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How Does The FAA Calculate A Civil Penalty?

by Greg Reigel 28. February 2017 08:16
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Every so often the Federal Aviation Administration ("FAA") will issue a press release about its proposed assessment of a civil penalty action against an air carrier, maintenance facility or some other business. In some instances the penalties proposed by the FAA may be millions of dollars. And while the FAA’s press release may cite to some of the violations the carrier or facility allegedly committed, the FAA never explains exactly how it arrived at the amount of the civil penalty it proposes to assess.

To provide a little background, when the FAA believes a certificate holder (whether an airman, air carrier, repair station or otherwise) has violated a regulation, it may pursue legal enforcement action against the alleged violator. The action can be against the party's certificate, also known as a "certificate action." In this situation the FAA seeks to suspend or revoke the party's certificate. Alternatively, the FAA could seek to impose a civil penalty or fine against the alleged violator, also known as a "civil penalty action."

Civil penalty actions are typically used against companies or entities, as opposed to individuals, that hold FAA certificates. The FAA may also pursue civil penalty actions against companies or individuals who do not hold FAA certificates (e.g. companies or individuals who violate hazmat regulations or individuals who violate passenger regulations such as interfering with a flight crewmember).

Sometimes, the FAA will bring a civil penalty action to avoid the six month limitation of the NTSB's stale complaint rule in a certificate action, and benefit from the longer two year limitation applicable to civil penalty actions. For example, if the FAA fails to initiate a certificate action within six months of discovering an alleged violation, it will resort to a civil penalty action which allows the FAA two years within which to initiate the action.

In order to determine the appropriate amount of the civil penalty for a given regulatory violation, the FAA uses the Sanction Guidance Table in FAA Order 2150.3B, Appendix B. If the amount of the proposed civil penalty is less than $50,000, then the FAA handles the action. However, if the proposed civil penalty is more than $50,000, then the United States Attorney's office handles prosecution of the action.

The Sanction Guidance Table provides a range of penalties based upon the type and size of the violator, the type of alleged violation and the number of alleged violations. The sanction guidance indicates a minimum and maximum range civil penalty for each instance of a violation of various regulations. And while the Sanction Guidance Table’s sanction ranges generally account for different types of violations, as well as the nature, extent and gravity of each general type of violation, a sanction isn’t calculated through a “strict mathematical formula”, but rather is determined based upon a judgment “of where a case lies along a spectrum of gravity.”

To calculate a civil penalty sanction, the FAA first determines the type and size of the violator and also whether the violator is a Small Business Concern. Next, the FAA starts with the middle of the range for the particular act or omission that caused the violation. It then specifically looks at a variety of factors that may be considered aggravating factors, which would result in increase in sanction, or mitigating factors which would decrease the sanction. These factors include:

  1. the nature of the violation;

  2. whether the violation was inadvertent and not deliberate;

  3. the certificate holder’s level of experience;

  4. the attitude of the violator (Note: The FAA does not consider a good compliance attitude, by itself, a basis for reducing a sanction. Fortunately, the FAA also does not consider a violator’s failure to respond to a letter of investigation, representation by counsel or contesting of a violation a poor compliance attitude);

  5. the degree of hazard;

  6. whether an employer or other authority has taken any action (i.e. if the employer took disciplinary action or criminal prosecution was involved);

  7. use of a certificate;

  8. violation history (i.e. a history of prior violations. Since compliance is expected, a violation-free history is not considered a mitigating factor);

  9. decisional law;

  10. the violator’s ability to absorb the sanction (i.e. whether the violator is able to pay a civil penalty and the effect the civil penalty will have on the violator’s ability to continue in business);

  11. consistency of sanction;

  12. whether the violation was reported voluntarily (this takes into consideration whether the violator reported the violation through a program such as the Aviation Safety Reporting Program, the Voluntary Disclosure Reporting Program or the Aviation Safety Action Program); and

  13. corrective action (e.g. corrective action that exceeds the minimum regulatory or statutory requirements. Corrective action taken after the violator becomes aware of the deficiency and before the FAA learns of the violation warrants greater mitigation than if the action is taken after the FAA takes enforcement action).

In some cases, where the degree of the violator’s fault is minimal, the potential hazard is very low, and no aggravating circumstances are present, the FAA may select a civil penalty amount that is below the range specified in the Sanction Guidance Table. Conversely, the FAA may select a civil penalty above the range if the violator’s fault was significant, the violation involved significant safety risks, the violator failed to take corrective action over an extended period of time, the violator has a poor compliance attitude or history, or the FAA feels it needs to make an example of the violator (or, as the FAA puts it, “to provide an economic disincentive or regulatory noncompliance”).

