Interim Policy Statement Concerning Small Entities Subject to the Railroad Safety Laws

DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

[FRA Docket No. SBR 97-1, Notice 1]

RIN NO. 2130--AB15

Interim Policy Statement Concerning Small Entities Subject to the

Railroad Safety Laws

AGENCY: Department of Transportation (DOT), Federal Railroad

Administration (FRA).

ACTION: Notice of interim statement of agency policy concerning small

entities subject to the railroad safety laws.

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SUMMARY: In this notice, FRA explains its communication and enforcement

policies and programs concerning small businesses subject to the

federal railroad safety laws. These policies are being published

pursuant to requirements set forth in the Small Business Regulatory

Enforcement Fairness Act of 1996. FRA has in place programs that devote

special attention to the unique concerns and operations of small

entities in the administration of the national railroad safety

compliance and enforcement program. FRA expects that publication of

these policies and programs will enhance safe operations for small

railroads, contractors, and shippers, and improve communication between

FRA and small entities.

DATES: Effective Date: This Interim Statement of Policy is effective

October 10, 1997.

Written Comments: Written comments must be submitted to FRA before

November 30, 1997.

FOR FURTHER INFORMATION PLEASE CONTACT:

(1) Principal Program Person: Mark Weihofen, Office of Safety,

Planning and Evaluation Staff Director, RRS-21, Federal Railroad

Administration, 400 Seventh Street, SW, Stop 25, Washington, D.C.,

20590; telephone 202-632-3303.

(2) Principal Attorney: Christine Beyer, Office of Chief Counsel,

RCC-11, Federal Railroad Administration, 400 Seventh Street, SW, Stop

10, Washington, D.C., 20590; telephone 202-632-6189.

SUPPLEMENTARY INFORMATION:

I. Legislative Background

The Small Business Regulatory Enforcement Fairness Act of 1996

(Pub. L. No. 104-121) (SBREFA) establishes new requirements for federal

agencies to follow with respect to small businesses, creates new duties

for the Small Business Administration (SBA), and amends portions of the

Regulatory Flexibility Act (5 U.S.C. 601, et seq.) and the Equal Access

to Justice Act (EAJA) (5 U.S.C. 501, et seq.). The primary purposes of

SBREFA are to implement recommendations developed at the 1995 White

House Conference on Small Business, to provide small businesses

enhanced opportunities for judicial review of final agency action, to

encourage small business participation in the regulatory process, to

develop accessible sources of information on regulatory requirements

for small business, to create a cooperative regulatory environment for

small business, and to make federal regulators accountable for

``excessive'' enforcement actions.

In order to accomplish these goals, SBREFA, among other things,

requires federal enforcement agencies to institute two new policies.

The first is a communication policy, described in section 213 of the

legislation, in which each agency must ``answer inquiries by small

entities concerning information on, and advice about, compliance with''

statutes and regulations within the agency's jurisdiction,

``interpreting and applying the law to specific sets of facts supplied

by the small entity.'' The second is an enforcement policy, required by

section 223 of SBREFA, which requires each agency to establish a policy

or program

to provide for the reduction, and under appropriate circumstances

for the waiver, of civil penalties for violations of a statutory or

regulatory requirement by a small entity. Under appropriate

circumstances, an agency may consider ability to pay in determining

assessments on small entities.

This enforcement policy must include conditions or exclusions, such as

requiring a small entity to correct the violation within a reasonable

time; excluding small businesses that have been subject to several

enforcement actions by the agency; excluding actions that involve

willful or criminal conduct; excluding actions that pose serious

health, safety, or environmental threats; and requiring a good faith

effort to comply with the law.

SBREFA incorporates the definition for ``small entity'' that is

established by existing law (5 U.S.C. 601, 15 U.S.C. 632, 13 CFR part

121) for those businesses to be covered by the agency policies.

Generally, a small entity is a business concern that is independently

owned and operated, and is not dominant in its field of operation.

Also, ``small governmental jurisdictions'' that serve populations of

50,000 or less are small entities. (Commuter railroads are governmental

jurisdictions, and some may fit within this statutory delineation

[[Page 43025]]

for small governmental jurisdictions, or small entities.) An agency may

establish one or more other definitions for this term, in consultation

with the SBA and after opportunity for public comment, that are

appropriate to the agency's activities.

II. Definition of Small Entity in the Railroad Industry

Pursuant to its statutory authority, the SBA promulgated

regulations that clarify the term ``small entity'' by industry, using

number of employees or annual income as criteria. 13 CFR 121.101-108,

and 201. In the SBA regulations, main line railroads with 1500 or fewer

employees, and switching or terminal establishments with 500 or fewer

employees constitute small entities. The SBA regulations do not address

hazardous material shippers in the railroad industry.

