[Federal Register Volume 88, Number 175 (Tuesday, September 12, 2023)]
[Proposed Rules]
[Pages 62480-62491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19422]


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DEPARTMENT OF LABOR

Office of Workers' Compensation Programs

20 CFR Part 702

RIN 1240-AA17


Longshore and Harbor Workers' Compensation Act: Civil Money 
Penalties Procedures

AGENCY: Office of Workers' Compensation Programs, Labor.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: The Office of Workers' Compensation Programs (OWCP) 
administers the Longshore and Harbor Workers' Compensation Act and its 
extensions. To promote accountability and ensure fairness, OWCP 
proposes new rules for imposing and reviewing civil money penalties 
prescribed by the Longshore Act. The proposed rules would also set 
forth the procedures to contest OWCP's penalty determinations.

DATES: The Department invites written comments on the proposed rule 
from interested parties. Written comments must be received by November 
13, 2023.

ADDRESSES: You may submit written comments, identified by RIN number 
1240-AA17, by any of the following methods. To facilitate the receipt 
and processing of comments, OWCP encourages interested parties to 
submit their comments electronically.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions on the website for submitting comments.
     Regular Mail or Hand Delivery/Courier: Submit comments on 
paper to the Division of Federal Employees', Longshore and Harbor 
Workers' Compensation, Office of Workers' Compensation Programs, U.S. 
Department of Labor, Room S-3229, 200 Constitution Avenue NW, 
Washington, DC 20210. The Department's receipt of U.S. mail may be 
significantly delayed due to security procedures. You must take this 
into consideration when preparing to meet the deadline for submitting 
comments.
    Instructions: All submissions received must include the agency name 
and the Regulatory Information Number (RIN) for this rulemaking. All 
comments received will be posted without change to https://www.regulations.gov. Please do not include any personally identifiable 
or confidential business information you do not want publicly 
disclosed.
    Docket: For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov. Although some 
information (e.g., copyrighted material) may not be available through 
the website, the entire rulemaking record, including any copyrighted 
material, will be available for inspection at OWCP. Please contact the 
individual named below if you would like to inspect the record.

FOR FURTHER INFORMATION CONTACT: Antonio Rios, Director, Division of 
Federal Employees', Longshore and Harbor Workers' Compensation, Office 
of Workers' Compensation Programs, (202) 693-0040, 
[email protected]. TTY/TDD callers may dial toll free 1-877-889-5627 
for further information.

[[Page 62481]]


SUPPLEMENTARY INFORMATION: 

I. Background of This Rulemaking

    The Longshore and Harbor Workers' Compensation Act (LHWCA or Act), 
33 U.S.C. 901-50, establishes a comprehensive Federal workers' 
compensation system for an employee's disability or death arising in 
the course of covered maritime employment. Metro. Stevedore Co. v. 
Rambo, 515 U.S. 291, 294 (1995). The Act's provisions have been 
extended to (1) contractors working on military bases or U.S. 
government contracts outside the United States (Defense Base Act, 42 
U.S.C. 1651-54); (2) employees of nonappropriated fund 
instrumentalities (Nonappropriated Fund Instrumentalities Act, 5 U.S.C. 
8171-73); (3) employees engaged in operations that extract natural 
resources from the outer continental shelf (Outer Continental Shelf 
Lands Act, 43 U.S.C. 1333(b)); and (4) private employees in the 
District of Columbia injured prior to July 26, 1982 (District of 
Columbia Workers' Compensation Act of May 17, 1928, Public Law 70-419 
(formerly codified at 36 DC Code 501 et seq. (1973) (repealed 1979)). 
Consequently, the Act and its extensions cover a broad range of claims 
for injuries that occur throughout the United States and around the 
world.
    OWCP's sound administration of these programs involves periodic 
reexamination of the procedures used for claims processing and related 
issues. On April 28, 2020, OWCP hosted a public outreach webinar to 
solicit stakeholders' views on how OWCP could improve its processes. 
See E.O. 13563, sec. 2(c) (January 18, 2011) (requiring public 
consultation prior to issuing a proposed regulation). OWCP considered 
the feedback received during that session in developing the proposal. 
For example, participants noted that the statute only allows penalties 
for knowing and willful failures to file the report, so OWCP should 
establish knowledge and willfulness before assessing a penalty. They 
also noted that employers and insurance carriers should have a method 
to contest penalty assessments. On December 14, 2020, OWCP published a 
Notice of Proposed Rulemaking and a Direct Final Rule in the Federal 
Register revising regulations governing electronic filing and 
settlements and establishing new procedures for assessing and 
adjudicating penalties under the Act. 85 FR 80601, 85 FR 80698. On 
January 20, 2021, a new administration assumed office. The Assistant to 
the President and Chief of Staff issued a memorandum to the Heads of 
Executive Departments entitled ``Regulatory Freeze Pending Review.'' 86 
FR 7424. The memorandum directed agencies to consider pausing or 
delaying certain regulatory actions for the purpose of reviewing 
questions of fact, law, and policy raised. OWCP believed that the most 
efficient way to implement the memorandum was to withdraw both the 
Direct Final Rule and the Notice of Proposed Rulemaking, rather than 
delay the effective date of the Direct Final Rule. The comment period 
was still open, and OWCP would have had to withdraw the Direct Final 
Rule anyway if it received significant adverse comments before the 
comment period closed. In accordance, on February 9, 2021, OWCP 
withdrew the Notice of Proposed Rulemaking and the Direct Final Rule. 
86 FR 8686, 86 FR 8721. Withdrawing the rule gave the new 
administration time to review the rule and consider the policies it 
would have implemented. After careful consideration, OWCP decided to 
move forward with a proposal to update its existing penalty regulations 
and implement a procedural scheme for employers to challenge penalties 
assessed against them.
    OWCP requests comments on all issues related to this rulemaking, 
including economic or other regulatory impacts on the regulated 
community.

II. Overview of the Proposed Rule

    The proposed rule would add new sections and amend existing 
sections to implement the Act's civil money penalty provisions. The Act 
allows OWCP to impose a penalty when an employer or insurance carrier 
fails to timely report a work-related injury or death, 33 U.S.C. 
930(e), or fails to timely report its final payment of compensation to 
a claimant, 33 U.S.C. 914(g). See 20 CFR 702.204, 702.236. The proposed 
rule would revise current Sec.  702.204 to provide for graduated 
penalties for an entity's failure to timely file, or falsification of, 
the required report of an employee's work-related injury or death. See 
33 U.S.C. 930(a); 20 CFR 702.201. The proposed rule provides that the 
penalty assessed will increase for each additional violation the 
employer has committed over the prior two years. The current regulation 
states only the maximum penalty allowable, without providing further 
guidance or a graduated penalty scheme. The proposed rule would also 
add new Sec. Sec.  702.206, 207, and 208. These proposed sections would 
add procedures for the District Director to notify entities of failures 
to accurately and timely file, provide an opportunity for a response 
before the District Director issues a notice of proposed penalty, and 
provide guidance to both the District Director and the Director in 
determining the amount of the proposed penalty and penalty by setting 
forth aggravating and mitigating factors they may consider.
    The proposed rule also contains a new subpart I setting out 
procedures for challenging proposed penalties and penalties under both 
Sec.  702.204 (for an entity's failure to timely file, or falsification 
of, the required report of an employee's work-related injury or death) 
and Sec.  702.236 (for failing to report the termination of payments). 
These proposed procedures would allow an entity against whom a penalty 
is assessed the opportunity for a hearing before an administrative law 
judge, and to petition the Secretary of Labor (Secretary) for further 
review. After receiving the OWCP Director's final penalty order 
assessing the penalty, consistent with sections 554 and 556 of the 
Administrative Procedure Act (5 U.S.C. 551 et seq.), the respondent 
would be able to request a hearing before an administrative law judge 
(ALJ) under proposed Sec.  702.906(a). During the hearing, entities 
would have the opportunity to submit facts and arguments for 
consideration consistent with the Rules of Practice and Procedure for 
Administrative Hearings Before the Office of Administrative Law Judges 
(29 CFR part 18). The ALJ would determine whether the respondent 
violated the statutory or regulatory provision under which the penalty 
was assessed and whether the amount of the penalty assessed was 
appropriate. Consistent with section 557 of the APA, the ALJ's decision 
would become the decision of the Agency without further proceedings, 
unless within 30 days, the respondent requested reconsideration of the 
ALJ's decision under proposed Sec.  702.907 or petitioned the Secretary 
for review under proposed Sec.  702.908. The Secretary's review would 
be discretionary and based on the record. These additional levels of 
review are consistent with the formal adjudication procedures under the 
Administrative Procedure Act, 5 U.S.C. 554, 556-557, and Recommendation 
93-1 of the Administrative Conference of the United States, which 
recommends that formal adjudication under the Administrative Procedure 
Act be made available where a civil money penalty is at issue. The 
proposed procedures would fully protect employers' and insurance 
carriers' rights to challenge OWCP's action before any penalty becomes 
final and subject to collection

[[Page 62482]]

and ensure transparency and fairness in the enforcement proceedings.

