[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
H.R. 5242, THE SMALL BUSINESS PAPERWORK AMNESTY ACT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON REGULATORY AFFAIRS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
ON
H.R. 5242
TO AMEND TITLE 44 OF THE UNITED STATES CODE, TO PROVIDE FOR THE
SUSPENSION OF FINES UNDER CERTAIN CIRCUMSTANCES FOR FIRST-TIME
PAPERWORK VIOLATIONS BY SMALL BUSINESS CONCERNS
__________
SEPTEMBER 26, 2006
__________
Serial No. 109-263
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
JON C. PORTER, Nevada C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia ELEANOR HOLMES NORTON, District of
PATRICK T. McHENRY, North Carolina Columbia
CHARLES W. DENT, Pennsylvania ------
VIRGINIA FOXX, North Carolina BERNARD SANDERS, Vermont
JEAN SCMIDT, Ohio (Independent)
BRIAN P. BILBRAY, California
David Marin, Staff Director
Lawrence Halloran, Deputy Staff Director
Benjamin Chance, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Regulatory Affairs
CANDICE S. MILLER, Michigan, Chairman
CHRIS CANNON, Utah STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio WM. LACY CLAY, Missouri
LYNN A. WESTMORELAND, Georgia CHRIS VAN HOLLEN, Maryland
JEAN SCHMIDT, Ohio
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
Ed Schrock, Staff Director
Erik Glavich, Professional Staff Member
Benjamin Chance, Clerk
Krista Boyd, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on September 26, 2006............................... 1
Text of H.R. 5242................................................ 7
Statement of:
Neugebauer, Hon. Randy, a Representative in Congress from the
State of Texas; and Hon. David Vitter, a U.S. Senator from
the State of Louisiana..................................... 14
Neugebauer, Hon. Randy................................... 14
Vitter, Hon. David....................................... 22
Wordsworth, James M., president, J.R.'S Stockyards Inn,
McLean, VA; Karen Harned, executive director, NFIB Legal
Foundation, National Federation of Independent Businesses;
and J. Robert Shull, deputy director, Auto Safety and
Regulatory Policy, Public Citizen.......................... 32
Harned, Karen............................................ 43
Shull, J. Robert......................................... 55
Wordsworth, James M...................................... 32
Letters, statements, etc., submitted for the record by:
Harned, Karen, executive director, NFIB Legal Foundation,
National Federation of Independent Businesses, prepared
statement of............................................... 45
Miller, Hon. Candice S., a Representative in Congress from
the State of Michigan, prepared statement of............... 4
Neugebauer, Hon. Randy, a Representative in Congress from the
State of Texas, prepared statement of...................... 17
Shull, J. Robert, deputy director, Auto Safety and Regulatory
Policy, Public Citizen, prepared statement of.............. 57
Vitter, Hon. David, a U.S. Senator from the State of
Louisiana, prepared statement of........................... 25
Wordsworth, James M., president, J.R.'S Stockyards Inn,
McLean, VA, prepared statement of.......................... 34
H.R. 5242, THE SMALL BUSINESS PAPERWORK AMNESTY ACT
----------
TUESDAY, SEPTEMBER 26, 2006
House of Representatives,
Subcommittee on Regulatory Affairs,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 p.m. in room
2203, Rayburn House Office Building, the Honorable Candice S.
Miller (chairman of the subcommittee) presiding.
Present: Representatives Miller, Lynch, and Neugebauer.
Staff present: Ed Schrock, staff director; Rosario
Palmieri, deputy staff director; Erik Glavich and Kristina
Husar, professional staff members; Benjamin Chance, chief
clerk; Krista Boyd, minority counsel; and Cecelia Morton,
minority office manager.
Mrs. Miller. Good morning. The Subcommittee on Regulatory
Affairs will come to order. I'm sorry I'm running a few minutes
late, running up the hill.
We certainly want to welcome you all to today's hearing,
particularly our special guest, Senator Vitter. We are
absolutely delighted, sir, that you could take the time to come
and testify before our committee on this very important topic.
Certainly a good friend and great friend in the House,
Representatives Neugebauer, as well. We certainly appreciate
you bringing this to the subcommittee's attention and being
here as well.
Today we are going to be hearing from witnesses regarding
H.R. 5242, which is also titled the Small Business Paperwork
Amnesty Act. Representative Neugebauer introduced this bill in
April of this year and at the same time, Senator Vitter
introduced a companion bill, S. 2556.
The Small Business Paperwork Amnesty Act would really give
small businesses the ability to correct a first-time paperwork
violation within 6 months, as long as the violation does not
harm the public interest, affect internal revenue laws or
threaten the public health or safety. Importantly, a small
business would not be exempt from a monetary penalty if the
head of an agency determines that the violation has a potential
of causing harm or impairs the ability to detect criminal
activity.
According to the U.S. Small Business Administration, there
are about 25 million businesses with less than 20 employees.
These firms actually account for over 97 percent of all U.S.
businesses and roughly 30 percent of all employment. Nearly 6
out of every 10 workers are employed at a business with less
than 500 employees. Their payroll contributions and tax base
constitute the economic heart and the backbone, certainly, of
our competitiveness in the global marketplace.
Federal policies should help them succeed, and help to
foster their advancement. But oftentimes this is not the case.
Sadly, agency bureaucrats are more concerned with meeting
monetary quotas for enforcement than ensuring compliance with
the regulations. This attitude is well ingrained within
agencies and unfairly punishes small businesses.
The regulatory burden on small business is much greater
than the burden imposed on larger firms. Firms with more than
500 employees pay roughly $5,300 per employee to comply with
Federal regulations. But businesses with less than 20 employees
pay more than $7,600 per employee, or about 45 percent more,
just for regulatory compliance. This burden has not been forced
upon them by foreign governments engaged in unfair trade
practices, it actually has been forced upon them by us. So we
need to take a very good look in the mirror here I think at the
Federal level.
And I'm certainly not proposing that we abolish
regulations. The integrity of regulations that keep our water
and our air clean and protect our children and society from
harm is really a reflection of the ideals that all of us
uphold. I'm suggesting that the Government provide small
businesses some form of monetary relief from insignificant
paperwork violations to ease the disproportionate burden that
they face. This would really help small businesses, I think,
without sacrificing regulatory safeguards. The legislation that
we are going to be dealing with today, again, introduced by
Representative Neugebauer and Senator Vitter, attempts to do
exactly that. If a small business has a paperwork violation
that essentially does not present a danger to the public health
or safety or violate Internal Revenue laws, then the Federal
agency citing the business is required to waive the civil fines
for the first time only.
And I would mention that this is really not a new idea.
Actually, Senator Feingold introduced legislation in the 104th
Congress that included a provision very similar to H.R. 5242.
In both the 105th and the 106th Congresses, the House passed
regulatory reform initiatives that included the language that
we are discussing today. Both bills passed with bipartisan
support. Fifty-four Democrats voted for the measure in 1998 and
64 voted for it in 1999.
In March 1998, the predecessor of this subcommittee held
hearings on the legislation. It was introduced by then-
subcommittee chair David McIntosh of Indiana and Ranking Member
Dennis Kucinich of Ohio. At the time, our colleague Mr.
Kucinich offered a very good reason why members of the
subcommittee should be supportive of the provision that
provides penalty relief for a first-time paperwork violation.
He stated, ``I would like to stress that this is a very
important point for every member of the committee and the
public to be aware of, that this penalty relates only to civil
fines not of a criminal nature. We have made sure to include
language that seeks to protect the health and safety of the
public.'' I mention that because I think it is important to
point out that this should be viewed in a bipartisan prism.
