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DEPARTMENT OF LABOR ENFORCEMENT AGAINST

SMALL BUSINESS

HEARING

BEFORE THE

SUBCOMMITTEE ON REGULATORY REFORM AND 

OVERSIGHT

OF THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC, JUNE 17, 2004

Serial No. 108–69

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

SAM GRAVES, Missouri 

EDWARD SCHROCK, Virginia 

TODD AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

TRENT FRANKS, Arizona 

JIM GERLACH, Pennsylvania 

JEB BRADLEY, New Hampshire 

BOB BEAUPREZ, Colorado 

CHRIS CHOCOLA, Indiana 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

ENI FALEOMAVAEGA, American Samoa 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

GRACE NAPOLITANO, California 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

DENISE MAJETTE, Georgia 

JIM MARSHALL, Georgia 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

BRAD MILLER, North Carolina 

[VACANCY] 

[VACANCY]

J. MATTHEW SZYMANSKI, Chief of Staff 

PHIL ESKELAND, Policy Director/Deputy Chief of Staff 

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT 

EDWARD SCHROCK, Virginia, Chairman 

ROSCOE BARTLETT, Maryland 

SUE KELLY, New York 

TRENT FRANKS, Arizona 

JEB BRADLEY, New Hampshire 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

[RANKING MEMBER IS VACANT] 

DONNA CHRISTENSEN, Virgin Islands 

ENI F. H. FALEOMAVAEGA, American 

Samoa 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

ED CASE, Hawaii 

DENISE MAJETTE, Georgia

ROSARIO PALMIERI, Senior Professional Staff

(II) 

C O N T E N T S 

WITNESSES

Page 

Varnell, Hon. Robert C., Deputy Solicitor, US Department of Labor ................. 4

Drummond, Ms. Anita, Director of Legal and Regulatory Affairs, Associated 

Builders and Contractors, Inc. ............................................................................ 14

Bennett, Mr. Perry A., Jr., Health Safety and Environmental Director, Molded Fiber Glass Companies ................................................................................... 17

Lee, Ms. Patricia H., President and CEO, National Institute for Urban Entrepreneurship ........................................................................................................... 21

APPENDIX

Opening statements: 

Schrock, Hon. Edward ...................................................................................... 32

King, Hon. Steve ............................................................................................... 34

Prepared statements: 

Varnell, Hon. Robert C., Deputy Solicitor, US Department of Labor .......... 36

Drummond, Ms. Anita, Director of Legal and Regulatory Affairs, Associated Builders and Contractors, Inc. ............................................................ 47

Bennett, Mr. Perry A., Jr., Health Safety and Environmental Director, 

Molded Fiber Glass Companies ................................................................... 54

Lee, Ms. Patricia H., President and CEO, National Institute for Urban 

Entrepreneurship .......................................................................................... 62

(III) 

(1)

DEPARTMENT OF LABOR ENFORCEMENT 

AGAINST SMALL BUSINESS 

THURSDAY, JUNE 17, 2004

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS

SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

Washington, D.C. 

The Subcommittee met, pursuant to call, at 10:35 a.m. in Room 

2360, Rayburn House Office Building, Hon. Edward L. Schrock, 

[chairman of the Subcommittee] presiding. 

Present: Schrock and Bordallo

Chairman SCHROCK. Good morning everyone. The hearing will 

come to order. 

Good morning, ladies and gentlemen. I will go ahead and begin. 

I know Mrs. Bordallo is on the way. I figure that by the time I finish with my opening statement, she will be here. If not, I will talk 

real slow at the end. 

Congress has taken steps to try to make life a little easier for 

small businesses over the past eight years. In 1996, they passed 

the Small Business Regulatory Enforcement Fairness Act. In part, 

it said that each Agency of the government must establish a policy 

to provide for the reduction or waiver of civil penalties for violations of statutory or regulatory requirements by a small business. 

In 2002, it continued to be the case that small business owners 

were seeing paperwork grow at a faster rate than their businesses’ 

bottom line and Congress acted by passing the Small Business Paperwork Relief Act. That legislation required agencies to share enforcement statistics with this Committee. Some of the raw statistics we found were that the Department of Labor conducted enforcement actions against 143,000 businesses in the last fiscal year. 

Small businesses accounted for 66,000 of those actions. Over a 

1,000 of those against small businesses came from the Employment 

Standards Administration, and over 12,000 came from the Occupational Safety and Health Administration, but these raw numbers 

don’t alone explain anything to us and that is why we are having 

this hearing today. 

The goals of the Department of Labor’s regulatory agencies are 

to ensure worker safety, health and compliance with labor laws. 

The goal of this Committee is to make sure that the Labor Department is achieving its aims with the most efficient means, that are 

the least disruptive to well-intentioned small business owners. Reasonable people can disagree on over how much the Labor DepartVerDate 0ct 09 2002 16:55 May 12, 2005 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 G:\HEARINGS\94312.TXT MIKEA
2

ment should focus on compliance assistance versus enforcement. 

We will hear from the Labor Department as well as from some of 

the regulated community on how well that balance is being 

achieved. 

People who own small businesses in the United States deserve 

fair treatment. They should be rewarded for making a good-faith 

effort to comply with these regulations. It is important to continue 

to work for more and better results for the small businesses in this 

country. The small business sector has been a constant source of 

economic growth and job creation in this recovery, and the government needs to work with, not against, America’s small businesses. 

I have made it a personal goal to work towards creating an environment where small businesses can grow and prosper in this 

country. The owners of small businesses should be less worried 

about how to deal with government regulation than with how to 

grow their businesses and create jobs in America. 

President Bush expressed, in his most recent State of the Union 

address, that our agenda for jobs and growth must help small business owners and employees with relief from needless regulation. I 

am confident that we can make significant headway towards the 

president’s agenda while still insuring compliance with our nation’s 

labor laws. 

[Chairman Schrock’s opening statement may be found in the appendix.] 

Then let me thank those of you who are going to be testifying 

today. It is now my pleasure to yield the floor to the ranking member, my good friend of 30 years from Guam, the gentle lady Madeline Bordallo.

Ms. BORDALLO. Thank you very much, Mister Chairman. It is indeed an honor to be serving with you after all these many years 

and it is not every day that a freshman Member of Congress is able 

to be a Ranking Member. 

This Committee has met time and time again to discuss the burdens federal agencies place on small businesses. It is a growing 

concern as our nation’s small enterprises strive to help aid our 

country in sustaining a much needed economic recovery. A recent 

study reported that for firms employing fewer than 20 employees, 

the annual regulatory burden is nearly $6,975 per employee, almost 60 percent higher than that of firms with fewer than 500 employees. 

This definitely is not right and something needs to be done to 

change it. Small businesses do not have the manpower or the extra 

money, as compared to their corporate counterparts, to be able to 

comply with the burdensome regulations imposed by many federal 

agencies. Most small firms simply do not have enough employees 

to weed through the paperwork or enough understanding of the 

new regulations to fully comply. 

As we depend on these small enterprises to continue generating 

75 percent of all new jobs, we must also recognize the challenges 

that they face and work to help them break down these barriers. 

In this hearing this morning, we are going to examine how the Department of Labor is living up to its commitment to lessen regulatory burdens facing small businesses. The Bush administration 

3

has repeatedly expressed that reducing regulations facing small 

businesses is a priority. We share this goal and we are here today 

to assess its progress. Even with the passage of the Small Business 

Paperwork Relief Act, agencies are still not completely reporting 

their enforcement actions and the effect that they have on our nation’s small firms. 

The Department of Labor report, issued this past year, generated 

concern based on the large number of citations that had been 

issued to small businesses through their Agency. For example, this 

report stated that the Occupational Safety and Health Administration, better known as OSHA, issued 24,583 assessments of which 

20,780 went to businesses with less than 250 employees. This resulted in a total of $51.7 million being assessed against small 

firms. In addition, the Mine Safety & Health Administration had 

104,800 enforcement actions, of which 100,300 were for small penalties. 

While the MSHA is not expected to necessarily reduce or abate 

penalties, they certainly are able to take certain factors into consideration before setting the burdensome penalties. These reports are 

a significant tool in this Committee’s ability to assess the impact 

that regulations are having on our nation’s small businesses. As 

this report indicates, the DOL needs to acknowledge the effects 

that these regulations are placing on small enterprises. They need 

to be innovative in the manner in which they communicate with 

small businesses and in being more resourceful in easing small 

firm’s ability to comply with these regulations. 

Our nation’s small businesses need to know exactly what is expected of them. This was promised to them through the Small 

Business Regulatory Enforcement Fairness Act in 1996, and again 

in the Small Business Paperwork Relief Act in 2002. As members 

of the Small Business Committee, we must continue to provide 

oversight to insuring that government agencies are held accountable for the regulatory burdens that they place on our small businesses. 

I want to thank the small business owners that are here today 

for taking time out of their schedules to talk with us and I look 

forward to hearing your testimony. 

Thank you, Mister Chairman.

