The uncertainty caused by future regulation negatively affects a small business’ ability to plan for future growth. While regulation is necessary, it must be pragmatic and sensible. Agencies need to carefully analyze how their regulations affect small businesses. At the same time, federal regulators should work with small businesses to help ensure compliance with the spirit of the law, rather than aggressively impose fines and penalties for violations that result from confusion.
Why regulatory reform is important to the NFIB membership:
- Since January 2009, “government requirements and red tape” has been a top-three problem for small business owners, per NFIBs monthly Small Business Economic Trends survey.
- According to the 2016 NFIB Small Business Problems and Priorities report “unreasonable government regulations” ranks second on the measures of small business problem importance.
- The federal government published 4,084 regulations in 2016.
- About 10 new regulations are finalized every day, according to data on regulations.gov, adding to the volumes of rules small business owners must comply with.
NFIBs Solution: Reform the Regulatory Flexibility Act and Ensure Agencies Focus on Compliance Instead of Harsh Penalties
One of NFIBs top regulatory reform priorities will be advocating for targeted reforms to the Regulatory Flexibility Act (RFA) and the Small Business Regulatory Enforcement Fairness Act (SBREFA). Enacted in 1980, the RFA requires federal agencies take into account small business economic impact during the rulemaking process. The goal of the RFA was to create a process by which the needs and priorities of small business are better taken into account early in the rulemaking process in an effort to eliminate a one-size-fits-all approach in drafting new regulations. While well-intentioned, the RFA is filled with numerous loopholes and imprecise language that has resulted in a relatively weak law.
In 1995, the White House held a conference aimed to identify problems with the RFA and propose reforms. Consequently, in 1996 a Republican Congress and President Clinton signed into law SBREFA. Among the various reforms, SBREFA required the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) to convene Small Business Advocacy Review (SBAR) panels that include representatives of regulated small businesses and provide an opportunity for small businesses to collaboratively work with the regulators to find alternatives that minimize any potential burden on small businesses – before a rule is proposed. These panels were later expanded to include the Consumer Financial Protection Bureau (CFPB) as well.
Clarify the indirect costs of regulation
The RFA only requires agencies to consider those small entities that are directly impacted by a new regulation. Consequently, regulators may ignore foreseeable indirect impacts a new regulation may have on a small business. Regulatory agencies often proclaim indirect benefits for regulatory proposals, but fail to analyze and make publicly available the indirect costs to consumers, such as higher energy costs, lost jobs and higher prices.
NFIB believes agencies should be required to make public and take into account for procedural purposes a reasonable estimate of indirect impact. Congress should hold agencies accountable for providing a balanced statement of costs and benefits in public regulatory proposals.
Expand the SBAR panel process to all agencies
As stated above the SBAR panels are currently only required at the EPA, OSHA, and the CFPB. NFIB believes that SBAR panels should be expanded to cover all agencies issuing rules that affect small businesses, as a means to require these agencies to evaluate the burdens their rules place on small employers.
Reduce job-killing penalties and fines
Many small business owners cannot afford a full-time compliance staff, which exposes them to potential paperwork penalties and even errors that could be made in good faith. NFIB believes that agencies should waive fines and penalties for small businesses the first time they commit a harmless error on regulatory paperwork. NFIB encourages Congress to explore requiring that agencies provide small businesses with a grace period to fix minor other violations, when the public and employees are not in imminent danger.
Devote more agency resources to compliance assistance
In their policies and actions, some agencies, most notably the Environmental Protection Agency and Occupational Safety and Health Administration, fail to understand how small businesses operate. Small business owners need assistance from agencies to understand the complex and voluminous regulations affecting their businesses. The expansion of enforcement capability often comes at the direct expense of helpful compliance programs. Compliance assistance programs should be made a priority, not an attempt to play “gotcha” with small business owners who are struggling to comply.