Congress is not the only branch of Government trying to
compel agencies to provide penalty relief to small businesses.
In April 1995, President Clinton issued a memorandum directing
the heads of 27 departments and agencies to waive penalties to
the extent permitted by law for small businesses. The standards
dictating when an agency should waive a fine are essentially
the same as those included in the legislation that we will be
examining today.
Unfortunately, Federal agencies did not and have not taken
seriously the directive to reduce or waive fines for small
businesses committing an insignificant first-time paperwork
violation. In fact, many argue that things could be getting
worse. Congress passed the Small Business Regulatory
Enforcement Fairness Act a year after President Clinton
directed agencies to provide penalty relief to small
businesses. Among other things, the law requires agencies to
establish policies to provide penalty relief to small
businesses. It has been a decade since that law took effect,
and we are still sort of concerned with the ``gotcha'' approach
to regulatory enforcement. I think again it is time for
Congress to take back some of the discretion that we have given
to the agencies. Agencies seem unwilling to implement fair
penalty relief to small businesses on their own, despite the
wishes of Congress and Presidents. Again, I think it is time
for Congress to mandate true penalty relief for the small
businesses that are really the engine of our economy. Again, I
want to thank the witnesses for being here. We certainly look
forward to your testimony, to both of you. At this time I would
like to recognize the distinguished ranking member of the
subcommittee, Mr. Lynch.
[The prepared statement of Hon. Candice S. Miller and the
text of H.R. 5242 follow:]
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Mr. Lynch. Thank you, Madam Chair. I join the Chair in
welcoming our colleagues. We appreciate your being here today
to talk about your legislation. I want to begin by commending
you both for your commitment to helping small businesses.
As we discussed at a recent hearing in this subcommittee,
the Government's paperwork burden in the last 5 years has
increased by over a billion hours. I think our efforts in terms
of helping small businesses are best aimed at reducing the
unnecessary part of that paperwork.
The legislation we are discussing today, H.R. 5242, has
been around for a number of years now. I believe the bill
overall is very well intended. Unfortunately, I don't think
that this bill would reduce paperwork for small businesses.
Instead it would encourage companies to break the law or
circumvent the law. Under the Small Business Regulatory
Enforcement Fairness Act, agencies are required to have
policies in place for reducing or waiving civil penalties for
small businesses, as the Chair noted. I think instead our focus
should be on causing those agencies to waive those penalties
when appropriate. Agencies should use this authority when
appropriate, but this discretion should be left to the agencies
charged with enforcing the law. I certainly agree that there
are many instances where waiving the fines and penalties are
appropriate.
H.R. 5242 would prohibit an agency from assessing a civil
fine against a small business for a first time information
collection violation. This would not just cover technical
paperwork violations, it would also cover any information
collection requirement, no matter how important ultimately.
Here are some examples of information collection covered by
this bill: EPA requires that lead paint disclosures require
landlords to notify prospective tenants about any known or
potential lead paint hazard in a home prior to leasing it.
Earlier this year, an administrative law judge upheld the civil
penalties assessed by EPA against two Rhode Island companies
that violated the lead paint disclosure rule after at least
four children suffered from lead poisoning.
Another example, the Emergency Planning and Community Right
to Know Act requires companies to report the presence of
hazardous chemicals at a facility. And firefighters and local
responders depend on having this information before they
respond to a fire so they can properly protect themselves. In
2001, three firefighters were killed from an explosion of a
hazardous material at a hardware store. Similarly, OSHA
requires companies to notify workers of particular hazards in
the workplace.
Earlier this month, OSHA cited a company partly for the
company's failure to communicate to employees the hazards of
working in a confined space after non-ventilated workspace
contributed to the deaths of three workers. EPA and the
Department of Transportation reporting requirements for
transporting hazardous materials would also be circumvented by
this legislation.
In 2005, two freight trains collided in South Carolina,
releasing an estimated 11,500 gallons of chlorine gas, which
caused 9 deaths and at least 529 people were sent to the
hospital. The Public Health, Security and Bioterrorism
Preparedness and Response Act of 2002 would also be affected.
That law requires companies that manufacturer, process or pack
food for human or animal consumption in the United States to
register with the FDA. That allows us to track them. If a
company is not registered with the FDA and is making
contaminated food, it could be very difficult for the FDA to
trace back the contamination. Right now, we are seeing the
impact of an e-coli impact from spinach. And we are having a
heck of a time tracing down the source of that. CDC has
reported 175 cases of e-coli so far, and it would help if we
had all those companies complying with the filing requirement.
Section 409 of the Sarbanes-Oxley Act requires public
companies to promptly disclose material changes in a company's
financial condition to allow investors the opportunity to make
informed decisions. This would be waived.
We also have a provision that in order to prevent illegal
immigrants from working in the United States, employers are
required to verify that workers are eligible to work in the
United States by completing an INS form I-9. This would also
allow those employees to fail to file. It is tough to police
without the filing. Yet there would be no penalty.
Agencies already must deal with fewer and fewer resources,
which makes it hard enough to enforce these important laws.
This bill would make this task even tougher. The exceptions in
H.R. 5242 are very, very narrow, too narrow to fix the glaring
problem. These exceptions can only be used if the head of an
agency makes a finding, for example, that a violation has the
potential to cause serious harm.
But in the first instance, the agency often has to become
aware of the need to take an enforcement action based on the
information collected from a company. So if they are not filing
the information, we will never know about it. An agency may not
know whether a violation presents a danger to the public until
it is too late.
Giving companies a free pass to break the law would weaken
the incentives of small businesses to comply with the law,
because they would know that even if they got caught they
wouldn't face consequences. The fact of the matter is, the
overwhelming majority of small businesses obey the law. This
bill would put those law-abiding companies at a severe
disadvantage competitively with those who break the law. We
need to look carefully at how we can help the small businesses
that are doing the right thing and need a break in a way that
doesn't jeopardize our health, safety and environmental
protection.
Madam Chair, I yield back.
Mrs. Miller. Thank you very much.
Our first witness this afternoon is Congressman Randy
Neugebauer, from the 19th District of the great State of Texas.
He is the author, of course, of the legislation that we are
discussing today, H.R. 5242, the Small Business Paperwork
Amnesty Act of 2006. The Congressman is in his second term of
office and he serves on the House Committee on Agriculture as
well as Financial Services. Before coming to Congress, he
served as the President and CEO of Lubbock Land Co., which is a
residential and commercial land development company which
created many successful subdivisions in that area. So he
certainly understands the challenges that are faced by many
small businesses, and we welcome you to the subcommittee and
look forward to your testimony, sir.
STATEMENTS OF HON. RANDY NEUGEBAUER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS; AND HON. DAVID VITTER, A U.S.
SENATOR FROM THE STATE OF LOUISIANA
STATEMENT OF HON. RANDY NEUGEBAUER
Mr. Neugebauer. Madam Chairman, thank you very much. I also
want to congratulate Senator Vitter and the city of New Orleans
and the State of Louisiana on a great night last night. I know
all of us are excited about the things that are going on there.
I also appreciate the Senator's support of this legislation.
Chairman Miller, Ranking Miller Lynch, members of the
subcommittee, thank you for the opportunity to appear before
this subcommittee to discuss an issue of tremendous importance
to small businesses. I appreciate your willingness to hold this
hearing at my request. Most of us can agree that the Federal
Government requires a substantial amount of paperwork for small
businesses. When I listen to small business owners back home in
West Texas, they continually reaffirm this reality, and they
want me to know that what we are doing here in Washington is
impacting them.
As a former small business owner myself, I can sympathize
with their frustration. For these reasons, I introduced the
Small Business Paperwork Amnesty Act in April of this year. I
strongly believe that this legislation will go a long way in
reducing this burden by bringing some common sense to the
relationship between small business owners and the Federal
Government.