IV. Section-by-Section Explanation

Section 702.204 Employer's Report; Penalty for Failure To Furnish and 
or Falsifying

    Under 33 U.S.C. 930(e), ``any employer, insurance carrier, or self-
insured employer who knowingly and willfully fails or refuses to send 
any report'' required by section 930 or ``knowingly or willfully makes 
a false statement or misrepresentation in any such report'' is subject 
to a civil penalty for each violation. Proposed Sec.  702.204 would 
revise the current regulation in several ways. First, paragraphs (a)(1) 
and (a)(3) clarify that ``knowingly'' means actual knowledge or 
constructive knowledge--that is, that the entity knew or reasonably 
should have known of the violation. This is similar to the test for 
knowledge under the Occupational Safety and Health Act (OSH Act), 29 
U.S.C. 651 et seq. See, e.g., Sanderson Farms, Inc. v. Perez, 811 F.3d 
730, 735 (5th Cir. 2016) (explaining that to satisfy the knowledge 
element of a prima facie case of an Occupational Safety and Health 
Administration (OSHA) violation, the Secretary of Labor has to prove 
that the employer had actual or constructive knowledge of the 
violation); N & N Contractors, Inc. v. Occupational Safety & Health 
Rev. Comm'n, 255 F.3d 122, 127 (4th Cir. 2001) (noting that an employer 
has constructive knowledge of a violation of a safety regulation if the 
employer fails to use a reasonable diligence to discern the presence of 
the violative condition); Halmar Corp., 18 BNA OSHC 1014, 1016 (No. 94-
2043, 1997) (explaining that the Commission's test for knowledge is 
whether the employer knew, or with the exercise of reasonable diligence 
could have known, of the violation.)
    Proposed paragraph (a)(1) further explains that the entity must 
have knowledge of ``the employee's injury or death, that the injury or 
death is likely covered by the Act, that a report is required, and that 
a report was not timely filed.'' The statute allows the Secretary to 
assess penalties when the failure, refusal, false statement, or 
misrepresentation is knowing, so this would clarify that knowledge 
includes knowledge of the employee's condition as well as of the legal 
requirement for a report and the fact that the report was not properly 
submitted. Similarly, paragraph (a)(3) explains that knowledge of a 
false statement or misrepresentation requires knowledge that the 
information in the report is untrue, incomplete, or misleading.
    Proposed paragraphs (a)(2) and (a)(4) address the willfulness 
requirement in the statute. Proposed paragraph (a)(2) explains that an 
entity willfully fails or refuses to send a report when it 
intentionally disregards the reporting requirement or is plainly 
indifferent to the reporting requirement. This is similar to the 
definition of willfulness in other contexts. The OSH Act, 29 U.S.C. 
666(a), also provides for penalties for willful violations but does not 
define willfulness. The Department of Labor's OSHA has provided that a 
willful violation exists under the OSH Act where an employer has 
demonstrated either an intentional disregard for the requirements of 
the OSH Act or a plain indifference to employee safety. OSHA 
Instruction CPL 02-00-164, Field Operations Manual, issued April 14, 
2020, pp. 4-22--4-24. There is ample case law validating the 
Department's willfulness definition. See, e.g., Bianchi Trison Corp. v. 
Sec'y, 409 F.3d 196, 208 (3d Cir. 2005) (``Although the [OSH] Act does 
not define the term `willful,' courts have unanimously held that a 
willful violation of the [OSH] Act constitutes `an act done voluntarily 
with either an intentional disregard of, or plain indifference to, the 
[OSH] Act's requirements.'''); Chao v. Occupational Safety and Health 
Rev. Comm'n, 401 F.3d 355 (5th Cir. 2005) (``A willful violation is one 
committed voluntarily, with either intentional disregard of, or plain 
indifference to, OSH Act requirements''); Fluor Daniel v. Occupational 
Safety and Health Rev. Comm'n, 295 F.3d 1232 (11th Cir. 2002) 
(explaining that ``[a]lthough Section 666 does not define the terms 
`willful' or `willfully,''' it is ``an intentional disregard of, or 
plain indifference to, OSHA requirements''); Stanley Roofing Co., 21 
BNA OSHC 1462, 1466 (2006) (discussing that a willful violation is one 
committed with intentional, knowing or voluntary disregard for the 
requirements of the Act or with plain indifference). Proposed paragraph 
(a)(4) addresses willfulness in making a false statement or 
misrepresentation. Similar to paragraph (a)(2), OWCP proposes to 
establish willfulness when an entity intentionally disregards or 
exhibits plain indifference to the truth. Proposed paragraph (a)(5) is 
intended to explain that when establishing a false statement or 
misrepresentation, OWCP only needs to demonstrate that doing so was 
knowing or willful--not both. See 33 U.S.C. 930(e).
    Proposed paragraph (b) provides that the number of penalties 
assessed in the prior two years against an entity will be considered in 
proposing and assessing further penalties. Proposed paragraph (b) also 
lists the baseline penalty amounts that will be recommended, beginning 
at five percent of the maximum penalty amount for a first violation, 
with the penalty doubling for each subsequent violation through the 
fifth violation. The sixth violation and subsequent violations will 
result in the maximum penalty. OWCP has proposed a percentage scheme 
because the maximum penalty amount will be adjusted every year under 
the Federal Civil Penalties Inflation Adjustment Act of 1990, as 
amended by the Federal Civil Penalties Inflation Adjustment Act 
Improvements Act of 2015, Public Law 114-74, section 701. Basing the 
baseline proposed penalty on a percentage of the maximum penalty 
amount, rather than a dollar amount, will allow OWCP to rely on the 
table even as the maximum penalty amount changes each year. 
Furthermore, as the maximum penalty is set by statute and regulation, a 
graduated penalty scheme beginning at a low percentage will allow OWCP 
to increase the baseline penalty with each subsequent violation and 
thereby increase the deterrent effect. As expanded upon later in the 
explanation for Sec.  702.208, the baseline proposed penalty amount for 
each violation can be adjusted higher or lower, consistent with the 
statutory maximum, based on relevant aggravating and mitigating 
factors.

Section 702.206 Notice of Failure To Timely Submit Accurate Report

    Under proposed paragraph (a) of Sec.  702.206, when OWCP receives 
information that indicates an injury or death has occurred on a 
particular date but has not received a report as required by Sec.  
702.201, the District Director will send a notice to the employer. This 
is consistent with the procedures set forth in chapter 08-0302 of 
OWCP's Longshore Procedure Manual, which instructs the District 
Director to send a missing form LS-202 pre-penalty letter. As explained 
in section 6 of chapter 08-0302, this pre-penalty letter describes the 
evidence OWCP has received that indicates an injury or death has 
occurred on a particular date; notifies the employer of its 
responsibility to file a report within 10 days of that date; and 
requests an explanation for the employer's failure to file a report 
within the required time limit. Furthermore, under proposed paragraph 
(a), the District Director's notice would specifically notify the 
employer that it may be subject to a penalty if its failure to timely 
submit a report is knowing and willful and instructs the employer

[[Page 62483]]

