

Congress made clear in enacting the DMCA that the basis for an exemption must be established de novo in each triennial proceeding. See Commerce Comm. Report at 37 (explaining that for every rulemaking, “the assessment of adverse impacts on particular categories of works is to be determined de novo.”). As Congress stressed, “[t]he regulatory prohibition [of section 1201(a)(1)] is presumed to apply to any and all kinds of works, including those as to which a waiver of applicability was previously in effect, unless, and until, the [Librarian] makes a new determination that the adverse impact criteria have been met with respect to a particular class and therefore issues a new waiver.” Id. (emphases added). Accordingly, the fact that an exemption has been previously adopted creates no presumption that readoption is appropriate. This means that a proponent may not simply rely on the fact that the Register has recommended an exemption in the past, but must instead produce relevant evidence in each rulemaking to justify the continuation of the exemption.

That said, however, where a proponent is seeking the readoption of an existing exemption, it may attempt to satisfy its burden by demonstrating that the conditions that led to the adoption of the prior exemption continue to exist today (or that new conditions exist to justify the exemption). This could include, for instance, a showing that the cessation of an exemption will adversely impact users' ability to make noninfringing uses of the class of works covered by the existing exemption. Assuming the proponent succeeds in making such a demonstration, it is incumbent upon any opponent of that exemption to rebut such evidence by showing that the exemption is no longer justified.

Proponents who seek to have the Librarian exempt a particular class of works from section 1201(a)(1)'s prohibition on circumvention must show: (1) That uses affected by the prohibition on circumvention are or are likely to be noninfringing; and (2) that as a result of a technological measure controlling access to a copyrighted work, the prohibition is causing, or in the next three years is likely to cause, an adverse impact on those uses. See 17 U.S.C. 1201(a)(1)(B). These requirements are explained below. The Register also considers potential exemptions under the statutory factors set forth in section 1201(a)(1)(C), as discussed below.

Noninfringing Uses. As noted above, Congress believed that it is important to protect noninfringing uses. There are several types of noninfringing uses that could be affected by the prohibition of section 1201(a)(1), including fair use (delineated in section 107), certain educational uses (section 110), certain uses of computer programs (section 117), and others.

The Register will look to the Copyright Act and relevant judicial precedents when analyzing whether a proposed use is likely to be noninfringing. A proponent must show more than that a particular use could be noninfringing. Instead, the proponent must establish that the proposed use is likely to qualify as noninfringing under relevant law. As the Register has stated previously, there is no “rule of doubt” favoring an exemption when it is unclear that a particular use is a fair use. See 2012 Recommendation at 7. Rather, the statutory language requires that the use is or is likely to be noninfringing, not merely that the use might plausibly be considered noninfringing. See 17 U.S.C. 1201(a)(1)(C). And, as noted above, the burden of proving that a particular use is or is likely to be noninfringing belongs to the proponent.

Adverse effects. The second requirement is a showing that users of the class of copyrighted works currently are, or are likely in the ensuing three-year period to be adversely affected by the prohibition against circumvention. 17 U.S.C. 1201(a)(1)(C). In weighing adverse effects, the Register must assess, in particular, “whether the prevalence of . . . technological protections, with respect to particular categories of copyrighted materials, is diminishing the ability of individuals to use these works in ways that are otherwise lawful.” Commerce Comm. Report at 37.

Congress stressed that the “main focus of the rulemaking proceeding” should be on whether a “substantial diminution” of the availability of works for noninfringing uses is “actually occurring” in the marketplace. House Manager's Report at 6. To prove the existence of such existing adverse effects, it is necessary to demonstrate “distinct, verifiable and measurable impacts” occurring in the marketplace, as exemptions “should not be based upon de minimis impacts.” Committee Report at 37. Thus, “mere inconveniences” or “individual cases” do not satisfy the rulemaking standard. House Manager's Report at 6.

To the extent that a proponent is relying on claimed future impacts rather than existing impacts, the statute requires the proponent to establish that such future adverse impacts are “ likely.” 17 U.S.C. 1201(a)(1)(B) (emphasis added). An exemption may be based upon anticipated, rather than actual, adverse impacts “only in extraordinary circumstances in which the evidence of likelihood of future adverse impact during that time period is highly specific, strong and persuasive.” House Manager's Report at 6.

The proponent must also demonstrate that the technological protection measure is the cause of the claimed adverse impact. “Adverse impacts that flow from other sources, or that are not clearly attributable to implementation of a technological protection measure, are outside the scope of the rulemaking.” Commerce Comm. Report at 37. For instance, adverse effects stemming from “marketplace trends, other technological developments, or changes in the roles of libraries, distributors or other intermediaries” are not cognizable harms under the statute. House Manager's Report at 6.

In conducting the rulemaking, the Librarian must also examine the statutory factors listed in section 1201(a)(1)(C). Those factors are: “(i) The availability for use of copyrighted works; (ii) The availability for use of works for nonprofit archival, preservation, and educational purposes; (iii) the impact that the prohibition on the circumvention of technological measures applied to copyrighted works has on criticism, comment, news reporting, teaching, scholarship, or research; (iv) the effect of circumvention of technological measures on the market for or value of copyrighted works; and (v) such other factors as the Librarian considers appropriate.” 17 U.S.C. 1201(a)(1)(C). In some cases, weighing these factors requires the consideration of the benefits that the technological measure brings with respect to the overall creation and dissemination of works in the marketplace. As Congress explained, “the rulemaking proceedings should consider the positive as well as the adverse effects of these technologies on the availability of copyrighted materials.” House Manager's Report at 6.

Section 1201(a)(1) specifies that the exemption adopted as part of this rulemaking must be defined based on “a particular class of works.” See 17 U.S.C. 1201(a)(1)(B) (emphasis added). Thus, a major focus of the rulemaking proceeding is how to define the “class” of works for purposes of the exemption. The starting point for any definition of a “particular class” under section 1201(a)(1) is the list of categories appearing in section 102 of title 17, such as literary works, musical works, and sound recordings. House Manager's Report at 7. But, as Congress made clear, “the `particular class of copyrighted works' [is intended to] be a narrow and focused subset of the broad categories of works . . . identified in section 102 of the Copyright Act.” Commerce Comm. Report at 38 (emphasis added). For example, while the category of “literary works” under section 102(a)(1) “embraces both prose creations such as journals, periodicals or books, and computer programs of all kinds,” Congress explained that “[i]t is exceedingly unlikely that the impact of the prohibition on circumvention of access control technologies will be the same for scientific journals as it is for computer operating systems.” House Manager's Report at 7. Thus, “these two categories of works, while both `literary works,' do not constitute a single `particular class' for purposes of” section 1201(a)(1). Id.

At the same time, Congress emphasized that the Librarian “should not draw the boundaries of `particular classes' too narrowly.” Id. Thus, while the category of “motion pictures and other audiovisual works” in section 102 “may appropriately be subdivided, for purposes of the rulemaking, into classes such as `motion pictures,' `television programs,' and other rubrics of similar breadth,” Congress made clear that it would be inappropriate “to subdivide overly narrowly into particular genres of motion pictures, such as Westerns, comedies, or live action dramas.” Id.

The determination of the appropriate scope of a “class of works” recommended for exemption may also take into account the adverse effects an exemption may have on the market for or value of copyrighted works. For example, the class might be defined in part by reference to the medium on which the works are distributed, or even to the access control measures applied to them. But classifying a work solely by reference to the medium on which the work appears, or the access control measures applied to the work, would be inconsistent with Congress' intent in directing the Register and Librarian to define a “particular class” of works. 11

Ultimately, “[d]eciding the scope or boundaries of a `particular class' of copyrighted works as to which the prohibition contained in section 1201(a)(1) has been shown to have had an adverse impact is an important issue to be determined during the rulemaking proceedings.” House Manager's Report at 7. Accordingly, the Register will look to the specific record before her to assess the proper scope of the class for a recommended exemption.

The administrative process employed in the fifth triennial rulemaking largely paralleled that of prior earlier rulemakings. See generally 79 FR 60398 (Sept. 29, 2011). First, the Copyright Office initiated the rulemaking process by calling for the public to submit proposals for exemptions. Id. Notably, the Office required proponents to provide complete legal and evidentiary support for their proposals at the outset of the rulemaking process, in the proponents' initial submissions. See id. at 60403 (stressing that “[p]roponents should present their entire case in their initial comments” and explaining that “the best evidence in support of an exemption would consist of concrete examples or specific instances” of adverse effects on noninfringing uses). 12 After receiving the initial submissions containing the proposed exemptions and posting them on its Web site, the Office published a notice of proposed rulemaking describing the proposals and inviting interested parties to submit comments both in support of and in opposition to those proposals. 76 FR 78866, 78868 (Dec. 20, 2011) (asking for “additional factual information that would assist the Office in assessing whether a Proposed Class is warranted for exemption and, if it is, how such a class already proposed should be properly tailored”). The Office then invited reply comments in support of and in opposition to the proposed classes, limited to addressing the points made earlier in the proceeding. Id. at 78868.

After the close of the comment period, the Office held a series of public hearings to further explore the proposed exemptions. 77 FR 15327 (Mar. 15, 2012). The first hearing was a “technology hearing” conducted in Washington, DC in May 2012, and was limited to demonstrations of the “technologies pertinent to the merits of the proposals.” Id. at 15328. 13 The Office requested that “[w]itnesses wishing to present demonstrations . . . do so at this hearing rather than at the other hearings, in order to permit the other hearings to proceed on schedule.” Id. Following the technology hearing, the Office held additional hearings in Los Angeles, California, and Washington, DC to hear testimony regarding the exemptions. Id. Those hearings “consist[ed] of presentations of facts and legal argument, followed by questions from Copyright Office staff.” Id.

After the hearing, the Office directed specific follow-up questions to a number of hearing participants in an effort to address unresolved questions regarding the proposed exemptions. 14 Then, based on the resulting record before the Office, and following consideration of the Assistant Secretary's views, 15 the Register provided a recommendation to the Librarian as to the classes of works that should be entitled to an exemption from section 1201(a)'s prohibition on circumvention. 16 The Librarian, after consideration of that recommendation, adopted a final rule announcing the exemptions. 77 FR 65260 (Oct. 26, 2012).

The Copyright Office is modifying its administrative process for the sixth triennial rulemaking. As in prior rulemakings, the overall aim of the process is to create a comprehensive record on which the Register can base her recommendation and the Librarian, in turn, can adopt final exemptions. The Office believes that the procedural changes it is making will further that objective by, among other things, making the process more accessible and understandable to the public, allowing greater opportunity for participants to coordinate their efforts, encouraging participants to submit effective factual and legal in support for their positions, and reducing administrative burdens on both the participants and the Office.

We describe below the administrative process that will be employed for this rulemaking.

With this notice of inquiry, the Copyright Office is calling for the public to submit petitions for proposed exemptions. In a departure from prior rulemakings, the Office is not requiring the proponent of an exemption to deliver the complete legal and evidentiary basis for its proposal with its initial submission. Instead, the purpose of the petition is to provide the Office with basic information regarding the essential elements of the proposed exemption, both to confirm that the threshold requirements of section 1201(a) can be met, and to aid the Office in describing the proposal for the next, more substantive, phase of the rulemaking proceeding. The petitions should comply with the below requirements. To assist participants, the Office has posted a recommended template form on its Web site, at http://www.copyright.gov/1201. If there are extenuating circumstances such that a participant cannot meet one or more of the requirements, the participant should contact the Copyright Office using the above contact information.

a. Petitions requesting a proposed exemption should be limited to five pages in length (which may be single-spaced but should be in at least 12-point type).

b. Petitions should address a single proposed exemption. That is, a separate petition must be filed for each proposal. Although a single petition may not encompass more than one proposed exemption, the same party may submit multiple petitions. The Office will be requiring participants in later rounds also to make separate submissions with respect to each proposed exemption (or group of related exemptions). The Office anticipates that it will receive a significant number of submissions, and requiring separate submissions for each proposed exemption will help both participants and the Office keep better track of the record for each proposed exemption. In the past, submitters sometimes combined their views on multiple proposals in a single filing, making it difficult and time-consuming for other participants and the Office to sort out which arguments and evidence pertained to which. Separating the submissions by proposal will allow for more focused responses and replies and a clearer record overall.

The Office also urges submitters to consider the appropriate level of specificity for their petitions, including the particular type of copyrighted work, and the specific medium or device at issue. For instance, as noted above, with respect to petitions to unlock wireless devices, the Office encourages participants to submit petitions that clearly identify a particular category of device.

c. The petition should concisely address each of the following elements of the proposed exemption, in separate sections as identified below, and in the below order, bearing in mind that more complete information—including legal and evidentiary support—will be permitted in later rounds of submissions.

The petition should clearly identify the submitter and, if desired, a means for others to contact the submitter or an authorized representative of the submitter by either email or telephone. Petitions will be published on the Copyright Office's Web site, and providing such contact information in the petition will allow parties with aligned interests to more easily coordinate their efforts during later stages of the rulemaking should they wish to do so. 17 The Office believes that the opportunity for those with substantially similar proposals to combine their efforts with respect to their legal and evidentiary submissions may yield a more complete record in some cases. 18 In addition, law clinics and other organizations that may be in a position to offer assistance to others will be aware of the proposals before full submissions are due. 19

The submitter should provide a brief statement describing the overall proposed exemption (ideally in one to three sentences), explaining the type of copyrighted work involved, the technological protection measure (“TPM”) (or access control) sought to be circumvented, and any limitations or conditions that would apply ( e.g., a limitation to certain types of users or a requirement that the circumvention be for a certain purpose). While the petition may seek to propose precise regulatory language for the exemption, it need not do so. The petition should focus instead on providing a clear description of the specific elements of the proposed exemption. The Office notes that the specific language for the regulation that the Office ultimately recommends to the Librarian will necessarily be tied to the full record at the end of the proceeding. Thus, at the petition phase, particularized regulatory language matters less than the substance of the proposal.

The petition must identify the specific class, or category, of copyrighted works that the proponent wishes to access through circumvention. The works identified should reference a category of works referred to in section 102 of title 17 (the Copyright Act) ( e.g., literary works, audiovisual works, etc.). Unless the submitter seeks an exemption for an entire category in section 102, the description of works should be further refined to identify the particular subset of work to be subject to the exemption ( e.g., e-books, computer programs, or motion pictures) and, if applicable, by reference to the medium or device on which the works reside ( e.g., motion pictures distributed on DVDs).

The petition should describe the TPM that controls access to the work. The submitter does not need to describe the specific technical details of the access control measure, but should offer sufficient information to allow the Office to understand the basic nature of the technological measure and why it prevents open access to the work ( e.g., the encryption of motion pictures on DVD using the Content Scramble System or the cryptographic authentication protocol on a garage door opener).

The petition must also identify the specific noninfringing uses of copyrighted works sought to be facilitated by circumvention ( e.g., enabling accessibility for disabled users, or copying a lawfully owned computer program for archival purposes), and the statutory or doctrinal basis or bases that support the view that the uses are or are likely noninfringing ( e.g., because it is a fair use under section 107, or a permissible use under section 117). The description should include a brief explanation of how, and by whom, the works will be used. But while the petition must clearly articulate the proposed use and the legal basis for the claim that it is noninfringing under current law, it need not provide fully developed legal or factual arguments in support of the claim. Such arguments and additional legal support can and should be fleshed out in the proponents' later submissions.

Finally, the petition needs to describe how the inability to circumvent the TPM has or is likely to have adverse effects on the proposed noninfringing uses ( e.g., the TPM prevents connection to an alternative wireless communications network or prevents an electronic book from being accessed by screen reading software for the blind). The description should include a brief explanation of the negative impact on uses of copyrighted works. The adverse effects can be current, or may be adverse effects that are likely to occur during the next three years, or both. Again, while the petition must specifically describe the adverse effects of the TPM, it need not provide a full evidentiary basis for that claim. Such evidence should be presented during the public comment phase of the rulemaking.