Over the past decade there has been a growing effort in
Congress to reduce the burden the Federal Government places on
small businesses. While there have been some small victories
along the way, this effort has met fierce opposition by special
interest groups and not surprisingly from the Federal
regulators themselves. In the late 1990's, former
Representative David McIntosh, who was chairman of this
subcommittee, introduced a similar bill that was approved by
this subcommittee. While a broader scope, Mr. McIntosh's bill,
the Small Business Paperwork Reduction Act of 1998, included
the same provisions that are found in the Small Business
Paperwork Amnesty Act that I have introduced. The House of
Representatives passed that bill overwhelmingly with an
overwhelming majority. Unfortunately, our colleagues in the
Senate were unable to pass with similar results.
Some may wonder, why am I taking on this issue almost 8
years later? Well, the fact is, time has not diminished the
need for this legislation. If anything, the passage of time has
only increased the need. According to the National Federation
of Independent Businesses, which you will hear from today,
small businesses with fewer than 20 employees face regulatory
costs of over $7,600 per employee per year. Each year these
costs continue to increase because the Federal regulations
continue to increase.
Today you will also hear from Mr. Jim Wordsworth, who
operates J.R.'s Stockyards Inn located in McLean, Virginia. He
will testify about the amount of regulation he must comply with
and the impact on his business. I can sympathize with Mr.
Wordsworth, because I have been in his shoes before. Indeed,
many business owners live in fear of Federal regulations. This
fear is not because they are in violation of any regulations
that they know about, but because they may be in violation of
regulations that they are not even aware of.
This ``gotcha'' mentality on the part of the Federal
agencies is at odds with the core principles of our economy. I
believe we have the responsibility to fight this mind set. We
must begin with common sense reforms.
From my personal experience, I know that for a small
business owner to be successful, he must diligently manage his
two greatest assets: resources and time. More often than not,
these things are in short supply. The cost of compliance to
obscure regulations further eat away at both. We must find ways
to help small business owners comply with paperwork
requirements so that they can devote more time and resources to
growing their businesses, creating new jobs, and thus expanding
the economy.
Due to the sheer volume and complexity of the Federal
regulations, even the most diligent small business owner may
inadvertently make an error or miss a deadline associated with
Government paperwork. The Small Business Paperwork Amnesty Act
will prevent bureaucratic agencies from imposing excessive
civil fines on small businesses for first-time inadvertent
paperwork violations. This bill will not exempt any business
from any paperwork requirements. I want to repeat that comment:
this bill will not exempt any business from any paperwork
requirements. It just gives leeway for business owners to
correct first-time mistakes. If the business does not comply
within the first 6 month period, the fine will be imposed.
Furthermore, this legislation will provide relief while
still providing for the safety and health of our communities.
Only those paperwork violations that do not threaten the public
welfare will be eligible for a second chance. A common
misconception concerning this legislation is that it will
somehow lead to more non-compliance or that agencies could not
enforce penalties for violations that could harm the public.
This is simply not the case. In the event that a paperwork
violation would harm the public welfare or present an imminent
threat to the environment, this bill gives the agency full
discretion to impose civil fines under the law.
However, the agency may give the small business, and I
would say may give the small business owner, 24 hours rather
than 6 months to fix the violation. In other words, if a
company swiftly and faithfully correct an inadvertent mistake,
only then will they be eligible to receive a second chance
under this bill. By giving these agencies this broad
discretion, we can be confident that those agencies will be
able to use this authority to carry out the mandate that we
have entrusted them to fulfill. The Small Business Paperwork
Amnesty Act strikes the right balance between reducing the
burden placed on small businesses and our responsibility to
protect communities and the environment.
In closing, I would like to say that here in Washington, it
is easy for some of us to forget the proper role of Government,
the reason that we are here in the first place. Personally, I
believe that Government is accountable to the people and not
the other way around. This philosophy is at the heart of this
legislation and I hope that this can be the basis of our
discussion here today. Again, thank you, Chairwoman Miller, for
holding these important hearings. I look forward to the
testimony of my colleague, Senator Vitter, and the witnesses on
the second panel. Thank you.
[The prepared statement of Hon. Randy Neugebauer follows:]
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Mrs. Miller. Thank you very, very much, Representative. We
appreciate that testimony. Senator Vitter, out next witness, we
certainly appreciate your coming. Actually, before you were
elected to the Senate, you served three terms in the House of
Representatives where you were a member of the Government
Reform Committee.
During his tenure in the House, he authored and passed
legislation establishing a prescription drug program for
military retirees, advancing missile defense and cleaning up
Lake Pontchartrain as well. For his work in Congress, Senator
Vitter has received numerous awards from leading organizations,
such as Americans for Tax Reform, the 60 Plus Association and
the Family Research Council. In the Senate, he serves on the
Committees of Commerce, Science and Transportation, Environment
and Public Works and Small Business and Entrepreneurship.
We are certainly glad to have you back on our side of the
Capitol, Senator, and the floor is yours, sir.
STATEMENT OF HON. DAVID VITTER
Senator Vitter. Thank you very much, Madam Chair. Thanks
for the invitation and thanks for your leadership. It is a real
honor and pleasure to be here, particularly since I am a former
House Member and a strong conservative. As both, I don't drink
from the water fountains over there, so it is particularly
refreshing to get back here, where I can do that freely and
breathe a little fresh air. Thank you for having this very
important hearing about a very important topic.
I share Randy's concerns, because I share his experiences.
I know in Louisiana, I talk to business, particularly small
business folks all the time. And they always talk to me about
the regulatory and the paperwork burden. I hear directly those
stories about their dealing with EPA or the Army Corps of
Engineers, the Coast Guard, SBA, Commerce, IRS, Customs, just
to name a few. Of course, on top of that, there is a State
bureaucracy that poses additional issues, Department of
Revenue, Labor, Wildlife and Fisheries, Insurance. So they face
a real burden which has been growing as they face other growing
burdens, health care costs and other things. It is just getting
out of hand and they tell me about that very directly, as they
do to Randy in his home district.
Having lived in the last couple of years through Hurricanes
Katrina and Rita, in some sense some of those experiences have
been magnified even more. Because of course you have an
extraordinary presence now of certain agencies like FEMA and
the Corps of Engineers. Unfortunately, although there has been
extraordinary commitment by the Congress, and extraordinary
help in many ways, unfortunately the sort of paperwork burden
is pretty extraordinary in a lot of those cases, too. So I hear
directly about that.
And of course, a lot of this, as you said yourself, has
been quantified by folks like the SBA Office of Advocacy. You
mentioned businesses with fewer than 20 employees spending more
than $7,600 per employee just to comply with Federal
regulations. NFIB estimates that all told, Americans spend
about $400 billion, $400 billion with a B, on this Federal
paperwork cost. That is the same general amount of spending
that we are going to pass later this week in the Defense
Appropriations bill, to fund all of our defense when we are at
war. It is pretty staggering that we are wasting that same
amount on pure paperwork burden.
Now, I certainly want to echo Randy's words and your words,
we are not getting rid of a single requirement. We need to do
that. We are acting to do that through other legislation. But
in this bill, we are not getting rid of a single requirement.
We are certainly not stripping away key health and safety
regulation. We are simply adopting a common sense rule while we
work through these regulations, while we hopefully narrow the
scope and lessen the burden. While we do that, a simple rule
that first-time violators will get some relief if the
regulation at issue doesn't affect public health and safety.
With regard to that, I certainly want to directly address
the comments of your ranking member. I am sorry he couldn't
stay, because I really wanted to have this discussion with him.