that it must file the required report no later than ten days after the 
receipt of the notice. As explained in the manual, ``once an employer 
has been advised in writing of its responsibility to file a timely 
report, any further failure should be considered knowing and willful.'' 
OWCP has therefore preliminarily determined that the first notice 
should clearly explain the penalties for not filing the report once the 
employer is undeniably on notice of the requirements--i.e., that OWCP 
will consider continued disregard of the legal requirement to be 
knowing and willful.
    Proposed paragraph (b) provides that ``if the employer does not 
file the required report within ten days of receipt of the notice 
described in paragraph (a), the District Director will send a second 
notice to the employer. As explained above, once the first notice has 
been sent to the employer, the employer is undeniably on notice of the 
requirement to timely file an accurate report and any future failures 
demonstrate a conscious disregard for the requirement. In this second 
notice, the District Director would notify the employer that its 
failure to file the required report after receipt of the notice 
described in paragraph (a) constitutes evidence that its failure to 
timely submit a report is knowing and willful; request an explanation 
for the failure to file a report within the required time limit and 
request the employer's reasons why the full baseline penalty amount 
under Sec.  702.204 should not be assessed against the employer, 
including documentation supporting any mitigating factors claimed under 
Sec.  702.208(c); and instruct the employer that its response should be 
filed within 30 days of receipt of the notice. This is consistent with 
the procedures set forth in the manual, although under the proposed 
rule, the information requested by the District Director is bifurcated 
into two notices rather than the single pre-penalty letter for a 
missing form LS-202 described in the manual. While the District 
Director may have other evidence that demonstrates knowledge and 
willfulness, this bifurcated notice system would ensure that by the 
time the District Director notifies the employer that its failure to 
timely submit a report is knowing and willful, the District Director 
has clear evidence that the employer was, at a minimum, aware of the 
legal requirements and yet chose to disregard them by failing to timely 
submit a report.
    Under proposed paragraph (c), when OWCP receives a report filed 
more than ten days from the date of an employee's injury or death or 
the date an employer has knowledge of an employee's injury or death, 
and the District Director has not already sent a notice under paragraph 
(a), the District Director may notify the employer of its 
responsibility to file a report within ten days of the date of an 
employee's injury or death or the date an employer has knowledge of an 
employee's injury or death. This is consistent with the first part of 
the pre-penalty letter for a late form LS-202 and the procedure manual, 
which also instructs the District Director to notify the employer of 
their obligations when a report is filed late. Unlike with a second 
notice of a missing form, however, the District Director would not 
automatically inform the employer that it may be subject to a penalty. 
In certain situations, however, the District Director may have 
information indicating evidence of knowledge and willfulness, in which 
case they will inform the employer that it may be subject to a penalty 
for failing to timely file the report as required by section 930(a) of 
the Act. In such circumstances, the notice will also request an 
explanation for the failure to file a report within the required time 
limit and the employer's reasons why the full baseline penalty amount 
under Sec.  702.204 should not be assessed against the employer, 
including documentation supporting any mitigating factors claimed under 
Sec.  702.208(c), and instruct the employer that its response should be 
filed within 30 days of receipt of the notice.
    Under proposed paragraph (d), when OWCP receives a report 
containing a false statement or misrepresentation, the District 
Director would send a notice to the employer that describes the 
evidence that indicates the report contains a false statement or 
misrepresentation; notifies the employer that it may be subject to a 
penalty if the false statement or misrepresentation was made knowingly 
or willfully; requests an explanation for the false statement or 
misrepresentation and the employer's reasons why the full baseline 
penalty amount under Sec.  702.204 should not be assessed against the 
employer; and instructs the employer that its response should be filed 
within 30 days of the date of the letter. Unlike with missing reports, 
the statute only requires that the false statement or misrepresentation 
be made knowingly or willingly, but not necessarily both. The District 
Director could obtain this evidence from many different sources if they 
suspect a false statement or misrepresentation. For example, the 
District Director may learn about injuries from news reports, from 
employee advocates, or from employees themselves.
    OWCP requests comments on all aspects of proposed Sec.  702.206, 
and particularly on the sources and type of information the agency 
should use to determine whether a failure was knowing or willful.
    As described earlier, this proposed rule applies to the LHWCA and 
its extensions, including the Defense Base Act, which covers 
contractors working on military bases or U.S. government contracts 
outside the United States. 42 U.S.C. 1651-54. There may be special 
considerations when determining whether an employer acts with knowledge 
and willfulness when it comes to reporting injuries sustained by 
employees of Federal contractors abroad. For example, there may be a 
heightened awareness of the legal requirements, either through the 
procurement process or other avenues. The contracting agencies may have 
related reporting requirements, and such information may demonstrate 
the contractor-employer's state of mind. OWCP therefore seeks comment 
on how to address failures under the Defense Base Act in particular, in 
light of the additional information available to the Federal 
Government, that would establish knowledge and willfulness.

Section 702.207 Consideration of Response; Notice of Proposed Penalty

    Proposed Sec.  702.207 sets forth the process for considering the 
response and issuing the notice of proposed penalty. Under proposed 
paragraph (a), the District Director would consider the employer's 
responses, if any, to the notices described in Sec.  702.206, as well 
as any other information the District Director has about the injury or 
the respondent, to determine whether the failure, refusal, false 
statement, or misrepresentation was knowing or willful as set forth in 
Sec.  702.204. As with Sec.  702.206(d), the District Director may have 
information about an injury or illness from many different sources, 
such as news reports, employee advocates, or employees themselves.
    Under proposed paragraph (b), if the District Director determines 
that there was a violation, they will issue a notice of proposed 
penalty. Proposed paragraph (b) also provides that the Director has the 
authority and responsibility for assessing a penalty using the 
procedures set forth at subpart I. The notice of proposed penalty is 
described in detail in section 903 and the corresponding section of 
this preamble.

[[Page 62484]]

Section 702.208 Special Considerations in Setting Penalty Amounts

    In proposed Sec.  702.208, proposed paragraph (a) provides that the 
District Director and Director may consider mitigating and aggravating 
factors when determining the amount of the proposed and assessed 
penalties. This must be consistent with the statutory maximum, which is 
currently $28,304 as adjusted for inflation, so the penalty cannot 
exceed that amount. See Federal Civil Penalties Inflation Adjustment 
Act Improvements Act of 2015, Public Law 114-74, sec. 701; Federal 
Civil Penalties Inflation Adjustment Act Annual Adjustments for 2023, 
88 FR 2210 (January 13, 2023). Proposed paragraph (b) lists the 
aggravating factors that may be considered: extent of delay in filing 
the report; attempts to conceal the injury or death; failure to timely 
pay compensation due the claimant; failure to submit information 
sufficient to determine whether the correct compensation has been paid; 
any prior settlements of penalties assessed by the Director; any 
outstanding proposed penalties assessed against the entity; any prior 
penalties assessed against an entity's parent company or subsidiary; 
and any other factors relevant to the respondent's conduct with respect 
to the contents of the report. The statutory instruction that the 
penalty is ``not to exceed'' a maximum amount indicates that Congress 
intended to provide the agency with some discretion in setting an 
appropriate penalty. These are factors that OWCP has preliminarily 
determined are relevant to the appropriateness of the penalty and its 
potential to deter future violations, and they are largely consistent 
with the factors listed in chapter 08-0302 of the Longshore Procedure 
Manual. The final factor is meant to address facts specific to a 
particular employer or situation that may not be generally applicable 
but are still relevant in a particular case. The agency welcomes 
comment on these proposed factors.
    Similarly, proposed paragraph (c) lists the mitigating factors that 
may be considered in lowering the amount: bringing the failure to 
comply with the Act or regulations to the District Director's 
attention; full payment of the correct amount of compensation to the 
claimant; timely compliance with the District Director's requests once 
failure to comply with the Act or regulations was brought to their 
attention; history of compliance with the Act and the regulations of 
this subchapter; a mass casualty event preventing the timely filing in 
all related cases; whether the respondent is a ``small entity'' within 
the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601(6); and any 
other relevant factors. These are meant to address situations where a 
penalty would still have a deterrent effect at a lower level and are 
largely consistent with the mitigating factors listed in chapter 08-
0302 of the Longshore Procedure Manual. The sixth factor, whether the 
respondent is a ``small entity,'' is listed as a proposed mitigating 
factor rather than a required consideration. The Regulatory Flexibility 
Act allows agencies to decline to consider small entity status for 
willful or criminal violations. See 5 U.S.C. 601 note Sec.  223(b)(4). 
Because violations under section 930 of the statute are all necessarily 
willful or involve knowing misrepresentation, OWCP includes it as a 
mitigating factor to consider when appropriate. As with the aggravating 
factors, the final factor is meant to address facts specific to a 
particular employer or situation that may not be generally applicable 
but are still relevant in a particular case. OWCP welcomes comment on 
these proposed factors.

Section 702.233 Additional Compensation for Failure To Pay Without an 
Award

    OWCP proposes to substitute the phrase ``additional compensation'' 
for the word ``penalty'' in Sec.  702.233's current title (i.e., 
``Penalty for failure to pay an award''). Section 702.233 implements 
section 14(e) of the Act, 33 U.S.C. 914(e), which provides that 
claimants are entitled to an additional 10 percent of any compensation 
payable without an award when not paid within 14 days of when it is 
due. The Board has held that payments under section 14(e) (which are 
paid to claimants, not OWCP) are ``compensation'' and not 
``penalties.'' Robirds v. ICTSI Oregon, Inc., 52 BRBS 79 (2019) (en 
banc). In reaching its conclusion, the Board relied on the Federal 
Circuit's decision in Ingalls Shipbuilding, Inc. v. Dalton, 119 F.3d 
972, 979 (Fed. Cir. 1997), which held that payments under section 14(e) 
are compensation. The majority of courts have also construed the 
similar language in section 14(f) of the Act, 33 U.S.C. 914(f) 
(requiring payment of additional 20 percent for late payments under 
terms of an award), as payments of ``compensation'' rather than a 
penalty. See Tahara v. Matson Terminals, Inc., 511 F.3d 950, 953 (9th 
Cir. 2007) (``[T]he LHWCA's plain language supports that a Sec.  914(f) 
late payment award is compensation''); Newport News Shipbuilding and 
Dry Dock Co. v. Brown, 376 F.3d 245, 251 (4th Cir. 2004) (``[I]t is 
plain that an award for late payment under [section] 14(f) is 
compensation.''). But see Burgo v. General Dynamics Corp., 122 F.3d 
140, 145-46 (2d Cir. 1997). Using ``additional compensation'' in the 
title of Sec.  702.233 promotes accuracy and clarifies the instances in 
which the new penalty procedures apply.

