Regulations Implementing the Longshore and Harbor Workers' Compensation Act: Recreational Vessels, 82117-82129 [2011-32880]

Agencies

• DEPARTMENT OF LABOR
• Office of Workers' Compensation Programs

[Federal Register Volume 76, Number 251 (Friday, December 30, 2011)]
[Rules and Regulations]
[Pages 82117-82129]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32880]


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DEPARTMENT OF LABOR

Office of Workers' Compensation Programs

20 CFR Part 701

RIN 1240-AA02


Regulations Implementing the Longshore and Harbor Workers' 
Compensation Act: Recreational Vessels

AGENCY: Office of Workers' Compensation Programs, Labor.

ACTION: Final rule.

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[[Page 82118]]

SUMMARY: This final rule contains regulations implementing amendments 
to the Longshore and Harbor Workers' Compensation Act (LHWCA) by the 
American Recovery and Reinvestment Act of 2009 (ARRA), relating to the 
exclusion of certain recreational-vessel workers from the LHWCA's 
definition of ``employee.'' These regulations clarify both the 
definition of ``recreational vessel'' and those circumstances under 
which workers are excluded from LHWCA coverage when working on those 
vessels. The final rule also withdraws a proposed rule that would have 
codified current case law and the Department's longstanding view that 
employees are covered under the LHWCA so long as some of their work 
constitutes ``maritime employment'' within the meaning of the statute.

DATES: This rule is effective January 30, 2012.

FOR FURTHER INFORMATION CONTACT: Gary A. Steinberg, Acting Director, 
Division of Longshore and Harbor Workers' Compensation, Office of 
Workers' Compensation Programs, U.S. Department of Labor, Room S-3524, 
200 Constitution Avenue NW., Washington, DC 20210. Telephone: (202) 
693-0031 (this is not a toll-free number). TTY/TDD callers may dial 
toll free 1-(800) 889-5627 for further information.

SUPPLEMENTARY INFORMATION: 

I. Background of This Rulemaking

    On August 17, 2010, the Department issued a Notice of Proposed 
Rulemaking (NPRM) under the LHWCA, 33 U.S.C. 901 et seq., proposing 
rules implementing amendments to LHWCA section 2(3)(F) governing 
recreational vessels. 75 FR 50718-30 (Aug. 17, 2010). The Department 
reissued the proposal on October 15, 2010, to implement a technical 
amendment to the title of 20 CFR chapter VI and to allow an additional 
30 days for public comment. 75 FR 63425-27 (Oct. 15, 2010). The comment 
period closed on November 17, 2010.
    As explained in the NPRM, 75 FR 50718-19, LHWCA section 2(3) 
defines ``employee'' to mean ``any person engaged in maritime 
employment, including any longshoreman or other person engaged in 
longshoring operations, and any harbor-worker including a ship 
repairman, shipbuilder, and ship-breaker * * *.'' 33 U.S.C. 902(3). The 
section then lists eight categories of workers who are excluded from 
the definition of ``employee'' and therefore excluded from LHWCA 
coverage. 33 U.S.C. 902(3)(A)-(H). Section 2(3)(F) in particular 
excluded from coverage ``individuals employed to build, repair, or 
dismantle any recreational vessel under sixty-five feet in length,'' 
provided that such individuals were ``subject to coverage under a State 
workers' compensation law.'' 33 U.S.C. 902(3)(F).
    Section 803 of Title IX of the American Recovery and Reinvestment 
Act of 2009, Public Law 111-5, 123 Stat. 115, 127 (2009), amended the 
section 2(3)(F) exclusion. That provision now excludes ``individuals 
employed to build any recreational vessel under sixty-five feet in 
length, or individuals employed to repair any recreational vessel, or 
to dismantle any part of a recreational vessel in connection with the 
repair of such vessel,'' and retains the state-workers'-compensation-
coverage proviso. 33 U.S.C. 902(3)(F), as amended by Pub. L. 111-5 
section 803, 123 Stat. 115, 187 (2009) (emphasis added).
    The Department's proposed rules were intended to implement amended 
section 2(3)(F) and clarify its application in several respects. The 
proposed rules set standards for when the amendment applied, refined 
the definition of ``recreational vessel,'' clarified what types of 
recreational-vessel work may result in an individual being excluded 
from the definition ``employee,'' and revised the current regulatory 
definition of how recreational-vessel length is measured. The proposal 
also codified the Department's longstanding view that employees are 
covered under the LHWCA so long as some of their work constitutes 
``maritime employment'' within the meaning of the statute. Finally, the 
Department included a summary of its initial regulatory flexibility 
analysis.
    The Department received many written comments in response to the 
NPRM from a variety of sources connected to the recreational-vessel 
community. The commenters included Longshore claimant and employee 
groups, recreational vessel manufacturers, marina owners and operators, 
repair shop owners, insurance-industry members, members of Congress, 
and the Small Business Administration's Office of Advocacy. The 
Department has found these comments very helpful and, in several 
important respects, has revised the final rule in response.

II. General Response to Significant Comments and Explanation of Major 
Changes

A. The LHWCA ``Situs'' Test

    As an initial matter, the Department notes that several comments 
responding to the NPRM appear to be based on the fundamental 
misunderstanding that these rules eliminate the LHWCA's ``situs'' 
requirement. For example, one commenter uses a hypothetical landlocked 
vessel manufacturing facility to illustrate how in its view the 
proposed rules would be unworkable. Similarly, several landlocked 
vessel manufacturers commented that the proposed rules would add to 
their costs of doing business, potentially resulting in a loss of jobs.
    Neither the proposed nor the final rules eliminate the LHWCA's 
situs requirement for recreational-vessel workers. As explained in the 
NPRM, 75 FR 50723-24 (Aug. 17, 2010), the LHWCA imposes both a 
``situs'' and a ``status'' requirement. Northeast Marine Terminal Co. 
v. Caputo, 432 U.S. 249, 256-265 (1977) (describing history of 
``situs'' and ``status'' tests). The situs test considers whether the 
injury occurred on ``the navigable waters of the United States 
(including any adjoining pier, wharf, dry dock, terminal, building way, 
marine railway, or other adjoining area customarily used by an employer 
in loading, unloading, repairing, dismantling, or building a vessel.'' 
33 U.S.C. 903(a); Caputo, 432 U.S. at 279. The status test considers 
whether the worker was ``engaged in maritime employment'' and therefore 
a covered ``employee'' when injured. 33 U.S.C. 902(3); Caputo, 432 U.S. 
at 265.
    Because the ARRA amendment revised the definition of ``employee,'' 
the proposed rules chiefly pertain to the status test. But the 
regulations in no way eliminate the situs requirement. Thus, workers at 
completely landlocked recreational vessel manufacturing facilities, 
repair shops, boat dealers and the like (i.e., facilities that do not 
meet the situs test) are not covered by the LHWCA, regardless of the 
section 2(3)(F) exclusion for recreational-vessel workers.

