NFIB

Stop Government Mandates
01/16/2001

Because of Washington's recent commitment to fiscal restraint, many who want to expand the role of government can no longer simply create a new program. Instead, they are seeking to achieve their goals by creating mandates on the private sector. These government mandates mask the true cost and size of government and they unfairly burden the small business community. NFIB is committed to stopping this trend. Here are a few things that need to get done:

The Legislative Solutions

• Stop the expansion of the Family Medical Leave Act (FMLA)
  The FMLA requires businesses with 50 or more employees to offer 12 weeks of unpaid leave to an employee for the birth or adoption of a child or for the serious illness of the employee, his spouse, parent or child. Upon return, the employee must be reinstated to the same job or an equivalent one. Some want to expand the provisions and scope of this law, for example, lowering the small business threshold. Family leave is more expensive to employers than it appears and because of their size, small businesses are the least able to adapt to these requirements. Moreover, mandates dictate benefits, taking away an employer and employee's ability to craft the benefits they want. Congress should restrain from placing additional mandates on small business.
• Stop mandating health insurance benefits
  Unfortunately, when it comes to health insurance reform, Congress seems to be heading in the same direction as the states which have already enacted more than 1,000 benefit mandates. History has shown that state-level benefit mandates have led small businesses to drop health care coverage altogether and have resulted in premium increases of up to 30 percent. Congress and the President must be shown that mandated health insurance benefits do not solve current problems with the health care system, they only create more.
• Stop the expansion of COBRA
  Under current law, small businesses are exempted from the requirement to provide employees who leave their job the option of continuing their employer?sponsored health insurance coverage for up to 18 months. Premiums are paid by the employees but the paperwork burden is born by the employer. Some want to mandate small businesses to provide COBRA coverage. COBRA requirements increase administrative costs and drive up premiums. Such a move would only hurt small businesses who are already unable to offer health insurance benefits because of unreasonably high insurance costs. Small business needs market?based insurance reform, not another federal mandate.
• Stop the Environmental Protection Agency (EPA) from making unreasonable mandates
  The recent increase in environmental activity on the part of the government has moved away from legislation. The EPA and some environmental activists are seeking to accomplish their goals by promoting aggressive rules that unnecessarily increase the costs, reporting requirements, and paperwork burdens on small businesses. In many cases, the EPA is expanding its authority without first seeking to amend the law that originally dictated their authority. The EPA should not be permitted to act without accountability to the public. If the administration wants new environmental programs, they should be forced to muster the political will ?? and public finances ?? needed to create such a program under law.
• Stop mandates from the Occupational Safety and Health Administration (OSHA)
  The administrative and paperwork burdens caused by existing OSHA regulations are already creating regulatory and compliance nightmares for small business owners. But, even more onerous regulations are in the works. Ergonomics rules, indoor air requirements, workplace violence guidelines and safety and health programs, among others, may soon become reality. Congress recently passed laws to reduce the paperwork burden and make regulations less costly and burdensome to small business. OSHA must be forced to comply with these laws.
• Abolish unfunded mandates A new law enacted in 1994 makes Congress more accountable for paying for new programs and requirements they place on state and local governments. Congress should be equally prohibited from enacting any unfunded federal mandates that leave small business footing the bill.

Balancing the Federal Budget: An Economic Necessity

The Problems for Small Business

• Increased taxes, spending, regulation and debt are stifling small business growth and job creation.
• The 1993 retroactive tax on small business dealt a double blow to those with thin profit margins.
• Small-business owners have to balance their checkbooks to stay in business, so why shouldn't the government?

The Legislative Solution

• Pass a constitutional amendment to require a balanced budget

The Arguments

Some people argue that the country does not need a balanced budget amendment to balance the budget. They say that if Congress and the President would just buckle down and make the tough choices, common sense (do not spend more than you take in) would prevail, spending would not dwarf revenues, and the budget would be balanced.

How Small Business Sees it

The Balanced Budget Act of 1997 promises to balance the federal budget by the year 2002. If that happens, it will be the first balanced budget since 1969! That's more than a quarter of a century. Common sense does not prevail in Washington. What does prevail is special-interest-pleasing spending that lawmakers hope will get them re-elected. In 1995, Congress spent over $1.6 trillion. And remember that a trillion is a thousand billion. And a billion is a thousand million. Overwhelming, isn't it? This outrageous spending is the reason why we are more than five trillion dollars in debt. Today, one-half of individual income taxes go to pay interest on the debt.

When asked whether Congress should focus its attention primarily on deficit reduction, foreign affairs, domestic programs, or none of the above, an overwhelming 87 percent of NFIB members chose deficit reduction. A 1995 NFIB survey found that 95 percent of small-business owners support establishing a constitutional amendment to balance the budget. Over the years, Congress has used the deficit to justify federal mandates on small business. With books balanced, lawmakers could no longer use shortfalls as an excuse to force small firms to spend their money. Since the best (and, in fact, the only) first step to getting out of a hole is to stop digging; it is time to balance the budget and bring federal spending under control.