Section 702.236 Penalty for Failure To Report Termination of Payments

    Proposed Sec.  702.236 revises the current rule to incorporate the 
penalty procedural rules proposed in new subpart I. It also clarifies 
that the Director, not the District Director, has the ultimate 
authority and responsibility for assessing the penalty. This is 
consistent with the process set forth in the new proposed subpart I.

Section 702.274 Employer's Refusal To Pay Penalty

    The proposed changes to Sec.  702.274 would simply (1) clarify that 
consequences for refusing to pay would occur only after the penalty 
becomes final and (2) update the outdated references to officials and 
offices within the Department of Labor.

Section 702.901 Scope of This Subpart

    Proposed Sec.  702.901 provides that the procedures set forth in 
subpart I apply when the District Director imposes civil monetary 
penalties under Sec.  702.204 or 702.236 and that any penalties 
collected are to be deposited into the special fund described in 33 
U.S.C. 944.

Section 702.902 Definitions

    Proposed Sec.  702.902 defines ``respondent'' as the employer, 
insurance carrier, or self-insured employer against whom the District 
Director is seeking to assess a penalty. This covers the possible 
entities against which penalties may be assessed under the scope of 
this subpart. 33 U.S.C. 914(g) authorizes the Secretary to assess a 
penalty against an employer, and section 935 substitutes the carrier 
for the employer regarding any obligations and duties imposed by the 
Act on the employer. Section 930(a) requires the employer to send the 
report to the Secretary, and section 930(e) explicitly makes employers, 
insurance carriers, and self-insured employers subject to possible 
penalties.
    For the purpose of this subpart, OWCP interprets insurance carriers 
to include self-insured employer groups. Under 20 CFR 701.301(a)(13), a 
carrier is an insurance carrier or self-insurer meeting the statutory 
requirements with respect to authorization to provide insurance 
fulfilling the obligation of an

[[Page 62485]]

employer to secure the payment of compensation. The penalties in this 
rulemaking are meant to address failures and misrepresentations in 
filing required reports, so to the extent the obligation to file falls 
on self-insured employer groups, they too may be respondents under 
subpart I.

Section 702.903 Notice of Penalty; Response; Consequences of No 
Response

    Proposed Sec.  702.903 is a new provision governing the District 
Director's notice of proposed penalty, the respondent's response, and 
the consequences of not responding. Paragraph (a) requires OWCP to 
serve a written notice on the respondent by a method that verifies the 
delivery date because date of receipt triggers the respondent's 
response period. If the respondent does not accept service, the receipt 
date will be the attempted date of delivery. This is to ensure 
respondents do not have an incentive to evade service. Proposed 
paragraph (b) prescribes the contents of the notice: the facts giving 
rise to the proposed penalty, the statutory and regulatory basis for 
the proposed penalty, the amount of the proposed penalty and 
explanation of the amount, instructions for including documentation in 
the response, and the consequences of failing to timely respond. 
Proposed paragraph (c) gives the respondent 30 days to respond. The 
response may include an explanation of why the full proposed penalty 
amount should not be assessed and documentation relevant to the factual 
basis for the penalty, including any mitigating factors claimed under 
proposed Sec.  702.208. Proposed paragraph (d) provides that if the 
respondent does not respond within 30 days, the District Director will 
submit the notice of proposed penalty to the Director as a preliminary 
decision. This ensures the process continues without delay while still 
providing the respondent with a fair opportunity to provide additional 
information or reasons that the District Director may not have 
considered.

Sec.  702.904 Preliminary Decision on Notice of Proposed Penalty After 
Timely Response

    Proposed Sec.  702.904 addresses the District Director's 
preliminary decision after a timely response from the respondent. If 
the respondent files a timely response to the notice described in Sec.  
702.903, the District Director would review the facts and any argument 
presented in the response, revise the proposed penalty amount, if 
warranted, and submit the revised notice of proposed penalty to the 
Director as a preliminary decision. This provision, along with proposed 
Sec.  702.903, allows the respondent a meaningful opportunity to be 
heard before the District Director and allows the District Director 
time to revise the proposed penalty if appropriate.

Section 702.905 Director's Penalty Order; Request for Hearing

    Proposed Sec.  702.905 addresses the Director's issuance of the 
penalty order and the process for requesting a hearing before the 
Office of Administrative Law Judges. Proposed paragraph (a) provides 
that the Director will consider the District Director's preliminary 
decision and issue a penalty order in no more than 30 days. OWCP 
welcomes comment on this time frame.
    Under proposed paragraph (a)(1) through (3), the penalty order must 
contain a statement of the reasons for the assessment, including an 
evaluation of any mitigating or aggravating factors considered, and the 
amount of the penalty; a statement of the respondent's right to request 
a hearing on the Director's penalty order and the method for doing so; 
and a statement of the consequences of failing to timely request a 
hearing. By including the reasons for the penalty and information about 
how to contest it, OWCP intends to provide the respondent with fair 
notice and a full opportunity to contest the penalty order.
    Proposed paragraph (b) provides that the respondent has 15 days 
from receipt of the Director's penalty order to request a hearing 
before an Administrative Law Judge by filing a request for hearing with 
the District Director. See, e.g., 20 CFR 702.316 (providing 14 days for 
parties to object to the District Director's recommendations and 
request a hearing). The request must be typewritten or legibly written 
so that the District Director can understand the contents. It must 
state the specific determinations in the Director's penalty order with 
which the respondent disagrees so that the ALJ understands the scope of 
the matter. It must also be signed and dated and include physical and 
electronic addresses so that OWCP and OALJ can document the date of the 
request and communicate with the respondent about the hearing.
    Proposed paragraph (c) would stay the collection of the penalty 
until final resolution, either by the ALJ or the Secretary. This 
provision would ensure the respondent does not have to pay a penalty 
until it is fully adjudicated. Proposed paragraph (d) provides that if 
the respondent does not request a hearing within 15 days of receipt of 
the Director's penalty order, the assessment and amount of the penalty 
set forth in the Director's penalty order will be deemed a final 
decision of the Secretary. This is to ensure the decision becomes final 
and that OWCP can collect the penalty even if the respondent takes no 
action. See 20 CFR 726.320(a).

Section 702.906 Referral to the Office of Administrative Law Judges

    Proposed Sec.  702.906 addresses referral of an assessment and 
penalty for a hearing before an administrative law judge and is similar 
to the civil money penalty provisions for failure to insure under the 
Black Lung Benefits Act, 20 CFR 726.309 through 311. Paragraph (a) 
provides that, when the District Director receives a request for 
hearing, the District Director will notify the Chief Administrative Law 
Judge, who will assign the case to an administrative law judge. The 
District Director will also forward the administrative record, which 
consists of the District Director's notice of proposed penalty and 
preliminary decision, the documentation upon which the District 
Director relied in issuing the notice of proposed penalty and 
preliminary decision, all written responses and documentation filed by 
the respondent with the District Director, the Director's penalty 
order, the documentation upon which the Director relied in issuing the 
penalty order, and the respondent's request for hearing. Limiting the 
administrative record to documents considered by the District Director 
and Director will allow the ALJ to determine the appropriateness of the 
penalty.
    Paragraph (b) provides that the rules set forth in 29 CFR part 18 
will apply to any hearing before an administrative law judge under 
subpart I. 29 CFR part 18 contains the existing rules of practice and 
procedure for administrative hearings before the Office of 
Administrative Law Judges and covers, among other things, general 
procedures, filing, service, and hearings.