Chairman SCHROCK. Thanks Ms. Bordallo. During my Navy career, I was privileged to serve on the island of Guam. Jeanne and 

I went there in 1975 and our only child was born there. We have 

a picture of Randy when he was a month old and Ms. Bordallo was 

holding him. Never could I have imagined that we would be sitting 

together in Congress like this. We are truly friends from a long 

way back and it is really nice to have her with us this morning. 

Before we begin receiving testimony from witnesses, I want to remind everyone that we would like the witnesses to stay as close to 

five minutes as possible. In front of you on the table, you will see 

a box that will let you know when your time is up. When it turns 

yellow, you have a minute left; and when it turns red, the trap door 

opens and away you go. And once that sign is on, we would ask 

that you try to wrap up as soon as you feel comfortable. 

4

We have two panels today. On the first panel, we have the Honorable Robert Varnell, who is the Deputy Solicitor of the U. S. Department of Labor. We are delighted to have you here and the floor 

is yours. 

STATEMENT OF THE HONORABLE ROBERT VARNELL, U.S. 

DEPARTMENT OF LABOR

Mr. VARNELL. Well, thank you, Mister Chairman. At the outset, 

I just wanted to say thanks for letting me represent the Department of Labor. I also wanted to just state that I have prepared a 

written statement, which I ask you to enter into the record.

Chairman SCHROCK. Without objection.

Mr. VARNELL. Thank you. Well, good morning and thank you 

again for inviting me here today to discuss how the Department of 

Labor is working hard to strike the appropriate balance between: 

on the one hand, fairly and effectively enforcing the laws with 

which Congress has charged us; and on the other, easing the regulatory burden on small business. 

In striking this balance, we recognize that small business is the 

engine driving America’s economy and that it must remain competitive. Our ultimate goal at the department is the protection of 

America’s workers. We are striking this balance in three ways. 

First, our enforcement agencies provide high-caliber compliance assistance, specifically directed towards the small business community. I have brought a packet of compliance-assistance materials 

with me today, which I will share with your staff before I depart. 

Second, our agency is effectively and fairly enforcing their laws and 

regulations while taking into consideration, when appropriate, the 

size of the employer. Finally, our approach to rule making gives 

due consideration to small business needs. 

Secretary Chao launched the compliance-assistance initiative in 

June 2002 with its primary focus on helping small business and 

she created the Office of Compliance Assistance Policy. Let me 

share a couple of examples of these efforts. The Department has 

developed ‘‘E-Laws Advisors,’’ an interactive electronic tool that 

provides information on more than 20 DOL laws. The site receives 

hundreds of hits each day. We also operate a Toll-Free National 

Call Center, which has response capabilities in over 140 different 

languages and has answered more than three million calls since it 

was set up back in September 2001. 

In addition to these department-wide efforts, our Agency has individually tailored a compliance assistance to achieve their unique 

missions. For instance, an FY 2003, OSHA’s newly created Office 

of Small Business Assistance coordinated more than 31,000 nationwide on-site consultation visits to small businesses. OSHA’s web 

site was recently named one of ‘‘Best of the Web’’ and receives more 

than 50 million hits each year. 

Like OSHA, Wage Hours developed unique compliance- assistance tools aimed at helping small business. This assistance includes extensive public-awareness campaigns such as YouthRules! 

explaining child-labor requirements and fair pay, explaining the 

5

Department’s new white-collar overtime rules. The Wage Hour web 

site is visited more than 78,000 times per month and the Agency 

fields nearly 40,000 toll-free telephone inquiries per month. 

When enforcement is required, OSHA and Wage Hour will continue to take into account the size of the business when assessing 

penalties. OSHA is required by the OSH Act to reduce penalties by 

up to 60 percent, depending on the size of the employer. Along with 

these reductions mandated by statute, OSHA and FY 2003 further 

reduced penalties in 71 percent of cases involving small businesses, 

totaling approximately $29 million in reductions. OSHA is also 

working to alleviate paperwork burdens on small business. For instance, OSHA’s policy, for certain paperwork deficiencies, allows for 

no citations to be issued. If citations are issued to certain technical 

violations, no penalty, or a reduced penalty, will be assessed. 

In addition, employers with ten or fewer employees, and that is 

75 percent of all employers in most instances, are exempted from 

keeping injury and illness records. Similarly, Wage Hour takes 

business size into consideration as well. Reductions or waivers for 

assessments against small entities are, in most cases, already 

factored into the statutory and regulatory formulas used to compute penalties. Wage Hour field managers also can make pre-assessment and post-assessment adjustments when levying penalties 

against an employer. When it comes to record-keeping penalties, 

Wage Hour does not have statutory authority to assess penalties 

for record-keeping violations related to minimum wage and overtime, and it assesses only a very small penalty for child labor 

record-keeping violations. 

In sum, when it comes to enforcement against small business, 

our agencies do not levy penalties simply for the sake of doing so. 

But make no mistake that we will pursue aggressive enforcement 

when it is warranted. Lastly, our approach to rule making makes 

sure that the interests of small business are taking into account. 

Our reg agenda is no longer a wish list and has been trimmed from 

130 down to 79 items. OSHA, under SBREFA, provides a vehicle 

for small business participation at the regulatory-development 

stage by way of its Small Business Advocacy Review Panel. 

Wage Hour says that small business, by clarifying out-dated 

rules, most notably and most recently, the FSLA’s white-collar 

overtime exemption. During this rule-making process, DOL carefully weighed the concerns expressed by small business, which is 

disproportionaly affected by unclear overtime rules and the risks of 

costly litigation. The DOL published a final rule sensitive to the 

challenges of small business and is aggressively providing compliance assistance through its Fair Pay Outreach Program. 

Thank you once again for allowing me to review how the DOL 

is working to strike the right balance for small business, and I 

would be very happy to answer any questions that you may have. 

[Mr. Varnell’s statement may be found in the appendix.]

Chairman SCHROCK. Thank you very much, Mr. Varnell. Let me 

ask a general question, which I might add to it: How does the Department of Labor and its subagencies decide to prioritize its resources as between compliance assistance and enforcement? What 

is the balance? And what is the procedure for first-time violators? 

6

On Page 7, Fiscal 2003 has said that you conducted 12,366 inspections. I am led to believe, right or wrong, that of all those inspections, there were 12,366 penalties. Help me understand all 

that?

Mr. VARNELL. I can take the first part—

Chairman SCHROCK. Sure.

Mr. VARNELL. —of your question first, which is how we—

Chairman SCHROCK. Balance.

Mr. VARNELL. —prioritize between compliance assistance and enforcement. At the outset, I should note that the department does 

have to make those kind of choices as far as priorities because we 

have limited resources and one thing is clear. Over the last few 

years, really since the beginning of Secretary Chao’s tenure at the 

Department of Labor, we have been putting increased emphasis on 

compliance assistance. It is much more of a priority I would submit 

than it used to be. The secretary launched the Compliance Assistance Initiative back in 2002; and along with that, she also established an Office of Compliance Assistance, which is devoted to coordinating these kinds of outreach efforts throughout our department, sharing best practices with our agencies, that kind of thing. 

But I also want to make clear that while compliance assistance 

is being given a greater priority, it has not replaced enforcement. 

We see it really as a powerful tool that compliments enforcement, 

both of which are part of our arsenal, so to speak, to assist small 

business as well as the rest of the regulated community in ultimately not violating our workplace rules and protecting America’s 

workers. Compliance assistance is our front-end approach, which 

we use to teach businesses what they need to do, so that they understand and so they don’t violate laws to begin with. Enforcement 

we use on the back-end, if necessary. 

So, again, it is a dual approach. We are trying to make them 

both priorities, but we really do see them as a complement to one 

another.

Chairman SCHROCK. If I am a small business owner and I am 

trying to get my business up and running, I am probably panicked 

that I am not going to make the bottom line at the end of the year, 

and the regulations are so voluminous that, at some point, something is going to slip through the cracks and he is probably going 

to violate something he doesn’t even realize that he is doing. What 

would be wrong with the system that when you inspect them, if 

they are making mistakes and it is the first time deal. So, this is 

the mistake you made. You will have 60 to 90 days to correct it. 

We will be back again for an inspection and if they have not corrected it, then take legal action. 

And I understand that incorrectly the first violation always results in a civil penalty, or some sort of penalty, financially or otherwise. Am I right or wrong, and if I am correct, why does it have 

to be that way? If we are truly trying to protect small business and 

7

give them an equal share of the succeeding, it seems like the heavy 

hand of government does everything they can to beat them down 

and we just have to stop that.

Mr. VARNELL. Good point. The first thing I would like to say is 

that the actions we take are ultimately guided by the statutes that 

we enforce and we are obligated to do that; and the OSH Act mandates that we seek out and enforce the law against violations, 

which can include first-time violations. But I agree, and the department agrees as well, that there has to be some flexibility in acknowledging the situation on the ground, so to speak. 

That being said, there is flexibility that goes into how penalties 

are ultimately levied. The OSH Act, itself, mandates that the size 

of the employer be taken into consideration. For those smallest employers, between one and 25 employees, the statute mandates that 

there be a reduction in penalty by 60 percent. On top of that, we 

can place a 10-percent reduction for first-time violations. There can 

also be a 15-percent reduction for good-faith efforts to comply with 

the law and also for quick abatement type stuff. So there really is 

flexibility there in how we address small businesses that are confronting regulations for the first time.