While the Office intends to err on the side of inclusiveness in interpreting petitions for proposed exemptions, it reserves the right to decline to proceed with further consideration of a proposed exemption if the proponent fails to identify the essential elements required for an exemption. In addition, if it is apparent from the face of the petition that the proposed exemption cannot be granted as a matter of law, the Office may decline to further consider the proposal. See, e.g., 77 FR 65260 at 65271-72 (concluding that a proposed exemption “to access public domain works” was beyond the scope of the rulemaking proceeding since section 1201's prohibition on circumvention applies only to works protected under title 17). Any such determinations will be noted in the Federal Register notice announcing the proposed exemptions to be considered.

The Copyright Office will study the petitions and publish a notice of proposed rulemaking identifying the proposed exemptions and initiating three rounds of public comment. The Office plans to consolidate or group related and/or overlapping proposed exemptions where possible to streamline the rulemaking process and encourage joint participation among parties with common interests (though such collaboration is not required). As in previous rulemakings, the exemptions as described in the notice of proposed rulemaking will represent only a starting point for further consideration in the rulemaking proceeding, and will be subject to further refinement based on the record. See 76 FR 78866, 78868 (Dec. 20, 2011). The notice of proposed rulemaking will also provide guidance regarding specific areas of legal and factual interest for the Office with respect to each proposed exemption, and suggest particular types of evidence that participants may wish to submit for the record. In the past, some submissions have been lacking in evidentiary support, which is critical to the process. The Office hopes that additional guidance as to the types of evidence that might be expected or useful vis-à-vis particular proposals will yield a more robust record.

To ensure a clear and definite record for each of the proposals, as noted above, both proponents and opponents are required to provide separate submissions for each proposed exemption (or group of related exemptions) during each stage of the public comment period. Although participants may submit or comment on more than one proposal, a single submission may not address more than one exemption. The Office acknowledges that this format may require some parties to repeat certain general information ( e.g., about their organization) across multiple submissions, but the Office believes that the administrative benefits for both participants and the Office of creating self-contained, separate records for each proposal will be worth the modest amount of added effort involved.

In an additional departure from past rulemakings, the first round of public comment will be limited to submissions from the proponents ( i.e., those parties that proposed exemptions during the petition phase) and other members of the public that support the adoption of a proposed exemption, as well as any parties that neither support nor oppose an exemption but seek only to share pertinent information about a specific proposal. These submissions may suggest refinements to the proposed exemptions described in the notice of proposed rulemaking, but may not propose entirely new exemptions. The proponents should present their entire case for the exemption during this round of public comment (other than responding to any opponents), including the complete legal and evidentiary basis for the proposal. In the notice of proposed rulemaking, the Office will offer additional guidance as to the format and content of these submissions, including instructions for providing documentary evidence.

In addition to their primary written submissions, where it may be helpful to establishing their case, proponents will have the option of submitting multimedia presentations of the proposed noninfringing use, adverse effects, and/or other pertinent material. More specific guidance with respect to the kinds of demonstrations the Office would find useful and the format and method for submitting, as well as the means to access such demonstrations, will be provided in the notice of proposed rulemaking. 20

The second round of public comment will be limited to submissions from opponents of the proposed exemptions. These, too, may include documentary evidence and/or multimedia presentations submitted in accordance with Office guidelines. The third round of public comment will be limited to supporters of particular proposals, or parties that neither support nor oppose a proposal, in either case who seek to reply to points made in the earlier rounds of comments. Reply comments shall not raise new issues, but should be limited to addressing arguments and evidence presented by others.

The Copyright Office intends to hold public hearings following the last round of public comments. The hearings are expected to be conducted in Washington DC and California, although the specific dates and locations have not yet been determined. A separate notice providing details about the hearings and how to participate will be published in the Federal Register . The Office expects to identify specific items of inquiry to be addressed during the hearings, and may offer particular participants the opportunity to demonstrate technologies that are unknown or are unclear to the Office.

Following the hearings, the Copyright Office may request additional information with respect to particular proposals from parties who have been involved in the rulemaking process. While this has been done in the past, the Office may rely on this process somewhat more in this proceeding to the extent it believes it would be useful to provide a final opportunity for proponents, opponents or others to supply missing information for the record or otherwise resolve issues that the Office believes are material to particular exemptions. Such requests for responses to questions will take the form of a letter from the Copyright Office and will be addressed to individual parties involved in the proposal as to which more information is sought. While responding to such a request will be voluntary, any response will be need to be supplied by a specified deadline. After the receipt of all responses, the Office will post the questions and responses on the Office's Web site as part of the public record.

Finally, in accordance with the statutory framework, the Register will review the record, consult with the Assistant Secretary, and prepare a recommendation with proposed regulations for the Librarian. See Conference Report at 64. Thereafter, the Librarian will make a final determination and publish the exemptions in the Federal Register for later codification in title 37 of the CFR 17 U.S.C. 1201(a)(1)(D).

As noted above, petitions for proposed rulemaking are due on November 3, 2014. After the Office publishes the notice of proposed rulemaking, it intends to give proponents at least 45 days to prepare and file their evidentiary submissions. The opponents will then have at least 45 days to respond, followed by a reply period of at least 30 days. The Office will provide at least 30 days' notice before the public hearings begin. Parties who receive post-hearing questions will be given at least 14 days to respond. The precise dates for these future aspects of the proceeding will be provided in subsequent Federal Register notices.

I. Background

Over the past several years, the Copyright Office has sought public input on technological upgrades to the recordation function. See 78 FR 17722 (Mar. 22, 2013); 79 FR 2696 (Jan. 15, 2014). In addition to seeking written comments, the Office has held focused discussions with copyright owners, users of copyright records, technical experts, public interest organizations, lawyers, and professional and industry associations regarding the same. See 79 FR 6636 (Feb. 4, 2014). Participants in these processes have expressed a number of concerns about the current recordation system, including frustration with the submission process, the amount of time the Office requires to record remitted documents, and the searchability of the public record. These problems are related in part to the fact that recordation remains a paper-driven process (in contrast to most registration transactions, which occur electronically). 1

To date, recordation specialists have had to review paper documents and manually transcribe selected information from the documents into an electronic format in order to permit indexing in the Office's online Public Catalog. Among the information that must be transcribed are the titles of copyrighted works associated with a document submitted for recordation, which are typically presented in a list appended to the document, referred to informally as a “title appendix.” A title appendix associated with a document can include hundreds, or even thousands, of titles. The Office attributes the long processing times associated with document recordation in considerable part to the manual entry of these titles. In an effort to reduce processing time for recorded document submissions, on July 16, 2014, the Office proposed a new rule that would, among other things, allow remitters to submit electronic title appendices containing 100 or more titles in electronic format. See 79 FR 41470 (July 16, 2014).

The Recording Industry Association of America, Inc., (“RIAA”) commented on the proposed rule, stating, among other things, that the Office should “provide for a mechanism or procedure by which a remitter can easily correct any errors to the electronic title list that the remitter has supplied.”  2 The Office agreed, and has adopted such a procedure as part of the final electronic title list rule, to be codified at 37 CFR 201.4(c)(4)(v). See the final rule entitled “Changes to Recordation Practices” published elsewhere in this issue of the Federal Register . Under the new § 201.4(c)(4)(v), if a remitter discovers that an error in an electronic title list has led to the inaccurate cataloging of a recorded document, it may submit a corrected title list to the Copyright Office in accordance with the procedures set forth in the rule. However, to avoid delay in implementing the electronic title list option, the Office decided to issue that final rule without imposition of a fee for corrections until such time as a fee is set in accordance with this separate notice. 3

Section 708(a) of title 17 authorizes the Register to fix fees for services other than those enumerated in paragraphs (1)-(9) of section 708(a) based on cost and without prior submission to Congress. 4 See 17 U.S.C. 708(a). Fees for Office services that the Register has the discretion to establish based on cost and without Congressional review include fees for copying Office records, fees for mail and delivery services, and fees for special handling. See 79 FR 15910, 15916-17 (Mar. 24, 2014). With the rule proposed herein, the Office seeks to adopt a new fee to recover costs associated with the correction of errors in the online Public Catalog following recordation of a document where the errors stem from a remitter's inaccurate electronic title list.

Based on a cost analysis, the Office believes that the initial fee for this service should be established at seven dollars per corrected title. The Office arrived at the seven dollar amount by considering the various personnel and systems costs associated with providing the new service. To process a corrected title list, senior recordation staff must first review the nature and extent of corrections, and the Office's accounting staff must process the payment associated with the submission. Then, the corrections must be individually transcribed into the Office's online Public Catalog; this is a labor-intensive process that involves searching for the original entry by volume and document number, finding the title or titles that require correction, and amending and/or adding new titles to the database. Once entered into the online Public Catalog, the resulting changes must be checked to ensure the correction process was successful.

After evaluating the anticipated personnel and overhead expenses that will be incurred to accomplish the above tasks, the Office estimates the average cost to be seven dollars per corrected title. The Office therefore proposes to establish the new fee at that amount.

For the reasons set forth in the preamble, the Copyright Office proposes amending 37 CFR part 201 as follows:

Sections 111 and 119 of the Copyright Act (the “Act”), Title 17 of the United States Code, allow cable operators and satellite carriers to retransmit programming that broadcast stations transmit on over-the-air broadcast signals. To use these statutory licenses, cable operators and satellite carriers are required to file statements of account (“SOAs”) and deposit royalty fees with the U.S. Copyright Office (“Office”) on a semi-annual basis. The Office invests these royalties in United States Treasury securities pending distribution of the funds to copyright owners that are entitled to receive a share of the royalties.

The Satellite Television Extension and Localism Act of 2010 (“STELA”), Public Law 111-175, amended the Act by directing the Register of Copyrights to issue regulations to allow copyright owners to audit the SOAs and royalty fees that cable operators and satellite carriers file with the Office. Section 119(b)(2) of the Act directs the Register to “issue regulations to permit interested parties to verify and audit the statements of account and royalty fees submitted by satellite carriers under this subsection.” 17 U.S.C. 119(b)(2). Similarly, section 111(d)(6) directs the Register to “issue regulations to provide for the confidential verification by copyright owners whose works were embodied in the secondary transmissions of primary transmissions pursuant to [section 111] of the information reported on the semiannual statements of account filed under this subsection for accounting periods beginning on or after January 1, 2010, in order that the auditor designated under subparagraph [111(d)(6)(A)] is able to confirm the correctness of the calculations and royalty payments reported therein.” 17 U.S.C. 111(d)(6).

The Office began working on its initial draft for this procedure in 2011. The initial draft was based on similar audit regulations that the Office developed for parties that make ephemeral recordings or transmit digital sound recordings under 17 U.S.C. sections 112(e) and 114(f), respectively, or manufacture, import, and distribute digital audio recording devices under 17 U.S.C. chapter 10.

On January 31, 2012 the Office received a Petition for Rulemaking, which was filed by a group of copyright owners. 1 The copyright owners urged the Office to adopt regulations that would allow them to audit the SOAs filed by cable operators and satellite carriers, and they provided the Office with proposed language for each regulation. See Petition at 1-4.

On June 14, 2012, the Office issued a Notice of Proposed Rulemaking that set forth its initial proposal for the audit procedure (the “First Proposed Rule”). See 77 FR 35643 (June 14, 2012). The Office received extensive comments from groups representing copyright owners, 2 cable operators, 3 and individual companies that retransmit broadcast programming under sections 111 or 119 of the Act, namely, AT&T, Inc., DIRECTV, LLC, and DISH Network L.L.C. 4

In lieu of reply comments, DIRECTV, the NCTA, and a group representing certain copyright owners  5 submitted a joint proposal for revising the First Proposed Rule. This group referred to themselves collectively as the “Joint Stakeholders,” and they urged the Office to incorporate their suggestions “as promptly as possible after receiving any further public comment.” JS First Submission at 1. 6 The Office also received reply comments from AT&T. AT&T explained that it was aware of the Joint Stakeholders' negotiations and the “potential areas of agreement” among the parties, but stated that it did not have a sufficient amount of time for “meaningful engagement” with the group. AT&T First Reply at 1. Therefore, AT&T urged the Office to publish the Joint Stakeholders' proposal “for further comment by other interested parties who were not parties to the agreement.” Id.

The Office carefully studied the Joint Stakeholders' proposal and the other comments and reply comments submitted in response to the First Proposed Rule. The Joint Stakeholders' proposal addressed many of the concerns that the parties raised in their initial comments. The Office therefore incorporated most of the Joint Stakeholders' suggestions into a revised proposed regulation (the “Second Proposed Rule”).

On May 9, 2013, the Office published the Second Proposed Rule in the Federal Register and invited AT&T, DISH, the ACA, the Broadcaster Claimants Group, the Commercial Television Claimants, and other interested parties to comment on the proposed regulation. The Office also invited reply comments from the Joint Stakeholders and other interested parties. See 78 FR 27137, 27138 (May 9, 2013). The Office received comments from AT&T and the ACA, and it received reply comments from the ACA, the NCTA, and a group representing the copyright owners (“Copyright Owners”) that negotiated the Joint Stakeholders' Proposal with the NCTA and DIRECTV. 7 The parties raised a number of complex issues, including issues of first impression that were not addressed in the comments or reply comments submitted in response to the First Proposed Rule.

On December 26, 2013, the Office issued an interim rule that addresses a procedural issue that was not contested by the parties (the “Interim Rule”). Specifically, the Interim Rule allows copyright owners to identify any SOAs from accounting periods beginning on or after January 1, 2010 that they intend to audit. At the same time, it provides licensees with advance notice of the SOAs that will be subject to audit when the final rule goes into effect. See 78 FR 28257 (Dec. 26, 2013).

After analyzing the latest round of comments, the Office identified a number of issues that were not addressed in the First or Second Proposed Rules or in the comments submitted in response to those proposals. Because the Office believed these issues might be narrowed through group discussion, it decided to convene a public roundtable before issuing another notice of proposed rulemaking. See 79 FR 31992 (June 3, 2014). During the roundtable the Office received valuable input from parties that previously submitted comments in this proceeding, including the Motion Picture Association of America (“MPAA”), the Commissioner of Baseball, the NCTA, the ACA, and DIRECTV. The Office also received guidance from Crunch Digital, a company that conducts audits on behalf of content owners and licensees in the music industry.

The issues discussed at the roundtable are summarized in the Office's Federal Register notice dated June 3, 2014 (the “Roundtable Notice”). The most significant concern was the potential for backlogs to develop as a result of the limit on the number of SOAs that could be audited at any one time under the existing proposal. 8 The Office also expressed concern about the accounting standards that should be applied during the audit, the limitation on ex parte communications between the auditor and the copyright owners, the amount of time allocated for consultations between the auditor and the licensee, and the procedure for allocating the costs of the audit between the copyright owners and the licensee. See 79 FR at 31994-95.

Following the roundtable, the Joint Stakeholders consulted with each other regarding three of these issues, namely: (i) Requiring an initial consultation between the auditor and a representative of the licensee and the participating copyright owners prior to the commencement of an audit; (ii) the accounting standard that should govern the audit; and (iii) the procedure for allocating the cost of an audit between the participating copyright owners and the licensee. On July 31, 2014, the Joint Stakeholders informed the Office that they had reached a consensus on two of these issues and they offered specific recommendations for modifying certain aspects of the proposed rule. 9 JS Second Submission at 1-2.

After reviewing the comments and reply comments submitted in response to the Second Proposed Rule, the input provided during the roundtable, and the Joint Stakeholders' Second Submission, the Office made several changes to the proposed rule (the “Third Proposed Rule”). 10 The Office invites public comment from copyright owners, cable operators, satellite carriers, accounting professionals, and other interested parties concerning the proposed modifications that are discussed below in sections II, III.A, III.B, VI.A, VI.B, VII.A, VII.B, and VIII.C. 11

Under the Second Proposed Rule, a copyright owner could initiate an audit by filing a written notice with the Office that identified the statutory licensee, the SOAs, and the accounting periods that would be subject to the audit. The Office would publish a notice in the Federal Register announcing the receipt of the notice of intent to audit, and within thirty days thereafter, any other copyright owner that wished to participate in the audit would be required to notify both the copyright owner that filed the notice and the licensee that would be subject to the audit. Copyright owners that failed to comply with this requirement would not be permitted to participate in the audit process and would not be permitted to audit the same SOAs in a subsequent proceeding.