Virtually every example he used, if not every single example he
used, clearly falls into the exceptions in the bill, clearly
his focus went directly at public health and safety or
potential serious harm to the public interest. So in the bill,
we clearly address that and clearly say no, we are not talking
about that. That isn't automatically waived. It could be
waived. There is discretion to waive it if the company comes in
and complies within 24 hours, which is obviously a very narrow
timeframe. And even then, the regulatory agencies doesn't have
to waive the civil penalty.
I think this is an enormously important point. Again,
virtually all if not every case he mentioned, is accepted in
the bill. In other words, those cases would not be governed by
the normal meat of the bill. It would be an exception to the
bill.
And again, what are we talking about? Well, the violation
would cause serious harm to the public interest. Everything he
said would have done that. If it would impair criminal
investigations, if it would concern the collection of taxes, if
it would present a danger to public health or safety, I think
about everything Congressman Lynch said, would do that. Again,
in those cases there wouldn't be this waiver.
And again, as Randy mentioned, I think it is very important
to say, we are only talking about civil penalties. Congressman
Lynch repeatedly used the term breaking the law, which is
technically correct, but it certainly makes it sound criminal.
And by definition, we are not talking about anything criminal,
by definition.
Again, this is really important to folks I represent. This
is really important to small business in Louisiana, was before
Hurricanes Katrina and Rita, it is even more so now because we
have greater need and therefore greater Federal help and
resources, which is great. But also much greater regulatory
burden as part of the Stafford Act and all of hurricane
response. We are certainly not complaining about the very
generous response, but it makes this sort of common sense
approach to a regulatory and paperwork burden that has gotten
out of hand even more important right now.
With that, Madam Chair, I thank you again for the kind
invitation for me to be here. I thank Representative Neugebauer
again for his leadership on this. I should say, and I want to
give credit where credit is due, we have both picked up the
mantle of folks who have come before us. Dave McIntosh, who was
in the Congress before us, started this. We took over the bill
from him. There have been others, as you mentioned, including
Democrats who have proposed largely the same thing. We are
continuing that fight, and it is something we absolutely need
to do quickly.
Thank you.
[The prepared statement of Hon. David Vitter follows:]
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Mrs. Miller. Thank you very much, both of you. We are
delighted to have you both here and certainly when
Representative Neugebauer approached me on this issue, I was
very enthusiastic about holding this subcommittee hearing on
this piece of legislation. This is a committee that has really
studied what we can do to assist every level of business, quite
frankly, in America, with various types of regulatory burdens.
I appreciated your comment that you think in Government we
need to be accountable to the people. Sometimes we all have to
remember that famous saying, I am from the Government and I am
here to help you. When small businesses and others hear us say
that, they dive for cover under the table sometimes.
One of the first hearings we actually had in this
subcommittee, Governor John Engler, former Governor from the
great State of Michigan who is now the Executive Director of
the National Association of Manufacturers, had a very
interesting testimony to this subcommittee where he talked
about a study that NAM has done recently that shows that the
structural burden, structural cost for American-made
manufactured goods is about 22, 23 points higher than any of
our foreign competitors. A principal region for that, a huge
component, not the only reason, but a big reason for that is
because of the regulatory burdens that businesses do face. So
when we see exodus of manufacturing jobs or other types of
industry that leaves our shores and perhaps goes to other
countries in a competitive, global marketplace, if we are
coming from Michigan, where you all know what is happening to
the American automobile industry, we have unfortunately sort of
an economic hurricane that is hitting Michigan right now. But
as we see some of these jobs leaving our Nation to China or
India or Mexico or wherever they are going, guess what? Those
nations did not place these regulatory burdens on us. We did it
to ourselves.
So the idea that you have here I think is great. I know,
Senator, you testified a bit about the burden, the regulatory
cost of compliance for every level of business, but
particularly small businesses that might have just a few
employees. And it makes some inadvertent error, and then it is
like a year in jail for jaywalking or something. I think the
standard always has to be, what is reasonable. That is
something that I think all of us in Congress, both Republicans,
Democrats, what have you, need to look at.
I guess I would ask this. How do you, particularly Senator,
with the kinds of experiences that you have had in your State,
the horrific natural things that have happened there, how do
you foresee this piece of legislation helping a new business,
perhaps a small business starting up, just trying to restart
their business?
Senator Vitter. Well, again, it gives a new business, a new
small business a chance. There is a huge difference between the
Xeroxes or the GMs of the world and small business, which
account for most of the jobs in this country and an even
greater percentage of the jobs in a State like Louisiana. One
of the differences is big, big companies can have full time
staffs. They have teams of people that comb through everything
we pass, every Congress and how it impacts their business and
what new reports they have to issue and how they are going to
issue.
Well, guess what? If you have a small business of 20
people, you don't have that sort of team. In fact, you don't
have a single person who can possibly do that. So we are
talking about a brand new requirement that is often created by
a brand new bill that we pass here that a small business of 20
people in Louisiana has no idea has come into existence. All of
a sudden, they can be hit for very serious civil fines the
first time there is non-compliance.
This is simply saying, first-time offense, and again, this
is very important, that is what we are talking about, first-
time offense, we are not talking about a pattern, we are not
allowing that to develop. First-time offense, civil penalty,
you are not putting people in a health or safety danger. That
is going to be waived. That is a huge relief to small business.
When you are trying to get a business up and running, that sort
of monetary financial threat, just like a liability threat from
lawsuits, can not only be crushing in practice, it can be so
intimidating that you never start the venture.
So I think it is a major factor. And I would echo your
comments. We talk about the problems of global competition. To
me, in any challenge you are facing in life, no matter what it
is, as an individual, as a Congress, as a company, no matter
what it is, there are some things that are going to be beyond
your control, but there are some things that are going to be
within your control. No matter what that challenge is, you are
always a lot better off focusing on the things that are within
your control and doing something about it. And this is within
our control. And this is a factor in global competitiveness.
I will be the first to admit, not everything that hurts us
in that global competition is within our control. Labor costs
in India are not within our control. This is. The regulatory
environment, the litigation environment, the taxation
environment is. We need to do something about it.
Mrs. Miller. Representative Neugebauer, I would ask you the
same question.
Mr. Neugebauer. I think that is a great question. I was
thinking back, and the way I relate to a lot of issues we have
up here is from my own experience. I was thinking about in 1980
when I started my construction company, my home building
company. My day started early, getting on the phones and
ordering materials to the jobs and then making sure that the
subcontractors were going to be there, starting to tour the
jobs and go back and discover that some materials that I had
ordered weren't there, having to go back, this is pre-cell
phone days, and call and make sure that the lumberyard--and all
day long. Then trying to find the time to meet with a client so
I could sell some more homes.
When I think about the small business person today, whether
it is a man or a woman, is that they wear so many hats. For 1
hour I am the construction supervisor, I am the material
orderer, I am the purchase agent, I am the accountant, I am
payroll, I am compliance. And all of those various hats. When I
first started in business in 1980, I spent about 90 percent of
my time actually doing what I call productive things, that is
selling and building, and 10 percent of my time was fooling
around with compliance of various regulations.
But over the years, I saw this huge increase in the amount
of regulation, in the amount of governance in my industry to
where I really, just before I came to Congress, realized I was
spending 70, 80 percent of my time trying to make sure that I
was in compliance with some very sophisticated rules and
regulations that the Government put on me, because of
punitiveness of the fine was major.
So small businesses are capitalized thinly to begin with.
And then you go in and start fining them for an inadvertent
mistake, it sends the wrong signal to business. It sends the
wrong signal to America as the Senator said. In America, 95
percent of our jobs are created by small business people in
this country. And in District 19, I can tell you about 100
percent of them are, because we would love to have an
automobile plant in District 19.
