Capitol Hill

On Oct. 10, the U.S. District Court for the Northern District of California issued a preliminary injunction barring implementation of the Department of Homeland Security's (DHS') rule dictating how employers must respond to Social Security Administration (SSA) "no-match" letters, which SSA issues when W-2 forms do not match its records. It is now up to DHS to respond, but the agency likely will not attempt to address the judge's decision until the next administration at the earliest.

NRCA and other business organizations were plaintiffs in the case and argued DHS' rule was promulgated in violation of the Regulatory Flexibility Act (RFA), which requires federal agencies to consider the economic impact of their regulatory actions on small businesses. NRCA and the other plaintiffs asserted DHS had failed to conduct a required regulatory flexibility analysis even though the rule would significantly affect small businesses.

The court agreed that DHS did not comply with RFA. The agency did not give small businesses a voice in the rulemaking process as it was supposed to do, and DHS Secretary Michael Chertoff erroneously certified that the rule would not significantly affect small businesses under RFA.

RFA requirements

In 1980, Congress enacted RFA, requiring that federal agencies consider the economic impact of their regulatory proposals on small businesses and make their analyses available for public comment. Federal agencies were to avoid imposing anti-competitive consequences on small businesses and, if necessary, explore less burdensome alternatives that would be equally effective in attaining agency objectives.

Federal agencies also were required to publish semiannual regulatory agendas and designate proposed rules likely to have a "significant economic impact on a substantial number of small entities." Additionally, RFA gave the U.S. Small Business Administration's Office of Advocacy responsibility for reporting annually to Congress and the president regarding federal agencies' compliance with RFA. And the chief counsel for advocacy was given vague authority to appear as amicus curiae ("friend of the court") in actions brought to review rules.

But RFA did not grant judicial review allowing private parties to sue agencies for noncompliance with RFA. During the next 15 years, the chief counsel reported most agencies were not following RFA, and it became clear to NRCA and others that "teeth" needed to be inserted into the act.

SBREFA

In 1996, NRCA played a major role in lobbying Congress to pass the Small Business Regulatory Enforcement Fairness Act (SBREFA) to amend RFA. I was a co-chair of the Regulatory Flexibility Act Coalition, and NRCA was instrumental in seeing that SBREFA gave courts judicial review for private parties, finally putting teeth into RFA.

SBREFA mandates that the U.S. Environmental Protection Agency and Occupational Safety and Health Administration (OSHA) must convene small-business advocacy review panels to vet proposed rules. And it affirms the chief counsel's authority to file amicus curiae briefs in appeals brought by small businesses from final agency actions, which the chief counsel threatened to do in the DHS case.

Since its enactment, SBREFA has been a bulwark for NRCA members against ill-conceived regulations. For example, it stopped several OSHA rules during the Clinton administration, such as the Safety and Health Program Standard, which was so big it actually incorporated the now-repealed ergonomics standard. SBREFA also played an important role in rectifying OSHA's 6-foot fall-protection standard for roofing work. And it has proved itself again by stopping the Bush administration's DHS no-match letter rule.

A necessary tool

NRCA led the charge to bolster RFA by lobbying for SBREFA and giving private parties the right to sue federal agencies for failing to properly take into account the burden their regulations impose on small businesses. RFA has proved to be a necessary tool for NRCA members to fight over-regulation. Importantly, it is equally effective regardless of which political party occupies the White House.

Craig S. Brightup is NRCA's vice president of government relations.