PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

NEW HOUSE SMALL BUSINESS COMMITTEE REPORT: Agencies’ Noncompliance with the Regulatory Flexibility Act

By at 3 June, 2024, 2:35 pm

by Karen Kerrigan – 

On May 22, the House Small Business Committee released a report following a 15-month long staff investigation into federal agency compliance – or lack thereof – with the Regulatory Flexibility Act (RFA). The RFA is designed to protect small businesses from the effects and unintended consequences of federal regulation. Upon release of the report, Chairman Roger Williams (R-TX) observed:

“This law was intended to act as a shield against the heavy hand of government for Main Street America, but it is not functioning as it should and needs to be significantly improved…Frustratingly, the executive branch expects Main Street to comply with mountains of regulations, but the government can’t even comply with the RFA by considering the best interests of small businesses.”

A range of questionable rulemakings are cited in the report where federal departments and agencies either ignored the law or incorrectly certified that specific regulations would not impact small businesses. These include a variety of regulations SBE Council or our members have commented on, written federal agencies about in terms of possible RFA non-compliance, or where we have supported or are supporting congressional or legal action to nullify rules or declare them invalid. Some of these rules mentioned in the report, include:

● DOL/OSHA Walkaround Rule

● DOL Independent Contractor Rule

● EPA WOTUS Rule

● CFPB Credit Card Penalty Fee Rule

● DOL Apprentice Rule

● NLRB’s Joint Employer Rule

● FTC Non-Compete Rule

● DOL Overtime Rule

● DOL Fiduciary Rule

The report includes other rulemakings advanced by an assortment of federal agencies. Key findings of the report include:

Finding 1: The RFA allows agencies to certify a rule if it does not have a significant impact on a substantial number of small entities. However, often, agencies improperly certify the rules in order to avoid conducting the RFA analysis, which means that rules are being finalized without adequately assessing the true impacts to small businesses.

Finding 2: Agencies often underestimate both the costs and the number of impacted small businesses when conducting an RFA analysis. This creates a disparity between what the agency claims and what the real-world impact of the rules are on small businesses. Furthermore, the agencies often fail to adequately consider less burdensome alternatives, or they choose to finalize a rule that is even more harmful to small businesses than other alternatives, without adequate justification.

Finding 3: Agencies repeatedly fail to appropriately assess if a rule is duplicative or conflicts with other rules, which causes small businesses to suffer from multiple overlapping regulations from both within the same agency and across the federal government.

Finding 4: Some agencies refused to comply with congressional oversight and provide Congress with requested information during their rulemaking process. This violates both the Constitution and Administrative Procedure Act and prevents this Committee from its duty to protect Main Street America.

There are ongoing rulemakings that SBE Council is currently questioning (not included in the report) about whether federal agencies complied with the RFA. In a statement of support for the report and the various legislative reforms the Committee has proposed to fix federal agency shortcomings and bring them into RFA compliance, I observed:

“SBE Council is grateful that the Committee has documented this damaging and prejudicial regulatory activity, which means productive steps can be taken to compel the federal government to follow the law when it comes to how it develops new regulations or modifies existing ones. SBE Council fully supports the range of solutions and reforms proposed by Committee members, as we believe the report’s findings are merely the tip of the iceberg and important steps must be taken to reform a careless regulatory culture that is permeating federal agencies and departments.”

SBE Council looks forward to our work with Chairman Williams and members of the Committee in advancing important measures to bring accountability, transparency and responsiveness to the federal regulatory process.

Karen Kerrigan is president & CEO, Small Business & Entrepreneurship Council. 

 

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