The Future of the Issue: What Needs to be Done

In order to keep the economy from dive-bombing, we must have tax limitation, requiring a three-fifths or two-thirds super majority vote as part of a balanced budget amendment. The future of small business will be profoundly affected by whether we can start reducing the deficit. The only way to do that is to balance the federal budget every year.

A balanced budget, additionally, will lower interest rates, which, in turn, encourages small-business owners to expand their businesses. The ultimate end result: job growth.

Wage and Hour Reform

The Problems for Small Business

• The Fair Labor Standards Act (FLSA), established in 1938, is a paperwork burden on the backs of small business. Paperwork is rated as one of the top problems for small business by NFIB members.
• One of the biggest complaints small-business owners have is the difficulty of trying to interpret and deal with wage and hour reporting requirements.
• FLSA is an outdated and one-size-fits-all approach that forces small-business to jump through hoops that were created for industrial, depression-era workers.
• FLSA provides disincentives for employers to reward their employees through bonuses and incentive-pay programs.

The Legislative Solutions

• Enact legislation that would reform FLSA in the following ways:
  1. Simplify an employer's ability to set up incentive or bonus payments to employees based on their job performance.
  2. Allow employers more flexibility to give employees compensatory time off instead of overtime wages.
  3. Allow flexibility within the work week.
  4. Allow employers to give employees partial day leave.
  5. Restore the small-business exemption in the FLSA.

The Arguments

Opponents of FLSA reform argue that increased options and flexibility will lead employers to take advantage of their employees, saving money by always giving time as compensation instead of pay.

How Small Business Sees It

The public sector already uses flex time and it appears to work well. This demonstrates that employers are not likely to take advantage of employees when compensation flexibility is introduced into the work place. The current system is flawed for the private sector. It allows employees to get paid overtime for a fifty-hour week, even if they are only working 30 hours the following week. In today's diverse work situations, everyone needs increased flexibility -- employers and employees.

Eighty-one percent of NFIB members believe that the Fair Labor Standards Act should be rewritten to allow employers more flexibility in dealing with wage and hour laws. The FLSA inhibits employers and employees from establishing a work environment that best fits the particular business and the particular employee. Nowhere is flexibility needed more than in a small business.

Employees today are more consumed by outside responsibilities than they were in 1938. Also, half of the work force is now female. That means that more parents are working, and need more flexibility to handle their family responsibilities. Allowing employees the option to take overtime pay or compensatory time will help employees better manage their responsibilities both at work and at home.

The Future of the Issue: What Needs to be Done

Both Congress and the President need to face this issue and make tough reforms to this tired old law. In recognizing that it is terribly outdated, that it is tailored to fit only depression-era industry workers, common sense must be implemented, and small-business employers relieved of the needless paperwork burden. In small businesses, employees are often family members of the employer, and if not they are certainly treated and thought of as family. As adults and professionals, they should be allowed to work out mutually agreed-upon time and compensation structures. They should be freed from the shackles of an outdated, ineffective law.

Health Care Reform: End the Bias Against Small Business

The Problems for Small Business

• Small businesses, unlike large firms that can self-insure, have to endure costly state insurance mandates.
• Since 1986, NFIB members have identified the cost of health insurance as a top problem.
• There are approximately 2.8 million self-employed Americans who are currently uninsured.
• Seventy-three percent of small-business owners agree that health insurance raises payroll costs to the point where it is difficult to compete.
• Small firms are far more likely to feel the painful brunt - both economic and emotional- of the preexisting condition exclusion, the 20 to 300 percent premium hike when an employee becomes sick, or the sudden cancellation of insurance.

The Legislative Solutions

• Allow self-employed individuals to deduct 100 percent of the costs of their health insurance premiums now... the 1997 tax bill merely created a phase-in (by the year 2007) of this tax benefit that only applies to big business today.
• Allow small business access to health insurance purchasing groups with the same benefits enjoyed by big firms under the Employee Retirement Income Security Act, a 1970s law that exempts businesses with self-insured benefits from state law.
• Preempt costly state benefit mandates.
• Rein in expensive medical malpractice laws by capping punitive and noneconomic damages.
• Implement administrative and paperwork reforms.
• Expand the availability of Medical Savings Accounts (MSAs)

Health Care for Small Business: How Small Business Sees It

As with any government mandate, health care mandates create a devastating burden for small business. Forcing small business to comply with mandates that are often completely unnecessary (such as coverage for hair transplants in at least one state) drives the cost of premiums up and provides a disincentive to insure employees at all. No one wins under this kind of law. The usual end result is that employees go without any employer-provided insurance. If they are insured, their employer is at a significant cash-flow risk because of the unnecessarily high costs of the insurance. In a 1993 survey, 85 percent of small business owners said they opposed mandating employers to provide health insurance for their workers.

