ISSUE: Exemption for Small Vessel Facilities

Jack_crop 300dpiSection 3(d) of the Longshore Act (33 U.S.C. 903(d)) states:

“3(d)(1) – No compensation shall be payable to an employee employed at a facility of an employer if, as certified by the Secretary, the facility is engaged in the business of building, repairing, or dismantling exclusively small vessels (as defined in paragraph (3) of this subsection), unless the injury occurs while upon the navigable waters of the United States or while upon any adjoining pier, wharf, dock, facility over land for launching vessels, or facility over land for hauling, lifting, or drydocking vessels.

3(d)(2) – Notwithstanding paragraph (1), compensation shall be payable to an employee –

(A)Who is employed at a facility which is used in the business of building, repairing, or dismantling small vessels if such facility receives Federal maritime subsidies, or

(B) If the employee is not subject to coverage under a State workers’ compensation law.

3(d)(3) – For purposes of this subsection, a small vessel means –

(A) A commercial barge which is under 900 lightship displacement tons; or

(B) A commercial tugboat, towboat, crew boat, supply boat, fishing vessel, or other work vessel which is under 1,600 tons gross as measured under section 14502 of title 46, or an alternate tonnage measured under section 14302 of that title as prescribed by the Secretary under section 14104 of that title.”

This exemption was added to the Longshore Act as part of the 1984 amendments.

This exemption concerns commercial vessels.  Please note that it has nothing to do with the February 11, 2009, recreational vessel amendment to section 2(3)(F), which I have discussed on several occasions

First, let’s review the several conditions that apply to the section 3(d) exemption, and then review the application procedures.

The facility must build, repair, or dismantle exclusively small vessels.

The exemption does not cover injuries that occur over the navigable waters of the United States or upon any adjoining pier, wharf, dock facility over land for launching vessels, or facility over land for hauling, lifting, or drydocking vessels.  So even in a Section 3(d) certified small vessel facility there will be work that is covered by the Longshore Act.

The exemption does not apply to facilities that receive Federal maritime subsidies*.

The facility’s employees must be covered by the state workers’ compensation law.  If not then the Longshore Act applies.

The facility must be “certified” by the Secretary of Labor.

The danger with regard to these conditions is that once a facility is certified and an exemption granted, if an event occurs that does not met one or more of these conditions, then the exemption lapses automatically, without any action being necessary on the part of the Secretary of Labor.  The Regulations implementing the Longshore Act at 20 C.F.R. 702.175 state,

“When a vessel other than a small commercial vessel enters a facility which has been certified as exempt from coverage, the exemption shall automatically terminate as of the date such vessel enters the facility.  The exemption shall also terminate on the date a contract for a Federal maritime subsidy is entered into, and, in the situation where the facility undertakes to build a vessel other than a small vessel, when the construction first takes on the characteristics of a vessel, i.e., when the keel is laid.  All duties, obligations and requirements oimposed by the Act, including the duty to secure compensation liability as required by sections 4 and 32 of the Act, and to keep records and forward reports, are effective immediately….”

The exemption certificate application procedure starts with the District Director of the U.S. Department of Labor’s district office where the facility is located.  The Longshore Procedure Manual, available on line, describes the application requirements.  The application must include the following:

– Name, location, physical description and a site plan (a diagram which accurately shows the physical layout of a facility, drawn to scale, or aerial photograph of the facility;

– Description of the nature of the business;

– An affidavit by a company officer verifying and/or acknowledging the following:

a) The facility is, as of the date of the application, engaged in the business of building, repairing or dismantling exclusively small commercial vessels and that it does not then, nor foreseeably will it, engage in the building, repairing or dismantling of other than small commercial vessels.

b) The facility does not receive any Federal Maritime Subsidy.

c) The signatory has the duty to immediately inform the District Director of any change in these or other conditions likely to result in a termination of an exemption.

d) The employer has secured appropriate compensation liability insurance under a state workers’ compensation law.

e) That any false, relevant statements relating to the application or the failure to notify the District Director of any changes in circumstances likely to result in termination of the exemption will be ground for revocation of the exemption certificate, and will subject the employer to all provisions of the Act, including all duties, responsibilities and penalties, retroactive to the date of the application or date of change in circumstances as appropriate.

Once the application is filed, the procedure provides that the District Director will notify the employer within 30 days if additional information is needed or if an inspection by the District Director will be required.  The final decision on the granting of the certificate of exemption will be made by the Director, Division of Longshore and Harbor Workers’ Compensation in Washington, DC.  The Director’s decision is final, not subject to review by the Office of Administrative Law Judges or the Benefits Review Board.

It is very important to note the certificate revocation provisions referred to above.  The District Director must be notified of any change in condition likely to result in termination of the exemption.  This includes sale of the facility to a new owner.

Approach section 3(d) with caution, and make sure that you are fully informed with regard to all of its provisions.

  • Federal Maritime Subsidy.  Federal Maritime Subsidy means the construction differential subsidy (CDS) or operating differential subsidy under the Merchant Marine Act of 1936, 46 U.S.C. section 1101 et seq.

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