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H.R. 5242, THE SMALL BUSINESS PAPERWORK

AMNESTY ACT

HEARING

BEFORE THE

SUBCOMMITTEE ON REGULATORY AFFAIRS

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

ON

H.R. 5242

TO AMEND TITLE 44 OF THE UNITED STATES CODE, TO PROVIDE FOR

THE SUSPENSION OF FINES UNDER CERTAIN CIRCUMSTANCES FOR

FIRST-TIME PAPERWORK VIOLATIONS BY SMALL BUSINESS CONCERNS

SEPTEMBER 26, 2006

Serial No. 109–263

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.oversight.house.gov

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCMIDT, Ohio

BRIAN P. BILBRAY, California

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

LAWRENCE HALLORAN, Deputy Staff Director

BENJAMIN CHANCE, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON REGULATORY AFFAIRS

CANDICE S. MILLER, Michigan, Chairman

CHRIS CANNON, Utah

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

JEAN SCHMIDT, Ohio

STEPHEN F. LYNCH, Massachusetts

WM. LACY CLAY, Missouri

CHRIS VAN HOLLEN, Maryland

EX OFFICIO

TOM DAVIS, Virginia HENRY A. WAXMAN, California

ED SCHROCK, Staff Director

ERIK GLAVICH, Professional Staff Member

BENJAMIN CHANCE, Clerk

KRISTA BOYD, Minority Counsel

(III)

C O N T E N T S

Page

Hearing held on September 26, 2006 ..................................................................... 1

Text of H.R. 5242 ..................................................................................................... 7

Statement of:

Neugebauer, Hon. Randy, a Representative in Congress from the State

of Texas; and Hon. David Vitter, a U.S. Senator from the State of

Louisiana ....................................................................................................... 14

Neugebauer, Hon. Randy .......................................................................... 14

Vitter, Hon. David ..................................................................................... 22

Wordsworth, James M., president, J.R.’S Stockyards Inn, McLean, VA;

Karen Harned, executive director, NFIB Legal Foundation, National

Federation of Independent Businesses; and J. Robert Shull, deputy

director, Auto Safety and Regulatory Policy, Public Citizen ..................... 32

Harned, Karen ........................................................................................... 43

Shull, J. Robert .......................................................................................... 55

Wordsworth, James M. ............................................................................. 32

Letters, statements, etc., submitted for the record by:

Harned, Karen, executive director, NFIB Legal Foundation, National Federation of Independent Businesses, prepared statement of ...................... 45

Miller, Hon. Candice S., a Representative in Congress from the State

of Michigan, prepared statement of ............................................................. 4

Neugebauer, Hon. Randy, a Representative in Congress from the State

of Texas, prepared statement of .................................................................. 17

Shull, J. Robert, deputy director, Auto Safety and Regulatory Policy,

Public Citizen, prepared statement of ......................................................... 57

Vitter, Hon. David, a U.S. Senator from the State of Louisiana, prepared

statement of ................................................................................................... 25

Wordsworth, James M., president, J.R.’S Stockyards Inn, McLean, VA,

prepared statement of ................................................................................... 34

(1)

H.R. 5242, THE SMALL BUSINESS PAPERWORK

AMNESTY ACT

TUESDAY, SEPTEMBER 26, 2006

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON REGULATORY AFFAIRS, COMMITTEE ON GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 2 p.m. in room

2203, Rayburn House Office Building, the Honorable Candice S.

Miller (chairman of the subcommittee) presiding.

Present: Representatives Miller, Lynch, and Neugebauer.

Staff present: Ed Schrock, staff director; Rosario Palmieri, deputy staff director; Erik Glavich and Kristina Husar, professional

staff members; Benjamin Chance, chief clerk; Krista Boyd, minority

counsel; and Cecelia Morton, minority office manager.

Mrs. MILLER. Good morning. The Subcommittee on Regulatory

Affairs will come to order. I’m sorry I’m running a few minutes

late, running up the hill.

We certainly want to welcome you all to today’s hearing, particularly our special guest, Senator Vitter. We are absolutely delighted,

sir, that you could take the time to come and testify before our

committee on this very important topic. Certainly a good friend and

great friend in the House, Representatives Neugebauer, as well.

We certainly appreciate you bringing this to the subcommittee’s attention and being here as well.

Today we are going to be hearing from witnesses regarding H.R.

5242, which is also titled the Small Business Paperwork Amnesty

Act. Representative Neugebauer introduced this bill in April of this

year and at the same time, Senator Vitter introduced a companion

bill, S. 2556.

The Small Business Paperwork Amnesty Act would really give

small businesses the ability to correct a first-time paperwork violation within 6 months, as long as the violation does not harm the

public interest, affect internal revenue laws or threaten the public

health or safety. Importantly, a small business would not be exempt from a monetary penalty if the head of an agency determines

that the violation has a potential of causing harm or impairs the

ability to detect criminal activity.

According to the U.S. Small Business Administration, there are

about 25 million businesses with less than 20 employees. These

firms actually account for over 97 percent of all U.S. businesses

and roughly 30 percent of all employment. Nearly 6 out of every

10 workers are employed at a business with less than 500 employees. Their payroll contributions and tax base constitute the ecoVerDate 11-MAY-2000 12:59 Dec 02, 2008 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\45345.TXT KATIE PsN: KATIE
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nomic heart and the backbone, certainly, of our competitiveness in

the global marketplace.