But we don't have that. So I think what we are just saying
here, and I think the term, using our head, using common sense,
is the approach that we send the signal to small business, you
know what, we want you to start a new business and we are going
to help you start that new business, rather than saying, we
can't wait for you to start that new business so we can get
you. That is the signal that we are talking about here. We are
trying to send a signal, let's start more small businesses.
That is the American dream. And let's make Government a part of
the solution and not part of the problem.
Mrs. Miller. I appreciate that. My background, actually,
before I got involved in politics, was in the marina business.
My family sold boats for a living, my dad built some of the
first fiberglass sailboats in the world, actually. I can
remember as a kid being around the epoxies and the resins and
all the woven, the different kinds of materials, etc. Today you
can't have two or three guys in the back building a boat,
because of the regulations. My brother is still in the boat
business and I can't believe, I won't even tell you what he had
to go through to put a paint booth in his place. But again,
these are small businesses.
But of course we want to ensure, I always say the standard
has to be reasonable. We want to make sure that as we progress
as a Nation that we do have reasonable standards in place for
worker safety, for environmental kinds of regulatory affairs,
etc. Let me just play the devil's advocate and ask a final
question to you both, in the interest of time, since my ranking
member unfortunately had to go to another hearing. I think he
might ask this question if he was here, about some people are
saying that because of this, you might have companies that
would start doing things, like dump mercury into the lakes or
some sort of pollution or what have you. What would your
response be to somebody who would be very critical of this
legislation? Either one of you?
Senator Vitter. If a company starts dumping mercury into
the environment because of this bill, they clearly haven't read
the bill. Because that sort of violation clearly is not covered
in the bill. That clearly impacts public health and safety.
That clearly doesn't get a pass at all.
In addition, we are only talking about first-time
violations. By definition we are not talking about a string or
pattern of violations, we are not allowing that to develop. In
addition, to get any waiver of civil penalties, the folks have
to comply. So they have to comply with the requirement, all the
requirements. So again, I think it was rather distracting to
the discussion, to put it kindly, when Congressman Lynch went
through this litany of abuses that clearly, clearly fall within
the category of public health and safety threat. Because those
don't get an automatic pass under the bill at all.
Mr. Neugebauer. I think Congress can testify to the fact
that we can't legislate morality, and we can't legislate people
doing the right thing. We have given it a really good try for
about 230 years, and we have figured out that people that are
going to obey the law, that are going to uphold the law, that
are going to play by the rules are going to do their very best
to do that. There are always going to be those.
The good news about this, this bill has no benefit for
those people who don't want to play by the rules. It has
absolutely no benefit for them. This bill is for the good guys,
the good men and women that are trying to run a small business,
keep their small business. And as the Senator said, if you have
a pattern saying, oh, yes, I forgot that report again, you
don't get any help under this bill, because we have been down
that road with you before, this isn't your first time. As we
say in Texas, this isn't your first rodeo.
So what I think the people that would talk about that are
trying to distract from this bill are the same people that want
to pass more regulations, want to make more burden on small
businesses and aren't really interested in giving small
business a break. That is really what this does, is it gives
small business people a break, gives them a second chance.
Mrs. Miller. OK. Thank you again very, very much for taking
time out of your schedule to testify before the subcommittee.
Representative, I certainly look forward to continuing to work
with you to push this very necessary legislation through the
process if we can.
Thank you both very much. We will adjourn for a moment for
our next panel.
[Recess.]
Mrs. Miller. Before you all sit down, I will ask you all to
raise your right hands. Because the subcommittee has subpoena
authority, we swear everybody in.
[Witnesses sworn.]
Mrs. Miller. Thank you very much.
We appreciate you all coming to the second panel. Our first
witness of the second panel this afternoon is Mr. James
Wordsworth, who is the owner of J.R.'s Stockyards Inn in
Virginia, located at Tyson's Corner. In addition to J.R.'s
Steakhouse, he is also the owner of two corporate picnic
facilities in McLean and Leesburg, VA, an off-premises catering
company, a marina in Stafford County and a company that builds
and designs modular prisons. Mr. Wordsworth has served as a
general partner in several small limited partnerships that
acquired raw land and planned, zoned and developed
subdivisions, featuring amenities such as golf courses and
waterfronts. He is here today representing the U.S. Chamber of
Commerce, where he was elected to the board of directors in
June 2001.
Mr. Wordsworth, we appreciate your attendance today and the
floor is yours, sir.
STATEMENTS OF JAMES M. WORDSWORTH, PRESIDENT, J.R.'S STOCKYARDS
INN, MCLEAN, VA; KAREN HARNED, EXECUTIVE DIRECTOR, NFIB LEGAL
FOUNDATION, NATIONAL FEDERATION OF INDEPENDENT BUSINESSES; AND
J. ROBERT SHULL, DEPUTY DIRECTOR, AUTO SAFETY AND REGULATORY
POLICY, PUBLIC CITIZEN
STATEMENT OF JAMES M. WORDSWORTH
Mr. Wordsworth. Thank you, Chairwoman Miller. My name is
Jim Wordsworth, I am the owner of J.R.'s Stockyards Inn, a fine
dining steakhouse in McLean, Virginia. I am also the owner of
several other small businesses, and a marina is one, and I
understand that is your family's background as well.
I am here today on behalf of the U.S. Chamber of Commerce.
I would like to begin by pointing out that there are several
common threats that are universal to Government paperwork: the
burdens imposed by agencies on businesses and individuals.
First is the sheer volume of paperwork requested. I hold in my
hand a 266-page document, I would like for you to see this
document. These are single spaced documents that list the 5,960
forms, and these are just the lists of the forms, not the
forms, forms and instructions generated by 109 bureaus and
departments of 49 agencies. That is within the Federal
Government. It does not include the State and local government
agency forms.
If I were to print all the forms and the instructions out,
print them out, the stack of paper would exceed the height of
the tallest person in this room. And that stack only grows. In
its 2002 report to Congress, OMB stated that all agency
regulations imposed over 7.65 billion hours of paperwork in
fiscal year 2001. Just 4 years later, that total has risen to
8.4 billion hours. This represents an increase of 750 million
hours.
The second point I would like to make is when Government
agencies estimate the time it takes to fill out the paperwork,
they almost never take into account the time it takes to
collect, to organize, and retrieve the information that they
have asked for. If they take into account this number, it would
be much larger.
The third characteristic that most forms have in common is
that there generally is a penalty associated with filling out
the forms incorrectly. In many cases, the penalty applies
whether the mistake was intentional or not. Although I try to
fill out every form in a timely manner, with due diligence and
care, as a small business owner my primary concern is running
my business and keeping my customers happy. Having provisions
passed in the law such as those contained in H.R. 5242, the
Small Business Paperwork Amnesty Act of 2006, that provides for
the suspension of fines under certain circumstances for first-
time paperwork violations by small business owners like myself,
would act as a fail-safe in the case that I make an inadvertent
error when filling out such a form.
This bill is strongly supported by the U.S. Chamber and
contains adequate protections to avoid excusing fines, adequate
protections to avoid excusing fines, for violations that could
present a danger to public health or safety or cause serious
harm to the environment or public interest that Congressman
Lynch pointed out.
I would like to also highlight just a few examples of how
this bill, if enacted into law, could affect my business. The
Census Bureau has a number of forms that are sent out to
businesses for the collection of data in order to distill the
results into valuable statistical information. Just recently,
my wife and I were in an unfortunate accident that required a
lengthy rehabilitation. During this time away from our
business, both of us away, if one of my employees inadvertently
misplaced or disposed of a census survey request for data, not
realizing the importance of the document, or attempted to fill
it out and didn't fill it out correctly or completely to the
best of their knowledge, my company could be fined up to $500.