Section 702.907 Decision and Order of Administrative Law Judge

    Proposed Sec.  702.907 governs the contents, issuance, service, and 
finality of the administrative law judge's decision on the Director's 
penalty order. Proposed paragraph (a) limits the administrative law 
judge's determinations to whether the respondent has violated the 
provision under which the penalty was assessed, and whether the penalty 
is appropriate under the standards set forth in Sec. Sec.  702.204, 
702.236, and 702.903(c)(2). Limiting the judge's consideration to these 
issues will help streamline the hearing and decision process. Proposed

[[Page 62486]]

paragraph (b) provides that documentation not presented to the District 
Director may not be admitted in any further proceedings before an ALJ 
unless the ALJ finds that the failure to submit the documentation to 
the District Director should be excused due to extraordinary 
circumstances. This is similar to 20 CFR 725.456(b)(1), which governs 
the admissibility of documentary evidence pertaining to the liability 
of a potentially liable operator and the identification of a 
responsible operator in a claim filed to seek benefits under the Black 
Lung Benefits Act, 30 U.S.C. 901-944. Similar to the limitation on 
issues considered by an ALJ, the limitation on evidence would simplify 
and streamline the penalty-assessment process. Proposed paragraph (b) 
would arm the District Director with sufficient information to 
accurately assess the proposed penalty before the case is referred to 
the Office of Administrative Law Judges. Extraordinary circumstances 
may be shown where an employer encounters ``particular difficulty 
obtaining the necessary evidence.'' See 65 FR 79989. This would entail 
showing that even after reasonable diligence, the respondent could not 
have produced the evidence at the District Director stage. For example, 
assume that after receiving the notice of proposed penalty, respondent 
requests but is unable to acquire documentation because of a 
catastrophic event or natural disaster that caused a delay in 
processing the request. If respondent obtains the documentation after 
the District Director issues the preliminary decision on the notice of 
proposed penalty, it may be able to demonstrate that extraordinary 
circumstances justify the admission of the evidence before the ALJ. 
Moreover, there is ample case law applying the extraordinary 
circumstances requirement under the Black Lung Benefits Act and 
confirming that it is a high bar to meet. See, e.g., Howard v. Apogee 
Coal Company, BRB No. 20-0229 BLA (Oct. 18, 2022) (rejecting employer's 
argument that extraordinary circumstances exist based on Director's 
actions in separate claims); Dallas McCoy v. Eastern Associated, BRB 
No. 19-0520 BLA (March 31, 2021) (unpub.) (``[T]he mere fact employer's 
exhibits were in DOL's possession does not show extraordinary 
circumstances for why Employer did not timely obtain and submit 
them.''); Bobby Knight v. Heritage Coal Co., BRB No. 19-0435 BLA (Dec. 
15, 2020) (unpub.) (rejecting employer's assertion that extraordinary 
circumstances exist where ``employer requested the relevant documents 
after the deadline'' to submit additional evidence).
    Proposed paragraph (c) requires the administrative law judge's 
decision to include a statement of findings and conclusions, with the 
reasons and bases for those findings and conclusions; instructions for 
filing a motion for reconsideration with the Administrative Law Judge; 
and instructions for filing a petition for review with the Secretary. 
This would allow the Secretary or a court to review the decision and 
determine its reasonableness if the respondent seeks further judicial 
review.
    Proposed paragraph (d) would require the administrative law judge 
to deliver a copy of the decision and order to the District Director 
for service on the parties. This is consistent with the procedures set 
forth in 20 CFR 702.349, where the administrative law judge delivers 
the compensation order to the District Director for service on the 
parties and on the representatives of the parties, if any. Proposed 
paragraph (e) provides that any party may move for reconsideration of 
the decision within 30 days of the date the District Director serves 
the decision, and that any such motion will suspend the running of time 
to file a petition for review under Sec.  702.908 until the date the 
motion for reconsideration is denied or 30 days after a new decision is 
issued. This would allow time for the ALJ to consider the motion and, 
if warranted, issue a new decision while still preserving the parties' 
rights to further appeal the decision. Proposed paragraph (f) provides 
that, absent a timely request for reconsideration or petition for 
review, or if any such motions or petitions are denied, the 
administrative law judge's decision will be deemed a final decision of 
the Secretary. Proposed paragraph (g) provides that the ALJ will 
forward the complete hearing record to the District Director at the 
conclusion of all hearing proceedings. This is consistent with 20 CFR 
702.349(a), where the District Director retains custody of the record 
after ALJ proceedings regarding a compensation order.

Section 702.908 Review by the Secretary

    Proposed Sec.  702.908 allows any party aggrieved by an 
administrative law judge's decision to petition the Secretary for 
review. Proposed paragraph (a) requires that any petition be filed 
within 30 days of the date on which the District Director serves the 
decision. Under proposed paragraph (b), if any party files a timely 
motion for reconsideration with the administrative law judge, the 30-
day period will not begin to run until the judge issues a decision on 
reconsideration and any petition for review filed earlier will be 
dismissed without prejudice as premature. This is to ensure the ALJ 
process is complete before moving to the next level in the appeal 
process. Proposed paragraph (c) sets out the requirements for the 
petition for review: that it be typewritten or legibly written, state 
the specific determinations in the ALJ decision with which the 
petitioner disagrees, be signed and dated, and include attached copies 
of the ALJ's decision and any other relevant documents in the record. 
This is to ensure the Secretary or their designee has sufficient 
information on which to render a decision. And proposed paragraph (d) 
provides the mailing address for sending the petition, notes that 
documents are not considered filed until actually received by the 
Secretary, and requires the petition to be filed in the manner 
specified in the ALJ's decision and order. This is to allow for future 
address changes and technological advancements, while avoiding 
confusion if information in the regulation becomes outdated.

Section 702.909 Discretionary Review

    Proposed Sec.  702.909(a) provides that the Secretary's review of a 
timely petition is discretionary and that the Secretary will send 
written notice of their determination to all parties. Paragraph (a)(1) 
provides that, if the Secretary declines review, the administrative law 
judge's decision will be considered the final agency decision 30 days 
after the filing of the petition for review. Under paragraph (b)(2), if 
the Secretary chooses to review the decision, the Secretary will notify 
the parties of the issues to be reviewed and set a schedule for the 
parties to submit written arguments in whatever form the Secretary 
deems appropriate. Proposed paragraph (b) requires the District 
Director to forward the administrative record to the Secretary if the 
Secretary decides to review the administrative law judge's decision.

Section 702.910 Final Decision of the Secretary

    Proposed Sec.  702.910 limits the Secretary's review to the hearing 
record. The Secretary will review findings of fact under a substantial 
evidence standard and conclusions of law de novo. The Secretary may 
affirm, reverse, modify, or vacate the decision, and may remand to the 
Office of Administrative Law Judges for further review. This is based 
on the scope of review for the Benefits Review Board for cases under

[[Page 62487]]

its jurisdiction. See 20 CFR 802.301 (``Such findings of fact and 
conclusions of law may be set aside only if they are not, in the 
judgment of the Board, supported by substantial evidence in the record 
considered as a whole or in accordance with law.''). The Secretary's 
decision must be served on all parties and the Chief Administrative Law 
Judge.

Section 702.911 Settlement of Penalty

    Proposed Sec.  702.911 provides that the respondent and the 
Director or District Director may enter into a settlement at any time 
during the penalty proceedings. This provision would cover both 
proposed penalties and assessed penalties and is meant to allow 
flexibility and forestall further litigation if OWCP and the respondent 
reach agreement at any point during the proceedings. Upon settlement, 
the OWCP official with whom the respondent settled would transmit a 
copy of the settlement agreement to the Deputy Director for Longshore 
Claims. This is to ensure the Longshore program is aware of every 
settlement for the purpose of tracking collections and recovery, as 
well as for possible consideration as an aggravating factor under any 
future penalty proceedings involving the same respondent. Proposed 
Sec.  702.911 also provides that penalties agreed upon in settlement 
agreements may be collected and recovered pursuant to Sec.  702.912. 
This is to ensure that the Department has a mechanism for collecting 
agreed-upon payments. OWCP welcomes comment on this proposed paragraph, 
and specifically whether settlement agreements should be made public 
when transmitted to the Deputy Director for Longshore Claims.

Section 702.912 Collection and Recovery of Penalty

    Paragraph (a) of proposed Sec.  702.912 provides that, when a 
penalty becomes final under Sec.  702.905(d), 702.907(f), 
702.909(a)(1), 702.910, or 702.911, the penalty is immediately due and 
payable to the Department on behalf of the special fund described in 33 
U.S.C. 944. Paragraph (b) provides that, if payment is not received 
within 30 days after it becomes due and payable, it may be recovered by 
a civil action brought by the Secretary, who will be represented by the 
Solicitor of Labor.

V. Legal Basis for the Proposed Rule

    Section 39(a) of the LHWCA, 33 U.S.C. 939(a)(1), authorizes the 
Secretary of Labor to prescribe rules and regulations necessary for the 
administration of the Act. The statute further allows OWCP to impose a 
penalty when an employer or insurance carrier fails to timely report a 
work-related injury or death, 33 U.S.C. 930(e), or fails to timely 
report its final payment of compensation to a claimant, 33 U.S.C. 
914(g). This proposed rule would effectuate these statutory provisions 
and falls well within these statutory grants of authority.