Large corporations that are able to self-insure do not have to comply with state mandates. The system is completely backwards! Thousands of people are employed by big business, but federal law exempts these businesses from state mandates because they self-insure. Instead, small business bears the burden or, sadly, goes without health insurance at all.

Allowing small businesses to band across state lines to create purchasing groups would allow them to receive the benefits of economies of scale and make them eligible for the set of rules under the Employee Retirement Income Security Act (ERISA), which exempts businesses from state law. This would allow small business to buy health insurance under the same rules as big business. This is, currently, a major problem with the system. For example, New Jersey small-business owner Sal Risalvato voluntarily provides health insurance for his employees. But when he buys insurance, Risalvato must pay for benefits mandated by the state. Companies with tens of thousand of employees (like GM) are big enough to self-ensure -- to pay claims out of company funds -- and that is what qualifies them for the special break: no state mandated coverage requirements -- requirements which can add 30 percent to the cost of premiums.

Another current inequity in the system is that incorporated businesses can deduct 100 percent of their health care premiums, while the self-employed business owners can only deduct 40 percent. While this percentage will eventually increase to 100%, phased in over the next ten years, the current inequity is illogical and unacceptable. The profit margin of a small business is so slim, the sooner small business can enjoy 100 percent deductibility, the better. This deductibility level will be a huge financial relief that will lead to more insured Americans.

Small business wants more options to bring costs down. By a two-to-one margin, NFIB members support the creation of tax-free medical savings accounts (MSAs), according to a 1994 survey. Starting this year, MSAs will give 750,000 families and individuals the ability to control their own health care costs. This is a logical plan for a country that is based on individual freedoms. Again, this type of reform needs to be expanded, giving more families the opportunity to have more individualized health care.

Another common-sense reform supported by small business is ensuring that people will not be denied health insurance if they change jobs or lose their job, with a guarantee that small business will have access to health insurance that cannot be canceled.

One reason for the high costs of health care is medical malpractice. In a litigation-crazed society, doctors must protect themselves by purchasing expensive malpractice insurance. But consumers ultimately pay for it in higher medical costs. Eighty percent of NFIB members favor a law limiting malpractice awards. Common sense could be restored to our legal system by capping punitive and noneconomic (pain and suffering) damages in medical malpractice suits. Small-business owners and their employees will realize the relief of lower health care costs and insurance premiums if we can curb a legal system that is out of control and only benefiting plaintiffs' attorneys.

The Future of the Issue: What needs to be done

The President and the Congress need to take a closer look at who is really suffering under our current health care system. There are some strong biases against small businesses that must end. NFIB wants passage of real health care reform reducing costs and assuring availability of insurance. Such reform will increase the number of people who have health insurance in this country.

Independent Contractor Definition

The Problems for Small Business

• The current definition of who is an independent contractor and who is an employee is so complex that many employers do not realize when they are in violation.
• Under current law, small-business owners have been hit with back-tax penalties because the Internal Revenue Service (IRS) reclassified their independent contractors as employees.
• Mistakes or disagreements with the IRS could cost small business the following penalties:
  1. 1.5 percent of all wages paid;
  2. all of the employer's share of FICA payroll tax;
  3. 20 percent of the employee's share of FICA payroll tax;
  4. the FUTA (unemployment insurance) tax;
  5. a 10 percent penalty for failing to deposit withheld taxes on time;
  6. and any interest accrued. [Section 6656, Internal Revenue Service Code]
• Fines are levied even if the mistake was unintentional -- the employer fully reported all payments to the independent contractor, and the contractor paid all applicable taxes.

The Legislative Solution

Congress must pass legislation clearly defining who qualifies as an independent contractor. The legislation should include a few simple tests to determine the classification of an independent contractor so that employers will avoid confusion that could lead to costly penalties by the IRS.

The Argument

Labor union bosses argue that small business would like to make all employees independent contractors.

How Small Business Sees It

Small business has no desire or intention of turning all of their employees into independent contractors. But redefining the independent contractor status will allow small-business owners to provide more jobs and allow entrepreneurs to create businesses for themselves as independent contractors. A clear independent contractor definition law cannot be used to force individuals into independent contractor status against their wills or in violation of existing laws.

Independent contractors are very different from full-time employees, and that should be as clear to the IRS as it is to business owners. Contractors and employees are both extremely valuable and play individual roles. An independent contractor brings specialized skills that are only needed for a short period of time or on an occasional basis. They are entrepreneurs who bring good work to a number of businesses at the same time and save employers from hiring an additional employee, when that type of time commitment would exceed their needs and budget. Independent contractors should be appreciated for their entrepreneurial spirit and what they bring to small business: the ability to be more flexible and more competitive. Yet they do not replace employees, who, to a small business, are like family.