Federal policies should help them succeed, and help to foster

their advancement. But oftentimes this is not the case. Sadly,

agency bureaucrats are more concerned with meeting monetary

quotas for enforcement than ensuring compliance with the regulations. This attitude is well ingrained within agencies and unfairly

punishes small businesses.

The regulatory burden on small business is much greater than

the burden imposed on larger firms. Firms with more than 500 employees pay roughly $5,300 per employee to comply with Federal

regulations. But businesses with less than 20 employees pay more

than $7,600 per employee, or about 45 percent more, just for regulatory compliance. This burden has not been forced upon them by

foreign governments engaged in unfair trade practices, it actually

has been forced upon them by us. So we need to take a very good

look in the mirror here I think at the Federal level.

And I’m certainly not proposing that we abolish regulations. The

integrity of regulations that keep our water and our air clean and

protect our children and society from harm is really a reflection of

the ideals that all of us uphold. I’m suggesting that the Government provide small businesses some form of monetary relief from

insignificant paperwork violations to ease the disproportionate burden that they face. This would really help small businesses, I

think, without sacrificing regulatory safeguards. The legislation

that we are going to be dealing with today, again, introduced by

Representative Neugebauer and Senator Vitter, attempts to do exactly that. If a small business has a paperwork violation that essentially does not present a danger to the public health or safety

or violate Internal Revenue laws, then the Federal agency citing

the business is required to waive the civil fines for the first time

only.

And I would mention that this is really not a new idea. Actually,

Senator Feingold introduced legislation in the 104th Congress that

included a provision very similar to H.R. 5242. In both the 105th

and the 106th Congresses, the House passed regulatory reform initiatives that included the language that we are discussing today.

Both bills passed with bipartisan support. Fifty-four Democrats

voted for the measure in 1998 and 64 voted for it in 1999.

In March 1998, the predecessor of this subcommittee held hearings on the legislation. It was introduced by then-subcommittee

chair David McIntosh of Indiana and Ranking Member Dennis

Kucinich of Ohio. At the time, our colleague Mr. Kucinich offered

a very good reason why members of the subcommittee should be

supportive of the provision that provides penalty relief for a firsttime paperwork violation. He stated, ‘‘I would like to stress that

this is a very important point for every member of the committee

and the public to be aware of, that this penalty relates only to civil

fines not of a criminal nature. We have made sure to include language that seeks to protect the health and safety of the public.’’ I

mention that because I think it is important to point out that this

should be viewed in a bipartisan prism.

Congress is not the only branch of Government trying to compel

agencies to provide penalty relief to small businesses. In April

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1995, President Clinton issued a memorandum directing the heads

of 27 departments and agencies to waive penalties to the extent

permitted by law for small businesses. The standards dictating

when an agency should waive a fine are essentially the same as

those included in the legislation that we will be examining today.

Unfortunately, Federal agencies did not and have not taken seriously the directive to reduce or waive fines for small businesses

committing an insignificant first-time paperwork violation. In fact,

many argue that things could be getting worse. Congress passed

the Small Business Regulatory Enforcement Fairness Act a year

after President Clinton directed agencies to provide penalty relief

to small businesses. Among other things, the law requires agencies

to establish policies to provide penalty relief to small businesses. It

has been a decade since that law took effect, and we are still sort

of concerned with the ‘‘gotcha’’ approach to regulatory enforcement.

I think again it is time for Congress to take back some of the discretion that we have given to the agencies. Agencies seem unwilling to implement fair penalty relief to small businesses on their

own, despite the wishes of Congress and Presidents. Again, I think

it is time for Congress to mandate true penalty relief for the small

businesses that are really the engine of our economy. Again, I want

to thank the witnesses for being here. We certainly look forward

to your testimony, to both of you. At this time I would like to recognize the distinguished ranking member of the subcommittee, Mr.

Lynch.

[The prepared statement of Hon. Candice S. Miller and the text

of H.R. 5242 follow:]

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Mr. LYNCH. Thank you, Madam Chair. I join the Chair in welcoming our colleagues. We appreciate your being here today to talk

about your legislation. I want to begin by commending you both for

your commitment to helping small businesses.

As we discussed at a recent hearing in this subcommittee, the

Government’s paperwork burden in the last 5 years has increased

by over a billion hours. I think our efforts in terms of helping small

businesses are best aimed at reducing the unnecessary part of that

paperwork.

The legislation we are discussing today, H.R. 5242, has been

around for a number of years now. I believe the bill overall is very

well intended. Unfortunately, I don’t think that this bill would reduce paperwork for small businesses. Instead it would encourage

companies to break the law or circumvent the law. Under the

Small Business Regulatory Enforcement Fairness Act, agencies are

required to have policies in place for reducing or waiving civil penalties for small businesses, as the Chair noted. I think instead our

focus should be on causing those agencies to waive those penalties

when appropriate. Agencies should use this authority when appropriate, but this discretion should be left to the agencies charged

with enforcing the law. I certainly agree that there are many instances where waiving the fines and penalties are appropriate.

