Regulatory Flexibility Act

• Author: William Funk - Jeffrey S. Lubbers
• Pages: 1107-1136

1107

REGULATORY FLEXIBILITY ACT

21

1107

Regulatory

Flexibility

Act

Citations:

5 U.S.C. §§ 601-612 (2012); enacted September 19, 1980, by Pub. L.

No. 96-354, 94 Stat. 1,164-1,170; amended by the Small Business Regula-

tory Enforcement Fairness Act of 1996, 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.

1108 REGULATORY FLEXIBILITY ACT

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Additional procedures are required to ensure small entities comment

whenever the Environmental Protection Agency (EPA), the Occupational

Health and Safety Administration (OSHA), or the Consumer Financial Pro-

tection Bureau (CFPB) promulgate rules. Prior to the publication of the ini-

tial RFA, these agencies 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 en-

tities and gather comments and suggestions on the proposed rule. These agen-

cies must also convene a regulatory review panel, consisting of employees

from that agency, the Office of Management and Budget, and the Chief Coun-

sel, 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

entities. 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 modify-

ing compliance or reporting timetables, simplifying compliance or reporting

requirements, using performance rather than design standards, and exempt-

ing 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 effects of the rule on small entities.

Agencies must publish semiannual regulatory agendas identifying up-

coming and current rulemaking proposals that may affect small entities. In

addition, the Act directs agencies to apply regulatory flexibility analysis to

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

viewing 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 also gives prominence to the role of the Chief Counsel for Advocacy of

the Small Business Administration and specifically requires an agency to

provide 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