House Judiciary Committee Approves Small Business Regulatory Reform Legislation

Posted 8/11/2011
By Robert L. Redding Jr.

The U.S. House of Representatives' Judiciary Committee continued its efforts to lighten the regulatory burdens on small businesses. The Regulatory Flexibility Act, H.R. 527, was approved in the committee markup by a vote of 18-8. This legislation amends the Regulatory Flexibility Act of 1980 (RFA).

The bill was introduced by House Judiciary Committee Chairman Rep. Lamar Smith, R-Texas, and has 23 co-sponsors.

The legislation requires federal agencies to assess the "indirect" impact of proposed federal regulations on small businesses in addition to the "direct" impact of regulations already required by federal law.

There has been much criticism of the original RFA as not being strong enough to protect the small business community from onerous federal regulations. This new legislation's goal is to increase the effectiveness of regulatory review and enhance the powers of the Small Business Administration's (SBA) Office of Advocacy, established in 1976. The SBA Office of Advocacy has participated in many Automotive Service Association (ASA) educational programs.

The Office of Advocacy reports "research shows that small businesses continue to bear a disproportionate share of the federal regulatory burden. The research finds that the total costs of federal regulations have further increased from the level established in the 2005 study, as have the costs per employee. More specifically, the total cost of federal regulations has increased to $1.75 trillion, while the updated cost per employee for firms with fewer than 20 employees is now $10,585 (a 36 percent difference between the costs incurred by small firms when compared with their larger counterparts)."

ASA has worked with the SBA to ensure that specific proposed regulations considered the impact on small businesses. Smith's legislation will increase the role of small businesses in the development of federal regulations.

The bill includes the following provisions:

• Requiring initial and final regulatory analyses to: (1) describe alternatives to a proposed rule that minimize any adverse significant economic impact or maximize the beneficial significant economic impact on small entities, and (2) include revisions or amendments to a land management plan developed by the secretary of agriculture or the secretary of the interior.

• Expanding elements of initial and final regulatory flexibility analyses under the RFA to include estimates and descriptions of the cumulative economic impact of a proposed rule on a small entity.

• Repealing provisions allowing a waiver or delay of the completion of an initial regulatory flexibility analysis. Requires the chief counsel for advocacy of the SBA to issue rules governing federal agency compliance with RFA requirements. Authorizes the chief counsel to modify or amend such rules, to intervene in agency adjudication relating to such rules, and to inform an agency of the impact of its rulemaking on small entities.

• Requiring each agency to publish in the Federal Register a plan for the periodic review of existing and new rules that have a significant impact on a substantial number of small entities to determine whether such rules should be continued, changed or rescinded.

• Providing for judicial review of an agency final rule for compliance with RFA requirements after the publication of such rule. In addition, it grants federal courts of appeal jurisdiction to review all final rules issued in accordance with RFA.

In additional judiciary action, the committee approved legislation to reduce frivolous lawsuits and restore sanctions against attorneys who file suits, in federal court, that have no merit. The committee favorably reported H.R. 966, the Lawsuit Abuse Reduction Act (LARA), by a vote of 20-13.

Federal rules mandating sanctions for frivolous suits were watered down in 1993. LARA reinstates monetary sanctions against lawyers who file frivolous suits.

Smith said, "The Lawsuit Abuse Reduction Act is just over a page long, but it would prevent the filing of hundreds of thousands of pages of frivolous legal pleadings in federal court. Lawsuit abuse has become too common in American society partly because the lawyers who bring these cases have everything to gain and nothing to lose. Plaintiffs' lawyers can file frivolous suits, no matter how absurd the claims, without any penalty. Meanwhile, defendants are faced with the choice of years of litigation, high court costs and attorneys' fees or a settlement. Many of these cases have cost innocent people and business owners their reputations and hundreds of thousands of dollars."

For more information on this legislation, please go to www.TakingTheHill.com. To learn more about the SBA's Office of Advocacy, readers can visit www.sba.gov/advocacy.

Bob Redding is the Automotive Service Association's Washington, D.C., representative. He is a member of several federal and state advisory committees involved in the automotive industry. For more information about the legislative activities of ASA, visit www.TakingTheHill.com.