VI. Information Collection Requirements

    The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., 
and its implementing regulations, 5 CFR part 1320, require that the 
Department consider the impact of paperwork and other information 
collection burdens imposed on the public. A Federal agency generally 
cannot conduct or sponsor a collection of information, and the public 
is generally not required to respond to an information collection, 
unless it is approved by the Office of Management and Budget (OMB) 
under the PRA and displays a currently valid OMB Control Number. In 
addition, notwithstanding any other provisions of law, an agency 
generally may not subject a person to penalty for failing to comply 
with a collection of information that does not display a valid Control 
Number. See 5 CFR 1320.5(a) and 1320.6.
    This proposed rule would not change any existing collections of 
information or generate any new collections of information. The forms 
for the first report of injury and notice of final payment are already 
approved under OMB Control Numbers 1240-0003 and 1240-0041, 
respectively. The information that respondents would submit to OWCP 
under this proposal would be in response to specific notices of 
proposed penalties and penalty orders. It would therefore fall under 
the exemption for requests for facts or opinions addressed to a single 
person. See 5 CFR 1320.3(h)(6).

VII. Executive Orders 12866, 13563, and 14094 (Regulatory Planning and 
Review)

    Under E.O. 12866, OMB's Office of Information and Regulatory 
Affairs determines whether a regulatory action is significant and, 
therefore, subject to the requirements of the E.O. and review by OMB. 
See 58 FR 51735 (Oct. 4, 1993). Section 1(b) of E.O. 14094 amends sec. 
3(f) of E.O. 12866 to define a ``significant regulatory action'' as an 
action that is likely to result in a rule that may (1) have an annual 
effect on the economy of $200 million or more (adjusted every 3 years 
by the Administrator of the Office of Information and Regulatory 
Affairs (OIRA) for changes in gross domestic product) or adversely 
affects in a material way the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, territorial, or tribal governments or 
communities; (2) create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impacts of entitlements, grants, user fees, or loan 
programs, or the rights and obligations of recipients thereof; or (4) 
raise legal or policy issues for which centralized review would 
meaningfully further the President's priorities or the principles set 
forth in the E.O. See 88 FR 21879 (Apr. 11, 2023). This proposal would 
clarify the process for assessing and appealing penalties and is 
largely consistent with practices already in OWCP's procedural manual. 
As such, this proposal is not likely to generate additional costs to 
the regulated community. OIRA has determined that this proposed rule is 
not a significant regulatory action under sec. 3(f)(1) of E.O. 12866, 
so it has not reviewed it prior to publication.
    Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, reducing costs, harmonizing rules, and promoting 
flexibility. It directs agencies to, among other things, propose or 
adopt a regulation only upon a reasoned determination that its benefits 
justify its costs; that it is tailored to impose the least burden on 
society, consistent with obtaining the regulatory objectives; and that, 
in choosing among alternative regulatory approaches, the agency has 
selected those approaches that maximize net benefits. Executive Order 
13563 recognizes that some costs and benefits are difficult to quantify 
and provides that, when 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.
    The Department has considered this proposed rule with these 
principles in mind and has concluded that, if adopted, the regulated 
community would benefit from this regulation. Promulgating procedural 
rules related to civil money penalties would benefit employers (and 
their insurance carriers) against whom OWCP may assess penalties. 
Currently, the regulations contain no set procedures for employers to 
challenge penalties, which can lead to procedural decisions being made 
on a case-by-case basis. The proposed rules

[[Page 62488]]

would establish a transparent and consistent pathway for assessment and 
adjudication of penalties: clear notice of the proposed penalty and an 
opportunity to contest it; hearing by an administrative law judge upon 
request; the opportunity to petition the Secretary for discretionary 
review; and a stay of payment for the penalty assessed until review is 
complete and the decision becomes final. These procedures would clearly 
protect an employer's rights to be fully heard before having to pay a 
penalty and promote consistency and fairness across different districts 
and regions.

VIII. Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531 
et seq.) directs agencies to assess the effects of Federal regulatory 
actions on state, local, and tribal governments, and the private 
sector, ``other than to the extent that such regulations incorporate 
requirements specifically set forth in law.'' This proposed rule does 
not include any Federal mandate that may result in increased 
expenditures by state, local, and tribal governments, or increased 
expenditures by the private sector of more than $100,000,000 (in 1995 
dollars). It is therefore not covered by the Unfunded Mandates Reform 
Act.

IX. Regulatory Flexibility Act and Executive Order 13272 (Proper 
Consideration of Small Entities in Agency Rulemaking)

    The Regulatory Flexibility Act of 1980, as amended (5 U.S.C. 601 et 
seq.) (RFA), requires an agency to prepare a regulatory flexibility 
analysis when it proposes regulations that will have ``a significant 
economic impact on a substantial number of small entities'' or to 
certify that the proposed regulations will have no such impact, and to 
make the analysis or certification available for public comment.
    The Department has determined that a regulatory flexibility 
analysis under the RFA is not required for this rulemaking. While many 
longshore employers and a handful of insurance carriers may be small 
entities within the meaning of the RFA, see generally 77 FR 19471-72 
(March 30, 2012), this proposed rule, if adopted as a final rule, will 
not have a significant economic impact on them. The procedures related 
to penalties generally simply provide additional structure and 
consistency to the assessment of penalties. While 33 U.S.C. 914(g) does 
not allow any discretion on the part of the agency, OWCP will take 
small entity status into account as a mitigating factor for penalties 
assessed under 33 U.S.C. 930(e). See 5 U.S.C. 601 note Sec.  223(b) 
(limiting the mitigation provisions in section 223 of the Small 
Business Regulatory Enforcement Fairness Act to be subject to ``the 
requirements or limitations of other statutes.'') See proposed Sec.  
702.208(c)(6).
    The Department therefore certifies that this proposed rule would 
not have a significant economic impact on a substantial number of small 
entities. Thus, an initial regulatory flexibility analysis is not 
required. The Department, however, invites comments from members of the 
public who believe the proposed rule would have a significant economic 
impact on a substantial number of small longshore employers or 
insurers. The Department has provided the Chief Counsel for Advocacy of 
the Small Business Administration with a copy of this certification. 
See 5 U.S.C. 605(b).

X. Executive Order 13132 (Federalism)

    The Department has reviewed this proposed rule in accordance with 
Executive Order 13132 regarding federalism and has determined that it 
does not have ``federalism implications.'' The proposed 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'' 
if promulgated as a final rule.

List of Subjects in 20 CFR Part 702

    Administrative practice and procedure, Claims, Longshore and harbor 
workers, Workers' compensation.
    For the reasons set forth in the preamble, the Department of Labor 
proposes to amend 20 CFR part 702 as follows:

PART 702--ADMINISTRATION AND PROCEDURE

0
1. The authority citation for part 702 continues to read as follows:

    Authority:  5 U.S.C. 301, and 8171 et seq.; 33 U.S.C. 901 et 
seq.; 42 U.S.C. 1651 et seq.; 43 U.S.C. 1333; 28 U.S.C. 2461 note 
(Federal Civil Penalties Inflation Adjustment Act of 1990); Pub. L. 
114-74 at sec. 701; Reorganization Plan No. 6 of 1950, 15 FR 3174, 
64 Stat. 1263; Secretary's Order 10-2009, 74 FR 58834.

0
2. Revise Sec.  702.204 to read as follows:


Sec.  702.204  Employer's report; penalty for failure to furnish and or 
falsifying.

    (a) Any employer, insurance carrier, or self-insured employer who 
knowingly and willfully fails or refuses to send any report required by 
Sec.  702.201, or who knowingly or willfully makes a false statement or 
misrepresentation in any report, shall be subject to a civil penalty 
not to exceed $28,304 for each such failure, refusal, false statement, 
or misrepresentation for which penalties are assessed after January 15, 
2023.
    (1) An entity knowingly fails or refuses to send a report required 
by Sec.  702.201 when it has actual knowledge, or reasonably should 
have known, of the employee's injury or death, that the injury or death 
is likely covered by the Act, that a report is required, and that a 
report was not timely filed.
    (2) An entity willfully fails or refuses to send a report required 
by Sec.  702.201 when it intentionally disregards the reporting 
requirement or is plainly indifferent to the reporting requirement.
    (3) An entity knowingly makes a false statement or 
misrepresentation in any report required by Sec.  702.201 when it has 
actual knowledge, or reasonably should have known, that information it 
provides in the report is untrue, incomplete, or misleading.
    (4) An entity willfully makes a false statement or 
misrepresentation in any report required by Sec.  702.201 when it 
intentionally disregards or exhibits plain indifference to the truth.
    (5) Proof of a false statement or misrepresentation made either 
knowingly or willfully in a report required by Sec.  702.201 is 
sufficient to warrant imposition of a penalty under this section.
    (b) In determining the penalty amount under paragraph (a) of this 
section, the number of penalties, if any, that have been assessed 
against the employer, insurance carrier, self-insured employer, or 
self-insured employer group in the two years preceding the most recent 
reporting violation will be considered. The baseline penalty will be in 
accordance with the following table and rounded up to the next dollar.