H.R. 5242 would prohibit an agency from assessing a civil fine

against a small business for a first time information collection violation. This would not just cover technical paperwork violations, it

would also cover any information collection requirement, no matter

how important ultimately.

Here are some examples of information collection covered by this

bill: EPA requires that lead paint disclosures require landlords to

notify prospective tenants about any known or potential lead paint

hazard in a home prior to leasing it. Earlier this year, an administrative law judge upheld the civil penalties assessed by EPA

against two Rhode Island companies that violated the lead paint

disclosure rule after at least four children suffered from lead poisoning.

Another example, the Emergency Planning and Community

Right to Know Act requires companies to report the presence of

hazardous chemicals at a facility. And firefighters and local responders depend on having this information before they respond to

a fire so they can properly protect themselves. In 2001, three firefighters were killed from an explosion of a hazardous material at

a hardware store. Similarly, OSHA requires companies to notify

workers of particular hazards in the workplace.

Earlier this month, OSHA cited a company partly for the company’s failure to communicate to employees the hazards of working

in a confined space after non-ventilated workspace contributed to

the deaths of three workers. EPA and the Department of Transportation reporting requirements for transporting hazardous materials

would also be circumvented by this legislation.

In 2005, two freight trains collided in South Carolina, releasing

an estimated 11,500 gallons of chlorine gas, which caused 9 deaths

and at least 529 people were sent to the hospital. The Public

Health, Security and Bioterrorism Preparedness and Response Act

of 2002 would also be affected. That law requires companies that

13

manufacturer, process or pack food for human or animal consumption in the United States to register with the FDA. That allows us

to track them. If a company is not registered with the FDA and is

making contaminated food, it could be very difficult for the FDA to

trace back the contamination. Right now, we are seeing the impact

of an e-coli impact from spinach. And we are having a heck of a

time tracing down the source of that. CDC has reported 175 cases

of e-coli so far, and it would help if we had all those companies

complying with the filing requirement.

Section 409 of the Sarbanes-Oxley Act requires public companies

to promptly disclose material changes in a company’s financial condition to allow investors the opportunity to make informed decisions. This would be waived.

We also have a provision that in order to prevent illegal immigrants from working in the United States, employers are required

to verify that workers are eligible to work in the United States by

completing an INS form I–9. This would also allow those employees

to fail to file. It is tough to police without the filing. Yet there

would be no penalty.

Agencies already must deal with fewer and fewer resources,

which makes it hard enough to enforce these important laws. This

bill would make this task even tougher. The exceptions in H.R.

5242 are very, very narrow, too narrow to fix the glaring problem.

These exceptions can only be used if the head of an agency makes

a finding, for example, that a violation has the potential to cause

serious harm.

But in the first instance, the agency often has to become aware

of the need to take an enforcement action based on the information

collected from a company. So if they are not filing the information,

we will never know about it. An agency may not know whether a

violation presents a danger to the public until it is too late.

Giving companies a free pass to break the law would weaken the

incentives of small businesses to comply with the law, because they

would know that even if they got caught they wouldn’t face consequences. The fact of the matter is, the overwhelming majority of

small businesses obey the law. This bill would put those law-abiding companies at a severe disadvantage competitively with those

who break the law. We need to look carefully at how we can help

the small businesses that are doing the right thing and need a

break in a way that doesn’t jeopardize our health, safety and environmental protection.

Madam Chair, I yield back.

Mrs. MILLER. Thank you very much.

Our first witness this afternoon is Congressman Randy

Neugebauer, from the 19th District of the great State of Texas. He

is the author, of course, of the legislation that we are discussing

today, H.R. 5242, the Small Business Paperwork Amnesty Act of

2006. The Congressman is in his second term of office and he

serves on the House Committee on Agriculture as well as Financial

Services. Before coming to Congress, he served as the President

and CEO of Lubbock Land Co., which is a residential and commercial land development company which created many successful subdivisions in that area. So he certainly understands the challenges

14

that are faced by many small businesses, and we welcome you to

the subcommittee and look forward to your testimony, sir.

STATEMENTS OF HON. RANDY NEUGEBAUER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS; AND HON.

DAVID VITTER, A U.S. SENATOR FROM THE STATE OF LOUISIANA

STATEMENT OF HON. RANDY NEUGEBAUER

Mr. NEUGEBAUER. Madam Chairman, thank you very much. I

also want to congratulate Senator Vitter and the city of New Orleans and the State of Louisiana on a great night last night. I know

all of us are excited about the things that are going on there. I also

appreciate the Senator’s support of this legislation.

Chairman Miller, Ranking Miller Lynch, members of the subcommittee, thank you for the opportunity to appear before this subcommittee to discuss an issue of tremendous importance to small

businesses. I appreciate your willingness to hold this hearing at my

request. Most of us can agree that the Federal Government requires a substantial amount of paperwork for small businesses.

When I listen to small business owners back home in West Texas,

they continually reaffirm this reality, and they want me to know

that what we are doing here in Washington is impacting them.