I have very capable managers that work for me and run my
business while we are out. But their expertise is in running
the business, not in filling out forms.
Additionally, during my wife's and my convalescence, the
management had to do extra duty to make up for our absence, so
they worked very long hours. It could be very understandable
and foreseeable that under those conditions that this type of
request could fall through the cracks. Adequate safe harbors
contained in this bill would provide me with a cushion that is
needed to avoid an expensive fine during this very difficult
time.
Another example where the bill's provisions may apply is in
filling out I-9 forms. Under current law, first-time
immigration paperwork violations, which are very complex, for
failure to properly prepare and file I-9 forms, could result in
civil penalties from $100 to $1,000.
The concept of waiving penalties for minor paperwork
violations for small businesses is not something new. Section
223 of Public Law 104-121 requires agencies to establish a
policy or program to provide for the reduction, and under
appropriate circumstances for the waiver of civil penalties for
violations by small businesses. Passage of H.R. 5242 would
incrementally extend the existing law to apply what agencies
already do and have already been doing for all paperwork
violations to first-time minor paperwork violations, something
that from my point of view would seem very logical and very
helpful and consistent with the current intent of Congress
under the present law.
In closing, I would like to again thank the committee for
holding this hearing and for its interest in the Small Business
Paperwork Amnesty Act. I would welcome any questions that you
might have.
[The prepared statement of Mr. Wordsworth follows:]
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Mrs. Miller. Thank you very much. We appreciate your coming
today, sir.
The committee is now delighted to welcome Karen Harned. Ms.
Harned is the executive director for the National Federation of
Independent Business Legal Foundation. As a member of a law
firm, she specialized in food and drug law and represented
several small businesses and their trade associations before
Congress and Federal agencies. She received her law degree from
the George Washington Law School in 1995.
We are delighted to have you, and the floor is yours.
STATEMENT OF KAREN HARNED
Ms. Harned. Thank you. Good afternoon, Madam Chairwoman and
members of the subcommittee. My name is Karen Harned, and I
serve as Executive Director of NFIB's Legal Foundation, the
legal arm of NFIB.
NFIB is pleased to have the opportunity to be with you
today offering our strong support for the Small Business
Paperwork Amnesty Act of 2006. H.R. 5242 would provide hard
working, well meaning small business owners with the
opportunity to correct paperwork mistakes before they are
forced to pay needless fines.
NFIB would also like to thank Congressman Neugebauer for
championing this bill and Senator Vitter for his continuing
work on this bill in the Senate and the other issues that he is
working on for small business in that body.
When it comes to regulatory paperwork costs, small business
gets stuck with the bill. A recent study performed for the
Small Business Administration estimated that $1.1 trillion of
the cost of regulation falls disproportionately on small
businesses with 20 or fewer employees. That is $7,647 per
employee per year.
For the average NFIB member, which employs five people and
reports gross sales of between $350,000 and $500,000 per year,
this price tag is huge. It is almost $40,000 annually, 8 to 10
percent of revenues generated from a small business's gross
sales are paid out in regulatory costs. That does not even
include Federal, State and local income taxes.
Small businesses face a 45 percent greater regulatory
burden than their larger counterparts. Unlike big businesses,
small business owners do not have compliance departments or
attorneys on staff to warn them of each and every regulation in
the pipeline. Instead, those responsibilities fall to them.
Does this mean that small business owners should get a free
pass? Of course not. After working on behalf of small business
for 4\1/2\ years, what I find most impressive about this
constituency is their respect for the law and their desire to
do the right thing. For example, according to an NFIB research
foundation poll on the Family and Medical Leave Act, small
businesses grant virtually all requests for family and medical
leave, whether required to by the law or not.
I thought it would be beneficial to provide a real life
example of the types of mistakes that would be forgiven under
H.R. 5242. Importantly, H.R. 5242 does not forget these
mistakes. It merely gives well-meaning small business owners
the opportunity to correct them. Non-compliance is not an
option under this bill.
Nancy Kleinfelter, an NFIB member, is President of
Baltimore Glassware Decorators, a small 15-employee business.
Her business must comply with EPA's toxic release inventory
lead rule, which requires small businesses to provide EPA with
detailed information regarding lead usage. Ms. Kleinfelter's
business prints small quantities of custom glass and ceramic
ware for proms, weddings, restaurants and novelty stores. In
fact, her decorated mugs have been sold here at the House gift
shop.
Her business sometimes uses lead-bearing colors on outside
surfaces of mugs and glasses which become part of the glass
after they are fired and the lead does not leach out. After 95
hours of work trying to comply with this rule, Ms. Kleinfelter
could not have complete confidence that the numbers she was
providing EPA were accurate.
H.R. 5242 would give small businesses like hers a chance to
fix mistakes that are made despite the small business owner's
best efforts. Economic studies, polls and real-life examples
all indicate why H.R. 5242 is such an important and necessary
piece of legislation. Moreover, it enjoys bipartisan support
going back to the Clinton administration.
NFIB supports strong regulatory reform measures that would
dramatically reduce the regulatory burdens placed on small
business. However, until such reforms are enacted, H.R. 5242 is
needed to stop the bleeding. The bill recognizes the tremendous
regulatory burdens small businesses face while at the same time
ensuring that the public policy objectives those regulations
are designed to address are met. It does not reward or create
loopholes for bad actors, but instead gives well-meaning, hard-
working small business owners a chance to correct unintended
mistakes before being forced to pay civil fines for failing to
dot every I and cross every T.
On behalf of NFIB's members, 92 percent of whom indicate
that they believe small business owners should be exempt from
first-time paperwork violations, I commend you, Madam
Chairwoman, for holding this hearing and inviting me to testify
today. I would be pleased to answer any questions that you
have. Thank you.
[The prepared statement of Ms. Harned follows:]
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Mrs. Miller. Thank you very much.
Our final witness today is Robert Shull, who is the deputy
director of auto safety and regulatory safety for Public
Citizen. Prior to joining Public Citizen, he served as director
of regulatory policy at OMB Watch. Mr. Shull has worked at
Children's Rights, a non-profit in New York that works
nationwide filing class action civil rights suits on behalf of
abused and neglected children in order to reform foster care.
So we certainly appreciate your attendance today and look
forward to your testimony as well, sir. The floor is yours.
STATEMENT OF ROBERT SHULL
Mr. Shull. Thank you, Madam Chair. I am pleased to be able
to come before you again, and I want to thank you for this
opportunity, and I thank the subcommittee.
I was really heartened to hear the opening words from you
that I heard at the beginning of this hearing, which is that
you are deeply concerned about finding a way to balance the
needs of small business while protecting the public interest. I
want to observe that when it comes to information collection
and small businesses, there are really two kinds of ways we can
go to try to strike that balance. One of them is a negative way
which could reduce the amount of information collected or
reduce the incentives for businesses to provide the information
that we need. And the other way to go is the positive way,
which is focused on helping small businesses to comply with
their obligations without reducing the quality, the quantity or
the utility of the information that we need to protect the
public. I am here today because we believe that this bill
follows this negative path rather than the positive path.
I have heard first of all that this bill focuses on first-
time violations and doesn't address or does not exempt repeat
offenders. But I do have to point out that there is a part of
the bill that does allow a business to have many first-time
violations. A business could fail to comply with an EPA
requirement, that is the first time it has failed to comply
with the EPA requirement. But it could also have a first-time
violation of an OSHA requirement, a first-time violation of
other Department of Labor requirements, a first-time violation
of SEC filing requirements and so on.
