2016 Annual Meeting Atlanta, GA September 15-16, 2016

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1 2016 Annual Meeting Atlanta, GA September 15-16, 2016 A Safety Step Forward in FAA Regulatory Compliance and Enforcement Matters Francis C. Heil, Of Counsel, Silverberg Goldman, L.L.P.

2 Aviation in itself is not inherently dangerous. But to an even greater degree than the sea, it is terribly unforgiving of any carelessness, incapacity, or neglect. (Captain A. G. Lamplugh, British Aviation Insurance Group, London. c. early 1930's) While first stated many years ago, at a time when passenger carriers were few and the industry was in its infancy, the notion rings especially true today, with thousands of flights carrying hundreds of thousands of passengers each day over great distances, at ever increasing speed. What is equally true is that aviation by its very nature is dynamic; ever changing, and certificate holders, 1 especially including air carriers, as well as the Federal Aviation Administration (FAA) must continually adapt to meet these changes in our industry. Regulatory Compliance is a Shared Goal While many of the changes result from technological advances in the design and capacity of airframes and engines, pilots, dispatchers and mechanics are responsible for properly operating and maintaining aircraft in accordance with their air carriers policies, procedures and training. Ultimately and as it should be it is the air carrier who is responsible for both the conduct of its employees and compliance with the FAA regulations. As such all air carriers must develop procedures, policies and practices, documented in the carrier s manual system, to properly operate, maintain and repair their aircraft and actively monitor their aircraft maintenance and operations performance to ensure continued compliance with its procedures and all applicable federal regulations. When noncompliant instances are identified, whether through inspections, internal audits or review of specific events, the air carrier must take expedient action, including, in some instances, removing one or more aircraft from revenue service, as well as appropriate changes to their procedures and training to not only remedy the non-compliance, but ensure the desired outcome and continued future compliance. For the FAA s part it must strive to promulgate clear and concise regulations in a timely manner that can be consistently interpreted by both the regulated community and FAA personnel that are required to interpret and enforce them. Complicating the FAA s rulemaking task is the necessity of considering a regulation s impact on a wide variety of disciplines, from Original Equipment Manufacturers (OEMs), to essential maintenance providers to parts fabricators, etc.; not an easy task. To address the differences inherent among the many certificate holders and their individual means of complying with the regulations, it is in the best interest of all that an active line of communication is established between the certificate holder and the FAA Office overseeing the certificate holder s compliance with the regulations. When questions arise as to specific requirements of a regulation, how an air carrier is meeting the requirements, or a specific event that has occurred, open communication between the FAA and the certificate holders management personnel is key to resolving any concerns, ideally at the lowest and most appropriate level. Increases in information shared between the regulator and the 1 Certificate holders include all entities that hold FAA certificates, including for example air carriers, commercial operators and repair stations. In this paper, the term certificate holders are used interchangeably with air carriers. Page 2

3 regulated transparency, if you will leads to a better understanding of the issues and solutions and with a positive and often proactive impact on the safety of the traveling public. By statute, air carriers have a duty to provide service with the highest possible degree of safety in the public interest. (See 49 USC 44702). Similarly the FAA has the primary duty to promote safe flight of civil aircraft in air commerce by prescribing and enforcing regulations and minimum standards in the interest of safety (See 49 USC 44701). The primary regulations regarding the maintenance and operation of commercial aircraft are published in 14 CFR parts 43, 117, 119, 120, 121, 125 and 135. Those Federal Aviation Regulations (FARs) require, among many things, that a carrier develop procedures for operating and maintaining its aircraft (See 14 CFR 121 Subparts G and L) and that its employees, (e.g. pilots, dispatchers, and mechanics) are properly trained and qualified in those procedures (see 14 CFR 121 Subparts N, O and P). Similarly, carriers must conduct internal audits and inspections to ensure that the procedures and training are effective and followed (see 14 CFR ). If the procedures and training are correct and properly followed, compliance and the expected level of safety for the traveling public is achieved. Where audits conducted by the air carrier identify a procedural or training failure that could result in non-compliance and/or an undesired aircraft state, a review will be initiated by the air carrier and changes to those procedures or training may occur. Conversely, if an event review identifies that, even though the procedures and training are correct and adequate, an individual failed to follow those procedures, individual corrective action may be appropriate. As part of its oversight responsibility, when an FAA inspection or audit identifies an instance of noncompliance, an investigation involving both the FAA and air carrier is initiated. In this case however, because the FAA has discovered the failure, the FAA may elect to take legal enforcement action against the certificate holder if it is determined that noncompliance with the regulations occurred even though corrective action has been taken by the certificate holder. In either case, the desired outcome mitigating the potential recurrence of the failure to comply with FAA regulations remains the shared objective of both the air carrier and the FAA. Considering that the goal of providing the safest means of transportation to the traveling public, through compliance with the regulations, is a shared objective among air carriers and the FAA, it is incumbent on both to work together to address failures, whether such failures occur at the carrier or as a result of the regulations. Working together requires air carrier and FAA personnel to communicate openly, professionally and effectively, in an environment built on trust and understanding. Air carriers have had the opportunity to communicate instances of noncompliance through the FAA s voluntary self-disclosure program. Provided the air carrier meets the requirements of Advisory Circular (AC)- Page 3