As a former small business owner myself, I can sympathize with

their frustration. For these reasons, I introduced the Small Business Paperwork Amnesty Act in April of this year. I strongly believe that this legislation will go a long way in reducing this burden by bringing some common sense to the relationship between

small business owners and the Federal Government.

Over the past decade there has been a growing effort in Congress

to reduce the burden the Federal Government places on small businesses. While there have been some small victories along the way,

this effort has met fierce opposition by special interest groups and

not surprisingly from the Federal regulators themselves. In the late

1990’s, former Representative David McIntosh, who was chairman

of this subcommittee, introduced a similar bill that was approved

by this subcommittee. While a broader scope, Mr. McIntosh’s bill,

the Small Business Paperwork Reduction Act of 1998, included the

same provisions that are found in the Small Business Paperwork

Amnesty Act that I have introduced. The House of Representatives

passed that bill overwhelmingly with an overwhelming majority.

Unfortunately, our colleagues in the Senate were unable to pass

with similar results.

Some may wonder, why am I taking on this issue almost 8 years

later? Well, the fact is, time has not diminished the need for this

legislation. If anything, the passage of time has only increased the

need. According to the National Federation of Independent Businesses, which you will hear from today, small businesses with

fewer than 20 employees face regulatory costs of over $7,600 per

employee per year. Each year these costs continue to increase because the Federal regulations continue to increase.

Today you will also hear from Mr. Jim Wordsworth, who operates J.R.’s Stockyards Inn located in McLean, Virginia. He will testify about the amount of regulation he must comply with and the

15

impact on his business. I can sympathize with Mr. Wordsworth, because I have been in his shoes before. Indeed, many business owners live in fear of Federal regulations. This fear is not because they

are in violation of any regulations that they know about, but because they may be in violation of regulations that they are not even

aware of.

This ‘‘gotcha’’ mentality on the part of the Federal agencies is at

odds with the core principles of our economy. I believe we have the

responsibility to fight this mind set. We must begin with common

sense reforms.

From my personal experience, I know that for a small business

owner to be successful, he must diligently manage his two greatest

assets: resources and time. More often than not, these things are

in short supply. The cost of compliance to obscure regulations further eat away at both. We must find ways to help small business

owners comply with paperwork requirements so that they can devote more time and resources to growing their businesses, creating

new jobs, and thus expanding the economy.

Due to the sheer volume and complexity of the Federal regulations, even the most diligent small business owner may inadvertently make an error or miss a deadline associated with Government paperwork. The Small Business Paperwork Amnesty Act will

prevent bureaucratic agencies from imposing excessive civil fines

on small businesses for first-time inadvertent paperwork violations.

This bill will not exempt any business from any paperwork requirements. I want to repeat that comment: this bill will not exempt any

business from any paperwork requirements. It just gives leeway for

business owners to correct first-time mistakes. If the business does

not comply within the first 6 month period, the fine will be imposed.

Furthermore, this legislation will provide relief while still providing for the safety and health of our communities. Only those paperwork violations that do not threaten the public welfare will be eligible for a second chance. A common misconception concerning this

legislation is that it will somehow lead to more non-compliance or

that agencies could not enforce penalties for violations that could

harm the public. This is simply not the case. In the event that a

paperwork violation would harm the public welfare or present an

imminent threat to the environment, this bill gives the agency full

discretion to impose civil fines under the law.

However, the agency may give the small business, and I would

say may give the small business owner, 24 hours rather than 6

months to fix the violation. In other words, if a company swiftly

and faithfully correct an inadvertent mistake, only then will they

be eligible to receive a second chance under this bill. By giving

these agencies this broad discretion, we can be confident that those

agencies will be able to use this authority to carry out the mandate

that we have entrusted them to fulfill. The Small Business Paperwork Amnesty Act strikes the right balance between reducing the

burden placed on small businesses and our responsibility to protect

communities and the environment.

In closing, I would like to say that here in Washington, it is easy

for some of us to forget the proper role of Government, the reason

that we are here in the first place. Personally, I believe that GovVerDate 11-MAY-2000 12:59 Dec 02, 2008 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 C:\DOCS\45345.TXT KATIE PsN: KATIE
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ernment is accountable to the people and not the other way

around. This philosophy is at the heart of this legislation and I

hope that this can be the basis of our discussion here today. Again,

thank you, Chairwoman Miller, for holding these important hearings. I look forward to the testimony of my colleague, Senator

Vitter, and the witnesses on the second panel. Thank you.

[The prepared statement of Hon. Randy Neugebauer follows:]

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Mrs. MILLER. Thank you very, very much, Representative. We

appreciate that testimony. Senator Vitter, out next witness, we certainly appreciate your coming. Actually, before you were elected to

the Senate, you served three terms in the House of Representatives

where you were a member of the Government Reform Committee.

During his tenure in the House, he authored and passed legislation establishing a prescription drug program for military retirees,

advancing missile defense and cleaning up Lake Pontchartrain as

well. For his work in Congress, Senator Vitter has received numerous awards from leading organizations, such as Americans for Tax

Reform, the 60 Plus Association and the Family Research Council.

In the Senate, he serves on the Committees of Commerce, Science

and Transportation, Environment and Public Works and Small

Business and Entrepreneurship.

