21. Regulatory Flexibility Act

• Pages: 1111-1133

1111

REGULATORY FLEXIBILITY ACT

21

1111

Regulatory

Flexibility

Act

Citations:

5 U.S.C. §§601-612 (2000 and Supp. IV 2004); enacted September 19,

1980 by Pub. L. No. 96-354, 94 Stat. 1,164-1,170; amended by Pub. L. No.

104-121, Title II, §§241-245, March 29, 1996, 110 Stat. 864.

Lead Agency:

U.S. Small Business Administration, Office of Advocacy, 409 3rd Street

SW, Washington, DC 20416, (202) 205-6533. http://www.sba.gov/advo.

Overview:

Requirements. The Regulatory Flexibility Act requires agencies to con-

sider the special needs and concerns of small entities whenever they engage in

rulemaking subject to the notice-and-comment requirements of the APA or

other laws. In 1996, the Act’s coverage was expanded to include interpretive

rules promulgated by the Internal Revenue Service (IRS) that contain small

entity information collection requirements. Each time an agency publishes a

proposed rule (or IRS interpretive rule) in the Federal Register, it must pre-

pare and publish a regulatory flexibility analysis (RFA) describing the impact

of the proposed rule on small entities (including small businesses, organiza-

tions, and governmental jurisdictions), unless the agency head certifies that

the proposed rule will not “have a significant economic impact on a substan-

tial number of small entities.”

The initial RFA, like the proposed rule itself, is subject to public com-

ment, and the agency is encouraged to facilitate participation by small enti-

ties by providing actual notice of the proceeding to affected small entities,

holding conferences and public hearings on the proposed rule as it affects

small entities, and transmitting copies of its initial RFA to the Chief Counsel

for Advocacy of the Small Business Administration.

1112 REGULATORY FLEXIBILITY ACT

21

Additional procedures are required to ensure small entities comment when-

ever either the Environmental Protection Agency (EPA) or the Occupational

Health and Safety Administration (OSHA) promulgate rules. Prior to the pub-

lication of the initial RFA, EPA or OSHA must notify and provide the Chief

Counsel with information regarding the potential impact of the proposed rule

on small entities. The Chief Counsel then identifies individuals to represent

small entities and gather comments and suggestions on the proposed rule. EPA

or OSHA must also convene a regulatory review panel, consisting of employ-

ees from that agency, the Office of Management and Budget, and the Chief

Counsel, to report on the agency’s information and small entity representatives’

comments and recommendations. This information becomes part of the

rulemaking record, which can provide a basis for the agency to amend its initial

proposed rule or RFA. The final rule adopted by any agency must be published

with a final RFA that summarizes and responds to significant issues raised by

the comments received.

The Act does not mandate any particular outcome in rulemaking; it en-

courages, but does not require, the “tiering” of government regulations through

a number of techniques designed to make them less burdensome to small enti-

ties. An agency’s initial RFA must identify any “significant alternatives” to the

proposed regulation that might achieve its goals while minimizing the impact

on small entities. Approaches suggested in the statute include modifying com-

pliance or reporting timetables, simplifying compliance or reporting require-

ments, using performance rather than design standards, and exempting small

entities from certain requirements. The final RFA must explain why any such

significant alternatives to the rule were not adopted and the steps taken by the

agency to minimize the affects of the rule on small entities.

Agencies must publish semiannual regulatory agendas identifying upcom-

ing and current rulemaking proposals that may affect small entities. In addi-

tion, the Act directs agencies to apply regulatory flexibility analysis to their

existing rules, initially evaluating them over a 10-year period and reviewing

them periodically.

In 2002, President Bush signed Executive Order 13,272, titled “Proper

Consideration of Small Entities in Agency Rulemaking.” For the most part the

Order simply restates the requirements of the Regulatory Flexibility Act, but

the Order gives prominence to the role of the Chief Counsel for Advocacy of

the Small Business Administration and specifically requires an agency to pro-

vide the Chief Counsel with a draft of any proposed rule that may have a

significant economic impact on a substantial number of small entities at the

same time the agency provides it to the Office of Information and Regulatory

Affairs (OIRA) under E.O. 12,866 or, if the draft is not required to be sent to