Small Business Regulatory Enforcement Fairness Act (SBREFA) 

Original Text

Effective Dates
3/29/1996 - Present

Reform Goals
Reduce the federal regulatory burden on small business by adding teeth to the Regulatory Flexibility Act. Improve Congressional oversight of the regulatory burden by allowing Congress to block new regulations. 

Requirements (What of whom?)
The SBREFA adds teeth to protections for small businesses by making non-compliance with the Regulatory Flexibility Act subject to judicial oversight. (See “Regulatory Flexibility Act” for details on the original requirements). Other incremental improvements to the RFA in the SBREFA  included:

  • Ups the evidentiary requirements for agencies to show whether rules affect a large number of small entities
  • Requires EPA, OSHA, and CFPB to include small entities in discussion panels during the regulatory flexibility analysis process for new rules.
  • Gives small businesses a way to recover legal fees and costs when a Federal agency “acts excessively” in enforcing rules. 

Oversight for rule compliance
A SBREFA sub-section known as the “Congressional Review Act” requires agencies to submit “major” rules” and associated cost-benefit analyses to Congress. [1,2] Congress has a 60-day time window to “opt out” of the rule by issuing a “joint disapproval.” This only requires a simple majority in the Senate and limits filibustering to expedite the process. Like any other law, the President can either sign or veto the decision, and Congress can override a veto with a two-third vote in both houses.  If the joint disapproval is signed by the President, the agencies may not create a rule that is “substantially the same” in the future. [3]

Reform “Teeth”
SBREFA adds teeth to the RFA by 1) making agencies liable in federal court for not submitting their RFA analyses and 2) creating a more straightforward mechanism for Congress to block a new economically significant rule. However, technically there is no legal consequence if an agency does not submit a rule to Congress to review (to understand why this is relevant, see “Outcomes: Congressional Review Act).

Outcomes

Judicial Review
Following the passage of SBREFA from 1996 to 1999, the Office of Advocacy counted at least 13 cases filed challenging agency compliance of the RFA. [4] These cases have been successful when agencies flagrantly ignored the RFA, but have failed when agencies show some kind of “good faith effort” to complete an analysis. Unfortunately, a “good faith effort” is not synonymous with “high quality analysis”.  The primary result of a successful lawsuit against an agency for failure to comply with the RFA is for the judge to “remand” (e.g. cancel) the rule and send it back to the agency to do a proper regulatory flexibility analysis. [5] This provides some temporary relief to small businesses while the agency reviews the rule, but does not stop them from re-passing the rule once they complete a new analysis, even if it shows a large impact on small businesses. 

Congressional Review Act
Historically, agencies have only submitted about 88% of final rules to Congress. This number continued to decline when the Government Accountability Office relaxed its oversight of the process in 2011. In 2012 and 2013, only 71% of final rules were submitted, and in the first half of 2014, less than 50% of all final rules were submitted.  The omissions included 6 “major” rules with more than $100 million in economic impacts and another 37 classified as significant by OIRA under EO 12866. [6] Even when Congress does see a rule, it rarely issues a joint disapproval. From 1996-2016, 1,488 major rules and 71,461 non-major rules were submitted to the Government Accountability Office under the CRA. [7] This resulted in 72 joint disapprovals issued by the House [8,9], of which 3 passed the Senate, and 1 was signed by the President. [10,11] This case occurred during the Clinton-Bush transition, where Bush repealed a rule that the Clinton administration had created. [12] So far this year, President Trump has signed 7 "joint disapprovals", making 2017 the most active for the CRA to date.

Commentary
The SBREFA failed to slow or reverse the federal regulatory compliance burden, which now averages nearly $12,000 per employee per year for small businesses in general and $35,000 per employee per year for small manufacturers. [13]

Judicial Review
While in theory judicial review sounds helpful, most small businesses have neither the time nor money to pursue legal action against agencies. While agencies faced with the threat of litigation are more incentivized to produce analyses, it does not stop them from implementing rules that have a large cost on small businesses. The RFA and SBREFA fundamentally rely on the good intentions of regulatory to self-police when it comes to reducing small business impacts.
 
Congressional Review Act
The CRA tends to be most useful for new Presidents and Congresses who want to overturn any rules created in the waning days of the previous administration. [14] The new 115th Congress is attempting to use the CRA to roll back recent Obama administration regulations dating back to May 16th, 2016. [15]  To date, there are 10 resolutions of joint disapprovals that have passed the House and await a Senate vote. [16]

References

  1. Small Business Regulatory Enforcement Fairness Act (SBREFA). P.L. 104-121, March 29, 1996
    (As Amended by P.L. 110-28, May 25, 2007). Link; "'Major rule' is defined as: "(A) an annual effect on the economy of $100,000,000 or more; "(B) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or "(C) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets."
  2. Note that because of some ambiguity in the language of the RFA, in practice CRA also gives Congress power over non-major rules. Congress may ask the Government Accountability Office about rules that have not been submitted, and in some cases can take action to block those rules under the joint disapproval process. See page 11 Link , PDF
  3. 2) A rule that does not take effect (or does not continue) under paragraph (1) may not be reissued in substantially the same form, and a new rule that is substantially the same as such a rule may not be issued, unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.” Link
  4. See page 3. Office of Advocacy. "Testimony of Jere W. Glover, Chief Counsel for Advocacy, U.S. Small Business Administration, before the Subcommittee on Commercial and Administrative Law, Committee on the Judiciary, U.S. House of Representatives, March 4, 1999, on Proposed 'Know your customer rule'." Link , PDF
  5. See page 1457. Jeffrey J. Polich. "Judicial Review and the Small Business Regulatory
    Enforcement Fairness Act: An Early Examination of When and Where Judges Are Using Their Newly
    Granted Power over Federal Regulatory Agencies". William & Mary Law Review. Volume 41 | Issue 4 | Article 6. 2000.“The court shall order the agency to take corrective action consistent with this chapter... including, but not limited to remanding the rule to the agency, and deferring the enforcement of the rule against small entities unless the court finds that continued enforcement of the rule is in the public interest.'” Link , PDF
  6. See page 2. Curtis W. Copeland. "Congressional Review Act: Many Recent Final Rules Were Not Submitted to GAO and Congress." July 15, 2014. Link , PDF 
  7. See the GAO Database for an up-to-date searchable list of rules submitted to the GAO under the CRA. Accessed 1/19/2017.
  8. See Page 11. Reference [6].
  9. See Reference [6].
  10. See page 2169 - http://harvardlawreview.org/wp-content/uploads/pdfs/vol_122_the_mysteries.pdf
  11. See page 16, Reference [6]. Note that in one other 1998 case, following a joint disapproval passed by the House of an Health Care Financing Administration (HCFA) rule, the agency decided to settle and pull the rule before the resolution went to the Senate.  
  12. Stuart Shapiro. "The Congressional Review Act, rarely used and (almost always) unsuccessful." April 17, 2015. Link
  13. National Association of Manufacturers, “The Cost of Federal Regulation to the U.S. Economy, Manufacturing and Small Business,” W. Mark Crain and Nicole V. Crain, September 10, 2014. Link , PDF 
  14. Harvard Law Review Volume 122. "The Mysteries of the Congressional Review Act." Link , PDF
  15. Susan E. Dudley. "Election Could Wake The Sleeping Congressional Review Act Giant." Forbes. November 14, 2016. Link
  16. Carol Andress. "The unintended consequences of the Congressional Review Act." February 11, 2017. Link