CP-19: Small Business Self-Disclosure Policy

Commissioner Policy

The DEC Policy System
Department ID: CP - 19
Program ID: N/A
Issuing Authority: John P. Cahill, Commissioner
Originating Unit: Environmental Enforcement, Compliance Assurance Bureau
Signature: John P. Cahill
Date: August 12, 1999
Phone: (518) 457-4348
Issuance Date: August 12, 1999
Latest Review Date (Office Use):

Consistent with the Civil Penalty Policy; Order on Consent Enforcement Policy; Record of Compliance; Natural Resource Damages and Small Business Self-Disclosure Policy:

The policies and procedures set out in this document are intended solely for the use and guidance of DEC personnel. They are not intended to create any substantive or procedural rights, enforceable by any party in administrative and judicial litigation with the State of New York. DEC reserves the right to act at variance with these policies and procedures.
Any penalty calculations undertaken hereunder by DEC in anticipation of litigation are exempt from disclosure under the Freedom of Information Law.
Pursuant to §4547 of the Civil Practice Law and Rules of the State of New York, all evidence or conduct of negotiations or settlement are inadmissible as evidence as proof of liability for or invalidity of the claim which is disputed as to either validity or amount of damages.
The penalty amounts calculated with the aid of this document in adjudicated cases must, on the average and consistent with consideration of fairness, be significantly higher than the penalty amounts which DEC accepts in consent orders which are entered into voluntarily by respondents.

Abstract: This document establishes the Department's policy for adjusting penalties where small businesses detect, voluntarily disclose and expeditiously correct certain violations discovered through environmental audits or formal compliance assistance programs. If a small business satisfies the policy criteria, the Department will limit the penalty to any significant economic benefit.

I. Purpose

This document sets forth DEC's Policy for promoting environmental protection and improving compliance rates by establishing a process for adjusting penalties where small businesses detect, voluntarily disclose and expeditiously correct certain violations discovered through environmental audits or compliance assistance. This Policy will provide the regulated community with greater certainty regarding the Department's response to self-disclosed violations. This enhanced certainty will reduce the fear associated with reporting violations and thereby foster compliance auditing and compliance assistance.

As set forth in this Policy, DEC will adjust penalties when a small business makes a good faith effort to comply with environmental requirements by conducting an appropriate audit or receiving compliance assistance and expeditiously disclosing and correcting all violations. The Department will eliminate the gravity component of any payable penalty where a small business satisfies the criteria in Section III.B. of this policy. If an entity satisfies this Policy's criteria but obtains a significant economic benefit, DEC will waive the gravity component of the penalty and limit the penalty to the economic benefit component. In accordance with Federal and State Civil Penalty Policies, the Department will continue to recover all instances of significant economic benefit. The penalty adjustment shall not apply to circumstances such as those involving Intentional wrongdoing or significant threats to health, safety or the environment.

II. Background

In an effort to assist the regulated community in complying with environmental regulations, and to achieve health, safety and Environmental benefits, the Department is adopting a broad policy for all regulatory programs, including air, water and solid and hazardous materials. This Policy builds upon the principles set forth in the USEPA Policy on compliance Incentives for small businesses and the USEPA Incentives for Self-Policing; Discovery, disclosure, correction and prevention of violations and will be implemented in a manner consistent with the Department's Civil Penalty Policy issued on June 20, 1990. Specifically, this Policy supplements the penalty adjustment provisions of the Civil Penalty Policy and Enforcement Guidance Memoranda Series and formalizes the Department's practice of exercising its prosecutorial discretion by eliminating or mitigating penalty demands for certain types of violations. In addition, this Policy is an element of the Department's implementation of the State's Small Business Technical and Environmental Compliance Assistance Program (see Clean Air Act §507 and Environmental Conservation Law §§19-0313 and 19-0315). Although this Policy addresses regulated entities that detect, voluntarily disclose and expeditiously correct violations, the Department also encourages development of appropriate environmental management systems and implementation of pollution prevention measures wherever practical.

III. Policy

Applicability

For purposes of this Policy, "small business" means any business that is independently owned and operated, not dominant in its field, and employs 100 or fewer individuals (across all facilities and operations owned by the entity).⁽¹⁾

State agencies, municipal corporations and public benefit Corporations employing 100 or fewer people are also eligible for penalty mitigation in accordance with this Policy. Although this Policy is expressly limited to small business, agencies and municipal and public benefit corporations, it discusses factors that may be relevant when assessing penalties for violations self-disclosed by regulated entities of all sizes.

This Policy applies to all civil, judicial and administrative enforcement actions taken under the authority of the environmental statutes and regulations that DEC administers. This Policy applies to actions commenced after the effective date of this Policy, as well as pending cases in which the Department has not reached agreement with the alleged violator on the amount of the civil penalty. This Policy does not apply to criminal actions.