B. Exclusion for Marina Workers

    A significant number of marinas and a marina trade association 
submitted comments in response to the NPRM. Most of these commenters 
expressed concern that the proposed rules would require marinas to 
purchase LHWCA insurance in addition to state workers' compensation 
insurance. The Department notes, however, that the LHWCA excludes from 
the term ``employee'' those ``individuals employed by a marina and who 
are not engaged in construction, replacement, or expansion of such 
marina (except for routine maintenance),'' provided the worker is 
subject to a state compensation law. 33 U.S.C. 902(3)(C).

[[Page 82119]]

This exclusion has rarely been tested in litigation, and the LHWCA does 
not define the term ``marina.'' Whether any particular facility is a 
marina and whether its workers are excluded under the terms of section 
2(3)(C) is a highly fact-bound question. See generally Keating v. City 
of Titusville, 31 BRBS 187 (1997). But at least some of these marinas' 
workers would likely be excluded from LHWCA coverage under section 
2(3)(C).

C. Definition of ``Recreational Vessel''

    The Department received many comments addressing the proposed 
``recreational vessel'' definition and has made several important 
changes to the final rule. The proposed definition incorporated the 
Coast Guard's standards for categorizing vessels as recreational and 
non-recreational. While the Department has retained those standards, 
the final rule contains two additional provisions designed to make the 
definition easier to apply. First, the final rule provides that 
manufacturers and builders may determine whether a vessel is 
recreational by the nature of the vessel's design rather than the end 
use of the vessel. And second, the rule includes within the definition 
of recreational vessels non-military vessels that are recreational by 
design and owned or chartered by federal, state or municipal 
governments. Both of these changes are explained in detail below. The 
Department believes that these changes answer many of the concerns 
raised by the commenters.

D. Walking In and Out of Qualifying Maritime Employment

    The Department has decided to withdraw proposed Sec.  701.303. This 
rule codified both the Director's longstanding position and controlling 
case law that the LHWCA covers a maritime employee if he or she 
regularly performs at least some duties that come within the ambit of 
the statute as part of his or her overall employment (i.e., 
``qualifying'' employment). 75 FR 50722 (Aug. 17, 2010). The rule also 
clarified that LHWCA coverage does not depend on whether the employee 
is performing qualifying maritime work or non-qualifying work at the 
time of injury. In discussing the proposal, the Department conducted an 
exhaustive review of the governing Supreme Court case law and noted the 
Court's ``bedrock principle that `maritime employment' for LHWCA 
purposes is a unitary concept: Coverage is established whether or not 
the employee was performing a particular covered activity when injured 
so long as his overall employment includes `some' qualifying maritime 
employment.'' 75 FR 50723, quoting Caputo, 432 U.S. at 265, 273. The 
Department viewed the rule as important to advising the regulated 
public of the LHWCA's coverage. 75 FR 50722.
    The Department received many comments on the proposed regulation. A 
great number of these commenters saw proposed Sec.  701.303 as an 
unwarranted expansion of the LHWCA's coverage and expressed great 
concern over the additional costs employers would incur if required to 
carry LHWCA insurance. Most of these comments focused on the nature of 
the facility (e.g., repair shop, manufacturing plant) where 
recreational vessel work is performed or the identity of the employer, 
rather than on the nature of an employee's work at those facilities. 
The commenters stated that it would be difficult to ascertain when a 
particular facility or employer conducted sufficient LHWCA-covered 
operations to trigger LHWCA coverage for the entire facility. Stating 
that the ``some'' standard was too vague and would lead to litigation, 
the commenters urged the Department to adopt a bright-line rule that 
would be easy to administer and set a high threshold for coverage to 
comport with the purpose of the recreational-vessel exclusion. Most 
commenters proposed an 80%-20% split: So long as less than 20% of a 
facility's or employer's work was on commercial vessels and the 
remainder on recreational vessels, all work at the facility would be 
excluded from LHWCA coverage.
    The comments misconstrue both the section 2(3)(F) exclusion and the 
import of proposed Sec.  701.303. Some of the exclusions from the 
definition of ``employee'' in LHWCA section 2(3) focus on the nature of 
the employer. For instance, section 2(3)(B) excludes ``individuals 
employed by a club, camp, recreational operation, restaurant, museum, 
or retail outlet.'' 33 U.S.C. 902(3)(B) (emphasis added). See Boomtown 
Belle Casino v. Bazor, 313 F.3d 300, 303-04 (5th Cir. 2002) (holding 
that plain language of section 2(3)(B) exclusion turns ``on the nature 
of the employing entity, and not on the nature of the duties an 
employee performs''). But section 2(3)(F) excludes individuals based 
solely on the type of work they do: It excludes ``individuals employed 
to build * * * repair * * * or to dismantle * * * in connection with 
the repair'' of a recreational vessel. 33 U.S.C. 902(3)(F) (emphasis 
added). Cf. Boomtown Belle Casino, 313 F.3d at 303-04 (contrasting 
section 2(3)(B)'s recreational exclusion with section 2(3)(C)'s 
exclusion for certain marina employees based on their job duties). 
Thus, for recreational vessel workers, the statute focuses exclusively 
on the kind of work the employee performs and not on the identity of 
the employer or the type of facility where the work is performed. Those 
comments urging the Department to adopt an 80%-20% rule based on the 
nature of the work performed by a particular employer or at a 
particular facility as a whole are inconsistent with the statute's 
plain language.
    Moreover, as noted, proposed Sec.  701.303 was not intended to 
expand LHWCA coverage. Rather, the rule codified the Supreme Court's 
interpretation of the LHWCA. The Department stands by its analysis of 
the governing case law. Thus, even in the absence of a regulation, a 
worker who regularly performs at least some duties that come within the 
ambit of the LHWCA as part of his or her overall employment is covered 
under the LHWCA, even if the injury occurs while the worker was not 
performing qualifying maritime duties. Caputo, 432 U.S. at 273. So too 
is a worker who is injured while performing qualifying maritime duties, 
regardless of his or her other job duties, so long as that employment 
is not excluded under section 2(3). See, e.g., Chesapeake and Ohio Ry. 
Co. v. Schwalb, 493 U.S. 40, 47 (1989) (``It is irrelevant that an 
employee's contribution to the loading process is not continuous or 
that repair or maintenance is not always needed. Employees are surely 
covered when they are injured while performing a task integral to 
loading a ship.'').
    Nevertheless, the Department has elected to withdraw the proposed 
rule. The Department appreciates the difficulties recreational-vessel 
employers and facilities face in determining whether their workers are 
performing LHWCA-covered activities in order to purchase the 
appropriate insurance. Further investigation into the industry's needs 
is warranted. Moreover, even though this rule would have an impact on 
the entire longshoring industry, the Department received only a few 
comments from individuals or groups with interests extending beyond the 
recreational-vessel segment of that industry. This result is not 
surprising because the NPRM chiefly involved implementation of the 
section 2(3)(F) exclusion for recreational-vessel workers. Given the 
rule's broad application, however, the Department is reluctant to 
promulgate the rule without input from the greater longshoring 
community.