We are certainly glad to have you back on our side of the Capitol,

Senator, and the floor is yours, sir.

STATEMENT OF HON. DAVID VITTER

Senator VITTER. Thank you very much, Madam Chair. Thanks

for the invitation and thanks for your leadership. It is a real honor

and pleasure to be here, particularly since I am a former House

Member and a strong conservative. As both, I don’t drink from the

water fountains over there, so it is particularly refreshing to get

back here, where I can do that freely and breathe a little fresh air.

Thank you for having this very important hearing about a very important topic.

I share Randy’s concerns, because I share his experiences. I know

in Louisiana, I talk to business, particularly small business folks

all the time. And they always talk to me about the regulatory and

the paperwork burden. I hear directly those stories about their

dealing with EPA or the Army Corps of Engineers, the Coast

Guard, SBA, Commerce, IRS, Customs, just to name a few. Of

course, on top of that, there is a State bureaucracy that poses additional issues, Department of Revenue, Labor, Wildlife and Fisheries, Insurance. So they face a real burden which has been growing as they face other growing burdens, health care costs and other

things. It is just getting out of hand and they tell me about that

very directly, as they do to Randy in his home district.

Having lived in the last couple of years through Hurricanes

Katrina and Rita, in some sense some of those experiences have

been magnified even more. Because of course you have an extraordinary presence now of certain agencies like FEMA and the Corps

of Engineers. Unfortunately, although there has been extraordinary

commitment by the Congress, and extraordinary help in many

ways, unfortunately the sort of paperwork burden is pretty extraordinary in a lot of those cases, too. So I hear directly about that.

And of course, a lot of this, as you said yourself, has been quantified by folks like the SBA Office of Advocacy. You mentioned businesses with fewer than 20 employees spending more than $7,600

per employee just to comply with Federal regulations. NFIB estimates that all told, Americans spend about $400 billion, $400 billion with a B, on this Federal paperwork cost. That is the same

general amount of spending that we are going to pass later this

week in the Defense Appropriations bill, to fund all of our defense

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when we are at war. It is pretty staggering that we are wasting

that same amount on pure paperwork burden.

Now, I certainly want to echo Randy’s words and your words, we

are not getting rid of a single requirement. We need to do that. We

are acting to do that through other legislation. But in this bill, we

are not getting rid of a single requirement. We are certainly not

stripping away key health and safety regulation. We are simply

adopting a common sense rule while we work through these regulations, while we hopefully narrow the scope and lessen the burden.

While we do that, a simple rule that first-time violators will get

some relief if the regulation at issue doesn’t affect public health

and safety.

With regard to that, I certainly want to directly address the comments of your ranking member. I am sorry he couldn’t stay, because I really wanted to have this discussion with him. Virtually

every example he used, if not every single example he used, clearly

falls into the exceptions in the bill, clearly his focus went directly

at public health and safety or potential serious harm to the public

interest. So in the bill, we clearly address that and clearly say no,

we are not talking about that. That isn’t automatically waived. It

could be waived. There is discretion to waive it if the company

comes in and complies within 24 hours, which is obviously a very

narrow timeframe. And even then, the regulatory agencies doesn’t

have to waive the civil penalty.

I think this is an enormously important point. Again, virtually

all if not every case he mentioned, is accepted in the bill. In other

words, those cases would not be governed by the normal meat of

the bill. It would be an exception to the bill.

And again, what are we talking about? Well, the violation would

cause serious harm to the public interest. Everything he said would

have done that. If it would impair criminal investigations, if it

would concern the collection of taxes, if it would present a danger

to public health or safety, I think about everything Congressman

Lynch said, would do that. Again, in those cases there wouldn’t be

this waiver.

And again, as Randy mentioned, I think it is very important to

say, we are only talking about civil penalties. Congressman Lynch

repeatedly used the term breaking the law, which is technically

correct, but it certainly makes it sound criminal. And by definition,

we are not talking about anything criminal, by definition.

Again, this is really important to folks I represent. This is really

important to small business in Louisiana, was before Hurricanes

Katrina and Rita, it is even more so now because we have greater

need and therefore greater Federal help and resources, which is

great. But also much greater regulatory burden as part of the Stafford Act and all of hurricane response. We are certainly not complaining about the very generous response, but it makes this sort

of common sense approach to a regulatory and paperwork burden

that has gotten out of hand even more important right now.

With that, Madam Chair, I thank you again for the kind invitation for me to be here. I thank Representative Neugebauer again

for his leadership on this. I should say, and I want to give credit

where credit is due, we have both picked up the mantle of folks

who have come before us. Dave McIntosh, who was in the Congress

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before us, started this. We took over the bill from him. There have

been others, as you mentioned, including Democrats who have proposed largely the same thing. We are continuing that fight, and it

is something we absolutely need to do quickly.

Thank you.

[The prepared statement of Hon. David Vitter follows:]

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Mrs. MILLER. Thank you very much, both of you. We are delighted to have you both here and certainly when Representative

Neugebauer approached me on this issue, I was very enthusiastic

about holding this subcommittee hearing on this piece of legislation. This is a committee that has really studied what we can do

to assist every level of business, quite frankly, in America, with

various types of regulatory burdens.

