Small Business-Friendly Legislation

Sometimes legislation comes along to make things easier, rather than more difficult and expensive, for small business owners.

The Small Business Regulatory Freedom Act of 2011 (S. 474), introduced by Sen. Olympia Snowe (R-Maine) and others in the U.S. Senate in March 2011, was such a bill. It was designed “to reform the regulatory process to ensure that small businesses are free to compete and to create jobs, and for other purposes.”

It included, among other things: judicial review to allow small entities to challenge proposed regulations, periodic review and sunset of existing rules, a requirement for small-business review panels for all agencies, a requirement for the Washington, D.C.-based Internal Revenue Service to consider small-entity impact and an assurance that agencies consider small-entity impacts during their rulemaking processes.

In May 2011, Sen. Snowe reintroduced S. 474 as S. 1030, the Freedom from Restrictive Excessive Executive Demands and Onerous Mandates Act of 2011. “S. 1030 is pretty much the same bill as S. 474, but there are a few differences,” explains Thomas M. Sullivan, of counsel with the law firm Nelson Mullins Riley Scarborough LLP, Washington, and the lobbyist for the National Association of the Remodeling Industry, Des Plaines, Ill. “As I see it, the bill empowers small businesses to have their voices heard by regulatory agencies,” he says.

Why does this matter to NARI and its members? Sullivan, who meets with NARI members on a regular basis, explains: “What I always hear is that remodelers have a customer-first service approach. As a result, they would like to see that customer-first solution to be part of how government agencies write rules. Unfortunately, this rarely happens, so it needs to be forced. One way to force it is through the mechanisms that Sen. Snowe sets up in her legislation.”

According to Sullivan, there are dozens of things in the bill that give small businesses the opportunity to have more impact on agency rulings. However, they boil down to three significant benefits for small businesses:

First, there is a transparency component to S. 1030. “When agencies do things, there are direct costs to businesses,” he explains. What has always been unclear, however, is the ripple effect (indirect costs) of those regulations. S. 1030 requires agencies to be transparent about the ripple effects of the regulations they propose.

“One ripple effect we are living with from the EPA’s lead-paint rule is the uptick of illegal, that is, non-EPA-certified, contractors doing work and underpricing NARI members and other remodelers who are doing what they are supposed to do,” he notes. According to Sullivan, EPA knew about this potential ripple effect in advance, but it was hidden from the public view.

“Sen. Snowe’s bill requires agencies to hear from small businesses on what they see as the potential ripple effects of proposed regulations and then requires the agencies to publicize these effects for broader public consideration before they make final decisions,” Sullivan adds.

The second benefit of the bill is quicker access to the legal process. When it is obvious that an agency is ignoring the views of small business, Sen. Snowe’s bill provides small business with an immediate route to the courts.

Third, the bill provides more authority to the Small Business Administration’s Office of Advocacy to compel agencies to listen to small businesses. According to Sullivan, the SBA’s Office of Advocacy is a “hidden jewel within the federal bureaucracy.” It is a group of professionals, including lawyers and economists, who fight for small business every day. “They filter out a lot of regulatory costs based on recommendations from small businesses,” he explains.

SBA’s Office of Advocacy publishes charts illustrating how regulations disproportionately impact small business. (See the table, page 22.) “This is the economic argument for Sen. Snowe’s bill,” Sullivan adds.