[[Page 82120]]

E. Date of Injury Rules

    In response to a number of persuasive comments, the final rule 
makes several changes and one addition to proposed Sec.  701.504. This 
rule sets out standards for determining the date of injury, which 
governs whether the section 2(3)(F) amendment applies. The final rule 
makes the date of harmful or causative workplace exposure--rather than 
the date of death or manifestation--the date of injury for determining 
whether the amendment applies in cases of occupational disease, hearing 
loss, and death. The rule also adds a new section addressing date of 
injury for cumulative trauma, which fixes the date of injury as any 
date on which a workplace trauma worsened the individual's condition.

III. Section-by-Section Explanation

701.301

    The Department proposed only technical revisions to this section to 
accommodate other substantive additions. In particular, the Department 
moved this section's lengthy definition of ``employee'' into a new 
Sec.  701.302. No comments were received, and the rule is promulgated 
as proposed.

701.302

    Proposed paragraph (c)(6) updated the paragraph in the definition 
of ``employee'' pertaining to the recreational vessel exclusion, which 
currently appears at Sec.  701.301(a)(12)(i)(F), to incorporate the 
amended section 2(3)(F) language and cross-reference new Sec. Sec.  
701.501-701.505. No comments were received, and the rule is promulgated 
as proposed.

701.303

    As discussed above, the Department has decided to withdraw this 
proposed regulation.

701.501

    (a) The Department proposed an updated and refined definition of 
``recreational vessel.'' The Department explained that the current 
regulations, promulgated in 1984, adopted the definition of 
recreational vessel from a statute administered by the Coast Guard. 75 
FR 50721 (Aug. 17, 2010). That statute, and the Department's current 
regulations, define ``recreational vessel'' as a vessel ``manufactured 
or operated primarily for pleasure, or rented, leased or chartered by 
another for the latter's pleasure.'' 20 CFR 701.301(a)(12)(iii)(F) 
(2009). See 46 U.S.C. 2101(25); 51 FR 4273 (Feb. 3, 1986). Prior to the 
ARRA amendment, this definition was limited by length: Section 2(3)(F) 
excluded only those individuals who worked on recreational vessels 
under sixty-five feet in length. Because the ARRA amendment removed the 
vessel-length limitation for workers who either repair recreational 
vessels or dismantle them for repair, the Department noted that both 
employers and employees could more frequently encounter difficulties 
determining which vessels were recreational. 75 FR 50721. The 
Department also wanted to ensure that individuals who perform repair 
work on vessels that have a significant commercial purpose were not 
improperly excluded under amended section 2(3)(F). 75 FR 50721.
    To accomplish these goals, the Department proposed using Coast 
Guard vessel categories to define a ``recreational vessel.'' 
Essentially, the Coast Guard deems the following to be recreational: 
Any unchartered passenger vessel used for pleasure and carrying no 
passengers-for-hire (i.e., paying passengers); and any chartered 
passenger vessel used for pleasure with no crew provided and with fewer 
than twelve passengers, none of whom is for hire. All other passenger-
carrying vessels fall into one of the following three non-recreational 
categories: Uninspected passenger vessel; small passenger vessel; and 
passenger vessel. 46 CFR 2.01-7; Navigation and Vessel Inspection 
Circular No. 7-94 (Sept. 30, 1994).
    The Department noted that these categories were used in boating 
safety and environmental contexts, and thus would be generally known to 
the recreational boating community. Id. The categories also provided a 
clear, objective basis by which employers and employees could readily 
ascertain whether a vessel being repaired was a ``recreational vessel'' 
for LHWCA coverage purposes. The Department received many comments 
regarding this proposed rule and has made several significant changes 
to the final rule in response.
    (b) Many comments state that the proposed ``recreational vessel'' 
definition is ambiguous. Some of the more specific criticisms state 
that the proposed definition would be difficult to apply in cases where 
a boat has multiple uses or is in-between uses, and where, over the 
course of its operations, the boat falls within different Coast Guard 
inspection categories. Some believe that the Coast Guard definitions 
are unfamiliar to boat builders and repairers.
    The Department has revised the rule to clarify that the time for 
evaluating the vessel's use is when the vessel is being built, repaired 
or dismantled. But the final rule continues to use the Coast Guard 
classifications to identify recreational vessels. In general, the 
comments did not offer any constructive alternatives to using the Coast 
Guard classifications except to leave the ``recreational vessel'' 
definition unchanged. As set forth in the NPRM, the Department believes 
that the definition needs greater clarity so that employers and 
employees may properly evaluate both their obligations and their rights 
under the LHWCA.
    The Coast Guard categories set a bright-line rule for determining 
whether any particular vessel is recreational. Presumably, a vessel's 
owner or operator is familiar with its use and whether the vessel is 
inspected or uninspected under the Coast Guard standards. An employer's 
simple inquiry may be all that is necessary to resolve the question. 
Further, as noted in the NPRM, some outward indicia point to a vessel's 
non-recreational status. For instance, passenger vessels and small 
passenger vessels must display certificates of inspection, and 
uninspected passenger vessels are subject to certain safety 
requirements and must have a licensed operator. These indicia of non-
recreational status will make it easier for employers and employees to 
recognize vessels that should not be considered ``recreational 
vessels'' for purposes of the section 2(3)(F) exclusion.
    (c) One commenter suggests simplifying the rule by describing the 
vessel categories excluded from the definition of ``recreational 
vessel'' rather than cross-referencing the Coast Guard statutes. The 
Department has not adopted this suggestion. Outside of the 
manufacturing and building context, a vessel's use at the time the 
repair or dismantling led to the compensable injury determines its 
recreational status. Using the general Coast Guard categories will 
allow the definition of ``recreational vessel'' to remain current and 
consistent with the term as used in the recreational boating industry. 
The Department has made a technical revision to the language in 
proposed Sec.  701.501(c) to simplify it. No change in meaning is 
intended by this revision.
    (d) Many comments state the proposed definition would unduly burden 
employers by requiring them to investigate their customers' vessel 
usage in order to determine whether the boat is recreational. Another 
comment urges a rule that uses the intent of the owner in buying a 
vessel instead of its actual use. Others question the feasibility and 
fairness of holding employers to account

