NASA Issues Final Rule Clarifying A Contractor’s Resonsibility to Obtain and Maintain Longshore and Defense Base Act Insurance

The Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) recently issued a Final Rule discussing a contractor’s responsibility to maintain Longshore and Defense Base Act coverage.  This link will take you to a PDF of the Final Rule, which is reprinted below:

Summary:

DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to clarify contractor and subcontractor responsibilities to obtain workers’ compensation insurance or to qualify as a self-insurer, and other requirements, under the terms of the Longshore and Harbor Workers’ Compensation Act (LHWCA) as extended by the Defense Base Act (DBA).

DATES:

Effective: July 1, 2014.

FOR FURTHER INFORMATION CONTACT:

Mr. Edward N. Chambers, Procurement Analyst, at 202-501-3221 for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202-501-4755. Please cite FAC 2005-74, FAR Case 2012-016.

SUPPLEMENTARY INFORMATION:

I. Background

DoD, GSA, and NASA published a proposed rule in the Federal Register at 78 FR 17176 on March 20, 2013, to make the necessary regulatory revisions to revise the FAR to clarify contractor and subcontractor responsibilities to obtain workers’ compensation insurance or to qualify as a self-insurer, and other requirements, under the terms of the LHWCA, 33 U.S.C. 901, et seq., as extended by the DBA, 42 U.S.C. 1651, et seq. Three respondents submitted comments on the proposed rule.

II. Discussion and Analysis

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the comments in the development of the final rule. A discussion of the comments and the changes made to the rule as a result of those comments are provided as follows:

A. Summary of Significant Changes

This final rule includes one change to align the FAR with Department of Labor’s (DOL) regulations and implementation of section 30(a) of the LHWCA. This change involves deleting proposed paragraph (b) of FAR clause 52.228-3, which stated that the actions set forth under paragraphs (a)(2) through (a)(8) may be performed by the contractor’s agent or insurance carrier. The DOL’s regulations place the responsibility for reporting injuries on the employer, see 20 CFR 703.115. The removal of proposed FAR 52.228-3 paragraph (b) also promotes consistency with the statutory requirements.

B. Analysis of Public Comments

1. Support of the Proposed Rule

Comment: Two respondents expressed support for the rule.

Response: The public’s support for this rule is acknowledged.

2. Clarify Term “Days”

Comment: One respondent recommends that the ten-day reporting period within the report of injury requirements set forth in proposed FAR 52.228-3 paragraph (a)(2) should be revised to read “ten business days.” The respondent asserts this modification will clarify the reporting period.

Response: The intent of this rule is to alert contractors to their obligations under the LHWCA, rather than to alter those obligations. The respondent’s suggested revisions could result in altering a contractor’s obligations and therefore are beyond the scope of the FAR rule. The DOL’s regulation interprets the ten-day injury reporting period set forth in LHWCA section 30(a), 33 U.S.C. 930(a), as ten calendar days. See 20 CFR 702.201(a) (using unqualified term “days” to describe reporting period). Thus, adding “business” days would alter the intent of the law.

3. Inclusion of “Work-Related” Terminology

Comment: The respondent states that the terms injury and death should be modified by adding the phrase “work-related” before both. The respondent asserts that this modification will serve to clarify a contractor’s obligation.

Response: The Councils do not recommend adding the phrase “work-related” to the terms “injury” and “death.” The added phrase is not necessary as the LHWCA defines an injury in 33 U.S.C. 902(2) and the concept of work-relatedness is subsumed in the term “injury.” Moreover, the question whether a particular injury is work-related is often a difficult issue to resolve, and a contractor may not be able to decide whether a particular injury arose out of and in the course of employment within the meaning of the statute. By leaving the terms “injury” and “death” unqualified, contractors will be encouraged to err on the side of reporting any incident that may be work-related.

4. Inclusion of “Actual” Terminology

Comment: One respondent suggests that the provision should specify that the contractor’s “actual/constructive” knowledge of the injury triggers the reporting period. The respondent recommends this revision to further clarify a contractor’s obligation.

Response: DOL’s governing rules use the unqualified term “knowledge of an employee’s injury or death” when describing the event that triggers the reporting period. This FAR rule simply tracks that language.