4 0058 2, and acceptable corrective action is taken, then the FAA takes no legal enforcement action. Acceptable corrective action could include improved procedures, training and audits at the air carrier for example, or corrective action could be specific retraining for an individual. In such events, not only does the certificate holder benefit from specific improvement to its manuals, procedures and policies, but the FAA Inspectors responsible for oversight of an air carrier benefit as well by becoming more knowledgeable and informed of the specific facts surrounding an event and the corrective actions taken by the air carrier, in many instances events that would never have been brought to the attention of the Inspector. In addition, through communication and sharing of information, the level of safety of the flying public is reinforced and the corrective actions that are taken reasonably ensure the event does not reoccur in the future. Not every instance of regulatory noncompliance is shared with the FAA however. There are a number of reasons why a carrier may not disclose a noncompliant event to the FAA, including, for example, not being able to meet the acceptance criteria of the program or the air carrier not being inclined to share sensitive information with the FAA. That is not to say that a responsible air carrier does not take appropriate corrective action in such instances. Quite the contrary, it is in the carrier s own interest and the interest of its employees and its passengers to do so in every case. It is worth emphasizing that, where an air carrier does not disclose internally discovered instances of noncompliance to the FAA or where the FAA, through its own inspections and audits, identifies specific instances of noncompliance, the FAA may take certain enforcement action against the certificate holder such as legal enforcement actions, including suspensions and revocations of certificates or more commonly, imposing civil penalties on the certificate holder. Past FAA Enforcement Actions The FAA publishes a quarterly listing of enforcement actions (Quarterly Enforcement Reports) against regulated aviation entities that are closed with either a civil penalty or 2 In evaluating whether an apparent violation is covered by this policy, the FAA will ensure that the following five conditions are met: (1) The certificate holder has notified the FAA of the apparent violation immediately after detecting it and before the Agency has learned of it by other means. (2) The apparent violation was inadvertent. (3) The apparent violation does not indicate a lack, or reasonable question, of qualification of the certificate holder. 4) Immediate action, satisfactory to the FAA, was taken upon discovery to terminate the conduct that resulted in the apparent violation. (5) The certificate holder has developed or is developing a comprehensive fix and schedule of implementation satisfactory to the FAA. The comprehensive fix includes a follow-up self-audit to ensure that the action taken corrects the noncompliance. This self-audit is in addition to any audits conducted by the FAA. Page 4

5 issuance of a certificate suspension or revocation 3. A review of the most recent five years of reported FAA enforcement cases, between 2010 and the third quarter of 2015, indicates the greatest percentage of enforcement cases, nearly one third, are related to Maintenance type cases. In addition, cases involving Drug Testing, Operations and Hazardous Materials make up half of the reported cases as shown below. Total # of Reported Cases between 2010 and 3Q 2015: 1894 Cases resulting in Certificate Revocations: 117 Cases resulting in Certificate Suspensions: 24 Type and Number of Cases Reported: Maint Drug Hazmat Flt Ops Records Other Percentage of Total Cases by Type: Maint Drug Hazmat Flt Ops Records Other 32.2% 17.8% 16.2% 16.8% 7.1% 9.9% While the information reported by the FAA Quarterly Enforcement reports does not describe the facts surrounding each case, nor specific regulations that were alleged to have been violated, it does give some idea to the types of events in the past in which the FAA chose legal enforcement actions to help ensure future compliance at the certificate holders. The information may be useful for certificate holders who look to focus their attention and resources for purposes of conducting internal audits and identifying potential and common industry risk areas. It is an additional piece of information that can be shared and analyzed together with the carrier s own internal reviews and audits. Similarly, given the opportunity and resources, a closer look of these cases by the FAA could potentially identify certain useful industry trends or possibly compliance issues with specific regulations that could be shared with the industry. Most every case listed by the FAA resulted in a civil penalty or certificate action, a few resulted in compromise orders with no findings of violation. FAA legal enforcement action has proven through the years to be an effective tool, but is it the most effective tool for ensuring future compliance and enhancing the level of safety for the traveling public? In each case a similar process was likely followed, after an alleged violation was identified, a Letter of Investigation was sent to the certificate holder, a response was provided, a Notice of Proposed Civil Penalty or Civil Penalty letter was issued, and an 3 See http// /Reports/ Page 5

