Judicial Review and the Small Business Regulatory Enforcement Fairness Act: An Early Examination of When and Where Judges Are Federal Regulatory Agencies
Polich, Jeffrey J., William and Mary Law Review
The battle between government regulators and big business is a clash of titans. Well-funded federal agencies are staffed with intricate networks of bureaucrats working to fulfill their legislative mandates and keep American businesses in line with public policy, whether the issue is pollution, workplace safety, taxation or the like.(1) Big business is ready and able to combat their nemeses with big budgets for lobbying, legal work, and compliance with the immense quantity of complex regulations enumerated in the Code of Federal Regulations.(2) All too often small businesses are found floundering in the middle of this fray. Their business practices inevitably leave them exposed to federal regulations aimed at curbing the excessive practices of big business.(3) Their budgets, however, leave them without adequate resources either to comply with or to fight intrusive federal regulators. In 1996, Congress gave small businesses a weapon of their own in their fight against this regulatory morass.(4) The Small Business Regulatory Enforcement Fairness Act of 1996(5) (SBREFA) contained a judicial review provision giving individuals or entities the power to challenge federal agencies in court if the agencies do not adequately take into account the disparate impact their proposed regulations will have on small businesses.(6) It remains to be seen whether this new weapon will be effective in assisting small businesses to survive in the current regulatory predicament.
This Note addresses the problems small businesses face in fighting or complying with federal regulations aimed primarily at the activities of big businesses, and Congress's legislative response to these problems. The primary focus is the initial response to the judicial review provision contained in SBREFA. A review of existing case law demonstrates that small entities have prevailed using SBREFA in cases in which there was a gross violation of federal rulemaking procedures by an agency, but failed when using SBREFA in cases in which the agency made some effort to comply with those requirements.
The first section of this Note examines the importance of small businesses and their plight in complying with federal regulations.(7) This section analyzes data from a variety of sources to show that compliance with federal regulations is often a matter of fixed costs.(8) The interests of large businesses in federal policymaking are better represented thanks to their ability to hire lobbyists.(9) Additionally, large businesses have entire departments that deal with regulatory compliance.(10) Small businesses often face the same regulatory requirements of these larger businesses, but lack the resources with which to fight or comply.(11) Data indicates that the amount expended on compliance with federal regulations is much higher proportionately for small businesses.(12)
The second section describes Congress's attempts at remedying this plight through the Regulatory Flexibility Act of 1980(13) (RFA) and SBREFA's amendments to the RFA.(14) The RFA attempted to alleviate some of the disproportionate strain placed on small businesses by requiring federal agencies, as part of their regulatory promulgation process, to take into account any disparate impacts that small entities might face.(15) An analysis of the legislation's effects shows that the RFA had little effect on the federal rulemaking process, in part, because it allowed agencies to certify with very little supporting data that their regulation would not have a disparate impact on small entities and, therefore, that a cost-benefit analysis was not required.(16) Further, small businesses had no remedy when the agencies' conclusions were wrong.(17) Congress, in an attempt to address this problem, passed SBREFA, which included, among other things, a judicial review provision allowing individuals or entities to challenge federal agency violations of the RFA in court.(18)
The third section looks at some of the early court cases that have arisen as a result of the new power given to small businesses by SBREFA. …