Chairman SCHROCK. As kind of a follow-up on that: What percentage of inspections result in enforcement action and what percentage of enforcement actions actually result in civil penalties?

Mr. VARNELL. I have seen some of this data and I think I can 

give you a snapshot view. Some of it fluctuates from agency to 

agency. The question, so that I can give you a complete response, 

I would like to follow-up in writing, if possible.

Chairman SCHROCK. All right.

Mr. VARNELL. But I do know, in the case of OSHA, something 

like approximately 30 percent of inspections result in the issuance 

of no citation because there is a finding of complete compliance, 

which is a significant percentage. And I know if you take that 70 

percent, in which a citation is issued, there is another percentage 

on which no penalty is levied because the violation that is found 

is something other than serious. 

Similarly, with the Wage Hour Division, I don’t have an exact 

percentage for you but I do know that it is a very small percentage 

of inspections that ultimately result in the department bringing an 

enforcement action, or initiating litigation in federal district court 

to secure back wages, a very small percentage. 

But, again, to completely answer your question, I would like to 

provide you some written statement.

Chairman SCHROCK. Can you help me with this. How do you 

measure success in your department? Do you include the number 

of inspections, the number of enforcement actions, the number of 

penalties imposed, the numbers of callers to your 800 numbers? 

Are there other numbers that you can use to gauge how well you 

are doing in this arena?

8

Mr. VARNELL. The first point I want to make is that we do track 

that kind of data on both the enforcement side of our approach and 

the compliance-assistance side of our approach, which again both 

are ultimately geared towards preventing workplace violations 

from occurring and protecting America’s workers. 

On the enforcement side, our agencies track the number of investigations that they initiate, the number of citations that they put 

forth, the number of violations that they cite, amounts of penalties, 

and some reductions in penalties are tracked. Similar with compliance assistance, we track the number of web site hits, the number 

of phone calls that we answer, the number of opinion letters that 

we respond to. We do track all of that kind of data, which is important because it is a good metric for letting us know how we are 

interacting with the public. 

But the more important point, the thing that we are ultimately 

trying to track, which we use to measure success, is really the data 

that shows whether the missions of our agencies are being accomplished. So, for instance, at OSHA, we are always constantly looking at injury and illness and fatality rates to make sure that those 

lines are trending down, which they are. On the wage-hour side of 

things, we are looking to measure if we are decreasing the amount 

of child-labor violations; we are finding the amount of back wages 

that we recover. 

So, ultimately, that is what we try to measure. I have had some 

experience with the Government Performance Results Act and I 

know that for agencies to be accountable for what they are supposed to be doing, they have got to be looking at the outcomes that 

we are producing and not just the outputs, the amount of paper we 

issue, the number of phone calls we make, that kind of thing.

Chairman SCHROCK. Ms. Bordallo?

Ms. BORDALLO. Thank you very much, Mr. Chairman. 

Mr. Varnell, my question is obviously, to use OSHA as an example, your inspectors need to be thoroughly familiar with the latest 

business processes to accurately access the danger to workers. Does 

the department have a program to inform itself of advances in 

business processes, or safety techniques and how does it pass that 

information out to the field? And secondly, does OSHA give the 

business a certain number of days to make corrections before a 

penalty is imposed?

Mr. VARNELL. I do know that OSHA and OSHA officials, investigators, technical experts, they have a lot of interaction with the 

regulated community, with industry, with small business. OSHA 

has several various technical Committees in which representatives 

from industry, from labor, from small business, come in and talk 

about the issues that they are dealing with, which includes a lot 

of technical development, that kind of thing. 

So there is interaction in that respect and it is filtered down to 

our OSHA officials on the ground. They have to know that information in order to conduct their inspections appropriately and make 

sure that they understand which hazards must be abated. 

I know you asked me a second follow-up.

9

Ms. BORDALLO. I did, a follow-up: Does OSHA give the business 

a certain number of days to make corrections before they impose 

a penalty?

Mr. VARNELL. This is a question that I may need to follow-up on 

in writing to make sure that I answer it appropriately. Again, I do 

know there is flexibility in the penalties that are ultimately levied 

and it is a 15-percent reduction that can be allowed for if quick 

abatement is done. So I know that the Agency tries to work with 

small business owners to abate hazards. I will have to get back to 

you on that.

Ms. BORDALLO. Yes, the reason I asked is I was an inspector for 

our government on Guam and I took an OSHA inspector with me 

and he always gave them 10 days to make corrections before any 

kind of penalty. And then they would come back to inspect again 

after 10 days. 

The other one is: You testified that the Department of Labor 

changed its overtime rule to respond to an explosion of class-action 

lawsuits. Can you tell us how many such suits were filed last year 

and can you tell us how many such suits were filed in 2002?

Mr. VARNELL. I have seen that kind of data. I don’t have the 

exact numbers for the exact time periods that you have just asked 

for. I know that I can get you that data. One thing that I can say 

is that there are now more class actions involving alleged violations 

of the Part 541 White Collar Rules than any other kind of workplace class-action litigation and that includes even discrimination 

or equal- employment lawsuits. 

So there really has been an explosion in this kind of class-action 

litigation. That is one of the driving reasons that the department 

felt like it needed to take this effort to update and modernize and 

clarify these rules.

Ms. BORDALLO. Can you get the figures to the Committee? I 

would appreciate that.

Mr. VARNELL. Absolutely.

Ms. BORDALLO. All right. Just one quick question, Mister Chairman. Can you tell us in detail what efforts the department makes 

to go out and find new businesses to make sure that they receive 

the proper education in compliance assistance? I ask because we 

have heard from the NFIB and other small business organizations 

that their members are often unaware of their obligation until an 

inspector shows up. Most of the compliance assistance that you reference in your testimony depends on a small business owner knowing that he or she needs more information. 

So can you give me some answer on that?

Mr. VARNELL. It is a fair point and I think it relates directly to 

this dual approach that we are trying to develop, which is compliance assistance first and enforcement on the back end, if necessary. 

The department is taking myriad steps to try to get the word out 

10

on what laws and regulations require of the regulated community. 

We recognize that if we are going to impose regulations on small 

business, then we have an equal obligation on our part to explain 

what those regulations actually require. 

A lot of it is technology based. We have very good web sites up 

and running that are accessed all the time. Again, the statistic that 

I cited in my opening statement said that our OSHA web site alone 

is contacted 50 million times approximately each year. We have 

toll-free call centers where people can call in, and there are efforts 

that we take. Well, we take the initiative to reach out and there 

are public-awareness campaigns. I know our Wage Hour Division 

has at least radio spots, perhaps TV as well, where they try to explain what worker protections are required under the Fair Labor 

Standards Act, under child labor, that kind of thing. 

So we are taking many steps to try to get the word out.

Ms. BORDALLO. I feel that it is a two-way street. We must cooperate and help out small businesses. Right now, the economy is such 

that our entire small business base is eroding because of overseas 

business. So, therefore, I feel that the Agency should go out of its 

way to assist small business.

Chairman SCHROCK. Let me just follow-up real quick. You said 

55 million hits a year.

Mr. VARNELL. Fifty million.

Chairman SCHROCK. Fifty million. Basically, what are they hitting on? What are they looking for? Just a myriad of things or is 

there one specific area?

Mr. VARNELL. It is a myriad of things. There are compliance-assistance tools geared specifically towards small business. There is 

a Small Business Handbook that OSHA has put out, which is sort 

of a nuts and bolts primer on what is required of small businesses 

as far as complying with the OSH Act; and various forms that have 

to be submitted are also downloadable from the web site, the statutes and regulations themselves are accessible, so it is a wide variety.

Chairman SCHROCK. Are you able to tell who the businesses are 

that hit you?

Mr. VARNELL. I don’t think so.

Chairman SCHROCK. Good. Well, I think that is good. I don’t 

think you need to know.

Mr. VARNELL. That is a good point. One thing that I would like 

to emphasize there. We have put in place what we call our confidentiality protocol.

Chairman SCHROCK. Great.

11

Mr. VARNELL. Recognizing the fact that there does have to be a 

fire wall between companies that want to learn what they need to 

do in order to comply with our laws, making sure that any fears 

they have of enforced regulations coming later on will take care of 

that.

Chairman SCHROCK. Nobody wants to have to approach the federal government on anything. And if they think that they are going 

to have a surprise inspection because they came on your web site 

that would not be a good thing.

Mr. VARNELL. Absolutely.

Chairman SCHROCK. Let me ask you: The issue of enforcement 

priority has come up several times, are OSHA and your other internal agencies focused on the biggest safety and health risks, or are 

they focused on all potential threats without regard to risk assessment? And one of the people who is going to speak next in her testimony talks about the big four as being: falls struck by, cut in between, which gives me the willies to think about it, and electric 

shock. Those seem to be what 96 or 94 percent of all the problems. 

How much time do you focus on the rest of that?

Mr. VARNELL. All of our agencies have to target the high risks 

that they are charged with addressing. Again, because our agencies 

have limited resources, there is one statistic that I know our department cites that says: The amount of resources we have, we can 

only go out and inspect each—it would take us 175 years to inspect 

each workplace, so we have to make priorities and decisions and 

what risks we want to address. 