6 Informal Conference was held to discuss the facts, the regulations, and corrective actions taken. In most cases a settlement was reached between the sides as to the final amount of the civil penalty paid. In some cases, where an agreement between the two sides could not be reached, a hearing before DOT Administrative Law Judge is held (14 CFR Part 13) or referral to a U.S. Attorney s Office for civil prosecution in U.S. District Court could occur. In most if not all cases, the certificate holder has taken corrective action it believes most appropriate to address the alleged violation; it did not wait for the legal enforcement process to play out. While that legal process is important, what is most important from a safety and regulatory compliance perspective is that corrective action is taken in a timely manner to reasonably ensure that the event does not occur again in the future. Are there other more effective ways to address instances of regulatory noncompliance and ensure the level of safety required for the traveling public? FAA Compliance Philosophy The FAA s statutory authority to prescribe, revise, and enforce regulations is in Title 49 of the United States Code, Subtitle VII, Chapter 447, Safety Regulation. In accordance with that authority and FAA policy, the FAA may exercise its discretion in taking what it believes is the most appropriate action to resolve safety issues. Consistent with that discretion, on June 26, 2015, FAA Administrator Huerta issued FAA Order stating the FAA Compliance Philosophy guidance for implementing the FAA's strategic safety oversight approach to meet the challenges of today's rapidly changing aerospace system. The Compliance Philosophy is the latest step in the evolution of how we work with those we regulate. It focuses on the most fundamental goal: find problems in the National Airspace System before they result in an incident or accident, use the most appropriate tools to fix those problems, and monitor the situation to ensure that they stay fixed. FAA Order applies to the compliance and enforcement programs and activities of all FAA offices that have regulatory responsibilities, including the Flight Standards Service, Aircraft Certification Service, Office of Aerospace Medicine, Air Traffic Safety Oversight Service, Office of Airports, Office of Security and Hazardous Materials Safety, and Office of Commercial Space Transportation. The Order further explains, to promote the highest level of safety and compliance with regulatory standards, the FAA is implementing Safety Management System (SMS) elements based on comprehensive safety data sharing between the FAA and the aviation community. To foster this open and transparent exchange of data, the FAA believes that its compliance philosophy, supported by an established safety culture at the certificate holder, is instrumental in ensuring both compliance with regulations and the identification of hazards and management of risk. SMS is in the process of implementation among all domestic air carriers, with completion required not later than March 9, 2018 (14 CFR Part 5). The FAA s Compliance Philosophy recognizes what experience has shown, that Page 6

7 noncompliant events are most likely due to reasons such as inadequate procedures, simple mistakes and lack of understanding or training. (Failings not too unlike those Captain A. G. Lamplugh noted decades ago.) Furthermore, the FAA believes, with concurrence from the industry, that most occurrences of non-compliance can most effectively be corrected by the certificate holder through root cause analysis and training, education or other appropriate improvements to procedures or training programs. Under the Compliance Philosophy, when deviations from regulatory requirements, policies and procedures do occur, the FAA's goal is to use the most effective means to return an individual or entity that holds an FAA certificate, approval, authorization, permit or license to full compliance and to prevent a recurrence. For Flight Standards personnel, those that perform oversight inspections of air carrier and other certificate holders, the Compliance Philosophy clarifies and reinforces its approach to oversight and compliance to stress an engaged, solution-oriented, outcome-based approach. The stated goal is to identify deviations from standards and correct them as effectively, quickly, and efficiently as possible. If the deviation does not involve intentional, reckless, or criminal behavior and the airman/organization is cooperative, FAA Inspectors may resolve the issue through use of the compliance tools, techniques, concepts, and programs at their disposal without resort to the legal enforcement actions, as has been more common historically. How it works Effective October 1, 2015, FAA personnel follow a prescribed internal process to determine what action to take for noncompliance with regulatory standards. The first priority is to identify the problem and stop any ongoing deviation from standards. Inspectors must then determine what action to take by evaluating both the airman s/organization s behavior and their level of cooperation. The process encourages Inspectors to seek to engage and collaborate with the certificate holders to correct the underlying problem, in essence a cooperative approach. In most instances, appropriate improvements to an air carrier's systems, procedures, or training programs or counseling or education for individuals can prevent a recurrence. The Inspector documents the agreed upon corrective action taken and subsequently verifies that those actions have addressed the concern and effectuated compliance. While many events will fall into a range where an Inspector will have discretion to handle the matter with a collaborative problem solving approach, there are instances when legal enforcement action remains appropriate. Those instances include where the alleged violation was intentional, reckless, or criminal, or if it is determined that an apparent violation was neither intentional nor reckless, yet there is repeated failure to make the corrections necessary to remediate the noncompliant event or instances of repeated deviations, in which cases legal enforcement action may be appropriate. Page 7