I appreciated your comment that you think in Government we

need to be accountable to the people. Sometimes we all have to remember that famous saying, I am from the Government and I am

here to help you. When small businesses and others hear us say

that, they dive for cover under the table sometimes.

One of the first hearings we actually had in this subcommittee,

Governor John Engler, former Governor from the great State of

Michigan who is now the Executive Director of the National Association of Manufacturers, had a very interesting testimony to this

subcommittee where he talked about a study that NAM has done

recently that shows that the structural burden, structural cost for

American-made manufactured goods is about 22, 23 points higher

than any of our foreign competitors. A principal region for that, a

huge component, not the only reason, but a big reason for that is

because of the regulatory burdens that businesses do face. So when

we see exodus of manufacturing jobs or other types of industry that

leaves our shores and perhaps goes to other countries in a competitive, global marketplace, if we are coming from Michigan, where

you all know what is happening to the American automobile industry, we have unfortunately sort of an economic hurricane that is

hitting Michigan right now. But as we see some of these jobs leaving our Nation to China or India or Mexico or wherever they are

going, guess what? Those nations did not place these regulatory

burdens on us. We did it to ourselves.

So the idea that you have here I think is great. I know, Senator,

you testified a bit about the burden, the regulatory cost of compliance for every level of business, but particularly small businesses

that might have just a few employees. And it makes some inadvertent error, and then it is like a year in jail for jaywalking or something. I think the standard always has to be, what is reasonable.

That is something that I think all of us in Congress, both Republicans, Democrats, what have you, need to look at.

I guess I would ask this. How do you, particularly Senator, with

the kinds of experiences that you have had in your State, the horrific natural things that have happened there, how do you foresee

this piece of legislation helping a new business, perhaps a small

business starting up, just trying to restart their business?

Senator VITTER. Well, again, it gives a new business, a new small

business a chance. There is a huge difference between the Xeroxes

or the GMs of the world and small business, which account for

most of the jobs in this country and an even greater percentage of

the jobs in a State like Louisiana. One of the differences is big, big

companies can have full time staffs. They have teams of people

that comb through everything we pass, every Congress and how it

impacts their business and what new reports they have to issue

and how they are going to issue.

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Well, guess what? If you have a small business of 20 people, you

don’t have that sort of team. In fact, you don’t have a single person

who can possibly do that. So we are talking about a brand new requirement that is often created by a brand new bill that we pass

here that a small business of 20 people in Louisiana has no idea

has come into existence. All of a sudden, they can be hit for very

serious civil fines the first time there is non-compliance.

This is simply saying, first-time offense, and again, this is very

important, that is what we are talking about, first-time offense, we

are not talking about a pattern, we are not allowing that to develop. First-time offense, civil penalty, you are not putting people

in a health or safety danger. That is going to be waived. That is

a huge relief to small business. When you are trying to get a business up and running, that sort of monetary financial threat, just

like a liability threat from lawsuits, can not only be crushing in

practice, it can be so intimidating that you never start the venture.

So I think it is a major factor. And I would echo your comments.

We talk about the problems of global competition. To me, in any

challenge you are facing in life, no matter what it is, as an individual, as a Congress, as a company, no matter what it is, there are

some things that are going to be beyond your control, but there are

some things that are going to be within your control. No matter

what that challenge is, you are always a lot better off focusing on

the things that are within your control and doing something about

it. And this is within our control. And this is a factor in global competitiveness.

I will be the first to admit, not everything that hurts us in that

global competition is within our control. Labor costs in India are

not within our control. This is. The regulatory environment, the

litigation environment, the taxation environment is. We need to do

something about it.

Mrs. MILLER. Representative Neugebauer, I would ask you the

same question.

Mr. NEUGEBAUER. I think that is a great question. I was thinking back, and the way I relate to a lot of issues we have up here

is from my own experience. I was thinking about in 1980 when I

started my construction company, my home building company. My

day started early, getting on the phones and ordering materials to

the jobs and then making sure that the subcontractors were going

to be there, starting to tour the jobs and go back and discover that

some materials that I had ordered weren’t there, having to go back,

this is pre-cell phone days, and call and make sure that the lumberyard—and all day long. Then trying to find the time to meet

with a client so I could sell some more homes.

When I think about the small business person today, whether it

is a man or a woman, is that they wear so many hats. For 1 hour

I am the construction supervisor, I am the material orderer, I am

the purchase agent, I am the accountant, I am payroll, I am compliance. And all of those various hats. When I first started in business in 1980, I spent about 90 percent of my time actually doing

what I call productive things, that is selling and building, and 10

percent of my time was fooling around with compliance of various

regulations.

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But over the years, I saw this huge increase in the amount of

regulation, in the amount of governance in my industry to where

I really, just before I came to Congress, realized I was spending 70,

80 percent of my time trying to make sure that I was in compliance

with some very sophisticated rules and regulations that the Government put on me, because of punitiveness of the fine was major.

So small businesses are capitalized thinly to begin with. And

then you go in and start fining them for an inadvertent mistake,

it sends the wrong signal to business. It sends the wrong signal to

America as the Senator said. In America, 95 percent of our jobs are

created by small business people in this country. And in District

19, I can tell you about 100 percent of them are, because we would

love to have an automobile plant in District 19.