No one understands the importance of this issue more than small-business owners: 79 percent of NFIB members believe that Congress should prohibit the IRS from reclassifying independent contractors as employees. At the 1995 White House Conference on Small Business, clarifying the definition of independent contractors was voted the No. 1 issue to small business!

A True Story

Sharon Herald, the owner of a small Michigan pet grooming business, lost $13,000 hard-earned dollars when the IRS fined her. The agency decided that her groomers, who Herald hired on a contract basis, qualified as employees. Herald had no idea she'd made a mistake.

At first Herald took on the IRS. But when the agency wrote her a letter stating that she had exhausted all of her appeals, Herald saw no alternative but to pay the $13,000 fine. To fight the battle would have cost her business four times as much as paying the fine.

The Future of the Issue: What Needs to be Done

The only means of definition at this time is the 20 Common-Law Test. It is lengthy, confusing, and arbitrary. The number of tests a worker must pass varies, because the IRS enforces these tests on a case-by-case basis. Imagine the strain that puts on small-business owners who do not know they have made a mistake in the first place. The system has to be changed to implement a few simple tests, replacing the 20 Common Law Test, that will free employers from confusion that can lead to unnecessary, costly disagreements with the IRS.

Legal Reform: A Small-Business Issue

The Problems for Small Business

• Cost and availability of liability insurance
• Frivolous lawsuits
• The crippling costs of defending oneself in a civil suit
• Out-of-control, lottery-sized damage awards
• Joint and several liability - paying for someone else's mistake
• Lack of predictability and fairness in the system

The Legislative Solutions

• Abolish joint and several liability - establish fault-based standards.
• Cap punitive and compensatory damages to fair, reasonable levels.
• Establish statutes of limitation on product liability, thus lending predictability to the system.
• Establish the English Rule (loser pays) to discourage frivolous suits.

The Argument: Part 1

Opponents of legal reform label it as a pro-big-business, anti-consumer issue. They say that changes in our civil justice system will reward only tobacco companies, big manufacturers and insurance companies, while victims rights will be cut short. This view of legal reform is so narrow that it has left out the largest group of victims... the small-business owners who create two out of three net new jobs in America.

How Small Business Sees It

Think about this: the estimated cost for a business owner's defense in the average lawsuit is $100,000. Sixty percent of NFIB's small-business owners makes less than $50,000 a year. Just one lawsuit... even if the defendant is innocent... can put an end to a small business and all the jobs it created. Civil trials involving big business are a profit game for trial lawyers and plaintiffs where no one loses enough to miss any paychecks, but for Main Street businesses, civil litigation can be fearsome and crippling.

The Argument: Part 2, and the Perspective from Small Business

When asked to address the issue of legal reform and small business, opponents of reform say that small-business owners would be adversely affected by reforms because their ability to sue others would be limited. But small-business owners say that argument is wrong. An NFIB survey of its more than 600,000 members, conducted in 1995, showed that small-business owners are six times more likely to be sued than they are to sue. They are much more concerned with defending themselves than suing others. Ninety-three percent feel that Congress should reform the United States legal system to reduce litigation and cap damage awards.

How a Corrupted System Disables a Small Business

Our civil justice system has turned into an unjust system that resembles a lottery more than a fair means of punishment and compensation. And when the lottery draws the number of a small business, its owner, innocent or guilty, may have to shut his/her doors, layoff employees and vanish into a legal graveyard. The cost of just one suit is that great. Entrepreneurs today often settle out of court, even when innocent, because they simply cannot afford the legal fees involved in fighting a suit. Even if a small-business owner goes to court and wins, the legal fees and court costs could still mean bankruptcy.

A True Story

Flag maker Pete Van de Putte of San Antonio, Texas, was more than disappointed, he was flabbergasted to be named in a personal injury suit in which his company had absolutely no involvement.

It seems the alleged victim had stopped to help the employees of a business lower a large American flag on a windy day. A gust of wind allegedly whisked the flag and the passerby 70 feet into the air. Old Glory then ripped and dumped the hanger-on who sued, claiming severe injuries because the flag was an "unreasonably dangerous product" without warning labels and the flagpole was "defectively designed" to allow consumers to become airborne.

Van de Putte's case is a classic example of lawsuit abuse. His firm, Dixie Flag Manufacturing Co., had not made or sold the flag in question. He was sued, as far as he knows, just because he happened to own a business that makes flags in the city where the incident occurred. Like many small-business owners innocently dragged into such cases, Van de Putte was forced to settle out of court rather than face the high legal bills and the immense waste of time that frivolous lawsuits demand.

