The Small Business Regulatory Enforcement Fairness Act

Complaints from small business that the Regulatory Flexibility Act had not adequately addressed regulatory burden led to the enactment of the Small Business Regulatory Enforcement Fairness Act (P.L. 104-121) on March 29, 1996. The law is far-reaching and provides small business with an array of new ways to air their concerns about agency regulations and enforcement activity.

Perhaps most significant, the two agencies that have received the brunt of the criticism from the small business community — the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) — must make a special effort to answer small business concerns during rulemakings.

Specifically, these agencies have to convene a "Small Business Advocacy Review Panel" to shape each rule that is expected to have a major economic impact on small business to better fit the needs of small business owners. Before issuing a proposed rule, the panel — composed of representatives from the involved agency (EPA or OSHA), OMB's Office of Information and Regulatory Affairs (OIRA), and the Small Business Administration's (SBA's) Office of Advocacy — must solicit and review recommendations from a second panel consisting of small entity representatives (which, in addition to small business, can include small not-for-profit organizations and small governmental jurisdictions).

The Act's other main component deals with agency enforcement of regulations once they are on the books — requiring SBA to establish and oversee a "Regulatory Enforcement Ombudsman" and 10 regulatory fairness boards located in 10 regional cites. Under the authority of the Ombudsman, the boards — each comprised of five small business owners — advise agencies on small business concerns and submit an annual report to Congress based on information that is gathered at fairness-board meetings.

Besides taking their concerns to fairness-board meetings, the Act provides several other outlets to small business owners who wish to challenge agency enforcement actions — through both petitions and the courts.

Excluding violations that are either criminal or blatantly "pose serious health, safety, or environmental threats," a small business owner can petition agencies to reduce or waive penalties on the basis of their economic impact to the business. Similarly, small business owners can file a grievance in court against agencies if they feel they have been "adversely affected or aggrieved" by a ruling. In accordance with this, the Act grants courts the authority to suspend regulations and force revisions that are more conducive to small business interests, or further, to establish that the regulation cannot be enforced against any small entity(1). Should a court find that an agency has been "excessive" in its enforcement of a regulation, the Act also allows small businesses to recover attorney's fees, and other costs associated with going to trial, from the federal government.

In deciding whether an agency has overreached, courts are to examine the agency's analysis of record-keeping requirements mandated by the Act. The analysis, which is also to be used in congressional reviews, must state the need for the rule, a summary of public concerns, a description of what is expected from small businesses, and a list of any steps taken by the agency to reduce economic burdens brought on by the rule. In addition, the agency must explain why it did not promote less burdensome rulings.

Notes

1.Currently the definition for "small entity" applies to about 93 percent of the nation's businesses.