                        Table 1 to paragraph (b)
------------------------------------------------------------------------
                                                             Baseline
                                                           (unadjusted)
                                                           penalty as a
                  Number of violations                     percentage of
                                                             statutory
                                                              maximum
------------------------------------------------------------------------
First missing/falsified report:.........................               5
Second missing/falsified report:........................              10
Third missing/falsified report:.........................              20
Fourth missing/falsified report:........................              40
Fifth missing/falsified report:.........................              80
Sixth (and above) missing/falsified report:.............             100
------------------------------------------------------------------------

0
3. Add Sec.  702.206 to read as follows:

[[Page 62489]]

Sec.  702.206  Notice of failure to timely submit accurate report.

    (a) When OWCP receives information that indicates an injury or 
death has occurred on a particular date but has not received a first 
report of injury or death as required by Sec.  702.201, the District 
Director will send a notice to the employer that:
    (1) Describes the evidence that indicates a covered injury or death 
occurred on a particular date;
    (2) Notifies the employer of its responsibility to file a report 
within 10 days of that date;
    (3) Requests an explanation for the failure to file a report within 
the required time limit;
    (4) Notifies the employer that it may be subject to a penalty if 
its failure to timely submit a report is knowing and willful; and
    (5) Instructs the employer that it must file the required report no 
later than ten days after receipt of the notice.
    (b) If the employer does not file the required report within ten 
days of receipt of the notice described in paragraph (a) of this 
section, the District Director will send a second notice to the 
employer that:
    (1) Notifies the employer that its failure to file the required 
report after receipt of the notice described in paragraph (a) of this 
section constitutes evidence that its failure to timely submit a report 
is knowing and willful;
    (2) Requests an explanation for the failure to file a report within 
the required time limit and reasons why the full penalty amount should 
not be assessed against the employer, including documentation 
supporting any mitigating factors claimed under Sec.  702.208(c); and
    (3) Instructs the employer that its response should be filed within 
30 days of receipt of the notice.
    (c) When OWCP receives a report filed more than ten days from the 
date of an employee's injury or death or the date an employer has 
knowledge of an employee's injury or death, and the District Director 
has not already sent a notice under paragraph (a) of this section, the 
District Director may notify the employer of its responsibility to file 
a report within ten days of that date. If the District Director 
preliminarily determines the failure to timely file was knowing and 
willful, this notice will also request an explanation for the failure 
to file a report within the required time limit and request the 
employer's reasons why the full penalty amount should not be assessed 
against the employer, including documentation supporting any mitigating 
factors claimed under Sec.  702.208(c), and instruct the employer that 
its response should be filed within 30 days of receipt of the notice.
    (d) When OWCP receives a report required by Sec.  702.201 
containing a false statement or misrepresentation, the District 
Director will send a notice to the employer that
    (1) Describes the evidence that indicates the report contains a 
false statement or misrepresentation;
    (2) Notifies the employer that it may be subject to a penalty if 
the false statement or misrepresentation was made knowingly or 
willfully;
    (3) Requests an explanation for the false statement or 
misrepresentation and reasons why the full penalty amount should not be 
assessed against the employer; and
    (4) Instructs the employer that its response should be filed within 
30 days of the date of the letter.
0
4. Add Sec.  702.207 to read as follows:


Sec.  702.207  Consideration of response; notice of proposed penalty.

    (a) The District Director will consider the employer's responses, 
if any, to the notices described in Sec.  702.206, as well as any other 
information the District Director has about the injury or the 
respondent, to determine whether the failure, refusal, false statement, 
or misrepresentation was knowing or willful as set forth in Sec.  
702.204.
    (b) If the District Director determines that the failure to file a 
timely report was knowing and willful, or the false statement or 
misrepresentation in such a report was knowing or willful, the District 
Director will issue a notice of proposed penalty. The Director has the 
authority and responsibility for assessing a penalty using the 
procedures set forth at subpart I of this part.
0
5. Add Sec.  702.208 to read as follows:


Sec.  702.208  Special considerations in setting penalty amounts.

    (a) In proposing and setting penalty amounts, the District Director 
and Director may, consistent with the maximum penalty set forth in 
Sec.  702.204, consider aggravating and mitigating factors.
    (b) The Director may consider the following aggravating factors in 
determining whether to increase the proposed penalty amount:
    (1) Extent of delay in filing the report;
    (2) Attempts to conceal the injury or death;
    (3) Failure to timely pay compensation due the claimant;
    (4) Failure to submit information sufficient to determine whether 
the correct compensation has been paid;
    (5) Any prior settlements of penalties assessed by the Director;
    (6) Any outstanding proposed penalties assessed against the entity;
    (7) Any prior penalties assessed against an entity's parent company 
or subsidiary; and
    (8) Any other factors relevant to the respondent's conduct with 
respect to the contents of the report.
    (c) The Director may consider the following mitigating factors in 
determining whether to reduce the proposed penalty amount:
    (1) Bringing the failure to comply with the Act or regulations to 
the District Director's attention;
    (2) Full payment of the correct amount of compensation to the 
claimant;
    (3) Timely compliance with the District Director's requests once 
failure to comply with the Act or regulations was brought to their 
attention;
    (4) History of compliance with the Act and the regulations of this 
subchapter;
    (5) A mass casualty event preventing the timely filing in all 
related cases;
    (6) Whether the respondent is a ``small entity'' within the meaning 
of the Regulatory Flexibility Act, 5 U.S.C. 601(6); and
    (7) Any other relevant factors.
0
6. Revise the section heading of Sec.  702.233 to read as follows:


Sec.  702.233  Additional compensation for failure to pay without an 
award.

0
7. Revise Sec.  702.236 to read as follows:


Sec.  702.236  Penalty for failure to report termination of payments.

    Any employer failing to notify the District Director that the final 
payment of compensation has been made as required by Sec.  702.235 
shall be assessed a civil penalty in the amount of $345 for any 
violation for which penalties are assessed after January 15, 2023. The 
Director has the authority and responsibility for assessing this 
penalty using the procedures set forth at subpart I of this part.
0
8. Revise Sec.  702.274 to read as follows:


Sec.  702.274  Employer's refusal to pay penalty.

    In the event the employer refuses to pay the penalty assessed after 
it becomes final as set forth in subpart I of this part, the District 
Director shall refer the complete administrative file to the Deputy 
Director for Longshore Claims, Division of Federal Employees', 
Longshore and Harbor Workers' Compensation, for subsequent transmittal 
to the Associate Solicitor for Black Lung and Longshore Legal Services, 
with the request that appropriate legal action be taken to recover the 
penalty.
0
8. Add subpart I to read as follows:

[[Page 62490]]

Subpart I--Procedures for Civil Money Penalties
Sec.
702.901 Scope of this subpart.
702.902 Definitions.
702.903 Notice of proposed penalty; response; consequences of no 
response.
702.904 Preliminary decision on notice of proposed penalty after 
timely response.
702.905 Director's penalty order; request for hearing.
702.906 Referral to the Office of Administrative Law Judges.
702.907 Decision and order of Administrative Law Judge.
702.908 Review by the Secretary.
702.909 Discretionary review.
702.910 Final decision of the Secretary.
702.911 Settlement of penalty.
702.912 Collection and recovery of penalty.


Sec.  702.901  Scope of this subpart.

    These procedures apply to the proposal, assessment, and 
adjudication of the civil money penalties prescribed by Sec.  702.204 
or Sec.  702.236.


Sec.  702.902  Definitions.

    In addition to the definitions provided in Sec. Sec.  701.301 and 
701.302, the following definition applies to this subpart:
    Respondent means the employer, insurance carrier, or self-insured 
employer against whom the District Director is seeking to assess a 
civil penalty.


Sec.  702.903  Notice of proposed penalty; response; consequences of no 
response.

    (a) The District Director will serve a written notice of proposed 
penalty through an electronic method authorized by OWCP or by trackable 
delivery method on each respondent against whom they are considering 
assessing a penalty. Where service is not accepted by a respondent, the 
notice will be deemed received by the respondent on the attempted date 
of delivery.
    (b) The notice must set forth the--
    (1) Facts giving rise to the proposed penalty;
    (2) Statutory and regulatory basis for the proposed penalty;
    (3) Amount of the proposed penalty, including an explanation for 
the amount proposed;
    (4) Instructions for including documentation in the response, as 
set forth in paragraph (d) of this section; and
    (5) Consequences of failing to timely respond to the notice as set 
forth in paragraph (e) of this section.
    (c) The respondent must respond within 30 days of receipt of the 
notice. The response may include--
    (1) Any explanation for why the full proposed penalty amount should 
not be assessed; and
    (2) Documentation relevant to the factual basis for the penalty, 
including any mitigating factors under Sec.  702.208.
    (d) If the respondent does not respond within 30 days of receipt of 
the notice, the District Director will submit the notice of proposed 
penalty to the Director as a preliminary decision.