This Policy sets forth how the Department expects to exercise its enforcement discretion in deciding on an appropriate enforcement response and determining an appropriate civil Settlement penalty for many types of violations. This Policy is not final agency action and is intended as guidance. It does not create Any rights, duties, obligations or defenses, implied or otherwise, in any third parties. This Policy is to be used for settlement purposes only and is not intended for use in pleading or at hearing or trial. To the extent that this Policy may differ from the terms of the applicable enforcement response policies (including penalty policies) under media-specific programs, this document supersedes those policies. Any penalty mitigation, however, will be consistent with the Department's Civil Penalty Policy.

If a regulated entity does not satisfy all of the following criteria or does not meet the definition of small business, this policy does not provide any special penalty mitigation. Good faith efforts to detect, voluntarily disclose and expeditiously correct all violations will, however, generally constitute violator cooperation and warrant a penalty adjustment in accordance with the Civil Penalty Policy and other applicable penalty guidance. This Policy does not limit DEC's discretion to use information on violations revealed through self disclosure or compliance assistance as evidence in subsequent enforcement proceedings that may be appropriate (e.g., violations not corrected in a timely fashion).
Criteria for Civil Penalty Mitigation

DEC will eliminate the gravity component of any payable penalty in any enforcement proceeding where a small business satisfies all of the following criteria:
1. Good Faith Efforts
  
  Good faith requires that an entity make reasonable efforts to assess compliance and promptly disclose and expeditiously correct all violations, including violations that may not qualify for penalty mitigation under this Policy. Facilities must also cooperate with DEC by providing information relevant to applicability of this Policy. A good faith effort to comply with applicable environmental requirements must be demonstrated by conducting an environmental audit or accepting compliance assistance. This Policy does not apply to violations revealed by legally mandated monitoring or sampling.
  1. Qualifying Audit Programs
    
    Violations identified through a qualifying audit program are eligible for penalty mitigation. Qualifying audit programs are limited to either (i) an environmental audit that is "systematic, documented, periodic and objective review by regulated entities of facility operations and practices related to meeting environmental requirements," or (ii) a documented, systematic procedure or practice which is an element of an appropriate due diligence program for preventing, detecting and correcting violations. See EPA's audit policy entitled, Incentives for Self-Policing, 60 F.R. 66706, 66711, December 22, 1995. The initial audit of a newly implemented self-audit program or outside party audit program qualifies.
  2. Compliance Assistance
    
    Entities may also demonstrate good faith by receiving compliance assistance from a government or government supported program that offers services to small businesses and promptly disclosing all violations detected during the compliance assistance by the regulated entity to DEC. Compliance assistance is information or assistance provided by DEC, a state or another government agency or government supported entity to help the regulated community comply with legally mandated environmental requirements. Compliance assistance does not include inspections or enforcement actions. The penalty mitigation provided by this Policy only applies to civil violations which are identified as part of an on-site compliance assistance visit to the facility or a State sponsored formal outreach program such as the Small Business Technical and Environmental Compliance Assistance Program (Program). Provided, however, the facility must also disclose all instances of known or suspected noncompliance, including requirements that may not be addressed through the outreach campaign or on-site assistance.
    
    This Policy does not create any right or entitlement to compliance assistance, and a small business that requests on-site compliance assistance will not necessarily receive such assistance. State or Federal actions in providing, or not providing, compliance assistance are not a legal defense in any enforcement proceeding.
2. Compliance History
  
  Regulated entities that have previously violated an order, stipulation, decree or agreement with the Department are not eligible for penalty mitigation. Facilities that have received a warning letter, notice of violation or field citation, or paid a Penalty or executed an order, stipulation, decree or other agreement regarding a citizen suit or an enforcement action or proceeding by a government agency for a violation of the requirement being disclosed within five years are not eligible for penalty mitigation. The Department will generally decide not to adjust penalties where a facility has been subject to two or more penalty demands for alleged violations of any State or Federal environmental requirements in the past five years.
  
  In the event that a facility changes ownership and management, and the new owners and managers have no relationship to the previous owners and managers, violations that occurred prior to the Change will not disqualify a candidate.
3. Disclosure
  
  All known or suspected violations must be fully disclosed in writing within 30 days after discovery and voluntarily disclosed before they are otherwise discovered by, or reported to, a regulatory agency. Violations must be disclosed prior to:
  1. announcement, scheduling or commencement of a federal, state or local agency inspection or investigation, including but not limited to issuance of an information request to the regulated entity;
  2. notice of a citizen suit;
  3. filing of a complaint by a third party;
  4. reporting of the violation to a government agency by anyone not officially authorized to speak on behalf of the regulated entity; or
  5. other situation likely to result in discovery of the violation by a regulatory agency.⁽²⁾
  The entity must disclose all instances of known or suspected Noncompliance, including those that may not warrant any penalty adjustment. Violations required to be reported by statute, Regulation or permit do not qualify for penalty mitigation.
4. Actual or Potential Harm
  
  Violations that cause serious harm to public health, safety or the environment are not eligible for penalty mitigation. For example, violations which require significant remedial efforts or which result in exceedences of air or water quality standards (e.g., 6 NYCRR Parts 257 and 703) typically will not qualify. Violations that present a significant threat to public health, safety or the environment are also excluded. For example, violations of 6 NYCRR §555.1, which prohibits the abandonment of an oil and gas well without properly plugging such well, may not qualify.
5. Culpability
  
  Violations that the Department alleges were committed with any of the culpable mental states defined in Penal Law §15.05 (intent, knowledge, recklessness and criminal negligence) or gross negligence do not qualify for penalty mitigation. Referral for criminal prosecution is not necessary for culpability to disqualify a candidate.
6. Return to Compliance
  All violations must be remedied within the shortest practicable period of time, not to exceed 180 days following detection of the violation, and in accordance with an acceptable compliance schedule And, if appropriate, work plan. In certain circumstances DEC may determine it is appropriate to authorize up to a period of one year From the date the violation is detected. Appropriate measures to prevent reoccurrence of such violations must be implemented in all Circumstances.