As a couple of examples: With our Wage Hour Division, they target what are referred to as high-risk industries. Those are industries that it is known that they are problems with the recidivism 

and continued violations with wage-hour laws. It includes things 

like the garment industry, retail, restaurants, hotels. Wage Hour 

also puts a lot of effort into trying to protect low-wage workers, vulnerable workers, workers that are less likely to try to protect their 

own rights on their own because they don’t have the tools or the 

know-how on how to do that. That includes immigrants, Hispanic 

workers, people with limited English proficiency. 

You mentioned OSHA. OSHA has to make the same types of 

choices and they do target what they refer to as high-hazard industries, and that does include construction because construction sites 

can be dangerous and there are problems there that have to be specifically targeted. Machine guarding, OSHA runs a site-specific targeting program. Again, OSHA also does reach out to certain populations that are known to have higher illness and injury rates like 

Hispanics and immigrant workers. 

So the short answer is: We do have to make those kinds of 

choices in our priorities.

Chairman SCHROCK. It seems to me that in the same testimony 

that she was saying that OSHA investigative—I am probably reading what she is going to read. OSHA’s investigative construction faVerDate 0ct 09 2002 16:55 May 12, 2005 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 G:\HEARINGS\94312.TXT MIKEA
12

cilities, as reviewed, the rate has fallen from 13.5 per 100,000 in 

1994 to 11.3 per 100,000 in 2002. That is darn good, but it needs 

to go further I guess right now.

Mr. VARNELL. I don’t have that exact data in front of me but I 

do know that our trend lines are moving in the right direction.

Chairman SCHROCK. Okay. Ms. Bordallo was talking about overtime rules. With regard to the new overtime rules, I noticed that 

in the final rules, it makes note several times of vigorous enforcement. Will small businesses have a period of time when they can 

learn about the rules beyond August or on the day that it becomes 

effective, or are you going to start enforcement actions right away? 

And tell me more about what your planned education effort entails 

because it may be awhile before these folks are going to be able to 

understand all this; and by the time that they understand it, they 

are going to be hit with a penalty?

Mr. VARNELL. Yes. The new rule does go into effect on August 

23rd. When that happens, it is an enforceable regulation that we 

have to enforce. But we published that final rule on April 23rd, giving a 120-day lead-up period between the time of final publication 

and the effective date, which is an unusually long period of time.

Chairman SCHROCK. Where did you publish it? How would the 

small business owner in Guam, for instance, know that there are 

such regulations?

Mr. VARNELL. Very good question and we recognize that. On 

April 23rd when we published the rule, the department, and specifically the Wage Hour Division launched what I would submit is 

the most aggressive public-outreach campaign that we have ever 

done, and it is right up there and it is under the sort of title: Fair 

Pay. It was launched the very same day. It includes a very elaborate web site, which includes fact sheets on the various occupations 

that are affected by the new rule; there are video seminars that 

can be downloaded and watched; there are several PowerPoint 

presentations that could be downloaded and distributed by employers and employees. 

On top of that, we have several, I would say tens or dozens of 

our officials out there talking about the rule, both career and noncareer; folks from our Wage Hour Division from Employment 

Standards Administration, from my office, the Solicitor’s Office, the 

Secretary’s Office, out on the street, so to speak, letting the public 

know what this rule is all about, so that they can be in a good position to begin complying with the rule once it goes into effect in August.

Chairman SCHROCK. I am guessing there are some small businesses that don’t have web sites and are in remote areas, as I mentioned. Are they going to get a mailing? How will they know that 

they need to look these regulations up?

13

Mr. VARNELL. I don’t know if there are any mailings. I don’t believe there are but I would have to confirm that.

Chairman SCHROCK. Well, how will these businesses know?

Mr. VARNELL. I agree. It is a challenge for us to get the word out 

there fully. We are taking aggressive steps to do that. The rule has 

generated a lot of buzz in the press, so I think there is sort of general recognition that this rule is out there and that people need to 

understand what it is. But we have to get the word out there as 

much as possible.

Chairman SCHROCK. Ms. Bordallo?

Ms. BORDALLO. Just a quick follow-up. That was one of the questions that I was going to ask. Just exactly how do you disseminate 

information from your agencies, and related agencies, to these 

small businesses in rural areas, mom and pop operations? I am just 

curious. Now we are talking about the overtime rule and I jut wonder: How effective is this? And would they then be penalized for 

not following the rules and regulations?

Mr. VARNELL. Yes. The nature of some of our agencies, MSHA for 

instance, the Agency that oversees mining, safety and health, is 

really set up and designed to reach those populations in geographic 

areas where they are most needed. So there is some sort of input 

into rural areas, so that small businesses can understand—

Ms. BORDALLO. Some.

Mr. VARNELL. —what the new regulations—

Ms. BORDALLO. But not enough.

Mr. VARNELL. Well, there are steps that need to be taken. You 

know we can use technology; we can use the press to get the word 

out, that kind of thing. But I don’t disagree that it is a challenge 

for us to get the words fully out there.

Ms. BORDALLO. I feel that if the department is going to embark 

on a new program, new regulations, then you have to have something in place where you are going to be able to disseminate the 

information to everyone. It is a tremendous job. There is no question about it. But it is something that should be in place before we 

begin to enforce rules and regulations.

Chairman SCHROCK. I think that is something this Committee 

needs to watch because in a lot of the areas that you represent, 

they are going to be so busy that they are not going to be reading 

newspapers, or watching television. They are going to be trying to 

keep their business going and if they don’t they are certainly going 

to get caught and we have got to be real careful on how we do that. 

In Virginia, where I live everybody has got a computer. I understand that. But in some of these remote, rural areas they don’t and 

14

I am afraid that they are going to be hit hard and those are probably the exact areas where we want to try to help from an economic standpoint, so we have got to be very careful. 

Thank you for coming. We have a lot to think about here and we 

have got to make sure that we watch out after these folks and assist you all in any way that we can and make sure that these outlying areas get information they need so that they are not going 

to fall into a trap sometime because I know that happens and that 

is one of the things that I am going to be watching to make sure 

that that doesn’t happen. I have had a few incidences of constituents at home who have had some rather uncomfortable dealings 

with OSHA and we are going to keep watching that. So I thank 

you and we will be in touch. Thank you very much.

Mr. VARNELL. Thank you.

Chairman SCHROCK. We will take about a three-minute break 

until the next panel is ready. 

[Recess.]

Chairman SCHROCK. I am going to call the next panel. Let me 

introduce them. First we have Anita Drummond. Anita is the Director of Legal and Regulatory Affairs for the ABC, the Associated 

Builders & Contractors, and her previous service included serving 

as an advocate and assistant counsel at SBA’s Office of Advocacy. 

Next is Perry Bennett, the HES Director for Molded Fiber Glass 

Companies of Ashtabula, Ohio. I am probably one of three or four 

people in this room who knows where that is. He is representing 

the American Composites Manufacturing Association. 

Last is Patricia Lee, the president and CEO of the National Institute for Urban Entrepreneurship. She was previously the managing vice president and National Director of Clinical Programs for 

the Institute of Justice. 

We are delighted to have you here. The same rules apply, except 

this time there are three trap doors instead of one. We will begin 

with Ms. Drummond. The floor is yours. 

STATEMENT OF ANITA DRUMMOND, ASSOCIATED BUILDERS 

AND CONTRACTORS, INC. 

Ms. DRUMMOND. Good morning. I am Anita Drummond. I am 

with Associated Builders & Contractors. It is a pleasure to be here 

today. I ask that my formal statement be placed in the record.

Chairman SCHROCK. Without objection. 

Ms. DRUMMOND. In addition, I would like to put in the record the 

excerpts from the IG’s report from the U.S. Department of Labor 

that I have given your staff. 

I failed to put that in my testimony because I had not had an 

opportunity to thoroughly review it prior to preparing my testimony, so I will make reference to it.

Chairman SCHROCK. Great. 

Ms. DRUMMOND. First of all, I would just like maybe to address 

for brevity’s sake some of the issues that came up when you met 

15

with the Deputy Solicitor. Specifically, you asked how do you measure success. 

The entire Department, including the Occupational Safety & 

Health Administration, has a strategic plan through 2008. Among 

the things they do is they evaluate the fatality statistics and then 

determine what types of goals they would have for reducing fatalities, as well as reducing injuries and illnesses. 

One of the things that we are critical of is looking at fatalities, 

looking at fatalities as a blanket number instead of getting a little 

deeper and finding out what causes fatalities. 

My testimony refers to what we call the Big Four. It has long 

been recognized by the Department as the major causes of fatalities 

in construction, with the exception of incidents that are not controlled by OSHA, and they do recognize that, such as automobile 

accidents. We would like to see OSHA focus its resources in addressing the Big Four fatality causes. 

Another question that was raised was does the Department have 

the authority in an abatement environment not to issue a citation. 

The Deputy Solicitor represented that potentially 30 percent of the 

inspections do not receive citations. I suspect if that statistic is correct it is because the Department does have the authority not to 

issue citations. 