[[Page 82121]]

for usage of a boat when off their premises.
    The Department does not believe a change in this requirement is 
necessary. Since 1984, the regulatory ``recreational vessel'' 
definition has required employers to determine whether a vessel is 
``manufactured or operated primarily for pleasure.'' 20 CFR 
701.301(a)(12)(iii)(F) (2009). To the Department's knowledge, making 
this inquiry has not proved to be problematic. In fact, two commenters 
stated that for insurance purposes, they track how much work they do on 
commercial vessels and how much on recreational vessels. That would 
only be possible by evaluating whether the vessels they service are 
used for pleasure. Moreover, using a standard other than usage could 
lead to the improper exclusion of workers from LHWCA coverage. As one 
commenter pointed out, vessels manufactured to recreational-vessel 
standards may in fact be used entirely for commercial purposes. See, 
e.g., Munguia v. Chevron U.S.A. Inc., 999 F.2d 808, 809-10 (5th Cir. 
1993) (noting that employer maintained a fleet of small vessels, 
including Lafitte skiffs, Boston whalers, and Jo-boats, solely to allow 
its employees to service an oil-production field located on water). 
Retaining the ``primarily for pleasure'' touchstone and looking to the 
vessel's use avoids the problem of improperly excluding a worker from 
LHWCA coverage.
    (e) Several comments from recreational-vessel manufacturers object 
to defining a recreational vessel by the vessel's end use because a 
manufacturer typically does not know it. Instead, manufacturers usually 
build to recreational-vessel standards established by the Coast Guard 
and market their products through retail sales channels. These 
commenters ask the Department to adopt a specific rule defining 
recreational vessels for manufacturers building new vessels or doing 
warranty work along the following lines: ``recreational vessel * * * 
means a vessel which by design and construction is intended by the 
manufacturer to be operated primarily for pleasure * * * (rather than 
for commercial or military purposes).'' In a related vein, one comment 
urges the Department to hold the manufacturer responsible for producing 
evidence regarding the relevant percentage of end-user purposes to 
establish that its purported intent is legitimate.
    The Department has revised the final rule to accommodate the 
manufacturers' concerns. A recreational-vessel manufacturer or builder 
is usually in a different position than entities that service, repair 
and dismantle vessels while in use because the manufacturer may not 
know either the purchaser's identity or the vessel's actual use. Thus, 
the final rule provides that a vessel being manufactured or built 
(including warranty service) is a recreational vessel when intended, 
based on design and construction, to be for ultimate recreational use. 
The final rule also places the burden on the manufacturer or builder to 
prove that the vessel or vessels under construction are built in 
accordance with applicable recreational-vessel standards. Because 
recreational-vessel manufacturing facilities are typically landlocked, 
the Department does not expect this change in the final rule to have a 
significant impact on the number of employees covered by the LHWCA.
    (f) Some commenters urge the Department to base the recreational-
vessel definition on a vessel's design or construction for repairers as 
well as for manufacturers, because repair work on vessels that are 
recreational by design is less hazardous than other maritime work 
covered by the LHWCA. The statutory language does not support this 
result. In setting forth section 2(3)(F), Congress described the 
vessels subject to its exclusion simply as ``recreational,'' a term 
which naturally denotes a form of usage. Manufacturers receive the 
benefit of a different definition solely because of the impracticality 
of a usage-based definition. Indeed, the statute from which the current 
regulatory definition is derived, 46 U.S.C. 2101(25), offers a 
bifurcated approach under which some vessels may be recreational if 
they are ``manufactured'' for pleasure, and others if they are 
``operated'' for pleasure, thus suggesting that the definition might 
vary depending on the setting. In a repair setting, where a vessel's 
operations are ascertainable, usage is the more appropriate approach.
    (g) One comment states that paragraphs (a) and (b) of the proposed 
definition are in tension because a vessel used ``primarily for 
pleasure'' may still have incidental use as a passenger vessel or other 
commercial purpose that renders the vessel non-recreational under the 
Coast Guard categories set forth in paragraph (b). This commenter 
suggests that the regulation be rewritten so that incidental non-
recreational use does not make the boat non-recreational for purposes 
of the section 2(3)(F) exclusion. While agreeing that a bright line may 
be necessary to determine recreational status, the commenter suggests 
looking to Coast Guard registration or state registration, whether a 
vessel is routinely engaged in various forms of commercial activity, 
and whether it falls within the Coast Guard definition of a non-
recreational vessel less than 20% of the time. Other commenters echo 
this incidental use concern.
    The Department agrees that occasional non-recreational use does not 
alter the vessel's core recreational purpose and should not take a 
vessel outside of the ``recreational vessel'' definition. To clarify 
this point and to resolve the tension the commenter notes between 
paragraphs (a) and (b), the final rule provides that a vessel remains 
recreational unless it falls within the designated Coast Guard vessel 
categories on a more than infrequent basis during the time the vessel 
is in operation.
    (h) A few comments note that some repairers work on a small number 
of government-operated boats which resemble recreational vessels in 
design aspects. Examples given of government-owned vessels serviced 
include fish and wildlife enforcement boats, public-safety boats, and 
recreational vessels used by police in undercover operations. The 
commenters observe that they would have to discontinue this work (which 
they often perform at a discounted rate as a service to their 
communities) if repairing this small number of vessels would bring them 
under LHWCA coverage.
    The Department agrees that servicing publicly owned or bareboat-
chartered vessels that would otherwise be considered recreational 
generally should not be considered commercial work subject to LHWCA 
coverage. The final rule changes the definition of ``recreational 
vessel'' to accommodate this approach.
    The final rule reflects a framework used in maritime and 
environmental statutes to define public vessels. See 33 U.S.C. 1321(4) 
(definition of public vessel for environmental protection statute); 46 
U.S.C. 2101(24) (definition of public vessel for Coast Guard statute); 
Blanco v. U.S., 775 F.2d 53, 57-60 (2d Cir. 1985) (discussing ``public 
vessels'' as defined in various maritime statutes). This definition 
requires that the governmental entity own or charter the vessel and use 
it for a non-commercial and non-military purpose. It encompasses the 
various kinds of government vessels that the commenters seek to have 
excluded from LHWCA coverage: Firefighting vessels, police vessels, 
some Coast Guard vessels, sheriff's office vessels, and state natural-
resource-department vessels. But to ensure the definition is not over-
expansive, vessels owned or chartered

[[Page 82122]]

by a governmental entity that are not of conventional recreational 
vessel construction or design, or that perform a traditionally 
commercial service (such as ferrying passengers), or that are military 
in nature are not considered public vessels.
    To identify the governmental entity that must own or operate a 
vessel in order for it to be eligible for ``public vessel'' status, the 
final rule uses the phrase ``the United States, or by a State or 
political subdivision thereof.'' The Department intends this phrase to 
be construed broadly, and to include entities such as a State's 
municipalities that meet the well-established factor-based inquiry for 
determining whether a public entity is a subdivision. See Wheaton v. 
Golden Gate Bridge, Highway & Transportation District, 559 F.3d 979, 
981-82 (9th Cir. 2009).

