The Small Business Regulatory Enf orcement Fairness Act of 1996 (SBREFA) w as signed by President Clinton on March 29, 1996. The law provides new avenues for small businesses to participate in and have access to the federal regulatory arena. The SBREFA gives small businesses:
more influence over the development of regulations;
additional compliance assistance for Federal rules; and
new mechanisms for addressing enf orcement actions by agencies.
Small businesses' most significant mechanism for influencing the development of federal regulations is the 1980 Regulatory Flexibility Act (RFA). The Small Business Administration's (SBA) Office of Advocacy provides a guide to the law . This law requires agencies to take steps to collect input from small entities on regulations and to determine
w hether a rule is expected to have a significant economic impact on a substantial number of small entities. Moreover, federal agencies are required to identify alternative regulatory approaches for small businesses, small governmental jurisdictions and non-profit organizations.
Many agencies have failed to comply w ith the RFA over the past 16 years, and small businesses found little recourse in the courts due to the absence of any enf orcement mechanism. The Small Business Regulatory Enf orcement Fairness Act corrects that by permitting judicial review of agencies' compliance w ith the Regulatory Flexibility Act.
Whenever a small business is adversely affected or aggrieved by an agency rulemaking for failure to comply w ith the RFA, the small business may seek review of the rule in court. The RFA now also applies to previously exempt interpretative rulemakings promulgated by the Internal Revenue Service that have inf ormation collection requirements.
The Office of Advocacy w ill have greater responsibility and influence under the RFA because the new law gives the Chief Counsel for Advocacy enhanced authority to file amicus briefs in court proceedings involving an agency's violation of the RFA.
The follow ing issues are subject to judicial review under the SBREFA:
the final regulatory flexibility analysis including the agency's efforts to evaluate alternative regulatory approaches and reasons for rejecting or accepting them;
the agency's effort to collect comments from small entities through a variety of mechanisms;
the agency's decision to certify that a rule w ill not have a significant impact on a substantial number of small entities, and the factual basis for the certification;
the agency's compliance w ith a requirement for periodic review s at the 10-year anniversary of every rule or the enactment of the 1980 law , w hich ever is first.
The new law also updates the requirements of a final regulatory flexibility analysis -- including a description of the steps an agency has taken to minimize the significant economic impact on small businesses.
The new law requires an extra step for the Environmental Protection Agency (EPA) and the Occupational Health and Saf ety Administration (OSHA) in the development of regulations. Specifically, the SBREFA requires that the agencies receive input from affected small business through the SBA's Office of Advocacy bef ore proposed rules are published.
When an EPA or OSHA proposal is expected to have a significant impact on a substantial number of small entities, the agency must convene a panel of employees from the agency, the Office of Advocacy, and the Office of Management and Budget to review a copy of the draft proposed rule and related agency analyses under the Regulatory Flexibility Act.
The panel also w ill collect advice from small business representatives and submit a report to the agency w ithin 60 days of convening of the panel. The agency w ill then review the report, make any appropriate revisions to the rule, and publish the proposed rule w ith the panel report as part of the record.
The SBREFA provides for congressional review of Federal agencies' regulations. Bef ore any rule goes into effect, agencies are required to forw ard the rule to Congress for review . Major rules--those w ith a $100 million impact on the economy or a major impact on an industry, government or consumers, or those affecting competition, productivity or international trade--cannot go into effect until congressional review is complete. Congressional review is subject to a presidential veto. Congress may take up to 60 session days for review and use a variety of mechanisms to delay implementation.
The agencies must publish compliance guides for all rules w ith a significant small business impact. These guides must explain in plain language how the firms can comply w ith the regulations.
If a small business is cited for a violation of a regulation, the court review may include the content of the small business compliance guide in assessing the reasonableness of the proposed penalty.
Agencies also are required to establish a system for addressing compliance inquiries from small business. Any guidance provided by an agency w ill be considered as evidence of the reasonableness of proposed penalties, fines or damages assessed against a small entity.
To step up compliance assistance, the SBREFA requires the Small Business Development Centers (SBDC) to be used as a point of distribution for compliance assistance. A listing of SBDC are available by calling the SBA at (800) U-ASK-SBA.
The new law establishes a complaint process w hereby small businesses may register complaints about enf orcement actions w ith the new ly-appointed SBA Ombudsman or a Small Business Regulatory Fairness Board.
Ombudsman -- The Small Business and Agriculture Regulatory Enf orcement Ombudsman receives comments from small businesses concerning aggressive enf orcement-related activities conducted by agency personnel. The Ombudsman reports annually to the Congress on agency enf orcement efforts and their impact on small businesses.
Regional Boards -- Regional Small Business Regulatory Fairness Boards w ere established in each of SBA's ten regions to advise the Ombudsman on matters of concern to small business relating to the enf orcement activities of agencies. Board members are small business ow ners and operators appointed by the SBA Administrator for terms no longer than three years.
Under the SBREFA, each agency must establish a policy to provide for the reduction, and under appropriate circumstances, for the w aiver of civil penalties for violations of statutory or regulatory requirements by a small business. The language in this section w as adopted from a statement and Executive memorandum issued by President Clinton in March 1995.
The SBREFA expands the ability of small businesses in litigation w ith the government to recover attorney fees under the 1980 Equal Access to Justice Act. In administrative and judicial proceedings, if the government's demand is unreasonable w hen compared to the judgement or decision, then the small business is aw arded attorney fees and other expenses related to def ending against the action. Allow able attorney fees w ere increased from $75 under the current law to $125 per hour.
The Office of Advocacy of the U.S. Small Business Administration w as established by Congress under Public Law
No. 94-305 to advocate the view s of small business bef ore federal agencies and Congress. Advocacy also is required by the Regulatory Flexibility Act to monitor agency compliance w ith the RFA.
Advocacy's 1996 communications to federal agencies on their compliance w ith the Act can be review ed on the Legislative Actions page. The public also may attain a copy of A Guide to the Regulatory Flexibility Act from the home page or by w riting to Advocacy.
The Office of Advocacy encourages small businesses and their representatives to hold agencies accountable for full compliance w ith the Regulatory Flexibility Act and to alw ays comment on proposed rules and regulatory economic impact analyses. Advocacy provides briefings and articles to organizations about small businesses' rights under SBREFA and the Regulatory Flexibility Act. For further inf ormation, contact:
Office of Advocacy
U.S. Small Business Administration 409 Third Street, SW
Washington, DC 20416
(202) 205-6532
Advocacy@sba.gov (link sends e-mail)
For regulatory flexibility analyses, Advocacy fully asserts its responsibility to monitor agencies. Thorough assessments by federal agencies are expected. Economic generalizations are not acceptable. Industry-specif ic analysis is critical.
One common mistake of agencies' economic analyses is the use of general statistics to estimate impact. The aggregate or mathematical average of a regulation on all business is not an effective w ay to determine the impact of a regulation on small business. The objectives of the RFA w ill be achieved only if agencies complete thorough detailed analyses that isolate small business sectors. Variables should include different business size and industry classifications. For instance, a rule may have a very small impact on one sector, but a significant impact on another. Advocacy regularly critiques agencies' analyses and look for the proper definition of small business for each industry,
evaluation of economies of scale, and segregated industry analyses. Small businesses' right to question the economic assumptions of federal agency