The Third Proposed Rule modifies this portion of the audit procedure in several respects. It provides that the notice should include the copyright owner's name, address, telephone number, and email address (but need not include a fax number). To facilitate the submission of notices, the Third Proposed Rule provides that notices should be addressed to the “U.S. Copyright Office, Office of the General Counsel,” and specifies the mailing address for time-sensitive materials where notices should be sent. It also establishes similar—but separate—procedures for submitting a notice of intent to conduct an initial audit and a notice of intent to conduct an expanded audit. 12

Under the Third Proposed Rule a notice of intent to conduct an initial audit must be received in the Office between December 1st and December 31st. The Office will publish a notice in the Federal Register announcing the receipt of that notice between January 1st and January 31st of the next calendar year. By contrast, a notice of intent to conduct an expanded audit may be filed at any point during the calendar year, provided that the notice is received within three years after the last day of the year in which any statement to be reviewed was filed with the Office. When the Office receives a notice of intent to conduct an expanded audit, it will publish a notice in the Federal Register within thirty days thereafter announcing the receipt of the notice. As the Office noted in its Federal Register document dated May 9, 2013, this step is intended to give copyright owners that did not join the initial audit an opportunity to participate in the expanded audit. See 78 FR at 27143.

The Office decided to modify the timing of the receipt and publication of the initial notice to prevent the development of backlogs in pending audits. This concern stemmed from the fact that—under the Second Proposed Rule—a licensee could be subject to only one audit during a calendar year, but there was no assurance that any given audit would be started and finished within a single calendar year. See 79 FR at 31993. Indeed, the Second Proposed Rule made clear that if a single audit spanned multiple years, the licensee would not be subject to any other audits during those years. See 78 FR at 27153.

At the roundtable, several participants suggested that the Office's concerns were unwarranted, because they expected audits to be completed within relatively short periods of time. The MPAA explained that it has audited SOAs on an informal basis for many years. According to the MPAA, before an audit begins, copyright owners often have a sense of what the problems may be based on the information already provided in the licensee's SOAs, and thus will be able to give the auditor a sense of what he or she should focus on from the outset. The MPAA stated that the most difficult part of the audit process is identifying the stations and signals carried by the provider. Under the proposed rule, the licensee would be required to provide this information at the outset. Therefore, the MPAA is of the view that the audit as a whole would be expected to proceed smoothly. The MPAA predicted that an audit involving a small cable system could be completed within a few weeks, while an audit of a large cable system might require three months. In response to the Office's concerns that some licensees may not be diligent in responding to the auditor's requests for information, the MPAA indicated that in its experience this was not a problem. According to the MPAA, copyright owners and licensees traditionally have been cooperative during the audit process, with disputes typically resolved through settlement and voluntary adoption of corrective practices.

While the Office appreciates the MPAA's experience, it is concerned that the level of cooperation experienced by the MPAA during these voluntary informal audits might not be universal. Indeed, as the NCTA observed in its written comments, “no one can predict at this point how smoothly the audit process will be for the cable and satellite industries.” NCTA Second Reply at 6.

As discussed in section IV.C, the Third Proposed Rule will allow licensees to suspend the audit for several months during each year. The Office is concerned that the audit process may be delayed even further if the licensee fails to respond to the auditor's requests in a timely manner. The Office believes that this is a real possibility given that—under the Joint Stakeholders' first proposal and the Second Proposed Rule—prolonging an audit into the next calendar year would preclude the copyright owners from commencing another audit involving that same licensee, thus creating an incentive for delay. See JS First Submission at 9-10; 78 FR at 27143; 79 FR at 31993. The roundtable revealed that, apart from the MPAA, none of the cable or satellite industry representatives in attendance has had any meaningful experience with audits involving SOAs. At the same time, the Office is aware that royalty audits of other types of content licensees may well take longer than a year to complete.

The Third Proposed Rule addresses this concern by establishing a schedule that is intended to ensure that the initial audit will be completed within a single calendar year. Specifically, it will require the copyright owners to file a notice of intent to conduct an initial audit during the month of December in the year before the audit is to begin, will require the Office to publish a notice in the Federal Register during January of the following year, and will require the auditor to deliver his or her final report to the participating copyright owners by November 1st of that same year. 13

This approach provides advantages over the Second Proposed Rule, which would have allowed the copyright owners to commence an initial audit at any time during the year. For instance, the Third Proposed Rule will substantially alleviate administrative burdens on the Office related to initial audits since notices will arrive in the Office within a set period of time, which in turn will allow the Office to publish them in the Federal Register as a group instead of publishing them on a piecemeal basis. In addition, this approach will improve certainty for both the copyright owners and statutory licensees. Copyright owners will be able to better coordinate their collective auditing activities, since notices of intent to conduct an initial audit will be submitted to the Office and published in the Federal Register at the same time each year. Likewise, a routine schedule for the submission and publication of notices will allow licensees to organize their affairs, because each December they will know whether they will be subject to an initial audit in the following calendar year.

In order to comply with the time limits set forth in section 111(d)(6)(E) of the Act, the copyright owners must file a notice of intent to audit a particular SOA within three years after the last day of the year in which the SOA was filed with the Office (regardless of whether they intend to conduct an initial audit or an expanded audit). The Third Proposed Rule recognizes that in any given year the copyright owners may file a notice of intent to conduct an initial audit involving any two of the SOAs that the licensee filed with the Office during that year or the three previous  14 calendar years. Once the Office receives a notice of intent to conduct an initial audit involving two SOAs filed by a particular satellite carrier or a particular cable system, the Office will not accept a notice of intent to conduct an initial audit involving that same carrier or that same system until the following calendar year.

Under the Third Proposed Rule, if the auditor discovers a net aggregate underpayment  15 of five percent or more during an initial audit of a satellite carrier or a single cable system, the copyright owners may expand the scope of the audit to include previous  16 SOAs filed by that licensee. If the auditor makes such a finding during an initial audit involving a sample of cable systems that are owned by a multiple system operator (“MSO”), the copyright owners may expand the scope of that audit to include previous SOAs filed by those cable systems, and in the following calendar year, the copyright owners may conduct an initial audit involving a larger sample of the cable systems owned by that MSO.

During an expanded audit the copyright owners would be able to audit any of the previous statements filed by the licensee, as long as they file a notice of intent to audit those statements within three years after the last day of the year in which those statements were filed with the Office. 17 U.S.C. 111(d)(6)(E). Although a notice of intent to conduct an initial audit must be filed in December and although the initial audit must be completed by November 1st of the following year, these requirements will not apply to expanded audits. Under the Third Proposed Rule a notice of intent to conduct an expanded audit may be filed during any month, and the auditor does not need to deliver his or her final report by November 1st of any given year.

Assuming the Third Proposed Rule is adopted as a final rule, it will supersede the Interim Rule in its entirety. Until then, copyright owners may use the Interim Rule to preserve their right to audit any SOA that was filed with the Office for accounting periods 2010-2 through 2014-1, 17 so long as the notice is received in a timely manner. 18

If a copyright owner does file a notice of intent to audit before the Third Proposed Rule goes into effect, then, as stated in the Interim Rule, the Office will publish that notice in the Federal Register within thirty days after it is received in the Office. See 37 CFR 201.16(c)(1). In such cases, the Third Proposed Rule provides that the audit shall be conducted using the procedures set forth in the proposed rule, except that regardless of the timing of the notice and its publication pursuant to the Interim Rule, the copyright owners must provide the licensee with a list of proposed auditors by March 16, 2015, and the auditor must deliver his or her final report to the copyright owners and the licensee by November 1, 2015.

The Second Proposed Rule provided that the copyright owners must deliver a list of three independent and qualified auditors to the licensee, along with information that is reasonably sufficient for the licensee to evaluate the independence and qualifications of each individual. Within five business days thereafter, the licensee would be required to select one of these individuals to conduct the audit. See 78 FR at 27139-40. None of the parties objected to this aspect of the Second Proposed Rule.

The Interim Rule allows a copyright owner to preserve the right to audit a particular SOA so long as it files a notice of intent within three years after the last day of the year in which that statement was filed. 37 CFR 201.16(c)(1). However, the Interim Rule does not specify a precise deadline by which a copyright owner must commence the actual audit. As the Office observed in the Roundtable Notice, copyright owners may feel obligated to file notices of intent to audit on a routine basis in order to preserve the option of auditing a particular statement, even if they do not expect to proceed with the audit in the foreseeable future. 79 FR 31993. In such cases, the licensee might be required to maintain records related to SOAs for many years before an audit got underway, which would create administrative burdens and increase the risk that records would be lost or damaged in the interim.

The Third Proposed Rule addresses this concern by establishing a deadline for commencing the audit. Specifically, it provides that the participating copyright owners must deliver the list of prospective auditors to the licensee within forty-five days after the date that the Office publishes a notice in the Federal Register announcing the receipt of the notice of intent to audit. Once the licensee has made its selection, the Third Proposed Rule provides that the licensee must notify the participating copyright owners and the participating copyright owners must retain the auditor that the licensee selected. It also provides that if the copyright owners fail to deliver a list of prospective auditors to the licensee within the time allowed or fail to retain the auditor that the licensee selected, the SOAs identified in the notice of intent to audit shall not be subject to audit.

At the roundtable, the audit firm Crunch Digital explained that it typically schedules a “kick-off call” at the start of each of its audits. During this call, the auditor and the party that is subject to the audit identify the types of books and records that the auditor intends to examine and the parties set a mutually agreeable schedule for the production of those items. In addition, each party designates a contact person who will be responsible for receiving and responding to communications regarding the audit. Crunch Digital explained that this improves the efficiency of the examination process, thus reducing the overall cost of the audit. The Joint Stakeholders made a similar recommendation in their Second Submission and the Office has incorporated that suggestion into the proposed rule. JS Second Submission at 1. Specifically, the Third Proposed Rule provides that the auditor shall meet with designated representatives of the licensee and the participating copyright owners (either in person or by telephone) within ten days after he or she has been selected. During the consultation, the parties are to review the scope of the audit, the methodology that the auditor will use during his or her review, and the schedule for conducting and completing the audit. The objective of this consultation is to establish the schedule and procedures for the production and review of information so that the audit will be completed in a timely fashion.

The Second Proposed Rule contained a provision that banned ex parte communications between the auditor and the participating copyright owners, except in certain narrow circumstances. For example, the auditor may communicate directly with the copyright owners if he or she has a reasonable basis to suspect fraud, and if the auditor reasonably believes that involving the licensee in the communication would prejudice the investigation of that fraud. In the Roundtable Notice the Office questioned whether this restriction is necessary and whether it might create inefficiencies. See 79 FR at 31994. At the roundtable the NCTA explained that this provision will promote transparency in the audit process. Specifically, the NCTA opined that it will ensure that copyright owners do not exercise undue influence over the auditor's deliberations, and that licensees are made aware of potential issues at the same time as the copyright owners, thus helping to eliminate the possibility of unfair surprise when the auditor delivers the initial draft of his or her report. Crunch Digital noted that this could be accomplished in most cases simply by copying the licensee on email communications between the auditor and the copyright owners or their representatives. The Office found the foregoing observations persuasive. Therefore, the Office has retained the prohibition against ex parte communications in the Third Proposed Rule.

The Second Proposed Rule provided that the licensee must deliver a document to the auditor and the copyright owners containing a certified list of the broadcast signals retransmitted during each accounting period that is subject to the audit, including the call sign for each broadcast signal and each multicast signal. In addition, cable operators must identify the classification of each signal on a community-by-community basis pursuant to sections 201.17(e)(9)(iv)-(v) and 201.17(h) of the regulations. See 78 FR at 27141.

The Office added this requirement to the Second Proposed Rule at the request of the Joint Stakeholders. As the Office noted in the Federal Register document dated May 9, 2013, licensees are supposed to report this information in their SOAs and the person signing each SOA must certify that this information is true, correct, and complete. The Office sought comment on whether there is any benefit in requiring licensees to provide information that should be apparent from the face of an SOA. See 78 FR at 27141.

AT&T stated that “there is no need to include this `make-work' step in the audit process,” because “it does not provide the auditor or the copyright owners with any information that is not readily available from the SOA.” AT&T Second Comment at 3. The ACA stated that “whatever benefit is derived, it is far outweighed by the administrative and financial burdens of compiling and submitting this information, especially for smaller cable operators.” ACA Second Comment at 3.

The Copyright Owners responded that this provision “provides tangible benefits that will promote the efficiency and effectiveness” of the audit procedure. CO Second Reply at 10. They noted that licensees that use Form SA 1-2, or the previous version of Form SA-3, are not required to identify “different channel line-ups linked to different subscriber groups.” Id. at 7. Therefore, “it is impossible to link communities with reported local stations” when reviewing these types of SOAs. Id. at 8.

Licensees that use the current version of Form SA-3 are supposed to identify the communities they serve, along with the relevant channel line-ups and subscriber groups. The Copyright Owners acknowledged that this information “might be sufficient to match communities and stations for systems having one or two subscriber groups and one or two separate channel line-ups.” Id. at 8. But identifying the signals that are retransmitted in each community can be “difficult, if not impossible” for larger cable systems “that cover large geographic areas” with “multiple channel line-ups and numerous subscriber groups.” Id. at 7, 10. For example, the Copyright Owners noted that Comcast of Southeast PA LLC recently reported 589 communities, 30 channel line-ups with 7 to 49 stations each, and 46 subscriber groups, while Time Warner Northeast LLC recently reported 257 communities, 17 channel line-ups with 9 to 21 stations each, and 51 subscriber groups. Id. at 8. The Copyright Owners contended that it would be “cumbersome and costly” for the auditor to identify the distant and local signals that are retransmitted in each community, given the complexity of information reported in these types of SOAs. Id. at 10. By contrast, they contended that it would be easy for the licensee to compile this information, because “the cable system is more likely to know what stations that it carries in each community.” Id. at 10.

Requiring the licensee to provide this information at the beginning of the audit was “an important component of the Joint [Stakeholders'] Proposal” from the Copyright Owners' point of view. 19 Id. at 7. The Joint Stakeholders agreed that the auditor should verify the information reported on the SOAs in order to confirm the correctness of the calculations and royalty payments reported therein, but the auditor should not determine whether a cable operator properly classified the broadcast signals reported on its SOAs, or whether a satellite carrier properly determined if any subscriber or group of subscribers is eligible to receive any broadcast signals under the Act. 20 See 78 FR at 27151.

In their reply comments, the Copyright Owners explained that they agreed to narrow the scope of the auditor's inquiry on the condition that the licensee produces a certified list of broadcast signals that were retransmitted during the accounting period that is subject to the audit. CO Reply at 7-8. They contended that the auditor needs this information to confirm the correctness of the calculations and royalty payments reported in the licensee's SOAs. Id. at 7, 9. They also contended that the certified list will avoid the need for “costly, time-consuming litigation” over signal classification issues. Id. at 9-10. The Copyright Owners explained that the list will help them determine whether the licensee correctly classified the carriage of each signal. If they disagree with the licensee's classification, the Copyright Owners will be able to raise their concerns during the audit, which in turn will give the licensee an opportunity to amend its SOAs if it agrees that a mistake has been made. Id. at 9.

The Office has noted AT&T's and the ACA's concerns, but has concluded that the Copyright Owners have the better argument. Requiring the licensee to identify the broadcast signals that the licensee retransmitted and the communities that the licensee served provides the auditor with information he or she needs to interpret an SOA and to verify the calculations and royalty payments reported therein. It is also a fair trade-off for excluding the classification of signals as local/distant or permitted/non-permitted from the scope of the auditor's inquiry.

