THE SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT

EILEEN LEE AND CASSANDRA MATTHEWS

One of the many promises made by the 1994 Republican Revolution on Capitol Hill was an overhaul of the federal regulatory process. In 1996, legislators delivered on that promise by passing the Small Business Regulatory Enforcement Fairness Act (SBREFA). One of the earliest victories for the Republicans, SBREFA is designed to reduce the small business regulatory burden and to expand the role of small businesses in the federal regulatory process.

Three years later, the federal government wants to hear from small business owners and managers to learn whether this new regulatory tool is meeting its objectives. In hearings around the country over the next few months, the Small Business Administration (SBA) wants to learn how businesses are interacting with federal regulators. Members of the National Apartment Association (NAA) are encouraged to participate and to use these meetings not only as an opportunity to share the experiences they have had trying to comply with federal regulations, but also to seek clarification or assistance from regulators.

The federal efforts on regulatory reform are particularly relevant to the apartment industry, where approximately 98.6 percent of the 40,455 apartment operators surveyed in the 1992 Census of Finance, Insurance, and Real Estate are considered small businesses. Each day, apartment owners and managers, regardless of their revenue profile, must comply with a myriad of regulatory requirements from agencies such as the U.S. Environmental Protection Agency (EPA), the U.S. Department of Housing and Urban Development (HUD), the Internal Revenue Service (IRS), and the Occupational Safety and Health Admin-is-tration (OSHA). Simplifying the compliance process, as SBREFA seeks to do, improves the apartment industry's ability to provide quality, affordable housing to America's citizens.

THE SMALL BUSINESS REGULATORY BURDEN AND SBREFA

The costs associated with regulatory compliance are particularly burdensome for small businesses. Unlike large corporations which are organized to manage the administrative, record keeping, research, and others expenses associated with regulatory compliance, small businesses often lack the personnel and financial resources to monitor regulatory requirements on federal, state, and municipal levels.

In enacting SBREFA, Congress noted that fundamental changes were needed in the regulatory and enforcement culture of federal agencies to make the agencies more responsive to the needs of small businesses. Under the new law, the SBA has the authority to create a regulatory fairness program specifically targeting small businesses. That program is headed by a National Ombudsman and 10 Regional Fairness Boards appointed by the SBA Administrator. SBREFA contains five parts, each addressing a specific legislative objective.

Subtitle A directs federal agencies to publish user-friendly, plain language compliance guides to assist small businesses in complying with federal regulations. Agencies also have the option of answering fact-specific inquiries from the public through informal guidance documents. These guides are to be made available at regional small business development centers located throughout the country or may be obtained directly from the relevant federal agency. Federal agency contacts are listed on page 78.

Subtitle B requires the SBA to designate a Small Business Ombudsman to oversee its regulatory fairness program and establishes 10 Regional Fairness Boards to collect information about the impact of agency actions. Federal agencies are also directed to develop programs that recognize the special needs of small businesses and may reduce or waive civil penalties for violations of statutory or regulatory requirements by these entities.

Subtitle C amends the Equal Access to Justice Act and allows small business to recover legal fees or costs resulting from an agency demand determined to be unjustifiably unreasonable or excessive.

Subtitle D requires agencies, in accordance with the Regulatory Flexibility Act of 1980 (5 U.S.C. sections 601-612), to perform a cost-benefit analysis for any proposed rule, to assess the impact a proposed regulation will have on small businesses, and to determine whether the rule is an unfunded mandate to states. In addition, this section amends the rulemaking procedures of EPA and OSHA by requiring the agencies to solicit advice and recommendations from small businesses through advocacy panels before the promulgation of rules that will have a significant economic impact on them. This portion of the law specifically authorizes judicial challenges of an agency's assessment.

Subtitle E gives Congress the authority to review and, where appropriate, overturn, major agency rules within 60 legislative days of an agency submitting the regulation to Congress. Until Congressional review of the rule is complete, the regulation cannot go into effect. Rules other than major rules may be reviewed by Congress, but they are not accorded a 60-day review period. Congress may issue a resolution of disapproval to prevent any rule from taking effect altogether.

SBREFA is a legally sanctioned and potentially powerful tool for small businesses. Knowing how to put SBREFA to work for you is as important as understanding its components. For instance, the National Apartment Association/National Multi Housing Council (NMHC) Joint Legislative Program staff used SBREFA to urge OSHA to produce compliance guides using the expert system format when they developed the 'Asbestos Advisor.' OSHA is also scheduled to release a compliance guide for the 'Lead in Construction Standard' (29 CFR 1926.62) this month. How can you leverage the tools provided by SBREFA on the local level?

First, you can participate in the hearings being held by the 10 Regional Fairness Boards. These panels review complaints and concerns of small businesses about federal agency enforcement actions. The NAA/NMHC Joint Legislative staff submitted testimony during the Region VIII Regulatory Fairness Board hearing on April 20, 1998.

The Regional Fairness Boards are located in Atlanta, Boston, Chicago, Dallas, Denver, Kansas City, New York, Philadelphia, San Francisco, and Seattle. For information about the meeting schedule, call the SBA Answer Desk at 1800/UASK-SBA or visit their Web site at www.sba.gov/regfair.

If you cannot attend the fairness board hearings, complete an appraisal form and submit it to your Regional Fairness Board. The National Ombudsman and the appropriate Regional Fairness Board review the forms. If necessary, the Ombudsman will schedule followup action, such as meetings with agency enforcement personnel. For appraisal forms, call the SBA Regulatory Fairness Hotline at 1888/REG-FAIR or visit the SBA Regulatory Fairness home page at www.sba.gov/regfair.

Submit questions regarding specific regulations to the relevant federal agency. The phone numbers for the Small Business Office at selected federal agencies are listed on this page.

SBREFA is not the final word on regulatory reform. Congress is currently working on several additional regulatory reform bills which would require federal agencies to conduct more rigorous risk analysis and would reduce the paperwork burden borne by small businesses. Given Congress' short legislative calendar this year, however, the outlook for adoption of a new law in this area is not likely in 1998.

Federal agencies are making progress in implementing SBREFA's mandates, but there is still room for improvement and a need for additional clarification in many instances. According to a recently released report by the U.S. General Accounting Office (GAO), 'Regulatory Reform: Implementation of the Small Business Advocacy Review Panel Requirements,' (GAO/GGD-98-36), both EPA and OSHA did notify the SBA when they determined a regulation would impact small businesses. However, GAO found this determination was not based on a consistent definition. The lack of specific government-wide criteria to trigger the creation of advocacy panels has enabled the agencies to claim certain rules would not trigger review by small business advocacy panels.

SBREFA is designed to enhance the compliance efforts of small businesses. If your business is experiencing problems with the Internal Revenue Service, if you are having difficulties with HUD concerning fair housing enforcement, or with the record keeping requirements under EPA's lead-based paint regulations, the processes put in place by this law are available to assist you.

SBREFA serves to promote the issues that affect small businesses and aims to ensure accountability for overzealous agency action. Ultimately, SBREFA will help diminish the circumstances that prompted its enactment, but only if small businesses themselves make the new law work for them. You can do that by: Requesting plain-language compliance materials from federal agencies to assist you in your efforts to comply with federal laws; Participating in the process through the regional fairness boards and filing appraisal forms; and Applying for a waiver of penalties if you get involved in a federal enforcement action or seek attorney's fees if the government pursues an excessive action against you. U

Lee and Matthews are members of the NAA/NMHC Joint Legislative Program staff, Washington, D.C.