8 Going Forward, Time will Tell So how might this change the FAA enforcement landscape going forward? What won t change is that carriers who are not compliant, open and transparent with the FAA will likely still face the traditional legal enforcement process. But for those carriers that meet the requirements and expectations of the new philosophy, they will likely see a reduction in the number of enforcement actions than in the past 4. For many compliant carriers, the notion of openness and transparency with the FAA will not be entirely new, though perhaps the FAA s expectation of the amount of information shared in the past will be even greater going forward under the new Compliance Philosophy. In addition, there will be issues that must be addressed as Compliance Philosophy matures. For example, what types and how much additional information can be appropriately shared? Is there a level of collaboration that might breach management prerogative on how best to operate and maintain its own aircraft within the scope of the FAA regulations? Potential disagreements may arise concerning whether the noncompliant behavior was inadvertent, reckless or intentional. Similarly, whether a carrier s management decision to discipline individual employees is sufficient corrective action alone, as well as inconsistencies in application of the Compliance Philosophy among the many FAA Offices and personnel. Ultimately, because there are many ways to comply with most FAA regulations, much of the Compliance Philosophy success will be determined by the individuals at both the FAA and the air carrier who are responsible for implementing it. Both the FAA and air carrier should carefully consider whom they select for positions that are responsible for leading discussions concerning noncompliant disclosures. To prevent a pendulum swing back to the past traditional enforcement activity those individuals must be objective, fair, and reasonable. When there is a professional difference of opinion, and there will be, their first action should be to understand the other s perspective. FAA Inspectors and Attorneys must consider all circumstances relating to the facts and allegations. They must make a good-faith effort to understand the position of the air carrier and to communicate their position in a timely manner. Every situation is different and there are many ways for air carriers to comply with the regulations. As has been stated by the National Transportation Safety Board the regulatory standard is not what an inspector believes should be done in connection with an overhaul, but, rather what the Administrator has specified, through approved overhaul manuals and other documents, must be done. (Administrator v. Alphin, 4 NTSB 23) While stated in the context of maintenance overhaul, the idea is applicable to all areas of FAA regulations. Equally true is that compliance with the regulations is expected and the 4 The Compliance Philosophy expects certificate holders to be proactive, cooperative, and capable of participating in effective corrective or preventive action. Evidence of such behavior includes consistently performing in a positive manner toward regulatory requirements; cooperates with investigative personnel to achieve compliance; andtakes actions necessary to come into and maintain compliance. Page 8

9 Compliance Philosophy does not and should not imply the FAA s unwillingness to apply the full force of statutory sanctions where warranted. All certificate holders would be wise to establish a regulatory compliance framework conducive to the Compliance Philosophy. In doing so Compliance Actions will be the tool that the FAA will use for deviations to regulatory standards that arise provided the certificate holder remains transparent, is willing and able to work with the FAA to conduct corrective action and come back into compliance. It is important to note that a Compliance Action is not an adjudication nor does it constitute a finding of violation. If carriers remain willing and able to fix problems, they should see a decrease in the number of enforcement cases initiated by the FAA for deviations found 5. Summary To meet the many changes in the industry, the FAA is correctly moving forward in its approach to FAA regulatory compliance and enforcement by establishing a new Compliance Philosophy that allows for a professional, collaborative approach to address safety issues. By providing a greater opportunity for an air carrier to communicate regarding specific instances of noncompliance with the FAA, and the FAA working with the carrier to identify root causes of the failure and take corrective action to ensure it does not occur again in the future, both the air carrier and the FAA provide an enhanced level of safety in the National Airspace System for the benefit of the traveling public. 5 The FAA Chief Counsel FY 2016 Business Plan calls for an evaluation of the effect of the FAA Compliance Philosophy on its Enforcement Division (AGC-300) workload by program office and prepare a report due September 30, Page 9

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