701.502

    (a) The Department proposed this rule to clarify what types of 
recreational-vessel work were covered both before and after the ARRA 
amendment. 75 FR 50721-22. The rule also made clear that the amendment 
did not have retroactive effect and that its application was based on 
the worker's date of injury. The section further defined the terms 
``length,'' ``repair'' and ``dismantle.'' Finally, the rule cross-
referenced Sec.  701.303 and provided that workers who engaged in both 
excluded recreational vessel work and qualifying maritime work were 
covered by the LHWCA.
    (b) Proposed paragraph (a) established that with respect to 
injuries before the amendment's effective date, February 17, 2009, a 
worker employed to repair, build, or dismantle any recreational vessel 
less than sixty-five feet in length is not an ``employee'' under the 
LHWCA, provided he or she is covered under a state workers' 
compensation law for such work. 75 FR 50729. On or after the 
amendment's effective date, a worker employed to build any recreational 
vessel under sixty-five feet in length, or repair or dismantle for 
repair any recreational vessel of any length is not an ``employee'' 
under the LHWCA, again provided he or she is covered under a state 
workers' compensation law. Id. This paragraph also establishes that the 
amendment only operates prospectively from its effective date. In the 
accompanying preamble, the Department noted that building recreational 
vessels sixty-five feet in length or greater and dismantling 
recreational vessels of any length (except in connection with a repair) 
was LHWCA-covered employment post-amendment. 75 FR 50722. The 
Department believed that this paragraph's provisions were consistent 
with congressional intent and the rules of statutory construction.
    No comments found fault with this section, and several offered 
approval of some aspects of it, including the non-retroactivity of the 
amendment, the state workers' compensation proviso, and the treatment 
of dismantling of vessels. Accordingly, paragraph (a) is promulgated as 
proposed.
    (c) Proposed paragraph (b)(1) defined vessel ``length,'' notably 
excluding bow sprits, bumpkins, rudders, outboard motor brackets, 
handles and other similar fittings, attachments and extensions from the 
vessel-length measurement. It also defined ``repair'' and 
``dismantle''. 75 FR 50729. In establishing these definitions, the 
Department relied on common-sense and industry-familiar definitions to 
make these concepts clearer and more objective, with the goal of 
avoiding future litigation. 75 FR 50722.
    Several comments supported the changes to the definition of length. 
There were no comments critical of these definitions. Thus, the final 
rule is promulgated as proposed.
    (d) The Department has made a technical change to the final 
definition of ``dismantle'' in paragraph (b)(3). As explained in the 
NPRM, 75 FR 50721-22, section 2(3)(F) originally excluded workers 
employed to ``dismantle'' recreational vessels less than sixty-five 
feet in length. This unqualified term would have excluded workers who 
dismantled a vessel at the end of the vessel's life. The amended 
statute, however, excludes only those workers who dismantle 
recreational vessels ``in connection with the repair of such vessel.'' 
Given this express limitation, the Department concluded that workers 
governed by the amended statute would not be excluded from LHWCA 
coverage when employed to dismantle obsolete recreational vessels. 
Although Sec.  701.502(a)(1) and (2) make this distinction clear, 
proposed paragraph (b)(3)'s definition of ``dismantle'' does not. 
Accordingly, the Department has added the language ``if the date of 
injury is on or after February 17, 2009'' to paragraph (b)(3)'s last 
phrase.
    (e) Proposed paragraph (c) essentially reiterated the walking-in-
and-out rule that was set forth more fully in proposed Sec.  701.303, 
i.e., it stated that a worker engaged part of the time in excepted 
recreational vessel work and part of the time in qualifying work is 
covered by the LHWCA. 75 FR 50729. Because the Department has withdrawn 
Sec.  701.303, paragraph (c) has been deleted from the final rule.

701.503

    This proposed rule reiterated the basic thrust of the amendment--to 
amend the recreational vessel exclusion--and set forth the amendment's 
effective date based on congressional intent and governing principles 
of statutory construction. No negative comments were received on the 
proposed rule, and it remains unchanged in the final regulation.

701.504

    (a) In the NPRM, the Department defined what date constitutes the 
``date of injury'' for different kinds of claims. 75 FR 50720, 50729-30 
(Aug. 17, 2010). The date of injury is the date at which a legally 
recognized harm occurs to a worker, giving rise to a compensation 
claim. It is the relevant point in time for determining whether the 
section 2(3)(F) amendment applies to a given claim: If the date of 
injury is on or after the amendment's effective date, February 17, 
2009, then the amendment's provisions apply to a claim; otherwise, the 
pre-amendment statute governs. The NPRM set forth different rules for 
traumatic injury, occupational disease, hearing loss and death claims.
    (b) Traumatic injury. For traumatic injury, proposed paragraph 
(a)(1) defined the date of injury as the date the worker is harmed. One 
comment generally supported this provision; no negative comments were 
received. Accordingly, this paragraph is promulgated as proposed.
    (c) Occupational disease. For occupational disease, proposed 
paragraph (a)(2) adopted the manifestation date--i.e., the date that 
the individual actually became aware of a disabling, work-related 
condition--to define the date of injury. The Department reasoned that 
this approach was consistent with judicial precedent and other 
statutory language making the manifestation date relevant for various 
purposes. 75 FR 50720.
    While a few comments offered general support for the proposed rule 
with respect to occupational disease, other comments strongly 
questioned the proposed rule's approach. Several comments pointed out 
that linking the date of injury to disease manifestation 
inappropriately borrows from statute-of-limitations contexts and is 
otherwise unfair and contrary to the position taken by the Department 
in the past. Instead, one comment urged using a rule that makes the 
date of exposure to harmful stimuli the relevant date for determining 
the ARRA amendment's applicability.
    The Department agrees with these comments and the final rule makes 
the

[[Page 82123]]