The Future of the Issue: What Needs to be Done

If meaningful reform does not have the support of both Congress and the President, if the system remains tilted to one side without limits on awards, the only group that wins is the trial lawyers. Even plaintiffs are not winners when most of their awards go to pay their attorneys' fees. Consumers lose because they end up paying the cost of all this frivolous litigation in the form of higher prices for the products and services they need and enjoy. These hidden 'tort taxes' total about $1,200 a year for every man, woman, and child in America.

Without reform, small-business owners will continue to live in fear of and be crippled by litigation. Even if a business never gets sued, the owner is profoundly affected by the rising costs and need for liability insurance. The cost and availability of liability insurance has been among NFIB's top five concerns for more than a decade. Small-business owners' cry for meaningful legal reform has been loud and clear for a long time. Reforming the legal system was the No. 1 recommendation at the White House Conference on Small Business in 1986. In 1995, a full decade later, legal reform remained in the top 10 at the White House conference. Seventy-two percent of NFIB members see legal reform as one of the top ways Congress can help ease their fears. Common-sense reform will allow small-business owners to concentrate on job creation and business expansion instead of worrying about being sued.

Regulatory Reform

The Problems for Small Business

The burden of federal regulations falls disproportionately on small business. The idea of some lawmakers and regulators that one-size-fits-all is unrealistic and costly.

• The regulatory cost per employee to small firms is approximately 50 percent more than the cost to large firms. Small businesses employ 53 percent of the work force, but shoulder 63 percent of the total business regulatory costs.
• Regulatory costs per employee are the highest for the smallest firms -- businesses with one to 4 employees have costs averaging $31,748 while businesses with 500+ employees face costs averaging $16,241 per employee.
• Firms with 20 to 49 employees spend, on average, 19 cents out of every revenue dollar on regulatory costs.
• Tax compliance and payroll record keeping are the two largest components of the regulatory burden today. Firms with less than 10 employees report that their tax and payroll costs represent about 80 percent of their total regulatory burden. In fact, firms with under 50 employees spend close to five percent of their revenue on tax compliance costs alone.

(Above data is from "The Changing Burden of Regulation, Paperwork, and Tax Compliance on Small Business: A Report to Congress," U.S. Small Business Administration, October, 1995.)

The Legislative Solutions

• Implement small business regulatory relief.
• Develop and implement specific simplified forms for small businesses.
• Implement risk assessment/cost benefit analysis.
• Require that all federal agencies must sunset and reexamine all regulations every five years before Congress can authorize their continuation.
• Restore "third party disclosures" to Paperwork Reduction Act review.
• Ease small business compliance burdens.

The Arguments

Proponents of more federal regulation and government involvement in running a small business argue that regulations are necessary to keep American business fair and friendly toward consumers, the environment, and employees.

How Small Business Sees It

American small business is fair and friendly toward consumers, the environment, and employees. Excessive regulation does not result in more responsible entrepreneurs; it results in more frustrated, financially-and-time-strapped entrepreneurs! We're regulating the life out of the American Dream.

NFIB members have long demanded regulatory reform. In a 1993 survey, 67 percent of small- business owners supported requiring the Environmental Protection Agency (EPA) to undertake a comparison of risks and benefits when issuing new regulations. Seventy-six percent support requiring the EPA to produce a "small-business impact statement" when writing new environmental regulations, according to a 1990 survey. Another 1993 poll found that 82 percent support requiring the federal government to create a short form for all business reporting requirements.

The majority of small-business owners also support reevaluating all existing federal regulations every three to five years.

A True Story



A True Story

Francis Vicino, an NFIB member from Wareham, Massachusetts, had to take out a 30-year mortgage to cover the $250,000 he spent on environmental engineers, lawyers and consultants in order to get approval to build a driveway that would connect the two buildings of his expanding business. The expansion would provide safer access to the dangerous S-shaped highway in front of the offices, and increased office space would enable him to add six people to their staff of 18.

The problem? The short road needed a precast-concrete culvert so that a small stream could flow under it. Defined as a 'wetland' by state and federal regulations, the brook is three feet wide and two feet deep at its fullest, but most of the time about six inches of water flows through it. In exchange for clear-cutting and filling in the small area of 'wetland' for the culvert, Vicino planned to replant the skunk cabbage, red maples, pines, birches and wild cherry trees on another part of the land. His plan, after an initial revision, was approved by his local conservation commission, and work started in October of 1987.

In November, an EPA representative visited Vicino and told him that he was violating the Clean Water Act by not having a federal permit. The EPA threatened a $25,000-a-day fine and imprisonment unless Vicino did what he was told. The agency forced him to replant the area in the fall, although Vicino's consultants had said the spring would be a better time to replant. Sure enough, most of the newly planted maples, pines and blueberries died.

Francis Vicino was forced to spend more money and time than he could afford on a project that should have been minor and was creating six new jobs for his community. He said: "It's too late for Congress to help us. But we hope no other small-business owners have to suffer as we did."