But we don’t have that. So I think what we are just saying here,

and I think the term, using our head, using common sense, is the

approach that we send the signal to small business, you know

what, we want you to start a new business and we are going to

help you start that new business, rather than saying, we can’t wait

for you to start that new business so we can get you. That is the

signal that we are talking about here. We are trying to send a signal, let’s start more small businesses. That is the American dream.

And let’s make Government a part of the solution and not part of

the problem.

Mrs. MILLER. I appreciate that. My background, actually, before

I got involved in politics, was in the marina business. My family

sold boats for a living, my dad built some of the first fiberglass sailboats in the world, actually. I can remember as a kid being around

the epoxies and the resins and all the woven, the different kinds

of materials, etc. Today you can’t have two or three guys in the

back building a boat, because of the regulations. My brother is still

in the boat business and I can’t believe, I won’t even tell you what

he had to go through to put a paint booth in his place. But again,

these are small businesses.

But of course we want to ensure, I always say the standard has

to be reasonable. We want to make sure that as we progress as a

Nation that we do have reasonable standards in place for worker

safety, for environmental kinds of regulatory affairs, etc. Let me

just play the devil’s advocate and ask a final question to you both,

in the interest of time, since my ranking member unfortunately

had to go to another hearing. I think he might ask this question

if he was here, about some people are saying that because of this,

you might have companies that would start doing things, like

dump mercury into the lakes or some sort of pollution or what have

you. What would your response be to somebody who would be very

critical of this legislation? Either one of you?

Senator VITTER. If a company starts dumping mercury into the

environment because of this bill, they clearly haven’t read the bill.

Because that sort of violation clearly is not covered in the bill. That

clearly impacts public health and safety. That clearly doesn’t get a

pass at all.

In addition, we are only talking about first-time violations. By

definition we are not talking about a string or pattern of violations,

we are not allowing that to develop. In addition, to get any waiver

of civil penalties, the folks have to comply. So they have to comply

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with the requirement, all the requirements. So again, I think it

was rather distracting to the discussion, to put it kindly, when

Congressman Lynch went through this litany of abuses that clearly, clearly fall within the category of public health and safety

threat. Because those don’t get an automatic pass under the bill at

all.

Mr. NEUGEBAUER. I think Congress can testify to the fact that

we can’t legislate morality, and we can’t legislate people doing the

right thing. We have given it a really good try for about 230 years,

and we have figured out that people that are going to obey the law,

that are going to uphold the law, that are going to play by the rules

are going to do their very best to do that. There are always going

to be those.

The good news about this, this bill has no benefit for those people

who don’t want to play by the rules. It has absolutely no benefit

for them. This bill is for the good guys, the good men and women

that are trying to run a small business, keep their small business.

And as the Senator said, if you have a pattern saying, oh, yes, I

forgot that report again, you don’t get any help under this bill, because we have been down that road with you before, this isn’t your

first time. As we say in Texas, this isn’t your first rodeo.

So what I think the people that would talk about that are trying

to distract from this bill are the same people that want to pass

more regulations, want to make more burden on small businesses

and aren’t really interested in giving small business a break. That

is really what this does, is it gives small business people a break,

gives them a second chance.

Mrs. MILLER. OK. Thank you again very, very much for taking

time out of your schedule to testify before the subcommittee. Representative, I certainly look forward to continuing to work with you

to push this very necessary legislation through the process if we

can.

Thank you both very much. We will adjourn for a moment for our

next panel.

[Recess.]

Mrs. MILLER. Before you all sit down, I will ask you all to raise

your right hands. Because the subcommittee has subpoena authority, we swear everybody in.

[Witnesses sworn.]

Mrs. MILLER. Thank you very much.

We appreciate you all coming to the second panel. Our first witness of the second panel this afternoon is Mr. James Wordsworth,

who is the owner of J.R.’s Stockyards Inn in Virginia, located at

Tyson’s Corner. In addition to J.R.’s Steakhouse, he is also the

owner of two corporate picnic facilities in McLean and Leesburg,

VA, an off-premises catering company, a marina in Stafford County

and a company that builds and designs modular prisons. Mr.

Wordsworth has served as a general partner in several small limited partnerships that acquired raw land and planned, zoned and

developed subdivisions, featuring amenities such as golf courses

and waterfronts. He is here today representing the U.S. Chamber

of Commerce, where he was elected to the board of directors in

June 2001.

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Mr. Wordsworth, we appreciate your attendance today and the

floor is yours, sir.

STATEMENTS OF JAMES M. WORDSWORTH, PRESIDENT, J.R.’S

STOCKYARDS INN, MCLEAN, VA; KAREN HARNED, EXECUTIVE DIRECTOR, NFIB LEGAL FOUNDATION, NATIONAL FEDERATION OF INDEPENDENT BUSINESSES; AND J. ROBERT

SHULL, DEPUTY DIRECTOR, AUTO SAFETY AND REGULATORY POLICY, PUBLIC CITIZEN

STATEMENT OF JAMES M. WORDSWORTH

Mr. WORDSWORTH. Thank you, Chairwoman Miller. My name is

Jim Wordsworth, I am the owner of J.R.’s Stockyards Inn, a fine

dining steakhouse in McLean, Virginia. I am also the owner of several other small businesses, and a marina is one, and I understand

that is your family’s background as well.