5. Conflicts With Current Practice

Comment: One respondent states that FAR 52.228-3 paragraph (b), which allows the contractor’s agent or insurance carrier to submit the first report of injury referenced in paragraph (a)(2), is inconsistent with section 30(a) of the LHWCA, 33 U.S.C. 930(a), as extended by the DBA, and the DOL’s current practice. The respondent argues that it is inappropriate to redefine this statutory provision through a FAR clause. The respondent recommends the proposed paragraph (b) should be amended to conform to current practice both under the DBA and LHWCA.

Response: The Councils concur with the respondent. The intent of this FAR rule is to clarify and inform contractors of their obligations under the DBA and the DOL’s regulations, not to alter those requirements. Section 30(a) of the LHWCA, as implemented by the DOL’s regulations, places the responsibility for reporting injuries on the employer. See 20 CFR 703.115. Accordingly, the Councils are removing the proposed FAR 52.228-3 paragraph (b) to promote consistency with the statutes referenced above.

6. Contractors Should Provide Insurance

Comment: One respondent states that the contractors should have sufficient insurance to be able to pay compensation if an employee is injured.

Response: The Councils concur that the views of this respondent are in accord with the intent of the law, this FAR rule, and the existing FAR clause 52.228-3.

III. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 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). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

DoD, GSA, and NASA have prepared a Final Regulatory Flexibility Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The FRFA is summarized as follows:

DoD, GSA, and NASA do not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because this rule merely clarifies the existing prescriptions and clauses relating to contractor and subcontractor responsibilities to obtain workers’ compensation insurance or to qualify as a self-insurer, and other requirements, under the terms of the LHWCA as extended by the DBA, and implemented in DOL Regulations. No comments from small entities were submitted in reference to the Regulatory Flexibility Act request under the proposed rule.

The rule imposes no reporting, recordkeeping, or other information collection requirements. The rule does not duplicate, overlap, or conflict with any other Federal rules, and there are no known significant alternatives to the rule.

Interested parties may obtain a copy of the FRFA from the Regulatory Secretariat. The FAR Secretariat has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business Administration.

What Happens if a Longshore Attorney Accepts Fees Without Receiving Prior Approval?

An award of attorney fees for Longshore and Harbor Workers’ Compensation Act (“Longshore Act”) and Defense Base Act claims must adhere to specific statutory requirements.  Section 28 of the Longshore Act controls.  In many cases, an injured worker’s employer or carrier pay attorney fees, provided that claimant is entitled to shift fees.  In a handful of cases, an attorney may ask the claimant to pay fees.  But, in all cases the attorney fees must be pre-approved by an appropriate agency or court before the attorney can actually accept the fees.  The statutory basis for the pre-approval requirement is found at Section 28(e), which states:

A person who receives a fee, gratuity, or other consideration, on account of services rendered as a representative of a claimant, unless the consideration is approved by the deputy commissioner, administrative law judge, Board, or court . . . shall, upon conviction thereof, for each offense be punished by a fine of not more than $1,000 or be imprisoned for not more than one year, or both.

See 33 U.S.C. § 928(e) (1984).

In other words, the Longshore Act makes it a crime to accept attorney fees without prior approval from the Division of Longshore and Harbor Workers’ Compensation (“DLHWC”), the judge, the Benefits Review Board, or the reviewing federal court.  Id.; see also Hensley v. Washington Metro. Area Transit Auth., 690 F.2d 1054 (D.C. Cir. 1982) (“Attorneys who receive unapproved fees are subject to criminal penalties.”).

Criminal penalties are not the only sanction for accepting unapproved fees.  The Secretary of Labor may also disqualify the attorney from representing Longshore or Defense Base Act claimants.  An attorney whose name is published on the Secretary’s list of disqualified individuals “shall not have their representation fee approved . . . .”  See 20 C.F.R. § 702.131 (2014).

Further, accepting attorney fees without the appropriate approval can land the attorney in hot water with their bar association. Attorneys are subject to Rules of Professional Conduct.  All state bar associations consider it professional misconduct for an attorney to commit a criminal act that adversely reflects on the attorney’s honesty, trustworthiness or fitness as a lawyer.  Consequently, if the attorney accepts a fee without first receiving the appropriate approval, they may face bar sanctions in addition to criminal charges and Longshore representation disqualification.

That is exactly what happened in Attorney Grievance Comm’n of Maryland v. Eisenstein, 635 A.2d 1327 (Md. 1994).  There, the Court of Appeals of Maryland thoroughly dissected Section 28(e) and determined that accepting fees without prior approval constituted “criminal conduct” for purposes of the Rules of Professional Conduct.  The court suspended the offending attorney from the practice of law for two years.