date of injurious exposure the date of injury for occupational 
diseases. Such an approach is both fairer and more consistent with the 
position taken by the Department in the past.
    Using an exposure date is far less arbitrary than using a 
manifestation date for occupational diseases. The causative 
physiological harm occurs when an employee is exposed to the noxious 
substance, even though the deleterious effects might not be felt until 
years later; in addition, the date the disease's symptoms manifest may 
vary greatly among individuals. Indeed, under a rule that makes 
manifestation the date of injury, similarly-situated employees may be 
treated differently: An employee who was both exposed and developed 
symptoms before the amendment would be accorded pre-amendment coverage, 
while one who was exposed pre-amendment but happened to develop 
symptoms after the amendment's effective date would not.
    And, as the comments allude to, using the exposure date as the date 
of injury affords workers, insurers, and employers the benefit of their 
legal expectations. Employees going to work on vessels that were 
covered pre-amendment did so with the expectation that they would 
benefit from LHWCA coverage for harmful on-the-job exposures, 
regardless of when those exposures manifested themselves in the form of 
a debilitating disease. Concomitantly, employers paid for insurance 
coverage in the event of harm to an employee caused by on-the-job 
exposure--whether harm from the exposure was realized immediately or in 
the long-run.
    As the comments also note, the Department has previously recognized 
the fundamental fairness of a rule that makes the date of exposure 
determinative for gauging the effective date of an amendment. Analyzing 
whether the District of Columbia Workmen's Compensation Act of 1928, 
D.C. Code 36-501 et seq., which extended LHWCA coverage to private 
workers in the District from 1928 to 1982, should continue to apply to 
claims based on employment events prior to that Act's repeal, the 
Department concluded that, ``for the purpose of determining whether a 
workers' compensation statute applies to such an injury (`coverage'), 
the relevant legal provisions are those in effect at the time of the 
employment exposure to the conditions that cause the disease.'' 51 FR 
4270, 4272 (Feb. 3, 1986). The Department reasoned that ``[w]orkers' 
compensation laws operate upon the employment relationship. The 
occurrence of an event or events in the course of that relationship is 
the foundation of any compensation-law liabilities that arise 
thereafter. The insurance requirement that is a socially and 
practically critical aspect of compensation legislation attaches to the 
conduct of covered employment.'' Because insurers are responsible for 
diseases resulting from exposure during the terms of their policies, a 
manifestation rule would unfairly ``relieve[] [insurance carriers] of 
liabilities they contracted to bear.'' Id. at 4272-73.
    Based on this analysis, the Department has reconsidered the 
reasoning it gave in the NPRM to support adopting a manifestation rule 
in occupational disease claims. Although cases the Department cited 
have applied the manifestation rule to determine the applicability of 
the 1972 amendments to the LHWCA, which expanded the categories of 
workers covered by the LHWCA, those cases relied on congressional 
intent specific to those amendments. In SAIF Corp./Oregon Ship v. 
Johnson, 908 F.2d 1434, 1439 (9th Cir. 1990), the court worried that an 
exposure rule would be contrary to Congress' intent to maximally expand 
LHWCA coverage. In order to conform to congressional intent, the court 
held that the manifestation date determined the amendments' coverage, 
because such a rule swept in the greatest number of workers. Id.; see 
also Insurance Company of North America v. Dep't of Labor, 969 F.2d 
1400, 1404 (2d Cir. 1992) (describing SAIF as holding that ``the 
manifestation rule best comports with the LHWCA's `paramount goal' of 
compensating workers for lost earning capacity stemming from 
occupational diseases'').
    The ARRA amendments present a different scenario. Under the ARRA 
amendment, a manifestation rule could result in fewer LHWCA-covered 
employees. But there is no evidence that Congress intended to exclude 
the largest number of workers possible from LHWCA coverage. Rather, by 
expanding the recreational-vessel exclusion via the ARRA amendment, 
Congress primarily sought to relieve businesses from paying for 
duplicative state workers' compensation and LHWCA insurance coverage 
for recreational-vessel workers. See H. Rpt. 111-4, at 49 (Jan. 26, 
2009). A manifestation rule does not serve that purpose. When the 
harmful exposure occurred while working on a covered vessel pre-
amendment, the insurance in place at the time would cover that injury. 
Any expense to businesses for pre-amendment exposures has already been 
incurred, and an exposure rule does not impose any new prospective 
LHWCA financial obligations. Thus, there is no basis to believe that 
Congress wished to deny workers the legal remedy in place when they 
were exposed to an injurious stimulus.
    In the NPRM, the Department cited other provisions of the LHWCA 
making manifestation the date of injury in a statute of limitations 
context. 75 FR 50720. See 33 U.S.C. 912, 913. But as the comments point 
out, this analogy was inapt. The definition of date of injury in a 
statute of limitations context is designed to preserve the ability to 
file a claim for individuals who might not have notice of their right 
to compensation until manifestation. The date of injury in the context 
of a statutory amendment serves a far different goal: Satisfying 
congressional intent and ensuring that the legitimate expectations of 
the parties with respect to coverage are met.
    One comment questioned how the last-employer rule would operate 
under the proposed manifestation-date rule. See generally Travelers 
Ins. Co. v. Cardillo, 225 F.2d 137 (2d Cir. 1955). The commenter noted 
concern about how the liable employer and insurance carrier would be 
identified in claims involving exposure at both covered and non-covered 
employment, and in cases with multiple employers. Because the final 
rule adopts date of exposure as the date of injury, current precedent 
provides clear guidance on the questions the commenter raised. The 
Department adheres to the well-established rule that the employee is 
eligible for LHWCA benefits if some of the exposure leading to the 
occupational disease occurred while covered under the Act. See Newport 
News Shipbuilding and Dry Dock Co. v. Stilley, 243 F.3d 179, 183-84 
(4th Cir. 2001). In cases where the harmful exposure spans both an 
employee's covered pre-amendment work and his or her exempt post-
amendment work, or spans covered commercial vessel work and exempt 
recreational vessel work, the employee will be eligible for benefits 
based on the covered work. The last employer for whom the employee 
performed covered work and that exposed him or her to a harmful 
stimulus is responsible for LHWCA benefits payable when injury results. 
See generally Avondale Industries, Inc. v. Director, Office of Workers' 
Compensation Programs, 977 F.2d 186 (5th Cir. 1992) (setting forth last 
covered employer rule).
    (d) Hearing loss. For hearing loss cases, proposed paragraph (a)(3) 
adopted the audiogram date--i.e., the date that the individual received 
a diagnosis quantifying hearing loss via

[[Page 82124]]