Prior to the SBA regulations establishing size categories, the

Interstate Commerce Commission (ICC) developed a classification system

for freight railroads as Class I, II or III, based on annual operating

revenue. (The detailed, qualifying criteria for these classifications

are set forth in 49 CFR part 1201.) The Department of Transportation's

Surface Transportation Board, which succeeded the ICC, has not changed

these classifications. The ICC classification system has been used

pervasively by FRA and the railroad industry to identify entities by

size. The SBA recognizes this classification system as a sound one, and

concurs with FRA's decision to continue using it, provided the public

has notice of the classification system in use for any particular

proceeding and an opportunity to comment on it. FRA has decided to

define ``small entity,'' on an interim basis, to include only those

entities whose revenues would bring them within the Class III

definition. FRA believes this definition is a much more realistic and

useful place to draw the line for safety purposes than the general SBA

definition, but that several other possible definitions deserve

consideration. Therefore, for purposes of the Interim Statement of

Policy at this point in time, FRA wishes to clarify that small entities

are: the Class III railroads; the hazardous material shippers that meet

the income level established for Class III railroads (those with annual

operating revenues of $20 million per year or less, as set forth in 49

CFR 1201.1-1); railroad contractors that meet the income level

established for Class III railroads; and commuter railroads or small

governmental jurisdictions that serve populations of 50,000 or less.

The principles concerning the aggregation of company affiliates set

forth in DOT's regulations at 49 C.F.R. 6.7(f) apply to this definition

for purposes of claims brought under EAJA. However, FRA intends to

develop a new definition for the term ``small entity'' for the railroad

industry that will apply to the programs set forth in this Policy

Statement.

Therefore, FRA now invites comment from the public on potential,

alternative definitions for the term ``small entity.'' Suggested new

definitions should be accompanied by supportable rationale, including

economic and employee data, operating concerns, and an explanation of

how SBREFA's legislative intent would be met by the adoption of a

particular definition. The comments should also include how the

proposed definition would apply to railroads, shippers, commuter

railroads, and contractors working in the railroad industry.

FRA is contemplating several potential new definitions at this

time: fifteen employees subject to the hours of service laws, which was

established by Congress as a benchmark for small business exemptions in

the Hours of Service Act, 49 U.S.C. 20102, 21101-21107, 21303-4;

400,000 person/hours worked annually, which equates to approximately

200 employees and which FRA has used as a size classification in

regulatory programs in the past; the Class III income designation

currently in use; the employee delineations established by SBA

regulation for main line and switching railroads; any combination of

these; and entirely new designations. FRA invites comments from all

individuals and entities subject to the railroad safety laws and other

members of the public on these potential designations for ``small

entity'' or any additional classifications that have not yet been

discussed. After reviewing comments submitted, FRA will conduct a

public meeting to further discuss and consider potential designations

with all interested parties. Commenters should be aware that the

``small entity'' definition FRA adopts here on an interim basis and the

one it ultimately adopts will determine the entities that will be

considered small for purposes of Regulatory Flexibility Act analysis,

the Equal Access to Justice Act, and FRA's small business enforcement

policy and communication program. However, whatever ``small entity''

definition FRA adopts, FRA will retain the authority to use different

criteria to tailor the applicability of any regulations it issues to

address appropriately the specific safety problem at issue. For

example, even if FRA decides to retain the interim Class III standard

for ``small entity,'' it may issue a rule that applies only to

railroads with more than a certain number of annual person/hours or to

all railroads, regardless of size.

III. FRA's Small Business Communication and Enforcement Programs

FRA's purpose in publishing this notice and policy statement is to

formally announce and explain its communication and enforcement

policies concerning small entities in the railroad industry. FRA is

hopeful that this publication will, aside from achieving compliance

with the SBREFA requirements, enhance railroad safety in several ways:

the number of small entities that participate cooperatively in the

safety compliance and enforcement program will increase; small

businesses will gain a greater understanding of railroad safety

requirements; small entities will be encouraged to communicate more

freely with agency personnel to alleviate potential safety risks before

they become hazardous; and FRA's understanding of small operations will

improve.

FRA's small business communication program has existed for some

time, and continues to grow to meet the needs of our customers in the

railroad industry. FRA Office of Safety and Office of Chief Counsel

personnel, at the headquarters, regional and local level, devote a

great deal of attention to the inquiries and concerns of small

entities. FRA's program is flexible and responsive to the particular

need expressed. The agency's response takes a variety of forms: verbal

and written answers to questions received, training sessions for new or

existing small businesses on the substance of railroad safety

regulations, and advice on a particular standard or interpretation of a

standard. Some of the FRA Regional Administrators have established

programs in which small entities in the region meet with FRA regional

specialists on a regular basis to discuss new regulations, persistent

safety concerns, developing technology, and ongoing compliance issues.