The Copyright Owners correctly noted that the previous version of Form SA-3 did not require licensees to report specific channel line-ups for each subscriber group. The current version of Form SA-3 instructs the licensee to identify each community served by the cable system and each television station carried by the cable system during the accounting period. 21 In the Office's experience, this information is clearly stated in the SOA in some cases, but in other cases it is not. When the information is deficient, the Office may write the licensee to request a clarification. 22

Requiring the licensee to provide this information at the outset of the audit should not impose an undue burden on the licensee. The licensee should be familiar with the stations that it carries and the communities that it serves and thus should be able to prepare a list of stations and communities without difficulty. Moreover, the Third Proposed Rule provides that the licensee must retain any records needed to confirm the correctness of the calculations and royalty payments reported in its SOAs for at least three and a half years after the last day of the year that the SOA is filed with the Office, and if an SOA has been audited under this procedure, must continue to maintain those records until three years after the auditor delivers his or her final report. By definition, this would include records that identify the stations that the licensee carries and the communities it serves. Thus, even if the required information is not apparent from the face of the SOA, the licensee should be able to compile a list of stations and communities from its own records.

The Office made one minor change to the Third Proposed Rule to make it consistent with the rules governing statements of account. Rather than employing the somewhat vague term “certified list,” the Third Proposed Rule clarifies that the list of broadcast signals must be signed by a duly authorized agent of the licensee, and that person must confirm that the facts contained in the document are true, complete, and correct to the best of his or her knowledge, information, and belief. See 37 CFR 201.11(e)(9)(iii)(E), 201.17(e)(14)(iii)(E).

The Second Proposed Rule provided that audits must be conducted “according to generally accepted auditing standards.” 78 FR at 27151. In the Roundtable Notice, the Office questioned whether this is the appropriate standard, noting that guidance from the American Institute of Certified Public Accountants (“AICPA”) indicates that “generally accepted auditing standards” are those used by accountants to audit corporate financial statements. See 79 FR at 31994. At the roundtable and in their Second Submission, the Joint Stakeholders were unable to reach agreement on what standard, if any, should be specified in lieu of “generally accepted auditing standards.” For its part, Crunch Digital confirmed at the roundtable that “generally accepted auditing standards” are not directly relevant to the type of audit contemplated by this rule. It also suggested that it is generally unnecessary to specify in advance the standard that will be applied during the audit, and that the auditor's approach can be considered by the parties during the initial consultation.

Given the lack of consensus on this issue, and that none of the parties could explain why any particular auditing standard should apply to these proceedings, the Office believes it is unnecessary to specify the professional standard to be employed under the rule. Instead, the Office believes that it is appropriate to rely on the auditors themselves to adopt an appropriate audit methodology based on their professional judgment, and to review that methodology with the participating copyright owners and the licensee during the initial consultation described in section III.B.

Under the Second Proposed Rule the statutory licensee would be required to provide reasonable access to its books, records, or any other information that the auditor needs to conduct the audit. It also provided that the licensee should produce any other information that the auditor reasonably requests. See 78 FR at 27141-42.

AT&T asserted that a cable operator should not be required to produce information regarding individual subscribers, because this would impose an undue burden on the licensee. AT&T Second Comment at 4. Instead, AT&T argued that the licensee should be allowed to provide “reports that include the number of subscribers, the amount of revenue and the numbers of subscribers and revenues applicable to specific service offerings at the system level.” Id.

The Copyright Owners contended that AT&T is seeking “a special set of accounting standards” for cable operators. CO Second Reply at 6. In their view, “[a]uditors should be free to request whatever information they need to fulfill their responsibility,” and they stated that “ill-defined subscriber and revenue `information in the form of reports' ” would not provide the participating copyright owners with the level of certainty that an audit should provide. Id. at 6-7.

The Office believes that it would be inappropriate to place categorical limits on the type of information that the auditor may request during an audit procedure. On the contrary, the auditor should be allowed to request any information he or she reasonably needs to conduct an audit. The Office is in no position to determine whether the auditor does or does not need individual subscriber information to satisfy applicable professional standards, and the Copyright Owners correctly note that the Office lacks the expertise that would be required to craft particularized exceptions to the information that reasonably could be called for in an audit.

The Office has considered AT&T's comments, but has concluded that the proposed rule adequately addresses AT&T's concerns. The Third Proposed Rule limits the number of SOAs and the number of cable systems that may be included in an initial audit or an expanded audit, which in turn limits the amount of information that the auditor may request. It provides that the auditor should be given “ reasonable access” to the licensee's books, records, and any other information that the auditor needs to conduct an audit (emphasis added). It provides that the licensee is only required to produce information that the auditor “ reasonably requests” (emphasis added). It also provides that the audit must be conducted during regular business hours at a location designated by the licensee, that consideration should be “given to minimizing the costs and burdens associated with the audit,” and, if the parties agree, that the audit may be conducted in whole or in part by means of electronic communication.

As the Office stated in the Federal Register document dated May 9, 2013, cable operators receive a substantial benefit from the statutory licensing system, insofar as it provides a mechanism for licensing broadcast content without having to negotiate with the individual owners of that content. During the legislative process that led to the enactment of STELA, the Congressional Budget Office estimated that the cost of responding to an audit would be minimal, because the auditor would verify information that the licensee already collected and maintained as a condition for using the statutory license. See H.R. Rep. No. 111-319, at 20 (2009). While the cost of producing information needed to verify the calculations and royalty payments reported in an SOA may be a new obligation, it is a reasonable cost of doing business under the statutory licensing system. See 78 FR at 27148.

The Second Proposed Rule provided that statutory licensees could suspend an audit for up to thirty days before the semi-annual deadlines for filing an SOA, although licensees could not exercise this option after the auditor issues the initial draft of his or her report. See 78 FR at 27141. The NCTA strongly disagreed with this aspect of the Second Proposed Rule. NCTA Second Reply at 6. It contended that a licensee should be allowed to suspend an audit for up to sixty days before the filing deadlines, because “the same individuals that will be involved in responding to an audit . . . typically will be responsible for preparing new statements of account for that licensee.” Id. at 5. AT&T expressed similar concerns in its comments on the First Proposed Rule, explaining that the staff members who would be responsible for responding to an audit would be the same individuals who are responsible for preparing AT&T's SOAs. AT&T First Comment at 1. AT&T explained that preparing these SOAs “essentially occupies the full time of the staff from two weeks before the close of each semi-annual period through the due date for the [SOA], two months after the close of the period.” Id.

The Office believes it would be unduly restrictive to prevent the auditor from working for up to four months out of the year, given the limit on the number of audits that may be conducted each year. However, the Office recognizes that the same individuals may be responsible for preparing the licensee's SOAs, responding to the auditor's requests for information, and reviewing the conclusions set forth in the auditor's report, and that it is difficult to predict how much time or effort this may require.

The Third Proposed Rule balances these interests by allowing the licensee to suspend its participation in the audit for up to sixty days before the semi-annual deadlines for filing an SOA (regardless of whether the licensee is subject to an initial audit or an expanded audit, and regardless of whether the auditor has issued the initial draft of his or her report). However, there are two exceptions to this rule. If the participating copyright owners provide the licensee with a list of prospective auditors, then, as discussed in section III.A, the licensee will be required to select one of those individuals within five business days thereafter, even if the licensee has suspended its participation in the audit. Likewise, the licensee will be required to provide the participating copyright owners with the list of broadcast signals discussed in section III.D, and a representative of the licensee will be required to participate in the initial consultation discussed in section III.B. These pre-examination activities should not impose an undue burden on the licensee. Moreover, under the proposed schedule for conducting an initial audit involving a cable operator, these preliminary activities may need to take place at the same time that the licensee is preparing its statement of account for the second accounting period of the previous year. 23 If the licensee could postpone these initial activities until after the filing of its SOA, it could prevent the auditor from completing his or her review in a timely manner.

While the Third Proposed rule allows the licensee to suspend its participation in the audit, it does not prevent the auditor from continuing to work on the audit during the suspension. For example, the auditor could review information he or she has received from the licensee and formulate requests for additional information, but the licensee would not be required to respond to those follow-up requests until the suspension ended. Since the SOA deadlines are known in advance, the parties are strongly encouraged to discuss these issues during the initial consultation that is contemplated under the Third Proposed Rule. If the licensee intends to suspend its obligations under this provision, the auditor should schedule the delivery of critical information that might otherwise threaten the audit deadline well in advance of the suspension period.

The Second Proposed Rule provided that the auditor should prepare a written report setting forth his or her initial conclusions and should deliver the initial findings to the licensee (but not the copyright owners). It provided that the auditor should then consult with the licensee for a period of thirty days, and if the auditor agreed that there were errors in the report, the auditor should correct those errors before delivering a final report to the participating copyright owners. If the auditor and the licensee were unable to resolve their differences, then under the Second Proposed Rule, the licensee could prepare a written rebuttal within fourteen days after the thirty-day consultation period, which would be attached as an exhibit to the final report.

In the Roundtable Notice, the Office asked the parties to consider whether the auditor and the licensee should be given more flexibility with respect to the consultation phase of the audit. In particular, the Office wanted to know whether the licensee should be given an opportunity to review the auditor's initial findings before the consultation period begins, whether a thirty-day consultation period would be a sufficient amount of time to resolve potential differences between the auditor and the licensee, whether the auditor should provide the licensee with a revised version of the report at the end of the consultation period ( i.e., before the licensee submits its written rebuttal), whether the licensee should be given more than fourteen days to prepare a rebuttal, or whether the auditor should be given more than five days to prepare the final report after receiving the licensee's rebuttal. See 79 FR at 31994.

At the roundtable, the NCTA stated that thirty days is a sufficient amount of time for the consultation period and that licensees do not need to receive an initial draft of the auditor's report in advance of the consultation period or an updated draft at the conclusion of that period. In the NCTA's view, adding any additional time to the calendar would merely delay the audit process. The NCTA stated that the written rebuttal will focus solely on the issues that the auditor and the licensee were unable to resolve during the consultation period (if any), and that fourteen days is a sufficient amount of time to prepare that response. If the licensee cannot convince the auditor to change his or her conclusions during the consultation period, then, in the NCTA's view, it is unlikely that the auditor will be persuaded by anything that the licensee says in its rebuttal and unlikely that the auditor will make any changes or revisions to the final version of that report before it is delivered to the participating copyright owners. The NCTA suggested that the rebuttal essentially would be a “minority report” and the act of attaching the rebuttal to the final report would be a ministerial task without any immediate practical significance. Thus, the auditor should not need any additional time to review the rebuttal or prepare the final report for the participating copyright owners.

In adjusting the proposed rule, the Office has largely relied upon the NCTA's understanding of how the consultation process would operate. Under the Third Proposed Rule, the auditor will deliver an initial draft of his or her report to the licensee (but, absent a suspicion of fraud, not to the participating copyright owners). The delivery of the initial draft will mark the beginning of the thirty-day consultation period. If, after consulting with the licensee, the auditor agrees that there are errors in the initial draft, the auditor is required to correct those errors. The auditor will then prepare a written report setting forth his or her ultimate conclusions, and on the last day of the consultation period will deliver the final version of that report to the licensee (but not to the participating copyright owners, again absent a suspicion of fraud).

Although the Office accepted most of the NCTA's suggestions, the Office believes it would be helpful if the auditor provides the licensee with the final version of the audit report at the end of the consultation period. This will create a clear record of any changes that the auditor made based on his or her discussions with the licensee, and if the licensee decides to prepare a written rebuttal, it will make it easier for the licensee to identify and respond to any issues that remain in dispute.

Upon receiving the final version of the report, the licensee may provide a written rebuttal within fourteen days after the conclusion of the thirty-day consultation period, but is not required to do so. Consistent with the NCTA's recommendation, the auditor will simply attach any rebuttal received from the licensee to the final version of his or her report, which together will constitute the final report. The auditor will not otherwise address the issues raised in the rebuttal; the rebuttal will serve merely to capture the ultimate areas of disagreement between the auditor and the licensee for the benefit of the participating copyright owners—since they may not be privy to the issues discussed during the consultation period—and to memorialize the licensee's position in the event that the licensee and the participating copyright owners revisit these issues in follow-on negotiations or litigation.

Within five business days after the written rebuttal has been delivered to the auditor or, if no rebuttal is provided, after the fourteen-day deadline for providing a rebuttal has passed, the auditor will deliver a complete copy of the final report to the participating copyright owners, with a copy to the licensee. As discussed in section II, the Third Proposed Rule further provides that the final report must be delivered by November 1st of the year in which the notice of intent to audit was published in the Federal Register (except that, as noted above, this requirement would not apply in the case of an expanded audit).

As discussed in section V.A, the Second Proposed Rule provided that the auditor must deliver the initial draft of his or her report to the licensee (but not the participating copyright owners) at the beginning of the consultation period. However, the Second Proposed Rule provided that the auditor could also send the initial draft to the participating copyright owners if the auditor reasonably suspected that the licensee had committed fraud. In such a case, the Second Proposed Rule provided that the auditor could send the licensee an abridged version of the initial draft containing all of the auditor's initial findings except for the auditor's suspicion of fraud. Consistent with certain other regulatory audit provisions, 24 the Office wanted to address the possibility that if an auditor discloses his or her suspicions to a licensee, the licensee may be tempted to conceal or destroy incriminating evidence before copyright owners are able to take action. See 78 FR at 27145.

The NCTA objected to this approach. It contended (incorrectly) that there is “no precedent in the Office's other audit rules” for withholding a suspicion of fraud from the licensee. NCTA Second Reply at 3. The NCTA predicted that the auditor “likely will lack formal legal training” and contended that “the Office's rules or precedent” do not provide “any guidance as to what types of actions might be considered `fraud' in this context.” Id. at 3. Instead, the NCTA stated that the auditor should be allowed to discuss his or her suspicions with the copyright owners “while still giving licensees an opportunity to respond to those allegations prior to the issuance of a final report.” Id. at 3.

As referenced above, the fraud exception set forth in the Second Proposed Rule was based, in part, on similar regulations that the Office has adopted in the past. See 37 CFR 261.6(f), 261.7(f), 262.6(f), 262.7(f). However, the NCTA is correct that the statutory provisions governing cable audits expressly state that the Register “shall issue regulations” that “shall . . . require” the “auditor to review [his or her] conclusions” with the licensee and “shall . . . provide an opportunity to remedy any disputed facts or conclusions.” 17 U.S.C. 111(d)(6)(C)(i), (iii).

After weighing the NCTA's concerns, the Office has concluded that the licensee should be given an opportunity to review and respond to the auditor's entire report, even in cases where the auditor suspects fraud. As noted in Section IX, licensees will be required to retain any records needed to confirm the correctness of the calculations and royalty payments reported in their SOAs for three and a half years after the last day of the year in which the SOA is filed with the Office, and if an SOA is audited under this procedure, to continue to maintain those records until three years after the auditor delivers his or her final report to the copyright owners. The risk that the licensee may conceal or destroy incriminating evidence should be minimized if the auditor preserves copies of that evidence before disclosing his or her suspicions to the licensee. If the auditor has a reasonable basis for suspecting fraud during the initial phase of the audit ( i.e., before the auditor prepares the initial draft of his or her report and before the consultation period begins), then, as discussed in section III.C, the auditor may communicate privately with the participating copyright owners, provided that the auditor reasonably believes that involving the licensee in the communication could prejudice further investigation of the fraud. As an additional protective measure, the Third Proposed Rule provides that the auditor may share the initial draft of his or her report with both the participating copyright owners and the licensee during the consultation period in cases where the auditor suspects fraud.

Congress directed the Office to “establish a mechanism for the [licensee] to remedy any errors identified in the auditor's report and to cure any underpayment identified.” 17 U.S.C. 111(d)(6)C)(ii). If the information in an SOA is incorrect or incomplete, if the calculation of the royalty fee is incorrect, or if the licensee has failed to deposit the correct amount of royalties, the Second Proposed Rule provided that the licensee may correct those errors by following the procedures set forth in 37 CFR 201.11(h)(1) or 201.17(m)(3). See 78 FR at 27145.

The Third Proposed Rule modifies this aspect of the audit procedure in three respects. First, it clarifies that the licensee may cure an underpayment by depositing additional royalties with the Office, but may not deliver those payments directly to the participating copyright owners or their representatives. Second, it provides that the licensee may cure deficiencies identified in the auditor's report only if the licensee represents that it has reimbursed the participating copyright owners for its share of the audit costs if reimbursement is owed. Third, it allows the licensee to request a refund from the Office if the auditor discovers an overpayment on any of the SOAs at issue in the audit.