an audiogram--to define the date of injury. The Department offered 
similar reasons to those offered in support of a manifestation rule in 
occupational disease cases, and additionally pointed out the difficulty 
of pinpointing a date of exposure in hearing loss cases.
    Although some comments offer general support for the proposed rule, 
other comments raise compelling questions similar to those raised 
concerning the date of injury for occupational disease cases. One 
commenter questions the fairness of an audiogram-date rule for hearing 
loss claims. For the same reasons the Department has now adopted an 
exposure rule in occupational disease cases, the Department also adopts 
an exposure rule for hearing loss cases as well. Such a rule is less 
arbitrary, recognizes that the genesis of the injury is when the 
exposure occurs, and is fair to all parties by giving them the benefit 
of an insurance contract that covers injuries based on when the 
exposure occurred.
    The comments suggest, and the Department agrees, that the reasoning 
set forth in the NPRM for using an audiogram rule is unpersuasive. 
There, the Department posited that an audiogram date was a better 
measure than an exposure rule for determining the ARRA amendment's 
applicability because of the difficulty in determining a precise date 
of harmful exposure. However, although exposure in hearing-loss claims 
typically occurs over an extended period of time, determining a single 
precise date is not necessary to administration of an exposure rule, 
and current law provides ample tools for handling claims involving 
exposure over periods of time. If some or all exposures occurred prior 
to February 17, 2009, the amendment would simply not apply with respect 
to a disability resulting from those exposures. And a worker would be 
eligible for full benefits if any of the exposure occurring during 
LHWCA-covered employment resulted in a hearing loss. See Port of 
Portland v. Director, Office of Workers Compensation Programs, 932 F.2d 
836, 839-40 (9th Cir. 1991). Moreover, pursuant to the last-covered-
employer rule, the most recent employer, if any, for whom the claimant 
performed LHWCA-covered work at which he or she suffered harmful 
exposure would be responsible for benefits. See id.
    (c) Death claims. For death claims, proposed paragraph (a)(4) 
adopted the date of death as the date of injury for determining the 
amendment's application. The Department based this proposal on court 
precedent applying the law in place at the time of death in death 
benefit cases.
    Although some comments expressed general support for the proposed 
rule, others urged the Department to use the date of the harmful 
workplace exposure or event that ultimately led to death as the date of 
injury, arguing that such a rule was more equitable. For essentially 
the same reasons stated above in the discussion of occupational disease 
cases, the Department agrees. Notably, as one comment suggests, in 
death cases, businesses have already paid and insurers have received 
the appropriate premiums to cover the death based on a causative 
workplace event that occurred while a worker was in covered employment.
    In the proposal, the Department relied on Insurance Company of 
North America v. Dep't of Labor, 969 F.2d 1400, 1406 (2d Cir. 1992), 
and similar cases for the proposition that death should be the date of 
injury. However, although the court held that the time of one's death 
was the date of injury for determining the applicability of the 1972 
amendments, it observed that the goal of the 1972 amendments was ``an 
expansion * * * of the class of persons entitled to benefits under the 
Act.'' Id. Here, the core purpose of the ARRA amendment is sparing 
businesses from the expense of duplicative state workers' compensation 
and LHWCA insurance coverage. One simply cannot infer that Congress 
sought to deny LHWCA benefits where workers were injured while covered 
by the LHWCA, but died post-amendment, given that employers would have 
already paid for LHWCA insurance coverage for a death resulting from an 
injury while a worker was performing LHWCA-covered employment.
    (d) Cumulative trauma. In the NPRM, the Department did not 
specifically address the date of injury in claims involving cumulative 
trauma. One comment urged that the final rule address this issue. To 
avoid any confusion on this subject, the Department agrees, and the 
final rule adds a new paragraph for cumulative trauma injuries. The 
rule states that the date of injury is any date on which a work-related 
trauma occurs that contributes to the cumulative condition. See Metro. 
Stevedore Co. v. Crescent Wharf and Warehouse Co., 339 F.3d 1102, 1105-
06 (9th Cir. 2003) (a trauma that worsens a cumulative condition is 
generally compensable). If, however, the injury is the result of a 
natural progression of an earlier trauma, then the date of the earlier 
trauma is the date of injury.
    (e) Proposed paragraph (b) and (c) set out the consequences of 
applying the date-of-injury to the ARRA amendment's effective date. If 
that date occurs before February 17, 2009, ARRA's effective date, then 
the pre-amendment section 2(3)(F) exclusion applies; if that date 
occurs on or after February 17, 2009, the post-amendment exclusion 
applies. The Department received no specific comments on these rules 
and they are promulgated without substantive change. To make these two 
paragraphs consistent, however, the Department has made a technical 
change to paragraph (c). The Department has replaced the phrase 
``employee's eligibility,'' which appeared in the proposed rule, with 
the phrase ``individual's entitlement'' in the final rule.

701.505

    The proposed rule provided that an employer may not stop paying 
compensation for an injury awarded prior to February 17, 2009, the ARRA 
amendment's effective date, even if that employee's work is excluded 
from coverage by the amendment. The Department proposed this paragraph 
in accordance with basic principles of finality and the presumption 
against retroactivity. The Department has received no specific comments 
on this section but has received some generally positive remarks on its 
interpretation of the non-retroactive character of the ARRA amendment. 
Thus, the proposed rule remains unchanged in the final regulation.

IV. Statutory Authority

    Section 39(a) of the LHWCA (33 U.S.C. 939(a)) authorizes the 
Secretary of Labor to prescribe rules and regulations necessary for the 
administration and enforcement of the LHWCA and its extensions.

V. Information Collection Requirements (Subject to the Paperwork 
Reduction Act) Imposed Under the Proposed Rule

    The final rule imposes no new collections of information.

VI. Executive Order 12866 (Regulatory Planning and Review)

    This rule has been drafted and reviewed in accordance with 
Executive Order 12866, section 1(b), entitled ``The Principles of 
Regulation.'' The Department has determined that the rule is not a 
``significant regulatory action'' under Executive Order 12866, section 
3(f). Accordingly, it does not require an assessment of potential costs 
and benefits under section 6(a)(3) of that order. Moreover, because it 
is not a

[[Page 82125]]

significant rule within the meaning of the Executive Order, the Office 
of Management and Budget has not reviewed it.

VII. Small Business Regulatory Enforcement Fairness Act of 1996

    As required by Congress under the Small Business Regulatory 
Enforcement Fairness Act of 1996, enacted as Title II of Public Law 
104-121 Sec. Sec.  201-253, 110 Stat. 847, 857 (1996), the Department 
will report promulgation of this final rule to both Houses of the 
Congress and to the Comptroller General prior to its effective date. 
The report will state that the Department has concluded that the rule 
is not a ``major rule'' as defined under 5 U.S.C. 804(2).

VIII. Unfunded Mandates Reform Act of 1995

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

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

    The Regulatory Flexibility Act of 1980, as amended (5 U.S.C. 601 et 
seq.), requires an agency to prepare a regulatory flexibility analysis 
when it proposes regulations that will have ``a significant economic 
impact on a substantial number of small entities,'' or to certify that 
the proposed regulations will have no such impact, and to make the 
analysis or certification available for public comment.
    The Department believes that the LHWCA itself accounts for most, if 
not all, of the costs imposed on the industry, and that this final rule 
does not directly add to those costs. The primary cost of the LHWCA 
lies in purchasing commercial insurance or qualifying as a self-insurer 
to insure covered workers. This requirement is imposed by statute. 33 
U.S.C. 904, 932. By expanding the number of recreational vessel workers 
who will be excluded from coverage, the section 2(3)(F) amendment will 
generally reduce the recreational vessel industry's costs for 
purchasing workers' compensation insurance or, in the case of a self-
insurer, providing compensation. This final rule simply seeks to make 
the potentially ambiguous language of the ARRA amendment clearer and 
more easily applied, and it does not deliberately seek to expand or 
contract businesses' eligibility for the recreational vessel exclusion. 
Moreover, to the extent comments have raised concerns that the proposed 
rule might be improved by making its provisions more easily workable 
for businesses without compromising the rule's underlying objective, 
the final rule, as discussed below, has accommodated such comments.
    Nonetheless, because the recreational-vessel building and repair 
industries include many small firms, and because the comments raise 
issues concerning how the Department might maximize benefits to small 
businesses via rulemaking, the Department has evaluated how the ARRA 
amendment, as implemented in this final rule, might affect small 
businesses. The Department prepared an initial regulatory flexibility 
analysis (IRFA) before proposing this rule and included a summary of 
that analysis in the NPRM. 75 FR 50725-28 (Aug. 17, 2010). The 
Department incorporates those documents by reference into this final 
regulatory flexibility analysis.