IV. Responsibility

The Regional Enforcement Coordinators (RECs) will be responsible for:

assessing whether applicants meet the criteria set forth in this Policy;
ensuring that all staff approvals necessary for penalty mitigation are obtained;
ensuring that violations disclosed pursuant to this Policy are corrected in accordance with the approved work plan; and
providing the Division of Environmental Enforcement (DEE) Director and the Office of Regional Enforcement Coordination with quarterly reports regarding implementation of this Policy.

The Pollution Prevention Unit will be responsible for coordination of a comprehensive outreach effort regarding this policy in conjunction with the Environmental Facilities Corporation's Small Business Assistance Program and Empire State Development's Environmental Ombudsman's Unit.

The DEE Director will be responsible for ensuring that this policy is implemented consistently across the State and providing Executive Staff with an annual report on the implementation of this policy by January 31 of each year.

V. Procedure

An applicant must submit the attached Violation Disclosure Form certifying that it is eligible for penalty mitigation pursuant to this Policy to the appropriate Regional Enforcement Coordinator.

The REC will, in consultation with appropriate Department Staff and pursuant to procedures adopted by the Regional Director, promptly determine whether the disclosure satisfies the criteria of this Policy.

The REC will provide the Regional Attorney, with a copy to the DEE Director, with a confidential memorandum proposing a response to the Violation Disclosure. This memorandum will explain why the application for penalty mitigation should be accepted or rejected.

The assigned enforcement attorney will notify the applicant in writing of the Department's eligibility determination and promptly proceed in accordance with applicable guidance and procedures.

Any questions regarding the Department's eligibility determination or interpretation of this Policy will be resolved by the General Counsel or designee.

1. The number of employees should be considered as full-time equivalents on an annual basis, including contract employees. Full-time equivalents means 2,000 hours per year of employment. (See CFR §372.3.)

2. Informational mailings to an industry sector regarding upcoming compliance requirements alone do not indicate likely discovery of violations.

Violation Disclosure Form

Applicability

This disclosure form is submitted on behalf of ________________________________________, which is independently owned and operated, not dominant in its field, and employs 100 or fewer individuals (across all facilities and operations owned by the entity). This number of employees is based on full-time equivalents on an annual basis, including contract employees. This disclosure form is submitted regarding violations occurring at _____________________________________.

Criteria for Penalty Avoidance

The entity has made a good faith effort to assure compliance by either:
1. performing a compliance audit (a systematic, documented, periodic and objective review of all operations and practices related to meeting environmental requirements); or,
2. receiving official on-site compliance assistance or formal outreach;
Within the past five (5) years, the facility has not been subject to a citizen suit or any government enforcement action, including issuance of a NOV, regarding the specific regulatory requirements disclosed, or subject to two or more penalty demands for any alleged environmental violations and the business has never violated an order, stipulation or agreement with the Department;
All known or suspected violations are being voluntarily disclosed within thirty days of discovery;
The violations did not cause serious harm to public health, safety or the environment. The violations did not present a significant threat or imminent danger to public health, safety or the environment;
The violations were not intentionally, knowingly or recklessly caused and were not the result of criminal negligence or gross negligence;
All violations have been corrected or will be corrected as indicated in the following table and in accordance with any attached compliance schedule or work plan. The stated schedule is the shortest practicable period of time for correcting the violations. Appropriate measures have been implemented to prevent reoccurrence of the disclosed violations; and
The violator did not derive any economic benefit from the violations; or any economic benefit was limited to _______________________________________________.

Certification

I, _________________________________________, certify that I am a responsible official of ______________________________________ and I am authorized to submit this form and the attached violation list and any attached work plan/compliance schedule to the New York State Department of Environmental Conservation.

I hereby affirm under the penalty of perjury that the information provided in this Violation Disclosure Form is true, accurate and complete and I understand that any false statement made herein is punishable as a Class A Misdemeanor under Penal Law §210.45.

Date: ________________

____________________________________
Name

____________________________________
Title

Attachments

STATE OF NEW YORK)

) ss.:

COUNTY OF )

On this ________ day of _______________ , ______ , before me personally came ___________________ , who, being by me duly sworn, deposes and says that s/he resides in _________________________ county; that s/he is the ____________________________ of ____________________________________________ , the corporation described in and which executed the foregoing instrument.

____________________________________
Notary Public

Violation	Detection Method / Date	Corrective Action	Completion Date