The Future of the Issue: What Needs to be Done

Much needs to be done. Congress and the President need to look at the regulatory burdens on small business and continue to reduce excessive regulation so that small business can grow and create new jobs. Lawmakers also need to keep in mind that small-business owners are good citizens. They are their own toughest regulators.

Superfund Reform: The Time is not Now. It's Yesterday.

The Problems for Small Business

Superfund, the 1980 law, which was intended to pay for the cleanup of the nation's hazardous waste sites, has turned into a bonanza for lawyers and a nightmare for small business.

• The liability structure of Superfund encourages excessive litigation.
• Wrong incentives: incentives to continue expensive litigation, incentives to prolong cleanup, incentives to drag even the smallest contributors through the lengthy bureaucratic and legal process.
• All segments of the small business community are affected by this severely flawed program.

The Legislative Solutions

• Repeal retroactive joint and several liability.
• Establish reasonable settlement offers.
• Eliminate liability for those parties involved in co-disposal municipal landfill sites.
• Eliminate liability for those parties who contribute only municipal solid waste to a site.
• Eliminate liability for those parties who contribute 1 percent or less of the waste (a one percent "de minimis exemption").
• Establish a clear, simple "ability to pay test"... where the burden is on the government to determine the business's ability to pay.
• Establish an incentive to discourage the inclusion of small businesses in the allocation process. For example, if a party is brought into the process and later found to be innocent or de minimis, the party responsible for bringing them in would be liable for the innocent party's attorneys' fees and liability allocation shares of the exempt business.
• Eliminate liability for recycling sites such as oil and recycling or refining centers.
• Establish definite time deadlines.

The Arguments

The Environmental Protection Agency (EPA) and its supporters argue that no one should be exempt from liability in Superfund action because it is not right to let polluters go "free," without paying for the cleanup. They also argue that the burden of paying for cleanup, if the liability system is changed, will end up on the backs of the taxpayers.

How Small Business Sees It

While the desire to require the polluter to pay is a noble one, the truth is that Superfund not only targets polluters, it targets thousands of innocent businesses. These businesses are held hostage while the true polluters hold up the proceedings... costing small business thousands in legal fees and years of legal anguish. Furthermore, the EPA and its supporters do not mention that already-established environmental taxes (mostly on petroleum, chemical and power industries) go directly to cleanup efforts! The typical taxpayer does not pay for Superfund clean up. It is imperative that Superfund be streamlined, because the current wastes that are incurred for the sake of a few guilty parties, overwhelmingly outweigh the benefits of their clean up contributions.

Superfund cases are so heavy with litigation and bureaucracy that $1.73 billion a year is spent on overhead, research, and legal expenses. In fact, a recent study of Superfund costs shows that the money paid to lawyers from 1986 to 1989 could have fully funded cleanups at 40 sites. In 1980, Superfund proponents said that $1.6 billion would be needed to clean up hazardous waste in America. But, in 15 years, the program has charged the government and private business more than $25 billion to clean up only 83 of the sites (there are more than 1,200 sites) enough to be taken off the list. The total cost of the program, if left unchanged, may well top $150 billion by 2025.

On average, it takes eight years from the time a site is discovered to the time cleanup work begins -- if it begins at all. This is time and money, spent on legal action and fees, that would better be spent on cleaning up! Including small and innocent businesses in Superfund liability slows the process and hampers the economic growth generated by affected small firms.

In 1994, over two-thirds of NFIB members said that they thought the EPA should undertake comparison of risks and benefits when issuing new regulations. Sixty-five percent of NFIB members said, in a 1995 poll, that they wanted to see retroactive superfund liability abolished.

The Liability Issue: Why Superfund is a Nightmare for Business Owners and Environmentalists, but for a Lawyer the Law is a Dream Come True

Superfund's liability guidelines are an invitation to excessive litigation. They are strict, which means that the Potentially Responsible Party (PRP) does not have to be proven negligent; the government only need prove that a PRP disposed of something at the site. The liability scheme is also retroactive, so it does not matter when the contribution to the site took place, even if it was before the Superfund law was enacted! Even if a previous owner of the property was the polluter, the current owner is still liable. Finally, it is joint and several. This means that the percentage of fault does not correlate with the percentage of liability. In other words, if your business had been contributing food scraps and paper products to a landfill that also contained high-level radioactive waste from a nuclear power plant, the mere fact that you contributed anything to the fill could make you liable for up to 100 percent of the cleanup of that site.

The liability standards were originally established to make it easy for the EPA to extract monies from polluters for cleanup. Instead, they serve as an excuse for the EPA and big polluters to extort cleanup fees from small-business owners who may be living paycheck-to-paycheck. The current liability standards just do not make sense. Both large and small business are spending more in legal fees than in cleanup fees, trying to decide who will foot how much of the bill. And meanwhile, the sites remain polluted! The only winners in those fights are the attorneys who are employed for years at a time over each Superfund site.

