As Congress has long recognized, small businesses are essential for a healthy economy, and they thrive when executive agencies pay close attention to their needs. On the contrary, when agencies adopt one-size-fits-all regulations, small businesses are often the ones to bear the burden. The Regulatory Flexibility Act (RFA) stands in the way of such widespread harm—or, at least, it should.

In a new white paper, Rob Smith of NFIB’s Small Business Legal Center explains what the RFA does, how agencies fail to comply with it, and how Congress can strengthen this statute going forward.

What Does the RFA Do?

The RFA requires that when an agency proposes a new rule, it must consider the impact the rule would have on small businesses. It must estimate the number of small businesses that would be significantly impacted by the rule, as well as the costs associated with reporting, recordkeeping, and compliance. If an agency claims that a rule wouldn’t have a significant effect on small businesses, it must certify this and provide factual support.

Agencies Fail to Comply With the RFA

Unanimously passed in 1980, the RFA was supposed to serve as a check on regulations that would harm small businesses. Too often, however, the RFA has been treated as little more than a speed bump on the road to a desirable policy, not changing agency behavior or improving outcomes for small businesses. Congress attempted to correct the statute’s shortcomings in the 1990s, but ultimately, its efforts didn’t go far enough.

Today, agencies routinely bypass the requirements of the RFA. They improperly certify that rules will not have a significant economic impact on small businesses, underestimate costs, or misstate the number of businesses that will be negatively affected by a rule. Sometimes, they don’t even try to comply with it at all.

Can We Fix the RFA?

The Small Business Legal Center proposes that these problems are not only necessary to solve, but also easily fixable. Congress should take legislative action to strengthen the RFA’s requirements and make it harder for agencies to get away with submitting subpar analysis and inaccurate data. If the RFA is brought up to date, the statute will be less of a paper tiger and more of a legitimate constraint on one-size-fits-all agency rulemaking.

The entire white paper can be downloaded here.

For more information, please visit nfib.com/legal or reach out to NFIB at info@nfib.org.