What happens if the case involves multiple violations (e.g. multiple violations of a single regulation, a single violation of multiple regulations, or multiple violations of multiple regulations)? Fortunately, the FAA doesn’t just determine the amount for each violation and then add them up. Rather, the FAA is required to consider the totality of the circumstances relating to the multiple violations, paying special attention to the seriousness of the potential hazard caused by the violations as well as the degree of the violator’s fault for the multiple violations.

At the end of the day, the Sanction Guidance Table is just that, guidance. And while the FAA, and its inspectors and attorneys, are required to follow the guidance, the FAA still has prosecutorial discretion. That is, the FAA ultimately has the discretion and authority to determine not only whether to pursue a civil penalty action, but also the type and amount of the sanction. But at least the Sanction Guidance Table provides some insight as to how the FAA may have arrived at a proposed sanction and what aggravating or mitigating circumstances it may, or should, have considered.

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Greg Reigel

Failure To Ensure Employee Coverage In Drug And Alcohol Testing Program Results In Civil Penalty For Part 135 Operator

by Greg Reigel 11. September 2012 09:38
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An administrative law judge ("ALJ") recently affirmed the FAA's assessment of a $4,400 civil penalty against a Part 135 operator for violations of FAR 135.251(a) (now codified at FAR 120.35(a)) and 135.255(b) (now codified at FAR 120.39(a)). In FAA v. M & R Helicopters, Inc. the FAA alleged that an M & R employee performed safety-sensitive tasks for M & R when he was not included in M & R's random pool for required drug and alcohol testing nor had he set up his own drug and alcohol testing program. Although the employee was also employed by Air Methods, Inc. ("Air Methods") and belonged to Air Methods' drug and alcohol testing program, Air Methods forbade its employees from performing any outside maintenance for other operators. M & R denied the allegations and appealed.

At the hearing before the ALJ, it was undisputed that the employee was not covered by M & R's or his own drug and alcohol testing program. However, M & R argued that since the employee was covered by Air Methods' drug and alcohol testing program, another one of his employers, this satisfied the requirements under the FARs. The ALJ initially observed that the definition of "employer" requires "an individual performing a safety sensitive function for an employer to be covered either by the employer's screening program or the program of the contractor (in this case, Air Methods) when the individual is performing work for the employer within the scope of his employment for the contractor."

Since the employee was not authorized under his employment with Air Methods to perform outside maintenance, he had been working outside the scope of his employment with Air Methods. As a result, the ALJ concluded that absent membership either in the employee's own drug and alcohol testing program or M & R's program, the employee was prohibited by the drug and alcohol testing regulations from performing his work for M & R because he was not covered by an authorized drug or alcohol testing program. Consequently, the ALJ assessed a $4,400 civil penalty against M & R.

This case highlights the need for operators subject to drug and alcohol testing requirements to ensure their employees are subject to a program that will cover their work before they perform any safety sensitive functions for the operator. Failure to comply with these requirements may result in significant civil penalties or certificate action. If you are unclear about the requirements contact me to discuss before you do something that could cause you problems with the FAA.

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Greg Reigel

What You Need To Know About FAA Civil Penalty Actions

by Greg Reigel 30. March 2011 10:38
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In recent months we have seen the Federal Aviation Administration ("FAA") aggressively pursuing civil penalty actions against various air carriers and maintenance facilities. In some instances the penalties proposed by the FAA have been millions of dollars. And although the media has a field day each time the FAA announces proposed civil penalties, we usually don't hear anything else about the case until it is resolved with a civil penalty actually assessed against the targeted air carrier or maintenance facility. If the proposed penalty is withdrawn or if the air carrier or maintenance facility beats the charges, we rarely hear anything at all.

In this article I would like to fill in that gap in time by providing you with an overview of the processes and procedures that occur from the time the FAA proposes a civil penalty until the case is resolved.

The Civil Penalty Action


When the FAA believes a certificate holder (whether an airman, air carrier, repair station or otherwise), it may pursue enforcement action against the offending party. The action can be against the party's certificate, also known as a "Certificate Action." In this situation the FAA seeks to suspend or revoke the party's certificate. Alternatively, the FAA could seek to impose a civil penalty or fine against the party, also known as a "Civil Penalty Action."

Civil Penalty Actions are typically used against companies or entities, as opposed to individuals, that hold FAA certificates. However, the FAA will often bring a civil penalty action against an individual to avoid the six month limitation of the NTSB's stale complaint rule in a certificate action, and benefit from the longer 2 year limitation applicable to civil penalty actions. Thus, if the FAA fails to initiate a certificate action within six months of discovering an alleged violation, it will resort to a civil penalty action which allows the FAA 2 years within which to initiate the action.