Beginning under Assistant Secretary Joe Deere during the Clinton Administration, he implemented a policy that allowed paperwork violations to be waived and, therefore, no citation issued if it 

was abated on site. My suspicion is that continues today, and that 

is the reason that of their inspections there is some number that 

no citation is issued I just wanted to answer that question that was 

raised. 

As to OSHA in general, OSHA has a very aggressive rulemaking 

agenda currently. Construction faces at least six rulemakings—beryllium, silica, hexivale and chromium, confined space, electrical 

transmission, and cranes and derricks. Six major rulemakings that 

are moving quickly through the pipeline. We would say that of 

those, probably cranes and derricks are the most significant because they directly go to some of the issues of fatalities. 

However, as a result, I will admit that our construction industry 

has been sidetracked by those rulemakings and not able to fully 

put pressure on the agency to focus on compliance assistance measures that would better address the Big Four. 

I would say that some of the things that we have experienced 

that are successful that should be elaborated on is training of compliance officers. In OSHA’s fiscal year 2005 proposed budget, they 

asked for more money to help train the compliance officers—we 

would support that—and for compliance assistance. 

The reason is construction is such a unique industry. It is not a 

set, steady workplace. You have to have different ways of going 

about protecting employees and training employees, so we would 

support actually a larger OSHA budget to train their compliance 

officers in construction. 

Another thing that is critically identified by OSHA in its strategic plan and we agree is the growing community of non-English 

speaking workers, particularly in construction. We think that 

something like a public service announcement system where you 

16

are actually educating workers directly on the major four fatalities 

in construction, or you could focus in other industries’ major hazards, would be another effective way to increase employees’ education, not just employers’. It would work both ways. 

You can look to the 1970s when we did a major PSA campaign 

for litter in the United States. It raised a high level of awareness 

of the general public. It is a similar environment. Those kinds of 

efforts take money, but they do get to the heart of the issue, which 

is worker safety. 

We are very pleased that ABC received a Susan Harwood grant 

wherein which we developed programs and did training for Hispanic workers. We do believe this is a critical area, and for our industry, as you can tell from my written testimony, workforce development is a critical issue. 

On enforcement in general, I do make reference in my testimony 

to two cases that are moving through the judicial pipeline. One 

critical one is OSHA’s effort to expand its authority to enforcement 

citations outside of what we believe is their statutory authority, 

and the Occupational Safety and Health Review Commission 

agrees. 

O.S.H.A. has taken upon itself that if there is a single violation 

such as a fall—let us say you have a railing that is missing. Instead of having a single citation employer, any employers that may 

be also on the worksite could be cited per employee for that citation, so it is a multiplier effect, which makes it more costly for the 

business, but it also makes it more unpredictable. 

You as an employer may have a fellow employer that does not 

have a handrail placed, and you are being cited for all your employees that are potentially affected by that. That is the type of cases 

that are moving through the court system, and the Secretary has 

appealed that to the Fifth Circuit trying to proceed with that enforcement authority. 

On other Department of Labor issues I would like to focus on the 

Davis-Bacon Act enforcement. First I would like to point to the Inspector General’s report, which I mentioned at the beginning of my 

oral testimony. The Inspector General has found the Department 

has spent $22 million over six years trying to fix the Davis-Bacon 

wage survey process. 

Davis-Bacon is a law that establishes the rates of prevailing 

wages that will be paid on federal construction projects. It is a system where the Department sends out surveys asking employers to 

fill out the paperwork to determine what the prevailing wage 

should be in their area. No matter what comes back, whether it is 

statistically viable or not, the Department will establish those 

wages. 

Those wages will not be published for 18 months, and in some 

cases you can view the Inspector General’s report much longer. 

Those wages will be published, so they already become stale. They 

are not necessarily statistically viable. The Department spent $22 

million in six years to have a system that is just about as bad as 

it has always been. 

One of the things the Department looked at was relying on the 

Bureau of Labor Statistics, which already has a system in place to 

evaluate wages that are actually paid, and it is statistically viable. 

17

The Department failed to adopt that system or a system that was 

like it. We recognize it is an expensive system to adopt, so why are 

we duplicating systems when we have another division in the Department of Labor that is already doing the surveys? 

This investigation started because Congress brought it to the attention of the GAO in 1995. The Inspector General, in his latest 

report, was the most critical of that aspect of the Department of 

Labor than any other thing going on in the Department of Labor. 

Finally, on Davis-Bacon, and it is more extensively described in 

my testimony. Under the Davis-Bacon Act, it is against federal policy for an employer to collect or to pay wages to a worker on federal 

work and then in turn that federal worker rebate any portion of 

their wages to an employer. That activity goes on on a daily basis 

in the United States. 

Union workers pay into what is called a job targeting fund. It is 

a large pot of money, and you can run a union LM-2 form that are 

published on the Department of Labor’s website. Union dollars, employees’ money, are going back to employers to help union contractors underbid particularly small businesses that are bidding on federal work. 

Even though it may be unattractive that they are underbidding 

small businesses, the more important issue is it is a violation of the 

statute of the Davis-Bacon Act for employees’ wages to be cut in 

order to rebate employers. 

The Department of Labor refuses to enforce this policy. It determined that it was against public policy and against the law during 

the first Bush Administration. The Court, the D.C. Circuit and the 

Ninth Circuit, have upheld against the Davis-Bacon Act, and yet 

the Department of Labor failed to enforce it. 

Those are my three points. I will be glad to take questions. 

[Ms. Drummond’s statement may be found in the appendix.]

Chairman SCHROCK. Thank you very much. 

Let me ask you. Is there anyone that remains here from DOL? 

[No response.]

Chairman SCHROCK. They are all gone, right? That is too bad. 

Mr. Bennett? 

STATEMENT OF PERRY A. BENNETT, JR., MOLDED FIBER 

GLASS COMPANIES

Mr. BENNETT. Mr. Chairman and honorable Member, I appreciate the opportunity to talk to you this morning on behalf of the 

American Composite Manufacturers Association. My name is Perry 

Bennett, and I am the Health Safety & Environmental Director 

from Molded Fiber Glass Companies in Ashtabula. 

A.C.M.A., just to familiarize you all, is a trade association serving the composite and cast polymer industry. We represent over 

1,100 companies nationwide and more than 80 percent of which are 

small and medium sized businesses. Our members manufacture 

many familiar products such as tubs and showers, boats, farm 

equipment, underground storage tanks, parts for automobiles, 

18

trucks, airplanes, power poles. It goes on and on. We make a lot 

of important products. 

Our company was established in 1948 in Ashtabula, Ohio. In 

1953, we began making the first Corvette made entirely of fiberglass. We have grown since then, but we are still a family-owned 

business. 

We understand and appreciate the importance of workplace safety and the overall health of workers. We take the health and welfare of our workers very seriously. Protecting workers is not just 

good for business. It is the right thing to do. 

We appreciate the role OSHA has played over the years in reducing workplace injuries. However, we do have some problems with 

the way OSHA conducts enforcement. In the words of the late 

President Reagan, ‘‘There is nothing wrong with America that 

Americans cannot fix.’’ I believe in that, and I hope that this testimony today can help. 

Our industry has some specific problems with OSHA enforcement, which include aggressive enforcement of antiquated regulations. 

I would also at this time ask if I could submit my written statement for the record. I also have for the record something I am 

going to be referring to. This is a consensus standard from the National Fire Protection Association. I submit this for the record, too. 

I will give it to a staff member when I am done.

Chairman SCHROCK. Thank you. Without objection. So ordered.

Mr. BENNETT. Thank you. 

Some of the specific problems we have is the enforcement of the 

antiquated regulations, some of which are 35 years old. The best 

example of this is Rule 1910-107, which deals with spray finishing 

using flammable, combustible liquids. 

When OSHA rules were first published in 1969, they incorporated standards issued by the National Fire Protection Association, and this is NFPA-33. Since then they update them about 

every two years. This is the latest version in 2003. 

However, OSHA continues to enforce 107, which is a 35-year-old 

rule. They continue to do that, even though, as I say, the standards 

on which the rule was originally promulgated was based on this, 

which has changed many times. 

Similarly, Regulation 1910-106, which is based on NFPA-30, a 

similar standard. That is for the handling and storage of flammable liquid and combustible liquid. On several occasions, OSHA 

aggressively cited some of our facilities for violations of various sections of 106. In these cases, even the old OSHA standard did not 

apply to the lower hazards seen in our industry. 

With a sizeable effort from our plant and our corporate staff, we 

were able to get these non-applicable citations dropped by OSHA 

by going to the OSHA area director. However, this effort involved 

over 40 hours of preparation at the plant safety level, 20 hours of 

preparation at the corporate level, overnight travel and a full day 

of the plant manager’s time in order to dispute a rule that should 

not be enforced, and so we have taken quite a bit of our time. 

19

Had we not prevailed at this level, we certainly would have had 

to hesitate taking it to court or going to a higher level because of 

the inability to recover legal costs and the costs of litigation. 