How a Corrupted System Disables a Mom-and-Pop

First, it is important to remember that business owners are also members of the community. They are parents and friends who do not want to live in an unclean world where children cannot drink the tap water. The pollution that small business contributes to landfills is a lot like what we throw out in our family's garbage every week. The waste from a restaurant, advertising agency, dressmakers shop... clearly, these are not the same as the waste compiled by a petroleum company, nuclear power plant or chemical manufacturer. And yet, a small business can still be liable for the entire cost of cleaning up a huge, toxic mess. As can a given community whose trash has always been taken to a particular landfill.

If the EPA knocks on the door of a pizza parlor, owned by a family, with ten employees, and hands over a bill for $200,000, the owner has to retain a lawyer and defend themselves. Because pizza crusts and paper napkin waste do not cost $200,000 to clean up, it quickly becomes obvious that paying attorney's fees out of the money the family has earned from pizza pies is a recipe for financial ruin. If the owner is lucky, he/she can settle the suit for $20,000, which could be a year's salary for one of its employees. By the time it is over, the pizza parlor will be lucky if it has not been forced to declare bankruptcy.

A True Story

Gettysburg restaurant owner and NFIB member Barbara Williams is one of 550 fourth party defendants in a Superfund lawsuit. Williams' insurance company refuses to defend her or pay the cost of settlement, even though her trash, which is solid municipal waste, was hauled away and disposed of at a state approved site. Williams is being sued for $76,253.71 because her trash was dumped into the Keystone landfill, even though she used a trash hauler that was approved and permitted by her borough government.

Keystone Sanitation, along with eight other parties, was sued by the Environmental Protection Agency on September 27, 1993 under the Superfund law. They and their attorneys then sued approximately 180 other businesses. Those businesses became third party defendants who, in turn, sued approximately 550 other small business, borough and school districts.

"We dumped what you set out on the curb for your garbage company to collect," Williams said. "But an attorney representing the third party defendants told us that our paid garbage bills proved that we contributed to the toxic waste and that we were guilty of contamination if we had thrown out one ballpoint pen in 24 years.... Being forced into this settlement would be devastating to my business. What is the Superfund law accomplishing? The attorneys are making a fortune, small businesses are unfairly burdened and the contamination isn't cleaned up."

The Future of the Issue: What Needs to be Done

Let's get small business out of Superfund liability by changing the guidelines to ones that are more reasonable and make common sense. Joint and several liability never makes sense in any litigation, and abolishing it is a streamlining measure. Strict liability is an open door to abuse of the system that turns into extortion with an environmental excuse. It costs more to sue a small business than the business can afford to contribute. Retroactive liability, as one man simply put it, is like this: "It's as if they have pictures of you driving through an intersection 20 years ago. They say you didn't obey the stop sign. You say there wasn't any sign there. They say, well, there is now."

Gettysburg restaurant owner and NFIB member Barbara Williams is one of 550 fourth party defendants in a Superfund lawsuit. Williams' insurance company refuses to defend her or pay the cost of settlement, even though her trash, which is solid municipal waste, was hauled away and disposed of at a state approved site. Williams is being sued for $76,253.71 because her trash was dumped into the Keystone landfill, even though she used a trash hauler that was approved and permitted by her borough government.

Keystone Sanitation, along with eight other parties, was sued by the Environmental Protection Agency on September 27, 1993 under the Superfund law. They and their attorneys then sued approximately 180 other businesses. Those businesses became third party defendants who, in turn, sued approximately 550 other small business, borough and school districts.

"We dumped what you set out on the curb for your garbage company to collect," Williams said. "But an attorney representing the third party defendants told us that our paid garbage bills proved that we contributed to the toxic waste and that we were guilty of contamination if we had thrown out one ballpoint pen in 24 years.... Being forced into this settlement would be devastating to my business. What is the Superfund law accomplishing? The attorneys are making a fortune, small businesses are unfairly burdened and the contamination isn't cleaned up."

The Future of the Issue: What Needs to be Done

Let's get small business out of Superfund liability by changing the guidelines to ones that are more reasonable and make common sense. Joint and several liability never makes sense in any litigation, and abolishing it is a streamlining measure. Strict liability is an open door to abuse of the system that turns into extortion with an environmental excuse. It costs more to sue a small business than the business can afford to contribute. Retroactive liability, as one man simply put it, is like this: "It's as if they have pictures of you driving through an intersection 20 years ago. They say you didn't obey the stop sign. You say there wasn't any sign there. They say, well, there is now."

Gettysburg restaurant owner and NFIB member Barbara Williams is one of 550 fourth party defendants in a Superfund lawsuit. Williams' insurance company refuses to defend her or pay the cost of settlement, even though her trash, which is solid municipal waste, was hauled away and disposed of at a state approved site. Williams is being sued for $76,253.71 because her trash was dumped into the Keystone landfill, even though she used a trash hauler that was approved and permitted by her borough government.