In conclusion, stiff penalties await an attorney who accepts fees without first seeking the appropriate approval from the DLHWC, administrative law judge, Benefits Review Board, or federal court.  The attorney may face imprisonment, disqualification, and bar sanctions.

Rhode Island Addresses the Scope of a Seaman’s Entitlement to Unearned Wages

In a lengthy decision, the Supreme Court of Rhode Island addressed a number of Jones Act-related issues, ultimately holding:

(1) that the trial justice’s unearned wages jury instruction, which was part of his instructions to the jury with respect to the plaintiff’s claim for maintenance and cure, was erroneous and resulted in prejudice to the defendant; (2) that the trial justice overlooked and misconceived material evidence in the course of granting the plaintiff’s motion for a new trial on his claims for negligence under the Jones Act and breach of the warranty of seaworthiness; and (3) that the trial justice erred in applying Rhode Island’s prejudgment interest statute, rather than following federal maritime law, which would have required the plaintiff to request an instruction whereby the issue of awarding prejudgment interest (vel non) would be submitted to the jury.

As to the unearned wages jury instruction, the court stated (with internal citations omitted):

Our review of the relevant case law make it abundantly clear that the unearned wages instruction given by the trial justice was erroneous.  For vessels like the Persistence, which are “ocean going ships, the rule is said to be that wages are recoverable for the balance of the voyage . . . .”  However, it is possible for a seaman and his or her employer to extend the period of recovery of unearned wages by contract.  Such a contract would have to provide a definite right to employment for a fixed period of time.  Accordingly, “[t]he period as to which unearned wages must be paid is determined by reference to the contractual relationship.  When a seagoing employee has no contractor has a contract with no enforceable term of duration, she only is entitled to unearned wages from the time she becomes unfit for duty to the end of that voyage.  Thus, we hold that Mr. King was only entitled to recover unearned wages as part of his claim for maintenance and cure for either (1) the duration of the voyage on which he was injured (which is not relevant here since the Peristence was docked when Mr. King’s injury occurred); or (2) for the duration of an employment contract between Mr. King and defendant, if there was such a contract.

. . .

We are of the opinion that the trial justice’s jury instruction with respect to unearned wages was given in error in that it was an incomplete and insufficient statement of the law.  The trial  justice stated that, if the jury awarded maintenance and cure, it “should also award . . . unearned wages . . . when [Mr. King] was serving the ship.”  The trial justice was correct that plaintiff was entitled to be compensated under maintenance and cure for the duration of his employment contract; i.e., when “he was serving the ship.”  However, the trial justice failed to explain that plaintiff was “serving the ship” only if he was on a voyage or had an employment contract for a specified duration.  The lack of clarification of the jury instruction with respect to unearned wages illustrates the fact that the trial justice did not “fram[e] the issues in such a way that the instructions reasonably set forth all of the propositions of law . . . .”  It is further our view that, because the unearned wages jury instruction was somewhat ambiguous in the eyes of this Court it is probable that it was even more so for the lay jurors.

King v. Huntress, Inc., — A.3d —- (R.I. 2014).

Government Accepting Comments About the Longshore Act’s Pre-Hearing Statement

When a Longshore or Defense Base Act claim starts, it is administered by the Office of Workers’ Compensation Program’s Division of Longshore and Harbor Workers’ Compensation.  In the event that a dispute arises, a party may request referral to the Office of Administrative Law Judges.  To do so, the referring party submits a Form LS-18, Pre-Hearing Statement.

Forms used by the government often have an expiration date and the Pre-Hearing Statement is no different.  The present Form LS-18 is scheduled to expire on July 31, 2014.  Accordingly, the Office of Workers’ Compensation Program has asked the Office of Management and Budget (“OMB”) to review the Pre-Hearing Statement and approve its continued use, without change, in accordance with the Paperwork Reduction Act.

In the event you care to do so, the OMB is now accepting public comments about the Pre-Hearing Statement.  The OMB is interested in comments that evaluate whether the proposed collection of information is necessary for the performance of the Office of Administrative Law Judges; evaluate the accuracy of the agency’s estimate of the burden of the proposed collection of information; enhance the quality, utility, and clarity of the information to be collected; and minimize the burden of the collected information “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 responses.”

For more information about OWCP’s Pre-Hearing Statement Request or the open comment period that ends on July 25, 2014, please view the memorandum at this link.