The statute clearly indicates that copyright owners should be given a single opportunity to audit a particular SOA, and that the auditor should review that statement on behalf of all copyright owners, regardless of whether they participate in the audit or not. See 77 FR at 35647. The statute also indicates that any copyright owner should be allowed to claim an appropriate share of additional royalty fees that result from the audit, even if that copyright owner did not join the audit or pay for the auditor's services. Id. at 35649.

Consistent with these principles, the Third Proposed Rule provides that a licensee may cure the underpayments identified in the auditor's final report only by depositing the additional royalties due under the statutory license with the Office. Paying additional royalties directly to the participating copyright owners pursuant to a negotiated settlement agreement would not satisfy this requirement, because that would unfairly prevent non-participating copyright owners from claiming an appropriate share of those payments. In the interests of transparency, the Third Proposed Rule provides that a representative of the participating copyright owners is to promptly notify the Office if the auditor discovered an underpayment or overpayment on any of the statements that were reviewed during the audit (although the copyright owners do not need to disclose the specific amounts). This will create a public record for the benefit of copyright owners that did not participate in the audit process, and will inform the Office that supplemental royalty payments, amended statements, and/or refund requests may be forthcoming from the licensee.

The Office previously determined that it has the authority to include a cost-shifting provision in the regulation, and the Second Proposed Rule expressly provided that the licensee “shall pay” for a portion of the audit costs if the auditor discovers a net aggregate underpayment that exceeds certain thresholds. See 78 FR at 27152. But as the ACA noted at the roundtable, some licensees may refuse to reimburse the participating copyright owners if they believe that the auditor's conclusions are unjustified. And as discussed in section VIII.C.2, Congress did not create a specific cause of action for licensees that fail to reimburse the copyright owners for their share of the audit costs.

The Third Proposed Rule addresses this issue by providing that a licensee may exercise its right to address deficiencies identified in an auditor's report only if the licensee confirms that it has reimbursed the participating copyright owners for any audit costs that the licensee is required to pay. In other words, the Office will not accept an amended SOA seeking to cure deficiencies discovered in an audit unless the licensee confirms in writing that it has reimbursed the participating copyright owners for its share of the audit costs or that it has no obligation to do so under the cost-shifting or cost-splitting rule.

The Second Proposed Rule provided that an amended SOA and/or additional royalty payments must be received within sixty days after the delivery of the final report to the participating copyright owners and the licensee, or within ninety days in the case of an audit involving an MSO. 25 In their Second Submission, the Joint Stakeholders stated that the licensee should reimburse the participating copyright owners for its share of the audit costs (if any) within thirty days after these deadlines. The Office agrees that the licensee should be given a precise deadline for reimbursing the participating copyright owners, but because a licensee's ability to cure its SOAs may be contingent upon paying its share of the audit costs, the Third Proposed Rule provides that the deadline for reimbursing the participating copyright owners and the deadline for filing an amended SOA and/or depositing additional royalties will be the same.

If the auditor discovers an overpayment on a particular SOA, the statutory licensee may request a refund by following the procedures set forth in sections 201.17(m) or 201.11(h) of the Office's existing regulations. The Second Proposed Rule provided that the refund request must be received in the Office within thirty days after the auditor delivers his or her final report to the licensee. The NCTA suggested that a licensee should be given sixty days to submit a refund request. NCTA Second Reply at 5. The Office has accepted the NCTA's suggestion, because it would be consistent with the sixty-day deadline for submitting supplementary royalty payments under the Third Proposed Rule, and consistent with the sixty-day deadline for requesting refunds under section 201.17(m) of the Office's existing regulations. In addition, the Third Proposed Rule corrects certain numbering errors in section 201.17(m) that were inadvertently created when the Office added a new paragraph to that section of the regulations. See 78 FR 1755 (Jan. 11, 2013).

Under the Second Proposed Rule, copyright owners would be allowed to conduct an initial audit of no more than two SOAs in a proceeding involving a satellite carrier or a single cable system. In a proceeding involving an MSO, copyright owners would be allowed to audit no more than ten percent of the Form 2 and Form 3 systems owned by that MSO. See 78 FR at 27143. To protect the interests of copyright owners, the Second Proposed Rule also created an exception to these rules. If the auditor discovered a net aggregate underpayment in his or her review of a satellite carrier or a single cable system, the copyright owners would be allowed to audit previous SOAs filed by that cable system or satellite carrier, so long as they filed a notice of intent to audit those statements in a timely manner. Likewise, if the auditor discovered a net aggregate underpayment in his or her review of an MSO, the copyright owners would be allowed to audit previous statements filed by each of the systems subject to the initial audit, and in the following calendar year they would also be allowed to audit a larger sample of the cable systems owned by that MSO. See id. The Third Proposed Rule modifies this portion of the audit procedure in several respects.

As discussed in section II, the Third Proposed Rule provides that the copyright owners must file a notice of intent to conduct an expanded audit, the notice must specify the statements that will be included in the expanded audit, and the notice must be received within three years after the last day of the year in which those statements were filed. It further provides that the expanded audit should be conducted using the same procedures that applied to the initial audit, although there are two exceptions to this rule. First, a notice of intent to conduct an expanded audit may be filed during any month of the year, as long as the copyright owners comply with the time limits set forth in section 111(d)(6)(E) of the Act; and second, the auditor does not need to deliver his or her final report by November 1st of the year in which the notice was published in the Federal Register .

Under the Third Proposed Rule, an expanded audit of a single cable system, multiple cable systems owned by the same MSO, or a satellite carrier may be conducted concurrently with another audit involving that same licensee. Since the initial audit may not be completed until late in the year and since the expanded audit may involve multiple SOAs and/or multiple cable systems, it seems unlikely—if not impossible—that the auditor would be able to complete the initial audit and the expanded audit within the same calendar year.

If the auditor discovers an underpayment of five percent or more during an initial audit, the Office believes that the copyright owners should be allowed to review previous statements filed by that licensee and to promptly initiate a new audit of the licensee's more recent statements. Likewise, if the auditor discovers an underpayment in the case of an MSO, then, as contemplated by the Second Proposed Rule, the copyright owners should be allowed to audit a larger sample of the MSO's cable systems in the following calendar year, even if an expanded audit remains pending. Copyright owners are entitled to know if the same problems appear in the licensee's earlier or later filings, or more broadly throughout an MSO's systems. If the expanded audit displaced the copyright owners' ability to initiate a new audit, it could impede the copyright owners' ability to audit the licensee's more recent filings, particularly because an expanded audit may be noticed at any time and has no deadline for completion. It would seem unwarranted to constrain the copyright owners' ongoing audit right vis-à-vis a particular licensee where that licensee has been found to have underpaid royalty fees in the past.

The Third Proposed Rule provides that the expanded audit may be conducted by the same auditor that conducted the initial audit of that licensee. The NCTA contended that the Second Proposed Rule created a procedure for selecting an auditor for an expanded audit involving a satellite carrier or a single cable system, but “[t]here is no provision made for the selection of an auditor for an expanded MSO audit.” NCTA Second Reply at 7. That is incorrect. The Second Proposed Rule provided that if the auditor discovered a net aggregate underpayment on the statements at issue in an audit involving an MSO, “[t]he number of Statements of Account of a particular cable system subject to audit in a calendar year may be expanded in accordance with paragraph (k)(3) of this section” (emphasis added). 78 FR at 27153. In other words, the procedure for selecting an auditor for an expanded audit involving a cable operator that owns multiple cable systems would be the same as the procedure for an expanded audit involving a cable operator that owns a single cable system.

To eliminate further confusion, the Third Proposed Rule clarifies that if the auditor discovers a net aggregate underpayment on the statements at issue in an initial audit involving an MSO, the cable systems that were included within that initial audit may be subject to an expanded audit. It also clarifies that the MSO may be subject to an initial audit involving a larger sample of its cable systems in the following calendar year, provided that the copyright owners file a notice of intent to audit those systems in a timely manner ( i.e., in the month of December of the year in which the auditor delivered the final report that triggered the option of auditing a larger sample).

The NCTA also contended that copyright owners should not be allowed to unilaterally use the same auditor in two consecutive expanded audits involving an MSO. 26 NCTA Second Reply at 8. Instead, the MSO should select the auditor “from a slate of names supplied by the [copyright] owners that could include the same auditor that conducted the initial audit.” Id. at 7.

As noted in section III.A, the Second Proposed Rule provided that the licensee could select the auditor from a list of names provided by the copyright owners. Because an expanded audit is simply an extension of the initial audit, it is appropriate and efficient for the same individual to conduct the audit from start to finish. Under the Second Proposed Rule, the same auditor who conducted the initial audit could conduct the expanded audit, provided that the copyright owners supply the licensee with information sufficient to show that there has been no material change in the auditor's independence and qualifications. If the auditor is no longer qualified or independent, or if the copyright owners prefer to use a different individual, a new auditor could be selected using the procedure discussed in section III.A.

In its comments, the NCTA recognized that there are benefits to using the same auditor to conduct an initial audit and an expanded audit. The auditor will be familiar with the licensee's accounting systems and methodologies, which should improve the efficiency of the expanded audit and reduce the potential burden on the licensee. The NCTA contended that these benefits should be balanced against the “benefits of giving the [MSO] a new opportunity to have a say in the selection of the auditor.” Id. at 8. However, the NCTA failed to explain what these purported benefits might be, why they should be bestowed upon MSOs (but denied to satellite carriers or cable operators that own a single cable system), or why they outweigh the benefits of using the same individual to conduct the initial audit and the expanded audit.

Building off a proposal made by the Joint Stakeholders, the Second Proposed Rule provided that the participating copyright owners would be required to pay the auditor for his or her services if the auditor discovered an overpayment on the SOAs at issue in the audit, or if the auditor discovered a net aggregate underpayment of ten percent or less of the amount reported on those statements. If the auditor discovered a net aggregate underpayment of more than ten percent on the SOAs at issue in the audit, the statutory licensee would be required to reimburse the copyright owners for those costs.

In addition, the Second Proposed Rule included a provision for splitting these fees in certain circumstances. If the auditor concluded in his or her final report that there was a net aggregate underpayment of more than ten percent, the cost of the audit would be split evenly between the copyright owners and the licensee if the licensee prepared a written rebuttal explaining the basis for its good faith belief that the net aggregate underpayment was between five percent and ten percent of the amount reported on the SOAs. 27 See 78 FR at 27152.

In all cases, there would be an overall limit on the costs that the licensee would be expected to pay. Specifically, the licensee would not be required to pay for any costs that exceeded the amount of the net aggregate underpayment that the auditor identified in his or her final report. See 78 FR at 27148.

In comments received in response to the Second Proposed Rule, the ACA asked the Office to go a step further by making it clear that if the auditor discovers a net aggregate underpayment of ten percent or more the licensee should not have to pay for any portion of the audit costs if the licensee prepares a written rebuttal stating that the underpayment was five percent or less and explaining the basis for its belief. ACA Second Comment at 4.

In the Roundtable Notice, the Office questioned whether the costs should be split between the parties based merely on the views expressed in the licensee's rebuttal. As the NCTA indicated during the roundtable, it is unlikely that the auditor will change his or her mind based on anything said in the rebuttal. If that is the case, it is unclear why a licensee's objections should gain renewed significance for the purpose of allocating costs, when those objections presumably were considered and rejected by the auditor during the consultation period. See 79 FR at 31995.

Following the roundtable, the Joint Stakeholders provided a substitute recommendation in their Second Submission. Under that proposal, the copyright owners would bear the costs of the audit if the auditor concluded in the final report that there was an overpayment or a net aggregate underpayment of five percent or less, and that the licensee would bear the costs if the auditor concluded that there was a net aggregate underpayment of ten percent or more. In cases falling in between, where the auditor found a net aggregate payment of more than five percent but less than ten percent, the audit costs would be split evenly between the licensee on the one hand and the participating copyright owners on the other.

The Office concurs with the cost-shifting and cost-splitting proposals set forth in the Joint Stakeholders' Second Submission. The Office does not accept the ACA's proposal, which would allow a licensee to avoid paying any portion of the audit costs simply by offering its views as to why an underpayment was five percent or less (even if the auditor determined that the underpayment was ten percent or more). ACA Second Comment at 4. As the Office noted in its Roundtable Notice, it is unclear why the licensee's rebuttal should be given greater weight than the auditor's conclusions, particularly given the NCTA's observation that the auditor would not be expected to make any changes to the final report based on the views expressed in the rebuttal.

The ACA contended that the proposed rule “may impose an unfair burden on small cable operators” by requiring them to pay for the cost of the audit “if the auditor finds a net aggregate underpayment of less than five percent.” Id. at 3. But as discussed above, the licensee would not be required to pay for any portion of the audit costs in this situation. The ACA does not contend that it would be unfairly burdensome for small cable operators to pay for the cost of an audit when the underpayment exceeds ten percent. Indeed, the ACA acknowledged that small cable operators will largely be protected by the provision stating that licensees will not be required to pay for any costs that exceed the amount of the underpayment that the auditor identifies in his or her final report. Id. at 2. The Office's existing regulations provide additional limitations for small cable operators that use Form SA 1-2. There is an upper limit on the gross receipts that may be reported on this form, which limits the amount of any underpayment that could be discovered during the course of an audit, which in turn limits the amount of any cost-shifting or cost-splitting that could be required. See 37 CFR 201.17(d)(2)(i). As the MPAA observed at the roundtable, it seems unlikely that copyright owners will be inclined to audit small cable operators, because even if the auditor discovers an underpayment, the cost of conducting the audit may exceed any amount that could conceivably be recovered from the licensee.

The Second Proposed Rule provided that the copyright owners should deliver an itemized statement to the licensee at the conclusion of the audit specifying the total cost of the audit procedure. See 78 FR at 27149. The Joint Stakeholders disagreed with this aspect of the Second Proposed Rule. In both their first and second proposals, they suggested that the auditor should be required to provide the licensee with itemized invoices during the course of the audit and that these invoices should be delivered by the fifteenth of each month. 78 FR at 27149; JS Second Submission at 2. The NCTA explained that this would minimize surprises for the licensee, and noted that monthly statements are a common feature of audits involving private sector program carriage agreements. NCTA Second Reply at 6-7.

After further analysis, the Office has included the Joint Stakeholders' suggestion in the Third Proposed Rule. The House Committee stated that the Office “may consider . . . audit provisions in private agreements to which cable operators or content owners may be parties.” H.R. Rep. No. 111-319 at 9 (2009). A monthly reporting requirement would promote transparency by requiring the auditor to disclose the ongoing cost of the audit procedure. And this would provide copyright owners and licensees with advance notice in the event that the auditor discovers an underpayment that triggers the cost-shifting or cost-splitting mechanisms discussed in section VIII.A above.

Under the Second Proposed Rule, if the auditor discovered a net aggregate underpayment that triggered the licensee's obligation to pay all or part of the cost of the audit, the licensee would be required to make such a reimbursement within a specified period of time. If the licensee disagreed with the auditor's conclusions, however, the rule provided the licensee with a mechanism for recouping those costs from the participating copyright owners, so long as a court issued a final judgment finding that the net aggregate underpayment was ten percent or less. See 78 FR at 27149. In proposing that provision, the Office assumed that the licensee might seek a declaratory judgment of non-infringement, and as part of that proceeding, obtain a judgment from a court evaluating the correctness of the conclusions set forth in the audit report. Id.

In response to the Second Proposed Rule, AT&T objected to any provision that would affirmatively obligate licensees to pay the costs of the audit. 28 It stated that “the enforcement mechanism built into the statutory license” allows copyright owners to seek “recourse through the courts if they believe that the licensee has failed to fulfill its obligations under the statute and the rules.” AT&T Second Comment at 2. AT&T contended that the Second Proposed Rule stands this “fundamental premise” on its head, because it “shifts the enforcement obligation from the copyright owners to the licensee” to seek reimbursement of costs. Id. at 2. It also contended that this would be “an unwieldy and potentially costly process,” because “the licensee would be forced to seek reimbursement from numerous sources” if the copyright owners divide the payment among themselves. Id. at 2.