Need for, and Objectives of, This Rule

    The primary goal of this rule is to provide a clear, workable 
definition of ``recreational vessel.'' Because the ARRA amendment to 
section 2(3)(F) removed the sixty-five-foot limitation on what 
constitutes a recreational vessel for all purposes but construction, 
the amended exclusion presents more opportunities for confusion among 
vessel-repair enterprises and their workers about whether the boats 
they work on are ``recreational vessels'' within the meaning of the 
LHWCA. The Department determined that the current regulatory definition 
of ``recreational vessel'' does not provide adequate guidance to the 
industry and its employees, and therefore adopts this rule to more 
clearly define the term.
    This definition, in turn, serves several purposes. It gives 
entities that build or repair vessels guidance regarding the 
classification of vessels their employees are working on so that they 
may insure themselves under the appropriate workers' compensation 
scheme (i.e., the LHWCA or a state law). Similarly, the definition 
provides guidance to workers who might otherwise be unsure of their 
rights under the LHWCA. Finally, a clear definition reduces the 
possibility of litigation over the applicability of the section 2(3)(F) 
exclusion.\1\
---------------------------------------------------------------------------

    \1\ As expressed in the NPRM, 75 FR 50725, the Department also 
anticipated that in the absence of a size limitation, more questions 
would be raised regarding coverage for workers who perform a 
combination of qualifying work (e.g., building a seventy-foot 
recreational vessel) and non-qualifying work (e.g., repairing a 
seventy-foot recreational vessel). The proposed rule sought to 
clarify how the LHWCA applies to workers engaged in qualifying 
maritime employment whose job duties also include tasks that do not 
come within the ambit of the LHWCA. As set forth above, however, the 
Department has withdrawn this proposed rule.
---------------------------------------------------------------------------

    The Director, Office of Workers' Compensation Programs, has the 
legal authority to issue this final rule. The LHWCA empowers the 
Secretary of Labor ``to make such rules and regulations * * * as may be 
necessary'' to administer the statute. 33 U.S.C. 939(a). The Secretary 
has delegated her authority to the Director, Office of Workers' 
Compensation Programs. Secretary's Order 10-2009 (Nov. 6, 2009). In 
addition, the Department, like any other administrative agency, 
possesses the inherent authority to promulgate regulations in order to 
fill gaps in the legislation that it is responsible for administering. 
Chevron v. Natural Resources Defense Council, 467 U.S. 837, 843-44 
(1984).

Response to Significant Issues Raised by Public Comments and the Small 
Business Administration's Office of Advocacy

    (a) Comments from the Small Business Administration's Office of 
Advocacy (SBA) and the National Marine Manufacturers Association (NMMA) 
raise questions as to whether the IRFA utilized correct data to 
estimate the number of small businesses affected by this rule. The 
Department has fully addressed these comments in the following section 
regarding the estimate of the number of small entities to which the 
final rule will apply.
    (b) Some commenters, including the SBA, assert that using the Coast 
Guard standards for classifying recreational vessels will expand the 
number of small businesses covered by the LHWCA, thereby increasing 
their costs. Because the term ``recreational vessel'' has been only 
generally defined in the past, it is impossible to ascertain the extent 
to which the revised definition will alter the exclusion's scope and 
thereby affect small entities. Moreover, the final rule retools the 
definition so that it involves significantly less verification effort, 
and to make the definition's scope clear so that businesses can avoid 
purchasing LHWCA insurance on a precautionary basis.

[[Page 82126]]

    (c) Addressing proposed Sec.  701.501, the NMMA comments that the 
definition of recreational vessel and its use of the Coast Guard 
standards is ambiguous and will impose additional costs on small 
businesses that may not be able to determine whether a vessel meets the 
definition and, as a result, may turn away important work rather than 
incur the costs associated with LHWCA insurance. The NMMA also posits 
that insurance firms will be less apt to write LHWCA policies on these 
businesses, again increasing costs. The NMMA further encourages the 
Department to adopt a different recreational-vessel definition for boat 
manufacturers that focuses on the manufacturer's intent in building the 
vessel rather than on its end use. The SBA similarly states that the 
Department should consider this regulatory alternative. In addition, a 
few small repair businesses note that under the proposed definition, 
they would have to turn away public-vessel work if performing such work 
made purchasing LHWCA insurance necessary.
    The Department has set forth its full response to these and other 
comments pertaining to the recreational-vessel definition in the 
section-by-section analysis for Sec.  701.501 above. The Department has 
made two important changes to the final recreational-vessel definition 
in response to these comments. These changes will help small businesses 
identify recreational vessels within the meaning of the section 2(3)(F) 
exclusion and make informed decisions regarding their need to obtain 
LHWCA insurance. First, the Department has promulgated an alternative 
definition for manufacturers and builders, which allows them to assess 
a vessel's recreational nature based on design and construction data 
reasonably available to them. Second, the final rule carves out an 
exception for public-purpose vessels so that businesses that repair 
these vessels in addition to other recreational vessels will not have 
to purchase LHWCA insurance.
    (d) Addressing proposed Sec.  701.303, many comments expressed the 
view that the Department should have considered alternative measures 
for determining coverage for workers who perform both qualifying 
maritime duties and non-qualifying work (walking-in-and-out of 
qualifying coverage). The commenters believed the rule would force 
businesses to secure expensive LHWCA insurance for their workers, 
instead of less expensive state workers' compensation insurance. In 
this regard, several commenters rejected the Department's suggestion 
that businesses could minimize the cost implications of the proposed 
rule by segmenting their workplaces into recreational and non-
recreational vessel operations. 75 FR 50728. These commenters (mostly 
small businesses) noted that their staffs were too small to segregate 
in this fashion. Most commenters proposed an 80%-20% split as an 
alternative: So long as less than 20% of a facility's or employer's 
work was on commercial vessels and the remainder on recreational 
vessels, all work at the facility would be excluded from LHWCA 
coverage. The SBA also suggested that the Department adopt this 
alternative.
    The Department has set forth its full response to these comments in 
subsection D of the General Response to Significant Comments and 
Explanation of Major Changes section above. For the reasons explained 
there, the Department is withdrawing proposed Sec.  701.303 and has not 
promulgated it in this final rule.

Small Entities to Which the Final Rule Will Apply

    (a) In the IRFA, the Department looked to available data to 
estimate the number of small entities that might be affected by the 
proposed rule. 75 FR 50725-27. The IRFA estimated that, in 2007, there 
were 1,102 recreational vessel building establishments, employing 
53,466 workers, generating $11.1 billion in shipments, and with a 
payroll of $1.9 billion; and 1,837 recreational boat repair 
establishments, employing 12,203 workers, generating $1.6 billion in 
revenue, and with $436 million in annual payroll. These entities were 
predominantly estimated to be small businesses.
    In reaching its conclusions, the IRFA recognized difficulties in 
finding well-tailored NAICS categories to capture the affected small 
businesses. The Department relied chiefly on two NAICS industry 
categories: (1) NAICS industry 336612 (Boat Building); and(2) NAICS 
industry 811490 (Other Personal and Household Goods Repair and 
Maintenance). The NAICS system is described in detail in the IRFA. 75 
FR 50726.
    (b) Several commenters, notably the NMMA and the SBA, state that 
the universe of affected small entities is larger than estimated in the 
IRFA. These commenters note that the IRFA did not look to several 
relevant NAICS categories in developing its profile of the small 
entities affected: NAICS industry 713930 (Marinas), NAICS industry 
44