FRA regional offices hold yearly conferences, in which specific blocks

of time are set aside to meet with small businesses and hear their

concerns. In addition, FRA has instituted new, innovative programs that

expand our existing communication policy for small entities. The

Railroad Safety Advisory Committee and Technical Resolution Committees,

which play an integral role in the development of railroad safety

regulations and the clarification of regulatory interpretations,

include representatives of small businesses.

[[Page 43026]]

Similarly, FRA's enforcement program devotes special attention to

ensuring that the limited financial resources of small entities are

considered during the enforcement process. FRA inspectors have and

utilize discretion when determining whether a civil penalty citation or

other enforcement action should be taken against a small entity. Staff

attorneys in FRA's Office of Chief Counsel regularly assess information

provided by a company concerning the degree to which fines will impact

the viability of a small business, and the extent to which a fine may

prevent the business from improving the safety of its operation. In

fact, the federal railroad safety laws include the requirement that

agency personnel consider a respondent's ability to pay in any civil

penalty action taken. Staff attorneys regularly invite small entities

to present information concerning financial status and other factors

that may result in a reduction or waiver of penalty assessments. FRA

has instituted a new enforcement program, the Safety Assurance and

Compliance Program (SACP), that also benefits small entities, and it is

described in more detail in the interim policy statement set forth

below.

FRA anticipates that when this interim policy statement becomes

final, it will be codified in the Code of Federal Regulations as an

appendix to 49 CFR part 209, so that all members of the public have

access to it as needed. The terms ``small business'' and ``small

entity'' have identical meaning for purposes of this document, and are

used interchangeably throughout.

Comments Requested

FRA invites written comment on the definition of ``small entity,''

potential alternative definitions, and supporting rationale for

suggested alternative definitions. Please direct all written comments

in triplicate to the Docket Clerk, FRA, 400 Seventh Street, SW, Stop

10, Washington, D.C. 20590 before November 30, 1997.

Federal Railroad Administration Interim Statement of Agency Policy

Concerning Small Entities

This interim policy statement explains FRA's communication and

enforcement policies concerning small entities subject to the federal

railroad safety laws. These policies have been developed to take into

account the unique concerns and operations of small businesses in the

administration of the national railroad safety program, and will

continue to evolve to meet the needs of our customers in the railroad

industry. For purposes of this policy statement, Class III railroads,

contractors and hazardous materials shippers meeting the economic

criteria established for Class III railroads in 49 CFR 1201.1-1, and

commuter railroads that serve populations of 50,000 or less constitute

the class of organizations considered ``small entities'' or ``small

businesses.''

FRA understands that small entities in the railroad industry have

significantly different characteristics than large carriers and

shippers. FRA believes that these differences necessitate careful

consideration in order to ensure that those entities receive

appropriate treatment on compliance and enforcement matters, and

enhance the safety of railroad operations. Therefore, FRA has developed

programs to respond to compliance-related inquiries of small entities,

and to ensure proper handling of civil penalty and other enforcement

actions against small businesses.

Small Entity Communication Policy

It is FRA's policy that all agency personnel respond in a timely

and comprehensive fashion to the inquiries of small entities concerning

rail safety statutes, safety regulations, and interpretations of these

statutes and regulations. Also, FRA personnel provide guidance to small

entities, as needed, in applying the law to specific facts and

situations that arise in the course of railroad operations. These

agency communications take many forms, and are tailored to meet the

needs of the requesting party.

FRA inspectors provide training on the requirements of all railroad

safety statutes and regulations for new and existing small businesses

upon request. Also, FRA inspectors often provide impromptu training

sessions in the normal course of their inspection duties. FRA believes

that this sort of preventive, rather than punitive, communication

greatly enhances railroad safety. FRA's Office of Safety and Office of

Chief Counsel regularly provide verbal and written responses to

questions raised by small entities concerning the plain meaning of the

railroad safety standards, statutory requirements, and interpretations

of the law. As required by the Small Business Regulatory Enforcement

and Fairness Act of 1996 (SBREFA), when FRA issues a final rule that

has a significant impact on a substantial number of small entities, FRA

will also issue a compliance guide for small entities concerning that

rule.

It is FRA's policy to maintain frequent and open communications

with the national representatives of the primary small entity

associations and to consult with these organizations before embarking

on new policies that may impact the interests of small businesses. In

some regions of the country where the concentration of small entities

is particularly high, FRA Regional Administrators have established

programs in which all small entities in the region meet with FRA

regional specialists on a regular basis to discuss new regulations,

persistent safety concerns, emerging technology, and compliance issues.