So we really could have a really bad actor who is failing
to comply with requirements across the board but getting
multiple first-time exemptions. I think that is one way that
this bill does not address the possibility of a repeat
offender.
I also am concerned about the public interest exceptions. I
am really glad to see that there are public interest exceptions
here, and as iterations of this bill have developed over the
years, these public interest exceptions have become more
detailed. That is really gratifying. But the way this iteration
of the bill has developed, the public interest exceptions have
a strange sort of sliding scale for these exclusions.
There are two sections of the bill that would address the
public interest. One would address potential serious harms to
the public interest, and another would address violations that
present a danger to public health and safety.
So when we focus on these two, it really looks like a
sliding scale. If a violation has the potential to cause harm
that isn't serious harm to the public interest, public interest
being broadly construed I presume to mean the public health and
safety but also ecological harms, consumer pocketbook harms and
so on. For these potentials to cause harm to the public
interest, there is a 6-month safe harbor for the first time
violation. If there is a potential to cause serious harm to the
public interest, there is no safe harbor.
But if a violation presents an actual danger to this more
narrow class of public health or safety, there is this optional
24 hour safe harbor for first-time violations. I think that
these incentives just seem really misaligned. There is sort of
a sliding scale that slides backward in a way that would need
to be addressed.
But I think that really, the positive way to go is the way
to go that I want to recommend the subcommittee focus on. I
don't think those options have been exhausted yet. We heard a
lot about compliance assistance, and it is absolutely true:
small businesses don't have the resources that their larger
competitors have to stay on top of all the requirements and to
make sure that they are fully complying with their obligations
under the law. So I think that the answer there is to provide
small businesses that additional resource through compliance
assistance offices. There have been bills that have been
introduced in both the House and the Senate to provide these
compliance assistance offices in every district of the country.
There are other options that I have mentioned in my prepared
statement.
I see that my time is up, so I look forward to your
questions.
[The prepared statement of Mr. Shull follows:]
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Mrs. Miller. Thank you very much.
We certainly appreciate all the panelists and I think I
would like to direct a question to Mr. Wordsworth, since you
really are the only small business person on the panel that is
working every single day in a small business and trying to
understand and to comply. I am certain you are trying your
darndest to comply with every piece of legislation and all the
rules and regulations and etc. at every level of Government,
the Federal level and the State level and sometimes the local
level can even be worse than the Federal level, if that is even
possible. But having come from a local level, I know how that
can be as well, with various kinds of things that you have to
comply with as well.
Would you just tell us generally how many hours a week you
actually spend working at your business and in the context of
that, how much time would you guesstimate you spend during your
average work week, maybe a percentage of your time, just trying
to comply with the various things that you have to comply with?
And as sort of an addendum to that, I know you have been at it
for many, many years, but maybe in the last 10 years, have you
seen a huge escalation in the amount of regulatory burden and
the amount of time you are spending for compliance? I guess
just generally, how much time do you spend complying and are
you seeing it get better or worse?
Mr. Wordsworth. First of all, my beginning experience was
with a large corporation before I started my own small business
in 1974. So I have had a period of time to accumulate some
experience. I am learning every day now.
Both my wife and I work 80 hours a week, maybe, 80, 85
hours a week in our businesses 7 days. And we have a number of
managers, but that is the life of the restaurant business. Of
that time, I would say a good 15 percent maybe is spent, and
maybe even more, in complying. You are so right when you say,
these are Federal regulations in this book. I really invite you
to entertain yourself by looking at this list. And you
understand, these aren't the forms, these are just the names of
the forms. The Chamber did an excellent job putting this
together. This should get some kind of award.
But many times, the State forms and the local forms are as
burdensome. In particular, in some jurisdictions we have meals
taxes. And almost the accounting meals taxes and the
repercussions for a meal, for properly filing a meals tax in
many cases is almost more impactful than filing a State sales
tax. And so most people don't have the great opportunity to see
the accumulation. No single item will ever kill you. But it is
the great accumulation and that is what we deal with. We are
the last guy, the total, the sum total. And it is the
accumulation of the regulations. I think many of them, I truly
believe, have unintended consequences. I don't think
legislators really intended the consequence that it is on small
business to comply.
Mrs. Miller. Thank you. Death by 1,000 paper cuts, I
suppose, is a way to say it as well.
Ms. Harned, if I could ask you, one of the, actually this
subcommittee has had a number of different hearings about
burden. We have really tried to analyze the construct of some
of the modeling that goes on with the various agencies about,
as they are trying to estimate burden, cost of compliance and
the amount of hours that people spend to try to comply with a
number of the different regulatory processes that they are
looking at.
I am just wondering, from your experience, through your
foundation there, and you were talking about the lady that was
in the business with the leaded glass and the EPA regulations.
I think you mentioned 90 some hours, I forget exactly what you
said, less than 100, that they thought that had estimated for
her to comply with that. Do you think that is a proper
estimation of time, or have you found in your experience that
agencies often lowball the amount of burden or cost of
compliance, or do you think they are usually generally on the
mark?
Ms. Harned. It varies by agencies. Unfortunately, all I
would really have to proffer there is anecdotal. But I think
really the answer to your question goes to the point that Mr.
Wordsworth just made, which is, each agency looks at the
regulatory obligations they put on small business owners and
the regulated community in a vacuum. I sat in a 2-hour meeting
with some officials from EPA that went through just one section
of one rule. I just sat there, just thinking, if I am a small
business owner, they said this is no big deal, this will only
take X amount of hours. But they are not thinking about all the
other forums that Mr. Wordsworth has to comply with.
So again, anecdotally we hear, this is a top 10 issue for
small business owners, so I do think that there is probably
something there to your point as far as agencies, what they are
estimating what is actually happening out there. But that being
said, I think the bigger problem is that each agency is looking
at the regulatory obligations they are imposing and the
paperwork requirements they are putting forward in a vacuum,
and they are not seeing, as you said, the death by 1,000 paper
cuts. As a result, that is really where I think small business
owners like Mr. Wordsworth get buried.
Mrs. Miller. And a final question for Mr. Shull. Mr. Shull,
I was interested in your articulating repeat offenders. I have
to tell you the truth, whenever I think of repeat offenders, I
think of a piece of legislation I was involved with as a former
Secretary of State of Michigan, where I was the chairman of the
traffic safety commission of our State and we were looking at
drunk driving repeat offenders. It was an interesting type of a
thing. I don't think it is particularly inherent to drunk
driving offenses, where somebody might have an extra glass of
wine or something, and they go out, and one time in their life
they have an incident, as opposed to a very small percentage of
the driving population who are the repeat offenders that have
an inordinate amount of the problems out there. They just
flaunt the laws, they don't care about the laws. It is not like
it happened once, OK, it can never happen really. But I think
it is a different kind of thing.
Obviously, as I say, I think the standard always has to be
reasonable. And what is reasonable, there is often a lot of
discussion on that. But I also think you could put it in the
context, and I would ask your opinion on this, as a Member of
Congress, this is just my second term here, but we have to fill
out a lot of different paperwork, forms, etc., for trips that
might be taken or different kinds of things that we are doing
with our budget, budgetary constraints. I am a big believer of
full transparency, etc. We try to make sure we are filling out
all the forms that we can. We have taken lessons from the
ethics committees and we understand what it is that they are
looking for. And when we fill out our financial disclosure
forms, we try and make sure we give them all the information
they want.
But if in advertently we somehow made a mistake and didn't
give them all the information that they want, I guess I would
just say, if it is OK for Congress, it is OK for us, how about
these small businesses that it happens to them one time? I
think, if I understand your testimony, too bad. It is OK for us
to get away with it but not for a small businesses. There can
never be an exception to the rule.