The FAA determines the amount of the civil penalty using the Sanction Guidance Table in FAA Order 2150.3B, Appendix B, which provides ranges for civil penalties based upon the type and size of the certificate holder, the type of alleged violation and the number of alleged violations. If the amount of the proposed civil penalty is less than $50,000, then the FAA handles the action. However, if the proposed civil penalty is more than $50,000, then the United States Attorney's office handles prosecution of the action. (For purposes of this article we will assume a case is being handled by the FAA).

A Civil Penalty Action is initiated when the FAA serves the certificate holder with a "Notice of Proposed Civil Penalty (the "Notice"). The Notice recites the relevant facts (usually discovered by the FAA during an investigation, inspection or audit), the regulations the FAA believes the certificate holder has violated and the proposed civil penalty.

Options for Responding to the Notice


The Notice is accompanied by an explanation of options for responding to the Notice. The certificate holder has the choice of the following seven options:

  1. Pay the penalty as proposed by the FAA;

  2. Submit written information and evidence demonstrating that a violation of the regulations was not committed or that; if it was, the facts and circumstances do not warrant the proposed civil penalty. The FAA will then consider this information in determining whether a civil penalty should be assessed and the amount of any such civil penalty;

  3. Submit written information and records indicating that the certificate holder is financially unable to pay the proposed civil penalty, or showing that payment of the proposed penalty would put the certificate holder out of business;

  4. Request that a civil penalty be assessed in a specific amount less than that proposed in the Notice, or that no civil penalty be assessed and provide the reasons and support for the requested reduction. The FAA will then consider this information when it determines whether the reduced amount should be assessed. If the FAA accepts the reduced amount that constitutes the certificate holder's agreement that an Order Assessing Civil Penalty in that amount may be issued and the certificate holder waives its right to a hearing regarding the civil penalty;

  5. Request an informal conference during which the certificate holder can discuss the matter with an FAA attorney and present any information the certificate holder might otherwise have wanted to provide under options 1-4;

  6. Request that the FAA impose a civil penalty without making findings of violations, providing reasons and any supporting documentation along with the request. If the FAA accepts the request, that constitutes the certificate holder's agreement that a Compromise Order in that amount may be issued and the certificate holder waives its rights to a hearing; or

  7. Request a formal evidentiary hearing before a Department of Transportation administrative law judge ("ALJ") at which the ALJ will decide issues of fact and law and will determine whether, and in what amount, a civil penalty will be assessed against the certificate holder.

The certificate holder must respond to the FAA with one of the seven options within 30 days after receiving the Notice. If the certificate holder selects any option other than option 7 and the case settles, either the case will be dismissed, which doesn't happen very often, or an order for a reduced civil penalty will be issued, which happens frequently. If the latter, then the certificate holder simply pays the penalty and the case is closed. If the case does not settle, or if the certificate holder elects option 7, then a hearing is held before an ALJ.

The Evidentiary Hearing


Prior to the hearing, the FAA issues a complaint that contains the same factual and regulatory allegations contained in the Notice. The certificate holder then submits an answer specifically admitting or denying the allegations contained in the FAA's complaint.

The certificate holder and FAA may also engage in discovery before the hearing. Discovery allows each party to ask the other to identify witnesses and produce evidence that will be introduced at the hearing and also provides an opportunity to depose witnesses. Through discovery, the certificate holder should be able to ascertain all of the facts and evidence upon which the FAA will be relying when it presents its case to the ALJ.

At the hearing, the FAA has the burden of proving its allegations by a preponderance of reliable, probative and substantial evidence. The FAA will present witness testimony and evidence and the certificate holder has the opportunity to cross-examine the FAA's witnesses and to present witnesses and evidence on its own behalf. At the end of the hearing, the ALJ will issue a decision regarding whether a civil penalty is supported by the facts and law, and if it is, the appropriate amount.

Appeal


If either the certificate holder or the FAA is unhappy with the ALJ's decision, that party may file a notice of appeal with the "FAA administrator." Yes, the same administrator responsible for the FAA. To make matters worse, the FAA Chief Counsel's office, which also prosecutes civil penalty cases, writes the decisions for the FAA administrator. If you are thinking this, at a minimum, appears unfair and biased, you are not alone. However, such is the system established by the current regulations.

The regulations require that the FAA administrator review the record, the briefs on appeal, and the oral argument, if any, and then issue the final decision and order of the FAA administrator on appeal. The FAA administrator may (1) affirm, modify, or reverse the initial decision of the ALJ; (2) make any necessary findings; or (3) remand the case for any proceedings that the FAA administrator determines may be necessary. If either party is unsatisfied with the FAA administrator's decision, that decision can be appealed to the United States Court of Appeals pursuant to a petition for review.

Conclusion


As you can see, a lot can happen after the FAA proposes a civil penalty against a certificate holder. Knowing the process and the options available, along with the assistance of an aviation attorney, can help you respond and successfully resolve an FAA civil penalty action.

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Greg Reigel



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