Another member company was recently cited for violating 1910-

107. I am referring to specific cases. Even though at one point 

OSHA back in 1996 wrote a directive, an interpretation of the compliance section saying if we comply with the consensus standard 

such as this rather than an OSHA standard in effect at the time 

of the inspection that clearly provides equal or greater employee 

protection, they will not be cited. 

The fact is, though, that OSHA inspectors are citing members of 

our industry for not complying with the outdated standard. These 

citations may be overturned on appeal, but fighting OSHA citations 

is a burdensome process. Most small companies simply do not have 

the resources, the knowledge or the courage to take on a federal 

agency. Therein lies the problem of not updating these rules. 

Another member company was recently cited for violating Section 

107. The OSHA inspector was apparently not aware of the more 

specific consensus standard for composites manufacturing in 

NFPA-33 or the OSHA interpretation letter that I referred to earlier. The inspectors were not aware of the other standards, nor 

were they aware of the letter from OSHA. 

We feel that better communications between the OSHA office—

Chairman SCHROCK. The OSHA inspector was not aware?

Mr. BENNETT. The OSHA inspector was not aware.

Chairman SCHROCK. Was not aware. Okay.

Mr. BENNETT. That was the problem. He cited them based on the 

rule that was not associated with our industry. It was the old rule, 

not the section that allows for a different standard. Again, these 

are processes, as was mentioned earlier, that have changed in the 

last 35 years and so they are citing based on some very old rules. 

Better communications between the OSHA office and the field inspectors is important, and open communications between the inspector and the company being inspected is important. Very often 

we may know of something that they do not ask. Often times employers do not know what citations are issued until several week 

after the inspection when they receive them in the mail. 

I know the OSHA field manual requires OSHA to notify us when 

they see a problem. Naturally you would want to know, especially 

if it is a very serious issue, a safety issue. We would want to know 

right away. Very often we do not know all of the citations we get 

until several weeks afterwards. 

I think I could describe the mood or the tone of most OSHA inspections that I have witnessed as intimidating, especially to a 

small business. Intimidating is the word rather than communication. 

Mr. Lowell Miles, a small business owner from Portland, Oregon, 

could not be here today. He wanted to come and testify. He is the 

former president of the ACMA and has worked for 20 years to reform OSHA and EPA and the NFCA Code. He has asked me to 

20

relay to you his experience with the OSHA department last year 

when the NFPA-33 Committee formally asked the OSHA Director 

to update Rule 107. 

The response from OSHA was that they see no reason to change 

the existing rule. Mr. Miles replied that OSHA is the only one remaining with that opinion since the Uniform Fire Code and the 

International Fire Codes have both been updated to include the 

new language in NFPA-33. All the other code setting folks believed 

that it was important to update their code, but OSHA said no. 

Complying with OSHA standards would be much easier for the 

composites industry if the agency had in place regulations that reflected up-to-date practices and if OSHA field inspectors were better trained. Outdated OSHA standards also create confusion in the 

state labor administrations that adopt and enforce federal standards. 

What happens there is the state offices do a lot of the enforcing 

in some of the states, but they are enforcing federal rules so there 

is more of a disconnect at the state level between the inspectors 

and the OSHA office who makes interpretations of rules, so I think 

there is a greater disconnect there in those states. They are even 

further removed from the OSHA interpretations than the federal 

inspector. 

A.C.M.A. stands ready to work with OSHA and update their 

standards. Specifically, we will continue our efforts to convince 

OSHA to adopt the update version of this, and I think this is only 

one example. This is an example that we know about in our industry. 

I think training is important for the field inspectors. Referring to 

some of the statements earlier, once an inspector comes in they are 

bound to issue a citation if they see something wrong. I do not ever 

remember getting 10 days. I wish we could get 10 days to fix something, but I do not ever remember getting any leeway in that manner. 

Thank you for allowing me to make these statements today. 

[Mr. Bennett’s statement may be found in the appendix.]

Chairman SCHROCK. What I hear you saying, and correct me if 

I am wrong, but what I think I heard you say was that sometimes 

the business owner who is being inspected by OSHA understands 

the regulations, the up-to-date regulations, better than the OSHA 

person doing the inspecting?

Mr. BENNETT. Unfortunately that happens, and I think probably 

more so in the larger companies where you have experts on board.

Chairman SCHROCK. And it sounds like each OSHA person is allowed to interpret their regulations as he or she sees fit?

Mr. BENNETT. Yes, I think until you go to the higher level. Very 

many times we have been very successful at going to the area director. We are a little bit larger business. We have people on staff 

like myself that are aware of these issues. You can go to the area 

director. 

21

He talked about getting these reductions. The only way you get 

reductions is to ask within 15 days for a meeting with the area director. I think many small businesses are unaware of that. They 

are unaware of the possible reductions, and they are afraid to do 

anything except pay their fine. What can happen is you could spend at least $50,000, one of our 

industries, putting a sprinkler system in that is beyond the amount 

of sprinkler system they need to put out fires from our processes. 

In so doing, you could spend $50,000 or $100,000 just because you 

are doing what OSHA has told you you have to do. 

Now, again the larger businesses are aware of this and have the 

expertise to go in there and say look, NFPA-33 applies. There is 

a letter that you guys put out in 1996. We are aware of that. A 

lot of the smaller businesses just do not know that, and they are 

unaware. They get hurt the most.

Chairman SCHROCK. Thank you. 

Ms. Lee? Thanks for being here. 

STATEMENT OF PATRICIA H. LEE, NATIONAL INSTITUTE FOR 

URBAN ENTREPRENEURSHIP

Ms. LEE. Good morning. My name is Patricia Lee, and I am the 

president and CEO of the National Institute for Urban Entrepreneurship, a non-profit, Washington, D.C. based, public interest organization. Thank you, Mr. Chairman, Ranking Member and other 

congressional staff for inviting me to testify before this Subcommittee today. It is truly an honor. 

I ask that my written statements also be included in the record. 

My comments about the Department of Labor’s enforcement actions and their impact on small business are derived from my own 

personal observations and experiences over 20 years as an attorney 

advocate for entrepreneurs, small and large businesses, and as a 

third generation entrepreneur. 

I started with my grandfather’s craft and jewelry business in 

Chicago and my mother’s After Five cosmetics and smaller businesses and my own serial businesses from book vending to carpet 

cleaning to a thriving law practice in Illinois. 

The entrepreneurs that I have represented and converse with on 

a daily basis would be considered micro entrepreneurs—the smallest of the small business by SBA standards. Generally they hire 

fewer than five employees, are entry level entrepreneurs in urban 

communities, are people of color and typically have gross receipts 

well under $500,000 annually. 

Although they may understand the intricacies of their own business, they rely heavily on pro bono attorneys because they lack access to capital to pay private attorneys or to hire in-house legal 

counsel. Although these entrepreneurs typically will be outside of 

the jurisdictional threshold of the U.S. Department of Labor’s enforcement actions, the regulatory thresholds do not provide the 

greatest of comfort. 

Both OSHA and FSLA have incomer threshold tests with FSLA 

further requiring a volume test, $500,000 gross receipts, to qualify 

for enterprise coverage. It is conceivable that a fledgling entreVerDate 0ct 09 2002 16:55 May 12, 2005 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 G:\HEARINGS\94312.TXT MIKEA
22

preneur could unknowingly meet the incomer’s test and, if the business is in a high cost district, such as New York, Chicago or Los 

Angeles, could exceed the $500,000 in gross receipts, but still yet 

not be profitable and lack an appreciation or basic understanding 

of the federal laws of which they must comply. 

My first recommendation would be for this Committee to evaluate the federal jurisdictional threshold and consider exempting 

small businesses by increasing the volume test to in excess of say 

$300 million in gross receipts. 

Second, I am aware of the regulatory burden on small businesses 

and have reviewed a report authored by Drs. Mark Crane and 

Thomas Hopkins for the SBA’s Office of Advocacy. The authors’ 

$7,000 regulatory burden per employee does not surprise me, and 

it may even be too low for the smallest of the small entrepreneurs 

that do not operate at the same efficiency levels as larger corporations. 

Further, with respect to the regulatory cost, one can only wonder 

where these costs will come from, especially when profit margins 

are razor thin or non-existent. Unfortunately, it may reduce employment, wages, a critical capital expenditure or investment, such 

as health care benefits, or create a future problem for the non-compliant business. 

Mr. Chairman, my father, who learned frugality from serving in 

the Navy as yourself, but in World War II, reminded me from time 

to time—

Chairman SCHROCK. Thanks for reminding me I was not in 

World War II. That is very nice.

Ms. LEE. —money does not grow on trees.

Chairman SCHROCK. Money does not grow on trees. If I heard 

that once when I was growing up, I heard it a million times.

Ms. LEE. And that estimated $7,000 presents a lost opportunity 

cost for the business, the worker and the owner. 

Third, enforcement actions appear to be driven by crisis rather 

than proactive education, outreach and collaboration. The wisdom 

of enforcement directed at a business after an alleged problem has 

occurred might make the consuming public feel better, but it does 

not protest the workers’ health and safety, nor does it save the 

business. 