Keystone Sanitation, along with eight other parties, was sued by the Environmental Protection Agency on September 27, 1993 under the Superfund law. They and their attorneys then sued approximately 180 other businesses. Those businesses became third party defendants who, in turn, sued approximately 550 other small business, borough and school districts.

"We dumped what you set out on the curb for your garbage company to collect," Williams said. "But an attorney representing the third party defendants told us that our paid garbage bills proved that we contributed to the toxic waste and that we were guilty of contamination if we had thrown out one ballpoint pen in 24 years.... Being forced into this settlement would be devastating to my business. What is the Superfund law accomplishing? The attorneys are making a fortune, small businesses are unfairly burdened and the contamination isn't cleaned up."

The Future of the Issue: What Needs to be Done

Let's get small business out of Superfund liability by changing the guidelines to ones that are more reasonable and make common sense. Joint and several liability never makes sense in any litigation, and abolishing it is a streamlining measure. Strict liability is an open door to abuse of the system that turns into extortion with an environmental excuse. It costs more to sue a small business than the business can afford to contribute. Retroactive liability, as one man simply put it, is like this: "It's as if they have pictures of you driving through an intersection 20 years ago. They say you didn't obey the stop sign. You say there wasn't any sign there. They say, well, there is now."

Gettysburg restaurant owner and NFIB member Barbara Williams is one of 550 fourth party defendants in a Superfund lawsuit. Williams' insurance company refuses to defend her or pay the cost of settlement, even though her trash, which is solid municipal waste, was hauled away and disposed of at a state approved site. Williams is being sued for $76,253.71 because her trash was dumped into the Keystone landfill, even though she used a trash hauler that was approved and permitted by her borough government.

Keystone Sanitation, along with eight other parties, was sued by the Environmental Protection Agency on September 27, 1993 under the Superfund law. They and their attorneys then sued approximately 180 other businesses. Those businesses became third party defendants who, in turn, sued approximately 550 other small business, borough and school districts.

"We dumped what you set out on the curb for your garbage company to collect," Williams said. "But an attorney representing the third party defendants told us that our paid garbage bills proved that we contributed to the toxic waste and that we were guilty of contamination if we had thrown out one ballpoint pen in 24 years.... Being forced into this settlement would be devastating to my business. What is the Superfund law accomplishing? The attorneys are making a fortune, small businesses are unfairly burdened and the contamination isn't cleaned up."

The Future of the Issue: What Needs to be Done

Let's get small business out of Superfund liability by changing the guidelines to ones that are more reasonable and make common sense. Joint and several liability never makes sense in any litigation, and abolishing it is a streamlining measure. Strict liability is an open door to abuse of the system that turns into extortion with an environmental excuse. It costs more to sue a small business than the business can afford to contribute. Retroactive liability, as one man simply put it, is like this: "It's as if they have pictures of you driving through an intersection 20 years ago. They say you didn't obey the stop sign. You say there wasn't any sign there. They say, well, there is now."

A True Story

Gettysburg restaurant owner and NFIB member Barbara Williams is one of 550 fourth party defendants in a Superfund lawsuit. Williams' insurance company refuses to defend her or pay the cost of settlement, even though her trash, which is solid municipal waste, was hauled away and disposed of at a state approved site. Williams is being sued for $76,253.71 because her trash was dumped into the Keystone landfill, even though she used a trash hauler that was approved and permitted by her borough government.

Keystone Sanitation, along with eight other parties, was sued by the Environmental Protection Agency on September 27, 1993 under the Superfund law. They and their attorneys then sued approximately 180 other businesses. Those businesses became third party defendants who, in turn, sued approximately 550 other small business, borough and school districts.

"We dumped what you set out on the curb for your garbage company to collect," Williams said. "But an attorney representing the third party defendants told us that our paid garbage bills proved that we contributed to the toxic waste and that we were guilty of contamination if we had thrown out one ballpoint pen in 24 years.... Being forced into this settlement would be devastating to my business. What is the Superfund law accomplishing? The attorneys are making a fortune, small businesses are unfairly burdened and the contamination isn't cleaned up."

The Future of the Issue: What Needs to be Done

Let's get small business out of Superfund liability by changing the guidelines to ones that are more reasonable and make common sense. Joint and several liability never makes sense in any litigation, and abolishing it is a streamlining measure. Strict liability is an open door to abuse of the system that turns into extortion with an environmental excuse. It costs more to sue a small business than the business can afford to contribute. Retroactive liability, as one man simply put it, is like this: "It's as if they have pictures of you driving through an intersection 20 years ago. They say you didn't obey the stop sign. You say there wasn't any sign there. They say, well, there is now."