I think of it as the Government sort of saying, do as I
say, not as I do. What is your thought on that?
Mr. Shull. Sure. Actually, I think there is a line in my
prepared statement where I do note that agencies already have
enormous discretion that they do exercise to waive off certain
first-time or technical violations. Although I am sure in your
case, any little slip-up will be noticed by your opponents and
you will be roundly criticized for it. So I am sure you are not
even getting off scot-free.
But I do think there is a positive alternative. I just want
to sort of take this example as another opportunity to point
another kind of positive alternative. I am sure it would be a
small chunk of time would be taken off Form A, Form B, Form C
and so on that cumulatively would make a difference. If
something so simple as having to fill out your name and your
office number and your address, if you could do that once and
every other form that you sit down to fill out, it were
automatically completed for you.
I think that there are ways, by shifting to electronic
reporting and by giving small business key identifiers that
they can take to all their forms. There are things like that
make it easier for businesses to report the things that they
have to report or disclose the things that they have to
disclose without having to--but it would give them a way to
spend a little bit less time doing that.
I think that is something that would help small businesses
and still allow the public to receive the information that it
needs. So I think that is another example of the kind of
positive way to go that doesn't reduce the information we
receive and it gives small businesses a special break.
Mrs. Miller. I appreciate those comments. I think that
would be optimal in a perfect world. But in a Government that
sometimes can't get the CIA and FBI to talk to one another, I
am not sure that we are going to be able to accommodate that.
But perhaps. It is certainly a goal.
At this time I would yield to recognize Representative
Neugebauer again, who is the author of this very interesting
legislation, for questions.
Mr. Neugebauer. Thank you, Madam Chairman.
Mr. Shull, I want to go back to the comment you made,
because I think sometimes, as I have listened to your
testimony, I don't disagree, but I think you are talking about
a different issue in many cases. What you are talking about is
someone that has, shortening the time for paperwork. I think
everybody on this dais would be for that.
What we are talking about is not people, how long it took
people to fill out that form. What we are talking about is if
you forgot to fill out that form. So what this bill does is it
addresses those people that didn't have, didn't say, it is too
long a form, I am not going to fill it out, it is for those
folks who thought that was a yearly report and it turns out it
was a quarterly report.
So we are talking about people that inadvertently--then
when you talk about violations, I think we have to be talking
about, a violation, for example, of a failure to report an
accident on your job site. This bill doesn't give you 6 months
to correct that violation on your job. It just says, if you
forgot to fill out the appropriate report when someone got hurt
on your job, and the administrator believes that the failure to
fill out that report did not cause significant health or hazard
to the employee, that there is a forbearance. If there was a
serious violation on that job site, and you didn't report it,
you don't get any help under this bill.
So certainly, everybody here thinks we ought to cut down on
the number of forms. And as Mr. Wordsworth pointed out with his
document, and the fact that you print out the instructions,
there are a lot of forms, I think everybody agrees with that.
What we are talking about is that, like we are talking about
Lori, and Lori writes me and says, Congressman Neugebauer, and
I am paraphrasing here, my husband and I have a small business.
My responsibility is to do the paperwork. She said, I am so
afraid that we are going to forget to fill out a form or we
don't fill it out correctly, and that we might be charged a
huge fine or a penalty for that. We have a very small business
and we can't afford that fine for something we didn't intend to
do.
So what this bill does is say to Lori and her husband, you
know what, we understand that you are trying to comply with the
law. Now, for those people that have serious violations, this
bill, as I said earlier, I think that the Chairwoman pointed
that out, it is not for those folks. We all want to work to
reduce the paper volume. But we need to, as the Chairwoman
said, if I get a break to get a second chance to fill out my
form because I didn't check that box and should have checked
that box, Lori and her husband ought to get a second chance,
too.
Mr. Shull. Yes, sir. And I believe that in many cases Lori
and her husband might already be getting second chances.
Because agencies do have discretion in some cases to waive
fines. And there are times when they will choose not to, either
because of the public interest hazard that is at stake or
because immediate compliance is the essence of the requirement.
For example, with the SEC and Y2K compliance, waiting until
after Y2K wouldn't have really helped things. So immediate
compliance was absolutely a necessity.
I am pleased to hear that there is some interest in carving
out some room for the public interest. There are some other
public interest issues, though, that haven't been accommodated
here that I do want to point out. One of them is that what
might look like at the time a minor violation that doesn't seem
to cause a harm to the public could ultimately, however, be
something that contributes to early warning about hazards that
are emerging. We might be getting that early warning if an
instance here and an instance there that are not being
reported. They are really sort of enormously complicated
issues. I think because we haven't exhausted all of the other
ways to help small businesses comply, I think this kind of
extraordinary remedy of giving people, letting people off the
hook for having failed to comply, this should be sort of the
last resort.
I think the first resort really should be helping small
businesses comply. For example, small business compliance
assistance. There are two bills right now, I believe it's H.R.
230 and S. 1411. These are bills that would help establish
small business compliance assistance programs, so that Lori
would never have to worry about missing out or failing to do
something correctly. She could go and get help to do it right.
Because I am sure that Lori and all her colleagues in the small
business community want to be good corporate citizens. They
want to provide the public or their employees the information
that they need to provide.
And I really think that the first way to go about it is to
help them do that. Help them with the burden before eliminating
the information that the public needs.
Mr. Neugebauer. If we really want to help them, we need to
cut that folder in about ten-fold. That would really help them,
because quite honestly, what we have done over the years is we
have tried to somehow think that writing a report or filing
some kind of form is going to somehow make the world a better
place. I will tell you that probably when we start boiling a
lot of that down, somewhere in a piece of compromise
legislation was, well, let's just have them fill out a report.
That is the kind of problem that is systemic in creating a
business community in America that is not competitive.
That is the reason that companies start to say, you know,
it is easier to do business in Ireland or it is easier to do
business in China or it is easier to do business in India or it
is easier to do business offshore than it is in America,
because we have taken this viewpoint that if we burden business
enough or try to make everybody play by the rules and create an
enormous number of rules that somehow things are better. And
quite honestly, that is not the mentality that works for this
country. It doesn't create jobs, it doesn't create opportunity.
In fact, it creates an opportunity for liability because it
causes people not to invest.
That is the reason I want to take my next question to Mr.
Wordsworth, have you ever found yourself sitting down with your
attorney and saying, how can we structure this little business
venture so that if we have some kind of a huge fine or a
liability arises that we can protect our other assets and our
other businesses?
Mr. Wordsworth. That would be a luxury, a pure luxury to
have the time to calculate a risk. I think in most cases, just
by living the business, you live a calculated risk. I think Mr.
Shull's word here is correct, exhausted. You really get
exhausted under the burden of these.
I don't think, as I understand this bill, this is not for
the removal of any form whatsoever. I think this is for amnesty
on a one-time occasion for a negligence that was unintended, a
paperwork negligence. I think that is the intent of the bill,
and I think it is misunderstood.
Mr. Neugebauer. Madam Chairwoman, thank you for allowing a
hearing on this bill, and I look forward to working with you
and helping continue. I know you are a great champion of small
business. I know you understand the importance of what they
contribute to our country. I look forward to working with you
on this. I want to also thank our panel today for their
attendance.
Mrs. Miller. Thank you very much, and I would echo that and
thank our panelists very, very much. We are delighted to have
you all, again in some cases, and look forward to continuing to
work with you all in a bipartisan spirit to make sure that
American businesses prosper and succeed in this global
marketplace. Thank you very, very much for coming.
[Whereupon, at 3:25 p.m., the subcommittee was adjourned.]