More likely than not, it stigmatizes and traumatizes the business 

owner, whose quest for the American dream quickly turns into an 

American nightmare. For this reason, I recommend that the Department of Labor exhaust proactive educational remedies, collaborate with the state and local agencies and undertake appropriate 

outreach in lieu of crisis oriented enforcement action. 

Fourth, my skepticism about burdensome federal labor regulations enforced vigorously is that, with all due respect, the regulatory enforcement is generally not as effective as it should be. 

Why create and then enforce countless regulations that are too 

complex for the ordinary person, unreasonable under basic standards of common sense and too costly for entry level enterprise? 

23

Aside from the well-meaning objective of worker protection, is not 

the real impact business failure? 

Mr. Chairman, it is time to reevaluate the purpose and the rationale behind the regulations and these vigorous enforcement actions. If the stated purpose does not fit the end, then consider repealing or changing the regulation, as well as altering the approach. 

Fifth, it is my opinion that both House Bill 2728, concerning the 

allowance for small business to obtain compliance extensions, and 

House Bill 1583, which relates to the allowance of attorney’s fees 

when a small business prevails, are both excellent ideas and would 

be beneficial. 

There is nothing better than a well-run, safe and profitable business, one that motivates and inspires its workers. Individuals who 

have the privilege and honor of working for a great company such 

as this truly appreciate it and are better for it. These good businesses are responsible to their consumer, to their workers and to 

their investors. 

Unless small businesses are allowed some flexibility to grow and 

are assisted with relevant education and appropriate outreach, consumers, workers and investors may miss out on the next amazing 

business enterprise. 

Thank you. 

[Ms. Lee’s statement may be found in the appendix.]

Chairman SCHROCK. Thank you very much. You are dead right. 

Our fathers must have grown up together.

Ms. LEE. Possibly so.

Chairman SCHROCK. We will compare notes. 

As you can see, we are going to have votes here, but what I am 

going to try to do is just ask some rudimentary questions so we do 

not have to hold you all because I have a feeling, based on the 

number of bells—she does not have votes? 

Let me ask all three of you. I am going to ask all three. Ms. 

Drummond kind of alluded to it. Any comments on the testimony 

of Mr. Varnell? I did not mean to put you on the spot.

Mr. BENNETT. I think I did make a comment.

Chairman SCHROCK. Please.

Mr. BENNETT. My question that I had for him, and I did not have 

the opportunity to question him, was he was asked the question, 

and I think he sort of dodged it, regarding how much emphasis is 

put on outreach or compliance assistance—

Chairman SCHROCK. Yes.

Mr. BENNETT. —versus enforcement. I do not think he answered 

that. I wondered how many dollars they spend on enforcement and 

how much of their staff or efforts goes towards enforcement versus 

outreach. 

24

I think it is true. They do have a great website. They have a 

wonderful website, but many of the businesses, like you said a little earlier, do not have access to the website, nor do they have time 

to sit there and cull through it during the day. They have other 

things to do. 

An outreach program I think is a very important thing, and I 

think—

Chairman SCHROCK. Yes. I think when I asked that there was 

a gray area there. That is the area where I think businesses are 

in trouble, and I think that is a problem. 

Ms. Lee?

Ms. LEE. I heard an admission from you that there is a problem.

Chairman SCHROCK. Yes. 

Ms. DRUMMOND. I can give you some insight into that. Fiscal 

year 2005 budget, which is not that much over prior years, they 

have 358 FTEs dedicated to compliance outreach, $71 million. On 

the enforcement side you are looking at $171 million and FTEs of 

1,581. Full-time employees. Sorry. 

You have 1,500 full-time employees on enforcement and 358 on 

what they call the federal compliance assistance activities.

Chairman SCHROCK. That does not bode well for small business. 

Ms. Lee?

Ms. LEE. We are very happy about many of the changes that are 

occurring within the Department of Labor, but also we thought 

that outreach definitely needed to be improved not only in the 

rural communities, but also in urban areas.

Chairman SCHROCK. Let me ask Ms. Drummond. In your written 

testimony you state that OSHA is not giving adequate attention to 

educating businesses about major hazards that exist. That struck 

me when I saw that last night. How should those priorities be 

changed to fix that? 

Ms. DRUMMOND. Respectfully, I only address construction.

Chairman SCHROCK. Right. 

Ms. DRUMMOND. We are spending a great deal of time on newly 

identified hazards by OSHA, and instead of going back and looking 

at the fact that 94 percent of the investigated fatalities in construction, and you can also look at their citation lists which fall in line 

that we have the Big Four. We would prefer that the agency spent 

more time on that. 

It is very true that they are increasing the number of people they 

are training, especially train the trainer. I often say something that 

the business community does not like. OSHA needs more money. 

Their budget has not stayed current with the number of employers 

doing different systems. They rely very heavily on the website. It 

is because it is inexpensive. I respect that.

Chairman SCHROCK. I do, too. 

25

Ms. DRUMMOND. They are doing the best they can with their resources.

Chairman SCHROCK. But there are still businesses that do not 

have access to that. 

Ms. DRUMMOND. Right. Getting to the point, they really need 

more money for that. 

I would like to take a page out of the Employment Training Administration. They are doing outreach to high school counselors on 

training and availability of training to students. They are writing 

letters to every high school counselor. 

If you use that as they are taking a whole different approach, 

OSHA could do something, and there are plenty of associations out 

there of business license county administrators and so forth. When 

someone gets a new business license, there may be passages that 

the Department could put together and give to them to send. 

Those are costly endeavors, but endeavors that may be valuable 

just the same.

Chairman SCHROCK. Let me ask one thing. In what capacity do 

ABC’s members feel OSHA inspectors are not sufficiently knowledgeable about their industry, and what can we do about that? 

It sounds like they are all interpreting things differently, and obviously they do not understand. You might have 10 inspectors, and 

they all come in with different solutions. 

Ms. DRUMMOND. ABC recognizes that the compliance officers are 

under the gun because they have to inspect all types of sites. We 

would really like to see them specialized. We would really like to 

see them trained when there is a new regulation out on how it 

would apply to construction. 

I point to steel erections. When steel erection standards were finished they invited the industry folks, union employers alike, to 

come in and train the compliance officers. We bore the cost as well 

as them. We shared the cost. 

I think that that should be a requirement that compliance officers understand the application of regulations as they apply to an 

industry.

Chairman SCHROCK. There have been a few who feel OSHA is 

more concerned with helping businesses comply with the letter of 

the law or achieving better worker safety and health outcomes.

Mr. BENNETT. I think in fairness, inspectors that I have encountered, and I speak from my own experience, really do want—I 

mean, they are trying to help. 

I think most inspectors I have encountered are very conscientious. They are really trying to do the job right. I think the problem 

is the policies and the rules under which they have to operate.

Chairman SCHROCK. They are operating under regulations that 

tie their hands. Yes.

Mr. BENNETT. They may be more focused on every dot and tiddle 

here in the rule rather than focusing on major issues at the workVerDate 0ct 09 2002 16:55 May 12, 2005 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 G:\HEARINGS\94312.TXT MIKEA
26

site. That is probably because of the procedures and policies that 

are in place.

Chairman SCHROCK. Right. Ms. Lee, in your work with urban entrepreneurs, do you find that these businesses are fully aware of 

the regulations that affect their business? When they are aware, 

how do they find out about them?

Ms. LEE. No, typically they are not fully aware of the regulations.

Chairman SCHROCK. How do they find out about them?

Ms. LEE. Really, the only way they do find out—there are two 

ways. Some are connected to the Internet, but most are not. Others 

attend various outreach—for example, legal services attorneys or 

public interest attorneys that are business oriented will provide 

some training and some help, but typically they are not aware.

Chairman SCHROCK. Folks, I am going to have to leave. I am 

going to turn this over to Ms. Bordallo. I am sure she has a lot of 

questions from the Guam perspective. I would like to be here to 

hear them since I love Guam, but let me thank you all. 

Believe me, what you are saying is not falling on deaf ears because we do not hold these hearings just to kill time during the 

day. We have these hearings because we want to hear from you all 

so we can fix these problems. I hear it every day from the constituents I represent. 

Slowly, but surely, we will keep chipping away at it and chipping 

away at it. The further we can chip away at the bureaucracy who 

does this, the better for everybody. Rest assured, action will be 

taken on the things you have spoken about. I really appreciate it. 

I am going to turn this over to Ms. Bordallo. I have to go do my 

duty and vote. Thanks.

Ms. BORDALLO. [Presiding] Thank you very much, Mr. Chairman. 

Before he leaves, I just want to say that I thought he asked a 

very, very important question earlier, and that was is there anybody here from the Department of Labor. It is unfortunate that the 

Deputy Solicitor is not here because I think these are the concerns 

they should listen to and certainly try to rectify some of the problems within the agencies. 

Be that as it may, I do want to comment to you, Mr. Bennett. 

You mentioned about the 10 day period that our OSHA inspectors 

give our people. Well, I represent a very compassionate community.

Mr. BENNETT. Great.

Ms. BORDALLO. They feel for small business. In Guam, about 95 

to 97 percent of our businesses come under the category of small 

business. 

My first question is to you, Anita. OSHA’s use of per employee 

citations for a single violation is very interesting. I presume what 

27

they are doing is leveraging the statutory penalty to make it as 

high as possible to deter violators. 