The ACA expressed the same view in its reply comments. It contended that it would be “burdensome and unfair” to expect small cable operators to pay for the audit and then take legal action to recover those costs from the copyright owners. The ACA explained that small cable operators have fewer financial and legal resources than the copyright owners, and stated that the cost of bringing a declaratory judgment action may exceed the amount that the licensee could expect to recover. ACA Second Reply at 2-4.

The Copyright Owners noted that AT&T made a similar argument during an earlier phase of this rulemaking, 29 and that AT&T's latest argument is simply a variation on the same theme. CO Second Reply at 2-3. They also stated that the licensee “will have no trouble” identifying the relevant copyright owners if there is a dispute between the parties. Id. at 5. They noted that the copyright owners will be required to identify themselves at the beginning of the audit by filing a notice with the Office. In the event that the court rules in the licensee's favor, they stated that the copyright owners will “likely” be subject to an order directing them to reimburse the licensee. Id. at 5.

The Office expressed several concerns about this provision in the Roundtable Notice and during the roundtable discussion. See 79 FR at 31995. In particular, the Office questioned whether the parties expect to engage in the sort of litigation contemplated by the Second Proposed Rule, the gravamen of which would seemingly be an infringement action or a declaratory judgment action for non-infringement; whether the court would review the auditor's report to determine the exact amount of underpayment in any such litigation; and whether the issue of audit costs might be better understood as a potential element of actual damages in such an infringement suit. The Office expressed reservations about its authority to essentially dictate the issues that a federal district court would be required to address in a suit initiated after the completion of the audit. In addition, the Office questioned whether the rule should affirmatively require the licensee to pay for the audit costs.

In their Second Submission, the Joint Stakeholders reiterated their belief that the proposed rule should provide a method for licensees to recover the costs of the audit from the participating copyright owners in a judicial proceeding. Specifically, they urged the Office to include the following provision in the proposed rule:

As AT&T and the ACA correctly observed, under the Second Proposed Rule, the licensee would have had an absolute obligation to reimburse the copyright owners for the cost of the audit, even if the licensee disagreed with the auditors' conclusions and declined to submit any additional royalty payments to the Office. AT&T Second Comment at 2; ACA Second Reply at 2-3. The Third Proposed Rule modifies the Second Proposed Rule so that licensees are required to pay the costs of the audit if they wish to cure a deficiency, as explained in section VI.B above. This revised approach has several advantages. Although the Second Proposed Rule directed the licensee to pay for the audit costs, it provided no obvious mechanism for the Office or any other party to enforce that mandate. Tying the payment of audit costs to the cure provisions, by contrast, will give the licensee an incentive to make these payments. If the licensee disagrees with the auditor's conclusion regarding the royalty underpayment, the licensee may choose not to deposit additional royalties with the Office or pay the attendant audit costs. In the case where a licensee opts not to cure, the licensee will run the risk of being subject to an infringement action, or in the alternative, could bring its own action against one or more of the copyright owners seeking a declaratory judgment of non-infringement.

The Office believes it is unnecessary for the rule to require a “true-up” of the auditor's costs after the close of any follow-on litigation, as the Joint Commenters urged in their Second Submission. To begin with, it is unclear what the term “true-up” is intended to mean or how the Joint Stakeholders propose to enforce this regulatory obligation. Moreover, the Joint Stakeholders' proposal raises issues that can and should be resolved by a court in the exercise of its remedial discretion as part of the contemplated judicial proceeding. In this regard, the Office notes that the audit costs might be characterized as an element of actual damages incurred by the copyright owners, or as an element of the relief to be awarded in a declaratory judgment action. See 28 U.S.C. 2202 (authorizing courts to grant “[f]urther necessary or proper relief based on a declaratory judgment or decree . . . against any adverse party whose rights have been determined by such judgment”).

The Second Proposed Rule provided that a statutory licensee should retain any records needed to confirm the correctness of the calculations and royalty payments reported in an SOA or amended SOA for three and a half years after the last day of the year that the SOA or amendment was filed with the Office, or in the event that an SOA or amended SOA was the subject of an audit, for three years after the auditor delivered his or her final report to the parties. As the Office explained in its earlier Federal Register document dated June 14, 2012, it is important to ensure that licensees “retain their records until the deadline for auditing [an SOA] has passed.” 77 FR at 35647. The Office is also concerned that copyright owners have the benefit of the three-year statute of limitations provided in the Act when an audit takes place. See 17 U.S.C. 507(b).

The NCTA contended that the Second Proposed Rule contemplates “a very lengthy, and burdensome, record retention period” following the completion of the audit and that it “imposes a significant burden” on small cable operators as well as MSOs that file multiple SOAs in each accounting period. NCTA Second Reply at 4. The NCTA instead suggested that a licensee be required to retain the required records for no more than one year after the auditor issues his or her final report.

The Office has considered the NCTA's concerns but has concluded that a licensee should be required to retain relevant records during the pendency of an audit and for three years after the auditor issues his or her final report, as provided in the Third Proposed Rule. This will ensure that the licensee does not discard its records before the three-year statute of limitations may expire. Moreover, the burden of retaining such records should be minimal. Many licensees collect, report, and maintain their records in electronic form, which should limit the cost of complying with the proposed rule. The Third Proposed Rule limits the number of SOAs that may be included in each audit, which in turn limits the number of records that must be retained when the auditor issues his or her final report. Furthermore, the licensee is only required to keep records that are “ necessary to confirm the correctness of the calculations and royalty payments reported” in those SOAs.

In consideration of the foregoing, the U.S. Copyright Office proposes to amend part 201 of 37 CFR, Chapter II, as follows:

In the Final Rules section of this Federal Register , EPA is approving the State's SIP submittal as a direct final rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no adverse comments. A detailed rationale for the approval is set forth in the direct final rule. If no adverse comments are received in response to this rule, no further activity is contemplated. If EPA receives adverse comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed rule. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule, and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment. For additional information, see the direct final rule which is located in the Rules section of this Federal Register .

Executive Summary

The Office of Federal Contract Compliance Programs (OFCCP) is a civil rights and worker protection agency. OFCCP enforces an Executive Order and two laws that prohibit employment discrimination and require affirmative action by companies doing business with the Federal Government. 1 Specifically, Federal contractors must not discriminate because of race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or status as a protected veteran. 2 They must also engage in affirmative action and provide equal employment opportunity without regard to race, color, religion, sex, national origin, disability, or status as a protected veteran.

The Vietnam Era Veterans' Readjustment Assistance Act of 1974 (VEVRAA), as amended, prohibits employment discrimination against certain protected veterans. Section 503 of the Rehabilitation Act of 1973 (section 503), as amended, prohibits employment discrimination against individuals with disabilities. Executive Order 11246, as amended, prohibits employment discrimination because of race, color, religion, sex, sexual orientation, gender identity, or national origin. 3 Compensation discrimination is one form of discrimination prohibited by the Executive Order.

On April 8, 2014, President Obama issued Executive Order 13665 entitled “Non-Retaliation for Disclosure of Compensation Information.” This Executive Order amends section 202 of Executive Order 11246 to prohibit Federal contractors from discharging or discriminating in any other way against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. This NPRM proposes new regulations implementing Executive Order 13665, which would apply to covered contracts and federally assisted construction contracts. The provisions of this proposed rule and the Executive Order apply to covered contracts entered into or modified on or after the effective date of the Final Rule. Modified contracts are contracts with any alteration in the terms and conditions of a contract, including supplemental agreements, amendments and extensions. See 41 CFR 60-1.3 (definition of “Government contractor”).

Despite the existence of laws protecting workers from gender-based compensation discrimination for more than five decades, a pay gap between men and women persists today. A comparison of average annual wage data reveals that women make 77 cents for every dollar that men make. 4 Recent data on average weekly wages from the Bureau of Labor Statistics (BLS) show a similar gap, with women making 82 cents for every dollar that men make. 5 The gap in wages is even greater for some women of color. BLS data show that African American women earn 68 cents and Latina women earn 59 cents for every dollar earned by a non-Hispanic white man. 6 Census data show similar disparities, with African American women making 64 cents, Latina women making 56 cents, and Asian women making 86 cents per dollar earned by a non-Hispanic white man. 7 While research has found that many factors contribute to the wage gap, such as occupational preferences, pay discrimination remains a significant problem, especially for the working poor and the middle class.

For example, according to a 2011 report, a typical 25 year-old woman working full-time, year-round will have already earned $5,000 less than a typical 25 year-old man. 8 If this woman faced the same wage gaps at each age that existed in 2011, then by age 35, she would have earned $33,600 less than a typical 35 year-old man. 9 Moreover, by age 65, this earnings gap would have ballooned to $389,300. 10 At the current rate of progress, researchers estimate it will take until 2057 to close the gender pay gap. 11

Research also reveals a wage gap amongst various racial groups. At the end of 2013, median weekly earnings for African American men working at full-time jobs were $646 per week, only 72.1 percent of the median for white men ($896). 12 The median weekly earnings for African American women was $621 per week, or 69.3% of the median for white men. 13 Further, a study based on the hiring pattern of male and female workers in the state of New Jersey found that African Americans, when re-entering the job market after periods of unemployment, are offered lower wages when compared to their white counterparts. 14 The study showed that the pay gap between these groups is typically 30 percent. 15 Controlling for various factors such as skills and previous earnings, the study found that up to a third of this pay gap could be attributed to racial discrimination in the labor market. 16 Similarly, a study based on National Longitudinal Survey data, found that the pay gap between African Americans and whites continues to exist, even after controlling for abilities and schooling choices. 17

Many of the studies analyzing pay disparities for the Hispanic populations focus on differences in education and age as compared to white workers. 18 However, even after analyzing the effect of these factors, these studies showed that these factors do not account for the entire pay gap for Hispanics. 19

Research conducted by The Institute for Women's Policy Research (IWPR) finds that the poverty rate for working women would be cut in half if women were paid the same as men who were similar in terms of their education and hours of work. The poverty rate for all working women would be cut in half, falling to 3.9 percent from 8.1 percent. 20 The high poverty rate for working single mothers would fall by nearly half, from 28.7 percent to 15 percent. 21 For the 14.3 million single women living on their own, equal pay would mean a significant drop in poverty from 11.0 percent to 4.6 percent. 22 Nearly 60 percent (59.3 percent) of women would earn more if working women were paid the same as men of the same age with similar education and hours of work. 23 This would go a long way toward closing the pay gap and reducing the poverty rate for working women. These statistics are intended to provide general information about the potential impacts of eliminating pay differentials among men and women, including pay differentials that may not be attributed to discrimination. In addition, these statistics include all employers and all employees in the U.S., whereas this proposed rule would apply to federal contractors and their employees. Therefore, the potential impact of this rule in reducing the pay gap would be much smaller than the impact of eliminating the pay gap among all working men and women.

Potentially nondiscriminatory factors can explain some of the gender wage differences, but accounting for them does not eliminate the pay gap. 24 Additionally, women earn less even within occupations. In a recent study of newly trained doctors, after considering the effects of specialty, practice setting, work hours and other factors, the gender pay gap was nearly $17,000 in 2008. 25 Catalyst, a nonprofit research organization, reviewed 2011 government data showing a gender pay gap for women lawyers, 26 and that data confirms that the gap exists for a range of professional and technical occupations. 27 In fact, according to a study by IWPR that used information from BLS, women frequently earn less than men within the same occupations. 28 Despite differences in the types of jobs women and men typically perform, women earn less than men in male dominated occupations such as managers, software developers and CEO's and even in those jobs commonly filled by women such as teachers, nurses and receptionists.

Among the possible contributing factors to the enduring pay gap is the prevalence of workplace prohibitions against discussing compensation. Whether communicated through a written employment policy or through more informal means, strictures against revealing compensation can conceal compensation disparities among employees. This makes it impossible for an employee to know he or she is being underpaid compared to his or her peers. If compensation remains hidden, employees who are being unfairly paid less because of their gender or race will remain unaware of the problem and will be unable to exercise their rights by filing a complaint pursuant to the Executive Order.

Although very little research has been conducted about pay secrecy policies and their effects, a recent survey by IWPR provides some insight into the prevalence of workplace rules against discussing compensation. The survey found that 51 percent of female respondents and 47 percent of male respondents reported that the discussion of wage and salary information is either discouraged or prohibited and/or could lead to punishment. 29 Further, the study found that these institutional barriers to discussing compensation were much more common among private employers than among public employers. 30 Sixty-two percent (62 percent) of women and 60 percent of men working for private employers reported that discussion of wage and salary information is discouraged or prohibited, compared to only 18 percent of women and 11 percent of men working in the public sector. 31

OFCCP enforces the prohibition against compensation discrimination by investigating class complaints of compensation discrimination and conducting compliance evaluations under Executive Order 11246. 32 If a contractor's employees are unaware of how their compensation compares to that of employees with similar jobs because the risk of punitive action inhibits discussions about compensation, employees will not have the information they need to assert their rights under Executive Order 11246. 33 An unwarranted difference in compensation or other forms of compensation that is based on a protected status like sex or race will likely continue and potentially grow more severe over time. Simply allowing employees to discuss compensation may help bring illegal compensation practices to light and allow employees to obtain appropriate legal redress.

Policies prohibiting employee conversations about compensation can also serve as a significant barrier to Federal enforcement of the laws against compensation discrimination. OFCCP primarily enforces prohibitions in Executive Order 11246 against pay and other forms of compensation discrimination by conducting neutrally scheduled compliance evaluations of Federal contractors. 34 While OFCCP typically develops statistical analyses to establish systemic compensation discrimination, interviewing managers, human resources professionals, and employees potentially impacted by discriminatory compensation is also an invaluable way for the agency to determine whether compensation discrimination in violation of Executive Order 11246 has occurred and to support its statistical findings. Therefore, the accuracy of OFCCP's investigative findings depends in part on the willingness of a contractor's employees to speak openly with OFCCP investigators about a contractor's compensation practices. If a contractor has a policy or practice of punishing employees for discussing their pay, the employees may be fearful and less forthcoming during interviews with OFCCP staff. Prohibiting discrimination against workers who discuss, inquire about or disclose compensation will help dispel an atmosphere of secrecy around the topic of compensation and promote the agency's ability to uncover illegal compensation discrimination.

The experience of Lilly Ledbetter demonstrates how pay secrecy enables illegal compensation discrimination. For Lilly Ledbetter, her employer's insistence on pay secrecy likely cost her the ability to seek justice for the compensation discrimination she suffered throughout her career. Lilly Ledbetter was employed at the Gadsden, Alabama plant of Goodyear Tire and Rubber Company. While there, she filed a charge with the EEOC alleging that she was paid a discriminatorily low salary as an area manager because of her sex in violation of Title VII of the Civil Rights Act of 1964. 35 Ledbetter only discovered how much her male co‐workers were earning when she found an anonymous note in her mailbox disclosing her pay and the pay of three males who were doing the same job. In an interview, she said that her employer told her, “You do not discuss wages with anyone in this factory.”  36 The Supreme Court, in 2007, issued its ruling in Ledbetter v. Goodyear Tire & Rubber Co. holding that Ledbetter's claim was untimely. 37

Pay secrecy policies interfere with the Federal Government's interest in efficiency in procurement. Economy and efficiency in federal procurement require that contractors compensate employees under merit-based practices, without any barriers to success. This rule would eliminate the barrier of pay secrecy policies and ensure that Federal contractor employees are compensated based on merit.