Also, FRA regional offices hold periodic conferences, in which specific

blocks of time are set aside to meet with small businesses and hear

their concerns.

In addition to these communication practices, FRA has recently

instituted innovative partnership programs that expand the extent to

which small entities participate in the development of policy and

process. The Railroad Safety Advisory Committee (RSAC) has been

established to advise the agency on the development and revision of

railroad safety standards. The committee consists of a wide range of

industry representatives, including organizations that represent the

interests of small business. The small entity representative groups

that sit on the RSAC may appoint members of their choice to participate

in the development of new safety standards. This reflects FRA's policy

that small business interests must be heard and considered in the

development of new standards to ensure that FRA does not impose

unnecessary economic burdens, and to create more effective standards.

Similarly, FRA has established Technical Resolution Committees for each

railroad safety discipline, which meet throughout the country to

discuss, refine, and clarify compliance policies and interpretations of

existing safety standards. These committees generally include small

business representation and provide another avenue of communication

between FRA and small entities. Finally, FRA has established a home

page on the Internet and makes pertinent agency information available

to the public in that medium. FRA's internet address is http://

www.fra.dot.gov and any particular FRA employee can be reached by

entering the following: first name.last [email protected].

FRA's longstanding policy of open communication with small entities

is apparent in these practices. FRA will make every effort to develop

new and equally responsive communication procedures as is warranted by

new developments in the railroad industry.

[[Page 43027]]

Small Entity Enforcement Policy

FRA has adopted an enforcement policy that addresses the unique

nature of small entities in the imposition of civil penalties and

resolution of those assessments. Pursuant to FRA's statutory authority

and as described in 49 CFR part 209, Appendix A, it is FRA's policy to

consider a variety of factors in determining whether to take

enforcement action against persons, including small entities, who have

violated the safety laws and regulations. In addition to the

seriousness of the violation and the person's history of compliance,

FRA inspectors consider ``such other factors as the immediate

circumstances make relevant.'' In the context of violations by small

entities, those factors include whether the violations were made in

good faith (e.g., based on an honest misunderstanding of the law) and

whether the small entity has moved quickly and thoroughly to remedy the

violation(s). In general, the presence of both good faith and prompt

remedial action militates against taking a civil penalty action,

especially if the violations are isolated events. On the other hand,

violations involving willful actions and/or posing serious health,

safety, or environmental threats should ordinarily result in

enforcement actions, regardless of the entity's size.

Once FRA has assessed a civil penalty, it collects at least the

statutory minimum amount ($250 for hazardous materials violations and

$500 for all others) unless it must terminate the claim for some

reason. However, civil penalties may be reduced from the initial

assessment based on the consideration of a variety of criteria found in

the railroad safety statutes and SBREFA: the severity of the safety,

health or environmental risk presented; the existence of alternative

methods of eliminating the safety hazard; the entity's culpability; the

entity's compliance history; the entity's ability to pay the

assessment; the impacts an assessment might exact on the entity's

continued business; and evidence that the entity acted in good faith.

FRA staff attorneys regularly invite small entities to present any

information related to these factors, and reduce civil penalty

assessments based on the value and integrity of the information

presented. Staff attorneys conduct conference calls or meet with small

entities to discuss pending violations, and explain the merits of any

defenses or mitigating factors presented that may have resulted or

failed to result in penalty reductions. Among the ``other factors'' FRA

considers at this stage is the promptness and thoroughness of the

entity's remedial action to correct the violations and prevent a

recurrence. Small entities should be sure to address these factors in

communications with FRA concerning civil penalty cases. Such long-term

solutions to compliance problems will be given great weight in FRA's

determinations of a final settlement offer.

Finally, under FRA's Safety Assurance and Compliance Program

(SACP), FRA identifies systemic safety hazards that continue to occur

in a carrier or shipper operation, and in cooperation with the subject

business, develops an improvement plan to eliminate those safety

concerns. Typically, the plan provides small entities with a reasonable

time frame in which to make improvements without the threat of civil

penalty. If FRA determines that the entity has failed to comply with

the improvement plan, however, enforcement action is initiated.

FRA's small entity enforcement policy is flexible and

comprehensive. FRA's first priority in its compliance and enforcement

activities is public and employee safety. However, FRA is obtaining

compliance and enhancing safety with reasoned, fair methods that do not

inflict undue hardship on small entities.

Submitted in Washington, DC, on August 6, 1997.

Donald M. Itzkoff,

Deputy Administrator.

[FR Doc. 97-21155 Filed 8-8-97; 8:45 am]

BILLING CODE 4910-06-P