Could you explain how that worked in the case you mentioned 

and whether in your opinion that bends the authority granted to 

OSHA by Congress? If the court upholds this technique, what do 

you see as the worst case scenario? 

Ms. DRUMMOND. In all due respect to the Secretary of Labor, she 

was confronted with a very difficult situation. She had what she 

represented was a very bad actor who engaged in egregious behavior. It was a contractor that exposed its workers to asbestos. In 

that situation, he was subjected to both local and federal citations. 

In an effort to punish the worst actor, the Department of Labor 

cited the employer for violations. Instead of saying you have a single violation, let us say personal protection equipment—let me use 

a better example. Maybe there was a protection to seal off an area. 

Instead of just having a single citation for failure to seal off an 

area, it was multiplied by every employee that was exposed to it. 

The Occupational Safety and Health Review Commission held 

that she had exceeded her statutory authority. You may only give 

citations for an incident of a violation, not an incident of a violation 

for every employee exposed. 

The concern is that while it was an admirable effort on her part 

to try to protect workers, it was beyond her statutory authority. 

When the Occupational Safety and Health Review Commission rejected their interpretation that they could expand their authority, 

the Department of Labor has now appealed that to the Fifth Circuit. 

Importantly, the Department had interpreted its authority differently in an earlier Administration. I believe it was a different 

Administration. Earlier the Department had interpreted its authority differently. 

This arbitrary and capricious interpretation directly reflects the 

fact that the system should be predictable. It is an example of how 

it has become unpredictable as the Department tries to stretch its 

authority beyond the statutory mandate from Congress. 

The worst case scenario is, and it does happen. This particular 

behavior does occur, but, just as stated before, most employers negotiate down their fines and move on. You cannot afford to challenge a citation, even if you do not always believe it is legitimate. 

Worst case scenario for construction sites. You have an employer 

that would have a violation. Maybe it is a lock out/tag out violation. You must lock down and tag a particular type of equipment. 

You could conceivably get a citation for every worker on the site, 

whether it was the employer who controlled that or not. 

I am Employer B. Employer A has a piece of equipment that is 

not in compliance and has not been labeled properly. That citation 

could go for every worker that is around that equipment of that 

employer plus any other employers on the site. 

You asked for worst case scenario. I am not suggesting the Department would take it as far as that, but I do believe they would 

take it that far if they thought the violation was something they 

thought was a significant hazard. While that may be a respectable 

position to take for worker safety, it is probably outside of her statutory authority. 

28

Did you have a second question?

Ms. BORDALLO. No. I think you covered it. 

Ms. DRUMMOND. Okay.

Ms. BORDALLO. Thank you very much for the explanation. 

The next one, I have a question for Perry Bennett. I found your 

testimony very interesting, and it makes me wonder why bother to 

have standards or have an agency like OSHA if they cannot be 

bothered to modernize their standards. 

Am I correct in assuming, and I think you said that to comply 

with the law, they want you to go back and use an outdated 35-

year-old standard. Is that correct?

Mr. BENNETT. Yes. They are citing people for violations of a 35-

year-old standard.

Ms. BORDALLO. And they are perfectly acceptable with that?

Mr. BENNETT. Yes. It was kind of shocking to me to hear that 

the OSHA director, who is not any longer—

Ms. BORDALLO. Do you feel they are embarrassed over it?

Mr. BENNETT. There did not seem to be any embarrassment, no. 

I do not think so. I do not understand why, but that is what has 

kind of got us puzzled over this.

Ms. BORDALLO. That is right. If they are not embarrassed, I 

guess they are not thinking of changing anything.

Mr. BENNETT. No. I think it is much easier for them to try and 

regulate based on interpretation, but interpretation does not go to 

due process of law, which is what this country is all about. 

Interpretation is easier because you know you have to go through 

the Federal Register and public comment and so on, so it takes 

time and effort to do that.

Ms. BORDALLO. I cannot imagine any agency or any organization 

functioning with standards that are 35 years old and have not 

made any updates. I mean, that is incredible. The whole world has 

changed in 35 years. Certainly you would have to add or amend the 

regulations. 

Perhaps this is something the Committee should—

Mr. BENNETT. The worst case here too is where a small business 

would invest a lot of money to put in a sprinkler system beyond 

the protection that he needed. Even the interpretation says it has 

to be equal to or greater than the coverage that is in the existing 

rule. 

If you are going the other way where it is determined your processes are safer than previously thought or safer than they previously were, that interpretation would not help you any. 

29

I guess the point I am trying to make is that a larger business 

with more wherewithal is going to fight this and perhaps win. The 

small businessman is more likely to say well, I have to do what 

they say, and I have to pay up and go on with business. I mean, 

that is why they probably would suffer more.

Ms. BORDALLO. Tell me this. Would the safety standards include 

ADA requirements? I mean, this only occurred when was it? ADA 

requirements were in the 1990s, right? Yes.

Mr. BENNETT. Yes. I think they have updated many of their statutes.

Ms. BORDALLO. In other words, they have updated?

Mr. BENNETT. Certainly, but this particular one is—

Ms. BORDALLO. Is 35 years old. I was just curious.

Mr. BENNETT. They do not see any reason to update it. Not only 

have we asked them, but even the NFPA-33 Committee has asked 

them to update their code. They see no reason not to.

Ms. BORDALLO. But this particular one. Yes. All right. Thank 

you, Mr. Bennett. 

Ms. Lee, your point about more proactive outreach is an interesting one. You listened to Mr. Varnell’s testimony about all the 

compliance assistance programs they have at the Department of 

Labor. 

Did they strike you as being passive in any way? By that I mean 

that a business has to know it has an obligation before it can go 

to DOL and find out about it. If they do seem passive to you, how 

would you suggest that the Department of Labor do a better job of 

finding businesses before disaster strikes?

Ms. LEE. Yes, I agree. Passive, but also insensitive. That is what 

I took because typically the way I see most small businesses, especially when it is urban or rural communities, they want to do the 

right thing there. They want to do the business to the best of their 

abilities. 

I was very skeptical about how much outreach is actually occurring. In my written statement I talked about a New York case 

where a worker died and then OSHA appeared. That particular 

community was a Chinese community. I questioned how much outreach had occurred in that community with that particular builder 

and his workers. 

I think that much more could be done in terms of outreach in addition to the whole website development, and much more can be 

done in terms of educating those small businesses.

Ms. BORDALLO. You brought up something about a Chinese worker. Does the Department of Labor make any effort to use the different languages in trying to educate the small business community? 

30

Ms. DRUMMOND. The Department of Labor currently has planned 

July 22, I believe, the Hispanic Summit, and they are trying to 

identify ways to reach at least the Hispanic community. That is a 

very big focus for them currently. 

I can say I know that in the construction industry our sectors, 

all the various sectors, National Association of Home Builders, I 

know we have done Spanish language materials. Again, this would 

be research intensive, but as an attorney I am always concerned 

about us translating regulations into a different language because 

we may change the definitions unintentionally. 

Of course, it would be wonderful if we could get some guidance—

more guidance—in different languages. I think there has been different outreach, but it has been on a very limited basis.

Ms. BORDALLO. Speaking of different languages also brings to 

mind the fact that I do not know what the percentages are. The 

representative from the Department of Labor did not have a lot of 

the statistics with him. I do not know what the percentage of foreign owned—not so much foreign, but American nationals, you 

know, other ethnic groups. 

What is the percentage of small business owners? There must be 

many. Do you have any idea? 

Ms. DRUMMOND. The Office of Advocacy keeps a lot of those statistics. I know some of the women-owned business statistics a little 

bit, but not—

Ms. BORDALLO. What are those? 

Ms. DRUMMOND. Women-owned businesses are primarily self-employed individuals, so they will make up something like 10 to 20 

percent, depending on how you calculate it. 

I do not know what the minority numbers are. This is something 

that businesses always complain about, paperwork, but one of the 

most valuable tools that we have to answer questions like yours is 

the business census that is conducted I believe every four years by 

the Bureau of the Census. The last was done in 2000. 

That is a great opportunity to collect critical information from 

business owners. It is statistically viable. It is done on a broad 

basis, and it can help Congress, as well as agencies, guide policies 

that are directed to these very communities.

Ms. BORDALLO. Absolutely. I agree. I think these statistics should 

be sought after. We need to have them. I know just from my small 

territory, we have many minority groups that have their own small 

businesses. It must be the case here in the United States as well. 

Ms. DRUMMOND. There are many groups, such as the U.S. Black 

Chamber of Commerce that would have all that.

Ms. BORDALLO. They would have those numbers. 

Ms. DRUMMOND. They are very good with outreach to those communities, as well as Ms. Lee’s organization, but the Small Business 

Administration keeps those statistics based on census data.

Ms. BORDALLO. Are there any other comments that any of you 

wish to make? 

31

I would like to thank you for coming here this morning to testify. 

There being no further business, the meeting on small business, 

the Subcommittee, now comes to closure. The meeting is adjourned. 

[Whereupon, at 12:15 p.m. the Subcommittee was concluded.]

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