Pay secrecy policies may decrease worker productivity. Workers, due to a lack of compensation information, may experience a reduction in performance motivation and are likely to perceive their employer as unfair or untrustworthy. Both reduce work productivity. 38 For example, one study has shown that workers without access to compensation information are less satisfied and less productive. 39 The precise reasons for this drop in productivity have not been investigated; however, a number of theories can be drawn from the empirical evidence gathered in this field. Because of pay secrecy policies, some workers do not know whether their own wages are reflective of job performance. This information gap makes it more difficult for workers to make informed choices about their own compensation and creates unnecessary barriers to enforcing laws against compensation discrimination. Information asymmetries provide an advantage and market power to the party with more information. This takes a unique form in labor markets where those involved in the transaction are people, who unlike machines, are likely to be affected by the information in terms of motivation and effort. When workers have access to more information about colleagues' compensation, salaries may be likely to be more closely linked to productivity on the job and compensation may be much less likely to be influenced by factors unrelated to job performance such as sex and race. As a result, workers with the ability to inquire about, discuss, and disclose compensation information may make more informed decisions about their careers. These workers may become aware of their current value to the organization, but also of their potential value, based on information they receive about the salaries of longer tenured employees or employees in higher wage positions. In companies with pay secrecy policies, negative influences on productivity may stem from workers overestimating the lower limits of pay for others in similar positions leading to an inaccurate compression of the pay range, and causing a perception that increased work will not result in a corresponding reward. 40 Workers with knowledge of compensation information are given accurate aspirational goals because they are aware of the salaries of the best compensated employees, and can make rational decisions about the cost of increased effort at work in relation to the benefit of increased compensation resulting from success in the job. 41

Worker distrust of corporate management is another potential cause of the lag in productivity for workers subject to pay secrecy policies. The restrictions on sharing compensation information may create a sense that the company has something to hide with respect to compensating employees. Younger employees value openness in general, and are more suspicious of companies instituting pay secrecy rules. 42 Workers who believe that they have been discriminated against may be empowered by the knowledge of their compensation relative to similarly situated employees. These workers may seek assistance from Federal civil rights enforcement agencies to rectify the discriminatory treatment, benefitting themselves and future employees. Further, feelings of institutional unfairness may have an additional negative impact on workers' productivity. 43

Federal contractors, as a result of Executive Order 13665 and the proposed implementing regulations, may also see a decrease in employee turnover and a related decrease in their training and onboarding cost. Some employees with knowledge of the benefits of increased production and advancement through the corporate hierarchy will work harder to achieve goals and secure advancement. The contractor benefits directly from these goal-oriented employees through better quality and more efficient work product. When these employees receive meritorious awards for their efforts, they may be more satisfied and more likely to remain with the company. Better retention of productive employees leads to less time lost to training new workers. 44 Less employee turnover may also allow Federal contractors to hold onto their highest performing employees and continue to benefit from the quality of their work product, job experience, and organizational knowledge.

Under the NPRM proposals, contractors could also be less burdened by investigation of baseless claims of compensation discrimination. As shown above, workers with knowledge of compensation relative to other employees can make more accurate determinations about the presence or absence of discriminatory practices. 45 When workers' suspicions of discriminatory practices are discredited by information about other employees' compensation, the company avoids the costs and time associated with defending against discrimination lawsuits filed by employees.

Transparency about compensation allows companies and their employees to identify and resolve unwarranted disparities in compensation prior to the employee filing a formal complaint or pursuing litigation. This additional openness about compensation could decrease discrimination complaints and investigations, saving both the contractor and the government time and money. Moreover, the employees may receive a faster remedy through internal resolution than would be possible through a complaint process or subsequent litigation.

The preceding paragraphs present several reasons why the proposed rule could yield productivity benefits or cost savings for covered federal contractors. However, OFCCP notes that, in addition to these benefits, and in order to achieve its goal of ensuring employees receive fair wages, this NPRM is expected to result in increased wage payments to employees. This may be the result of employees using the information that they receive about the compensation paid to others to pursue increased wage payments. Employers may either voluntarily increase wages or be required to do so through actions taken by employees. These higher wage payments may, in some instances, result in net costs to covered contractors.

To help ensure that fear of discrimination does not inhibit the employees of Federal contractors from sharing information with one another about their compensation, and to promote economy and efficiency in Federal Government procurement, this NPRM proposes new regulations. This new rule would apply to all Federal contractors with contracts entered into or modified on or after the effective date of the rules that exceed $10,000 in value. 46 The proposals would require Federal contracting agencies to add a specific nondiscrimination provision regarding compensation disclosure to the mandatory equal opportunity clauses. Contracting agencies may either incorporate the equal opportunity clauses by reference or expressly include it in government contracts, and modifications thereof if not included in the original contract. 47 This provision would prohibit contractors from terminating or otherwise discriminating against employees and applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. This prohibition in no way compels employees to share compensation information with others; it simply protects those who choose to do so from discrimination by their employer. The proposed amendment to the equal opportunity clauses would generally protect employees who reveal compensation information but would not protect employees who disclose compensation information that they had access to as part of their essential job functions. This exception allows contractors to take adverse action against employees who have access to compensation information pursuant to their work duties (e.g., human resources professionals) and disclose that information to other individuals who do not otherwise have access to such information, unless the disclosure is in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the employer, or is consistent with the contractor's legal duty to furnish information.

In addition to the proposal amending the existing equal opportunity clauses in § 60-1.4 to include the nondiscrimination provision in Executive Order 13665, the NPRM also proposes to define key terms used in Executive Order 13665 that are incorporated into the proposed rule. Finally, in § 60-1.35, contractors would be provided defenses to allegations of violations of the nondiscrimination provision. The proposed defenses provisions allow contractors to pursue a defense as long as that defense is not based on a rule, policy, practice, agreement or other instrument that prohibits employees or applicants from discussing or disclosing their compensation or that of other employees consistent with the provisions in the equal opportunity clauses in § 60-1.4. Section 1.35 of the NPRM also proposes requiring the dissemination of the nondiscrimination provision in handbooks and manuals, and through electronic or physical postings. For those contractors that provide manager training or meetings, OFCCP is considering making it a requirement that they include nondiscrimination based on pay in their existing manager training programs or meetings. As for other contractors, OFCCP would encourage them to adopt this as a best practice for minimizing the likelihood of workplace discrimination. Consequently, OFCCP seeks comment on the feasibility of requiring contractors with manager training programs or meetings to include a regular review of the nondiscrimination provision. The language of the provision will be prescribed by the Director of OFCCP to ensure consistency of message and clarity of purpose. We are particularly interested in the cost associated with including a review of the provision in existing manager training programs or meetings.

Issued in 1965, and amended several times in the intervening years, Executive Order 11246 has two purposes. First, it prohibits covered Federal contractors and subcontractors from discriminating against employees and applicants because of race, color, religion, sex, sexual orientation, gender identity, or national origin. 48 Second, it requires covered Federal contractors and subcontractors to take affirmative action to ensure that equal opportunity is provided in all aspects of employment. The nondiscrimination and affirmative action obligations of Federal contractors and subcontractors cover all aspects of employment, including rates of pay and other compensation.

The requirements in Executive Order 11246 generally apply to any business or organization that (1) holds a single Federal contract, subcontract, or federally assisted construction contract in excess of $10,000; (2) has Federal contracts or subcontracts that combined total in excess of $10,000 in any 12-month period; or (3) holds Government bills of lading, serves as a depository of Federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount.

Pursuant to Executive Order 11246, receiving a Federal contract comes with a number of responsibilities. Section 202 of this Executive Order requires every contractor to agree to comply with all provisions of the Executive Order and the rules, regulations, and relevant orders of the Secretary of Labor. A contractor in violation of the Executive Order 11246 may have its contracts canceled, terminated, or suspended or may be subject to debarment after the opportunity for a hearing. 49

The current regulations at § 60-1.4 enumerate the basic equal employment obligations of Federal contractors in a clause required to be included in all Federal contracts. The current § 60-1.3 includes relevant definitions. The NPRM proposes the following changes to the regulations:

• Amending § 60-1.3, Definitions, to insert definitions for each of these words or terms: Compensation, compensation information, and essential job functions.

• Amending § 60-1.4(a), Equal opportunity clause, Government contracts, to include the requirement that Federal contractors refrain from discharging or otherwise discriminating against employees or applicants who inquire about, discuss, or disclose their compensation or the compensation of other employees or applicants, except where the disclosure was carried out by an employee who obtained the information in the course of performing his or her essential job functions. This new requirement would be inserted as § 60-1.4(a)(3).

• Amending § 60-1.4(b), Equal opportunity clause, federally assisted construction contracts, to include the requirement that construction contractors must refrain from discharging or otherwise discriminating against employees or applicants who inquire about, discuss, or disclose their compensation or the compensation of other employees or applicants, except where the disclosure was carried out by an employee who obtained the information in the course of performing his or her essential job functions. This new requirement would be inserted as § 60-1.4(b)(3).

• The NPRM would delete the outdated reference to the “Deputy Assistant Secretary” in § 60-1.4(d), Equal opportunity clause, Incorporation by reference, and replace it with the “Director of OFCCP.” The proposal also includes changing the title of § 60-1.4(d) to Inclusion of the equal opportunity clause by reference and making a conforming change in the text.

• Creating a new provision at § 60-1.35 entitled Contractor Obligations and Defenses to Violation of the Nondiscrimination Requirement for Compensation Disclosures. Proposed § 60-1.35(a) and (b), respectively, would establish a general defenses provision and an essential job functions defense provision. Both provide contractor defenses to alleged violations of the nondiscrimination obligation for employees who inquired about, disclosed or discussed compensation. Proposed § 60-1.35(c) would also require Federal contractors to incorporate the nondiscrimination provision, as prescribed by the Director of OFCCP and made available on the OFCCP Web site, into their existing employee manuals or handbooks, and disseminate the nondiscrimination provision to employees and to job applicants. The prescribed nondiscrimination provision is based on the language in section 2(b) of Executive Order 13665. This dissemination can be executed electronically or by posting the prescribed provision in conspicuous places available to employees and job applicants.

The NPRM proposes definitions for three words or terms used in Executive Order 13665 and incorporated into the NPRM. The term “compensation” would be included and defined in § 60-1.3. The definition would include payments made to an employee, or on behalf of an employee, or offered to an applicant as remuneration for employment, including but not limited to salary, wages, overtime pay, shift differentials, bonuses, commissions, vacation and holiday pay, allowances, insurance and other benefits, stock options and awards, profit sharing, and contributions to retirement. This definition aligns with the definition OFCCP uses in the context of compensation discrimination investigations. 50

Next, the proposed rule adds the term “compensation information” to the definitions section at § 60-1.3. We propose to define “compensation information” by adopting the definition used by OFCP in existing guidance. As such the definition would cover any information related to all aspects of compensation, including but not limited to information about the amount and type of compensation as well as decisions, statements, or actions related to setting or altering employees' compensation. This proposed definition is meant to be broad enough to cover any information directly related to employee compensation, as well as the process or steps that led to a decision to award a particular amount or type of compensation.

Lastly, the proposed rule adds the term “essential job functions” to the definitions section. The proposed definition of “essential job functions” would include the fundamental job duties of the employment position held by an individual. The term does not include the marginal functions of the position. A job function may be considered essential for any of several reasons, including but not limited to the following:

• The function may be essential because the reason the position exists is to perform that function;

• The function may be essential because of the limited number of employees available among whom the performance of that job function can be distributed; and/or

• The function may be highly specialized so that the incumbent in the position is hired for his or her expertise or ability to perform the particular function.

In the Americans with Disabilities Act Amendments Act (ADAAA) and OFCCP's regulations implementing section 503 of the Rehabilitation Act, the “essential job function” analysis and evidence relate to issues of reasonable accommodation and qualification. 51 The goal in the disability context is to provide equal opportunity to individuals with disabilities, and to provide reasonable accommodation that is sufficient to allow an employee to perform the essential functions of the job and a job applicant to participate in the application process. However, in the context of Executive Order 13665, the goal is to determine whether an employee, by virtue of the job or position held, had access to employee and applicant compensation information as an essential job function and improperly disclosed that information. Such an employee could properly be subject to adverse action by the employer for making that disclosure under Executive Order 13665 and its implementing regulations as proposed in this NPRM.

OFCCP is proposing to adopt the section 503 and ADAAA definition and the broad factors that determine whether a job function may be considered essential, because contractors are familiar with them and they also apply in this context. We are not certain of the applicability of the existing list of types of evidence contractors could look to when determining if a particular function is essential. Not all of these section 503 factors, as listed below, may be particularly applicable in this context.

• The contractor's judgment as to which functions are essential;

• Written job descriptions prepared before advertising or interviewing applicants for the job;

• The amount of time spent on the job performing the function;

• The consequences of not requiring the incumbent to perform the function;

• The terms of a collective bargaining agreement;

• The work experience of past incumbents in the job; and/or

• The current work experience of incumbents in similar jobs.

The NPRM utilizes definitions and concepts from analysis of claims under the ADAAA and Title VII of the Civil Rights Act of 1964 (Title VII). However, any application or interpretation of the definitions and concepts under this proposed regulation is limited to pay disclosure discrimination claims governed by Executive Order 13665. As such, this NPRM is not intended to influence the analyses by the Equal Employment Opportunity Commission (EEOC) or the courts with respect to adjudication of claims under the ADA, as amended, and Title VII.

Therefore, OFCCP is specifically seeking public comment on the applicability of these factors, and possibly other factors, when making the determination of “essential job function” under Executive Order 13665, section 2(b). The factors would be considered when determining whether a disclosure by an employee of another employee's or job applicant's compensation was protected under section 2(b) of the Executive Order 13665 and the proposed amendments to § 60-1.4 implementing this section of Executive Order 13665. If the disclosure is not protected by the nondiscrimination provisions because the employee had access to the compensation information by virtue of the employee's essential job functions, the employee making the disclosure could be subjected to disciplinary or other adverse action by the employer without the employer violating Executive Order 13665 or its implementing regulations, unless that disclosure meets the exceptions provided for in section 2(b).

The proposed rule adds a clause to § 60-1.4(a), Governments contracts, and to § 60-1.4 (b), Federally assisted construction contracts. In the existing regulations, § 60-1.4(a) requires contracting agencies to include the equal opportunity clause in section 202 of Executive Order 11246 in governments contracts and modifications thereof if the clause was not included in the original contract. By accepting the Federal contracts, contractors accept the nondiscrimination and affirmative action requirements contained in the equal opportunity clause and agree to include the requirements in existing paragraph 1 through 7 of the clause in their subcontracts and purchase orders unless exempted by law, regulations or order of the Secretary of the U.S. Department of Labor.

Executive Order 13665, issued on April 8, 2014, amends section 202 of Executive Order 11246 so that it includes a new provision prohibiting discrimination against employees who have disclosed their compensation or the compensation of others, with limited exceptions. Contracting agencies must incorporate the new provision into the existing equal opportunity clause in their contracts, and contractors are held to comply with the revised clause and to include it in their subcontracts and purchase orders for new and modified contracts after the effective date of this Rule.

The proposed rule would revise § 60-1.4 (a) by inserting a new paragraph 3 into the equal opportunity clause, and renumbering the subsequent paragraphs in the clause. The text of the new paragraph is identical to the text in section 2(b) of Executive Order 13665. Under the terms of the provision, contractors will not be allowed to discharge or discriminate in any other manner against any employee or job applicant because such employee or applicant has inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant. This provision in EO 13665 does not apply when an employee with access to the compensation information of other employees or job applicants as a part of such employee's essential job functions discloses the compensation of such other employees or applicants to individuals who do not otherwise have access to such information, unless such disclosure is in response to a formal complaint or charge, in support of an investigation, proceeding, hearing, or action, including an investigation conducted by the employer, or is consistent with the contractor's legal duty to furnish information.

In the existing regulations, § 60-1.4(b), Equal opportunity clause, federally assisted construction contracts, a similar change is proposed. Section 60-1.4(b)(1) requires that administering agencies involved in federally assisted construction through grants, loans, insurance, or guarantee include in their contracts for construction work text informing the funding applicant that the equal opportunity clause must be incorporated into the contracts and contract modifications if they are funded in whole or in part by Federal money. The section further provides the exact language for the equal opportunity clause that lists the contractor's obligations. As with § 60-1.4(a), by accepting the funding the contractor is agreeing to assume the nondiscrimination and affirmative action obligations of Executive Order 11246, including incorporating existing paragraph 1 through 7 of the equal opportunity clause into their subcontracts and purchase orders unless exempted by law, regulations, or order of the Secretary of the U.S. Department of Labor.

The proposed rule revises § 60-1.4(b)(1) by inserting a new paragraph 3 into the equal opportunity clause, and renumbering the subsequent paragraphs in the clause. The text of the new paragraph is identical to the text in section 2(b) of Executive Order 13665 as reprinted above.