Sec.  702.904  Preliminary decision on notice of proposed penalty after 
timely response.

    If the respondent files a timely response to the notice described 
in Sec.  702.903, the District Director will review the facts and any 
argument presented in the response, revise the proposed penalty amount, 
if warranted, and submit the revised notice of proposed penalty to the 
Director as a preliminary decision.


Sec.  702.905  Director's penalty order; request for hearing.

    (a) The Director will consider the District Director's preliminary 
decision and issue a Director's penalty order no more than 30 days 
after receipt of the District Director's preliminary decision. The 
Director's penalty order must--
    (1) Include a statement of the reasons for the assessment, 
including an evaluation of any mitigating or aggravating factors 
considered, and the amount of the penalty;
    (2) Set forth the respondent's right to request a hearing on the 
Director's penalty order and the method for doing so; and
    (3) Set forth the consequences of failing to timely request a 
hearing as set forth in paragraph (d) of this section.
    (b) The respondent has 15 days from receipt of the Director's 
penalty order to request a hearing before an Administrative Law Judge 
by filing a request for hearing with the District Director. The request 
must--
    (1) Be typewritten or legibly written;
    (2) State the specific determinations in the Director's penalty 
order with which the respondent disagrees;
    (3) Be signed and dated by the respondent making the request or by 
the respondent's authorized representative;
    (4) State both the physical mailing address and electronic mailing 
address for the respondent and the authorized representative for 
receipt of further communications.
    (c) A timely hearing request will operate to stay collection of the 
penalty until final resolution of the penalty is reached by the 
Administrative Law Judge or the Secretary, as appropriate.
    (d) If the respondent does not request a hearing within 15 days of 
receipt of the Director's penalty order, the assessment and amount of 
the penalty set forth in the Director's penalty order will be deemed a 
final decision of the Secretary.


Sec.  702.906  Referral to the Office of Administrative Law Judges.

    (a) When the District Director receives a request for hearing in 
response to a Director's penalty order issued under Sec.  702.905, the 
District Director will notify the Chief Administrative Law Judge, who 
will assign an Administrative Law Judge to the case. The District 
Director will also forward to the Office of Administrative Law Judges 
the following documentation, which will be considered the 
administrative record:
    (1) The District Director's notice of proposed penalty and 
preliminary decision issued under Sec. Sec.  702.903 and 702.904;
    (2) The documentation upon which the District Director relied in 
issuing the notice of proposed penalty and preliminary decision;
    (3) All written responses and documentation filed by the respondent 
with the District Director;
    (4) The Director's penalty order;
    (5) The documentation upon which the Director relied in issuing the 
penalty order; and
    (6) The respondent's request for hearing.
    (b) Except as otherwise provided in this subpart, the Rules of 
Practice and Procedure for Administrative Hearings Before the Office of 
Administrative Law Judges at 29 CFR part 18 will apply to hearings 
under this subpart.


Sec.  702.907  Decision and order of Administrative Law Judge.

    (a) In reviewing the Director's penalty order, the Administrative 
Law Judge must limit their determinations to:
    (1) Whether the respondent has violated the sections of the Act and 
regulations under which the penalty was assessed;
    (2) The appropriateness of the penalty assessed as set forth in 
Sec. Sec.  702.204, 702.236, 702.271, and 702.903(c)(2).
    (b) Documentation not presented to the District Director may not be 
admitted in any further proceedings before an Administrative Law Judge 
unless the Administrative Law Judge finds that the failure to submit 
the documentation to the District Director should be excused due to 
extraordinary circumstances.
    (c) The decision of the Administrative Law Judge must include a 
statement of findings and conclusions, with reasons and bases therefor, 
instructions for filing a motion for reconsideration with the 
Administrative Law Judge, and instructions for filing a petition for 
review with the Secretary.

[[Page 62491]]

    (d) On the date of issuance, the Administrative Law Judge must 
deliver a copy of the decision and order on the District Director for 
service on the parties.
    (e) Any party may ask the Administrative Law Judge to reconsider 
their decision by filing a motion within 30 days of the date the 
District Director serves the decision. A timely motion for 
reconsideration will suspend the running of the time for any party to 
file a petition for review under Sec.  702.908 until the date the 
motion for reconsideration is denied or 30 days after a new decision is 
issued.
    (f) If no party files a motion for reconsideration or petition for 
review within 30 days of the date the District Director serves the 
Administrative Law Judge's decision, or if any such motions or 
petitions are denied, the decision will be deemed a final decision of 
the Secretary.
    (g) At the conclusion of all hearing proceedings, the 
Administrative Law Judge will forward the complete hearing record to 
the District Director who referred the matter for hearing, who will 
retain custody of the record.


Sec.  702.908  Review by the Secretary.

    (a) Any party aggrieved by the decision of the Administrative Law 
Judge may petition the Secretary for review of the decision by filing a 
petition within 30 days of the date on which the District Director 
serves the decision. Copies of the petition must be served on all 
parties and on the Chief Administrative Law Judge.
    (b) If any party files a timely motion for reconsideration under 
Sec.  702.907(e), any petition for review filed before service of a 
decision on reconsideration, whether filed prior to or subsequent to 
the filing of a timely motion for reconsideration, will be dismissed 
without prejudice as premature. The 30-day time limit for filing a 
petition for review by any party will begin upon service of a decision 
on reconsideration.
    (c) The petition for review must--
    (1) Be typewritten or legibly written;
    (2) State the specific determinations in the Administrative Law 
Judge's decision with which the party disagrees;
    (3) Be signed and dated by the party or the party's authorized 
representative; and
    (4) Include attached copies of the Administrative Law Judge's 
decision and any other documents admitted into the record by the 
Administrative Law Judge that would assist the Secretary in determining 
whether review is warranted.
    (d) All documents submitted to the Secretary, including a petition 
for review, must be filed with the Secretary of Labor, U.S. Department 
of Labor, 200 Constitution Ave. NW, Washington, DC 20210, in the manner 
specified in the Administrative Law Judge's decision and order. 
Documents are not considered filed with the Secretary until actually 
received.


Sec.  702.909  Discretionary review.

    (a) Following receipt of a timely petition for review, the 
Secretary will determine whether the Administrative Law Judge's 
decision warrants review. This determination is solely within the 
Secretary's discretion. The Secretary will send written notice of their 
determination to all parties.
    (1) If the Secretary does not notify the parties within 30 days of 
the petition for review's filing that they will review the decision, 
the Administrative Law Judge's decision will be considered the final 
decision of the agency at the expiration of that 30 days.
    (2) If the Secretary decides to review the decision, the Secretary 
will notify the parties within 30 days of the petition for review's 
filing of the issue or issues to be reviewed and set a schedule for the 
parties to submit written argument in whatever form the Secretary deems 
appropriate.
    (b) If the Secretary decides to review the decision, the District 
Director must forward the administrative record compiled before the 
Administrative Law Judge to the Secretary.


Sec.  702.910  Final decision of the Secretary.

    The Secretary's review is limited to the hearing record. The 
findings of fact in the decision under review shall be conclusive if 
supported by substantial evidence in the record as a whole. The 
Secretary's review of conclusions of law will be de novo. Upon review 
of the decision, the Secretary may affirm, reverse, modify, or vacate 
the decision, and may remand the case to the Office of Administrative 
Law Judges for further proceedings. The Secretary's final decision must 
be served upon all parties and the Chief Administrative Law Judge.


Sec.  702.911  Settlement of penalty.

    At any time during proceedings under this subpart, the Director or 
District Director and the respondent may enter into a settlement of any 
proposed or assessed penalties. Upon settlement, the District Director 
or Director will transmit a copy of the settlement agreement to the 
Deputy Director for Longshore Claims. Any settlement agreement under 
this subpart may be considered as an aggravating factor under any 
future proceedings under this subpart. Penalties agreed upon in 
settlement agreements may be collected and recovered pursuant to Sec.  
702.912.


Sec.  702.912  Collection and recovery of penalty.

    (a) When the determination of the amount of the penalty becomes 
final (see Sec. Sec.  905(d), 907(f), 909(a)(1), 910, 911), the penalty 
is immediately due and payable to the U.S. Department of Labor on 
behalf of the special fund described in section 44 of the Act, 33 
U.S.C. 944. The respondent will promptly remit the final penalty 
imposed to the Secretary of Labor by either check or automated 
clearinghouse (ACH).
    (b) If such remittance is not received within 30 days after it 
becomes due and payable, it may be recovered in a civil action brought 
by the Secretary in any court of competent jurisdiction, in which 
litigation the Secretary will be represented by the Solicitor of Labor.

    Signed at Washington, DC, this 5th day of September 2023.
Christopher Godfrey,
Director, Office of Workers' Compensation Programs.
[FR Doc. 2023-19422 Filed 9-11-23; 8:45 am]
BILLING CODE 4510-CR-P