These proposed changes to § 60-1.4 are intended to eliminate the secrecy and fear surrounding a discussion or disclosure of compensation information. When employees lack access to compensation information it is more difficult for them to make informed choices about their own compensation, and creates unnecessary barriers to filing complaints with civil rights agencies such as OFCCP. Secrecy may also have a detrimental impact on business productivity, employee morale and retention, and could drive increased cost related to human resources management as discussed earlier in the preamble to the NPRM. 52 Studies have shown that these pay secrecy policies are common among contractors and foster negative consequences for some employees and applicants for employment. 53 The proposed rule does not require employees to share information about compensation with other employees.

The NPRM proposes deleting the outdated reference to the “Deputy Assistant Secretary” in § 60-1.4(d), Equal opportunity clause, Incorporation by reference, and replacing it with the “Director of OFCCP.” The proposal also includes changing the title of § 60-1.4(d) to Inclusion of the equal opportunity clause by reference and changing the first sentence of § 60-1.4(d) by deleting “incorporated by reference” and inserting to “included by reference.”

Proposed Section 60-1.35, Contractor Obligations and Defenses to Violation of the Nondiscrimination Requirement for Compensation Disclosures, would add a new section to part 60-1 that would implement the requirements of section 2(b), as well as the contractor defenses set forth in the Executive Order.

To provide an analytical framework, OFCCP views Executive Order 13665 as establishing a new prohibition against discrimination against any employee or applicant who inquires about, discusses, or discloses her own or someone else's compensation. The equal opportunity clause paragraph set out in section 2(b) of the Executive Order is framed in terms of discrimination. Thus, OFCCP believes that the burdens and standards of proof applicable to Title VII discrimination cases are appropriately applied to violations of section 2(a). OFCCP notes that the new prohibition here diverges from the traditional retaliation framework in that the adverse action would not flow from filing a complaint; assisting or participating in an investigation, evaluation or hearing; or otherwise opposing an act or practice made unlawful by Executive Order 11246. 54 That traditional retaliation framework is designed to protect the integrity of the administrative and legal processes by which workers assert their rights to be free from discrimination. The prohibition at issue here serves a very different purpose—to protect workers from pay discrimination itself.

As supported by administrative case law, the nondiscrimination standards developed under Title VII of the Civil Rights Act of 1964 apply to cases brought under Executive Order 11246. 55 Both the Executive Order and Title VII have as one of their goals the identification and elimination of employment discrimination; therefore, Title VII standards for determining the existence of discrimination may properly be applied to discrimination cases under Executive Order 11246. 56 Thus, OFCCP expects that it will evaluate contractor defenses pursuant to 60-1.35 under a Title VII discrimination framework. 57

Under Title VII, the applicable analytical framework is found in 42 U.S.C. 2000e-2(m), which provides that “an unlawful employment practice is established when the complaining party demonstrates that race, color, religion, sex or national origin was a motivating factor for any employment practice, even though other factors also motivated the practice.” Under this framework, where the contractor has set forth a lawful reason for its action, i.e., the violation of its legitimate workplace rule, OFCCP would have to demonstrate that the improper reason, i.e., disclosure or discussion of compensation by the applicant or employee, was a motivating factor for the adverse action even if the lawful reason also motivated the adverse action. Under Title VII, therefore, the employer cannot defeat liability once the plaintiff proves the existence of an impermissible motivating factor.

The employer can, however, limit the scope of an adverse remedial order under Title VII if it can prove that it would have taken the same employment action in the absence of the impermissible motivating factor, i.e., based on violation of the legitimate workplace rule. The court in that situation may grant declaratory relief, injunctive relief and limited attorney's fees and costs, where appropriate. The employer would not be liable for monetary damages or a reinstatement order. 58

The Department recognizes that the National Labor Relations Act (NLRA), like the Executive Order, prohibits employers from discriminating against employees and job applicants who discuss or disclose their own compensation or the compensation of other employees or applicants. 59 Therefore, a significant portion of the contractor's workforce may be subject to the protections of both the NLRA and the Executive Order. The Department believes that the prohibitions under Executive Order 13665 are compatible with the existing prohibitions under the NLRA, although the Executive Order affords protection to a broader group of employees than under the NLRA. The Executive Order also covers supervisors, managers, agricultural workers, employees of rail and air carriers and covers activity that may not be “concerted” under the NLRA.

It is well settled that the NLRB applies a motivating factor analysis, thus protecting an employee's right to engage in wage discussions with other employees, unless the employer can demonstrate, as an affirmative defense, that the adverse action taken against the employee would have occurred in any event. 60 OFCCP notes that the “motivating factor” causation standard applicable under the NLRA is consistent with the standard applicable to Title VII discrimination cases. 61 Accordingly, OFCCP proposes applying the “motivating factor” causation standard in assessing liability for violations of the new prohibition established in the Executive Order as a matter of consistency with Title VII and NLRA principles.

The Department is of the opinion that the Supreme Court's recent decision in University of Texas Southeastern Medical Center v. Nassar does not dictate otherwise. 62 The Court held in Nassar that Title VII's anti-retaliation provision requires “but for” causation, and that the standards and burdens of proof in the 1991 amendments to the Civil Rights Act at 42 U.S.C. 2000e-2(m) apply only to claims for discrimination based on race, color, religion, sex, or national origin under section 2000e-2, not retaliation discrimination referenced in 42 U.S.C. 2000e-3. Thus, under Nassar, the “motivating factor” standard applicable in discrimination cases no longer applies in retaliation cases. As noted above, though, OFCCP does not believe that the burdens and standards applicable to retaliation cases are applicable here, but invites comments on this issue. Furthermore, the Department notes that the EEOC has taken the position that Nassar does not apply to retaliation claims by Federal sector employees and applicants, due to different controlling statutory language in Section 717 of Title VII. 63 No conflicts exist between the EEOC's position on Nassar and the Department's interpretation of Nassar as described above.

Finally, the Department is aware of the District of Columbia Circuit Court decision, Chamber of Commerce v. Reich , 64 holding that Executive Order 12954, which authorized the Secretary of Labor to disqualify from certain Federal contracts employers who hire permanent replacement workers during a lawful strike, was in conflict with the NLRA and “pre-empted by the NLRA which guarantees the right to hire permanent replacements.”  65 No such conflict exists here, as Executive Order 13665 is compatible with the existing prohibitions under the NLRA.

The text of paragraph 60-1.35(a) incorporates the text in section 5(a) of Executive Order 13665. The text of paragraph § 1.35(a) sets out the general contours of a permissible contractor defense—that any such defense can be based on a legitimate workplace rule that does not violate the prohibition in paragraph (3) of the equal opportunity clause. For example, the contractor may have a rule that prohibits employees from being disruptive in the workplace. An employee may violate that rule by standing on her desk and repeatedly shouting out her pay. If the contractor terminates her for those actions, the contractor may have a defense to a charge of discrimination if it can demonstrate that she was terminated for being disruptive, not for disclosing her pay. Similarly, an employee may violate that same rule if she constantly asks other employees on working time unwelcome questions about their compensation after they request that she stop asking them. These examples are provided simply to illustrate that paragraph 1.35(a) permits contractors to enforce rules against disruptive behavior in the workplace, even if the applicant or employee is discussing his/her compensation or that of other applicants or employees while being disruptive. As with implementation of any legitimate workplace rule, though, the rule must be uniformly and consistently applied, and all defenses under this section will be evaluated based on the specific facts and circumstances. OFCCP is concerned that contractors' legitimate workplace rules, policies and practices such as those related to maintaining discipline in their workplaces and protecting their businesses be consistently and uniformly applied and narrowly defined to ensure they do not unnecessarily prohibit, or tend to prohibit, employees or applicants from inquiring about, discussing or disclosing their compensation or the compensation of other employees or applicants. 66 Accordingly, OFCCP invites comments on how to harmonize contractors' enforcement of legitimate workplace rules with the rights of applicants and employees to discuss, disclose, or inquire about compensation.

The text of paragraph § 1.35(b) is identical to the text in section 2(b) of Executive Order 13665. This paragraph in effect incorporates a specific, legitimate workplace rule: In general, a contractor will not violate proposed equal opportunity clause paragraph 3 if it takes adverse action against an employee, who is entrusted with confidential compensation information of other employees or applicants as part of his or her essential job functions, for disclosing the compensation of other employees or applicants, unless the disclosure occurs in certain limited circumstances.

This defense acknowledges that an employee who has access to sensitive compensation information of others within an organization as part of his or her essential job functions has a duty to protect such information from disclosure. If, however, such an employee discloses or discusses the compensation of other applicants or employees based on information that the employee received through means other than essential job functions access, e.g., through a conversation with a colleague, the defense would not apply. Similarly, the defense would not apply where such an employee pursues her own possible compensation discrimination claim or raises possible disparities involving the compensation of other employees to a contractor manager. Without this distinction, employees with essential job functions access, who primarily work in human resources departments and who are predominantly women, 67 would receive less protection than other employees who learn of possible compensation disparities in a similar manner.

The Executive Order and OFCCP recognize that disclosure by someone with essential job functions access to compensation information may also be appropriate in other limited circumstances. To the extent that an employee with access to compensation information as part of his or her essential job functions discloses compensation information of others in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, § 60-1.35(b) and § 60-1.32 prohibit the contractor from taking adverse action against that employee. As paragraph § 1.32(a) provides, contractors are not allowed to harass, intimidate, threaten, coerce, or discriminate against individuals who have engaged in protected activities, which include assisting in an investigation, review or hearing. Paragraph § 1.35(b) reinforces that the same protection and remedies apply to employees with access to compensation information, who disclose compensation information pursuant to a formal complaint or charge, investigation, proceeding hearing, or action, including an investigation conducted by the contractor, or consistent with the contractor's legal duty to furnish information. As with any defense, OFCCP will evaluate the availability of a paragraph 1.35(b) defense based on the specific facts and circumstances of each case.

Proposed § 60-1.35(c) would require Federal contractors to incorporate the nondiscrimination provision, as prescribed by the Director of OFCCP and made available on the OFCCP Web site, into their existing employee manuals or handbooks, and disseminate the nondiscrimination provision to employees and job applicants. The prescribed nondiscrimination provision is based on the language in section 2(b) of Executive Order 13665. This dissemination can be executed electronically or by posting a copy of the provision in conspicuous places available to employees and job applicants. In person or face-to-face communication of the provision is not required or recommended, however, contractors may use this method if they typically communicate information to all employees or applicants in this manner.

For contractors that provide manager trainings or meetings, OFCCP is considering making it a requirement that they include a review of the prohibition on discriminating based on an employee or applicant inquiring about, discussing, or disclosing compensation information in their existing manager trainings or meetings. As for other contractors, OFCCP would encourage them to adopt this approach as a best practice for minimizing the likelihood of workplace discrimination. Consequently, OFCCP seeks comment on the feasibility of requiring contractors with manager trainings or meetings to include a regular review of the nondiscrimination provision. The language of the provision will be prescribed by the Director of OFCCP to ensure consistency of message and clarity of purpose. We are particularly interested in the cost associated with including a review of the provision in existing manager training programs or meetings.

Executive Order 13563 directs agencies to propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs; tailor the regulation to impose the least burden on society, consistent with obtaining the regulatory objectives; and in choosing among alternative regulatory approaches, select those approaches that maximize net benefits. Executive Order 13563 recognizes that some benefits are difficult to quantify and provides that, where appropriate and permitted by law, agencies may consider and discuss qualitatively values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts.

This proposed rule has been designated a “significant regulatory action” although not economically significant, under section 3(f) of Executive Order 12866. The NPRM is not economically significant because it will not have an annual effect on the economy of $100 million or more. The Office of Management and Budget (OMB) has reviewed the NPRM.

The proposed regulatory changes are needed to ensure that employees of Federal contractors and subcontractors are able to discuss their compensation without fear of adverse action. It is also needed to enhance the ability of Federal contractors and their employees to detect and remediate unlawful discriminatory practices. The NPRM is designed to contribute to a more efficient market in Federal contracting, and ensure that the most qualified and productive workers receive fair wages. The existence of pay secrecy practices means some workers can be fired for even disclosing their compensation or asking their co-workers how much they earn. Even employers who do not specifically restrict employee communications about compensation take great care to guard individual compensation information. The proposals in this NPRM benefit OFCCP's enforcement by incorporating into the equal opportunity clauses the prohibition against pay secrecy policies, specifically that an employer cannot discriminate against an employee or applicant who has inquired about, discussed, or disclosed compensation information. 68 By including the provision in the equal opportunity clauses OFCCP is clearly defining such actions as discriminatory and enhancing OFCCP's ability to take action when it finds pay secrecy policies or practices during compliance evaluations and complaint investigations. In developing its NPRM, OFCCP worked with several other Federal agencies on the National Equal Pay Task Force to identify the persistent challenges to equal pay enforcement and develop an action plan to implement recommendations to resolve those challenges. OFCCP also consulted a number of sources in order to assess the need for the proposed rulemaking. For instance, OFCCP reviewed national statistics on earnings by gender produced by BLS and the U.S. Census Bureau. Those statistics show persistent pay gaps for female and minority workers. 69 These well-documented earnings differences based on race and sex have not been fully explained by nondiscriminatory factors including differences in worker qualifications such as education and experience, occupational preferences, work schedules or other similar factors. 70 Thus, some of the remaining unexplained portion of the pay gap may be attributable to discrimination.

Currently, OFCCP lacks sufficient, reliable data to assess the gender- or race-based pay gap experienced by employees of Federal contractors or subcontractors, including how much of the potential pay gap is attributable to pay discrimination instead of nondiscriminatory factors, and how many contractors are violating the pay discrimination laws OFCCP enforces. Pay secrecy was among one of the most prevalent employer policies and practices that made discrimination much more difficult to discover and remediate. 71 OFCCP's work led to the determination that there is a substantial need for the proposed regulatory action.

Research conducted by the IWPR concluded that the poverty rate for working women could be reduced by half if women were paid the same as comparable men. The paper determined that nearly 60 percent (59.3 percent) of women could earn more if working women were paid the same as men of the same age with similar education and hours of work. 72 The poverty rate for all working women could be cut in half, falling to 3.9 percent from 8.1 percent. 73 The high poverty rate for working single mothers could fall by nearly half, from 28.7 percent to 15 percent. 74 For the 14.3 million single women living on their own, equal pay could mean a significant drop in poverty from 11.0 percent to 4.6 percent. 75 These statistics are intended to provide general information about the potential impacts of eliminating pay differentials among men and women, including pay differentials not attributed to discrimination. In addition, the IWPR statistics include all employers and all employees in the U.S., whereas this proposed rule would apply to only a subset of such employers and employees. Therefore, the potential impact of this rule would be much smaller than the impact of eliminating pay differentials among all working men and women.

Discrimination, occupational segregation, and other factors contribute to creating and maintaining a gap in earnings and keeping a significant percentage of women in poverty. It is worth noting, however, that some research has established that women earn less than men regardless of the field or occupation. 76 This research also suggests that persistent pay discrimination for women translates into lower wages and family income in families with a working woman. The gender pay gap may also affect the economy as a whole.

This is a summary of Commission's document, Report No. 2954, released June 12, 2012. The full text of Report No. 2954 is available for viewing and copying in Room CY-B402, 445 12th Street SW., Washington, DC or may be purchased from the Commission's copy contractor, Best Copy and Printing, Inc. (BCPI) (1-800-378-3160). The Commission will not send a copy of this document pursuant to the Congressional Review Act, 5 U.S.C. 801(a)(1)(A), because this document does not have an impact on any rules of particular applicability.

Subjects: In the Matter of Amendment of Section 73.202(b), Table of Allotments, FM Broadcast Stations, (Enfield, New Hampshire; Hartford and White River Junction, Vermont; and Keeseville and Morrisonville, New York), published at 76 FR 9249, February 17, 2011, in MB Docket No. 05-162, and published pursuant to 47 CFR 1.429(e). See also § 1.4(b)(1) of the Commission's rules.

Number of Petitions Filed: 1.