I am here today on behalf of the U.S. Chamber of Commerce. I

would like to begin by pointing out that there are several common

threats that are universal to Government paperwork: the burdens

imposed by agencies on businesses and individuals. First is the

sheer volume of paperwork requested. I hold in my hand a 266-

page document, I would like for you to see this document. These

are single spaced documents that list the 5,960 forms, and these

are just the lists of the forms, not the forms, forms and instructions

generated by 109 bureaus and departments of 49 agencies. That is

within the Federal Government. It does not include the State and

local government agency forms.

If I were to print all the forms and the instructions out, print

them out, the stack of paper would exceed the height of the tallest

person in this room. And that stack only grows. In its 2002 report

to Congress, OMB stated that all agency regulations imposed over

7.65 billion hours of paperwork in fiscal year 2001. Just 4 years

later, that total has risen to 8.4 billion hours. This represents an

increase of 750 million hours.

The second point I would like to make is when Government agencies estimate the time it takes to fill out the paperwork, they almost never take into account the time it takes to collect, to organize, and retrieve the information that they have asked for. If they

take into account this number, it would be much larger.

The third characteristic that most forms have in common is that

there generally is a penalty associated with filling out the forms incorrectly. In many cases, the penalty applies whether the mistake

was intentional or not. Although I try to fill out every form in a

timely manner, with due diligence and care, as a small business

owner my primary concern is running my business and keeping my

customers happy. Having provisions passed in the law such as

those contained in H.R. 5242, the Small Business Paperwork Amnesty Act of 2006, that provides for the suspension of fines under

certain circumstances for first-time paperwork violations by small

business owners like myself, would act as a fail-safe in the case

that I make an inadvertent error when filling out such a form.

This bill is strongly supported by the U.S. Chamber and contains

adequate protections to avoid excusing fines, adequate protections

to avoid excusing fines, for violations that could present a danger

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to public health or safety or cause serious harm to the environment

or public interest that Congressman Lynch pointed out.

I would like to also highlight just a few examples of how this bill,

if enacted into law, could affect my business. The Census Bureau

has a number of forms that are sent out to businesses for the collection of data in order to distill the results into valuable statistical

information. Just recently, my wife and I were in an unfortunate

accident that required a lengthy rehabilitation. During this time

away from our business, both of us away, if one of my employees

inadvertently misplaced or disposed of a census survey request for

data, not realizing the importance of the document, or attempted

to fill it out and didn’t fill it out correctly or completely to the best

of their knowledge, my company could be fined up to $500. I have

very capable managers that work for me and run my business

while we are out. But their expertise is in running the business,

not in filling out forms.

Additionally, during my wife’s and my convalescence, the management had to do extra duty to make up for our absence, so they

worked very long hours. It could be very understandable and foreseeable that under those conditions that this type of request could

fall through the cracks. Adequate safe harbors contained in this bill

would provide me with a cushion that is needed to avoid an expensive fine during this very difficult time.

Another example where the bill’s provisions may apply is in filling out I–9 forms. Under current law, first-time immigration paperwork violations, which are very complex, for failure to properly prepare and file I–9 forms, could result in civil penalties from $100 to

$1,000.

The concept of waiving penalties for minor paperwork violations

for small businesses is not something new. Section 223 of Public

Law 104–121 requires agencies to establish a policy or program to

provide for the reduction, and under appropriate circumstances for

the waiver of civil penalties for violations by small businesses. Passage of H.R. 5242 would incrementally extend the existing law to

apply what agencies already do and have already been doing for all

paperwork violations to first-time minor paperwork violations,

something that from my point of view would seem very logical and

very helpful and consistent with the current intent of Congress

under the present law.

In closing, I would like to again thank the committee for holding

this hearing and for its interest in the Small Business Paperwork

Amnesty Act. I would welcome any questions that you might have.

[The prepared statement of Mr. Wordsworth follows:]

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Mrs. MILLER. Thank you very much. We appreciate your coming

today, sir.

The committee is now delighted to welcome Karen Harned. Ms.

Harned is the executive director for the National Federation of

Independent Business Legal Foundation. As a member of a law

firm, she specialized in food and drug law and represented several

small businesses and their trade associations before Congress and

Federal agencies. She received her law degree from the George

Washington Law School in 1995.

We are delighted to have you, and the floor is yours.

STATEMENT OF KAREN HARNED

Ms. HARNED. Thank you. Good afternoon, Madam Chairwoman

and members of the subcommittee. My name is Karen Harned, and

I serve as Executive Director of NFIB’s Legal Foundation, the legal

arm of NFIB.

NFIB is pleased to have the opportunity to be with you today offering our strong support for the Small Business Paperwork Amnesty Act of 2006. H.R. 5242 would provide hard working, well

meaning small business owners with the opportunity to correct paperwork mistakes before they are forced to pay needless fines.

NFIB would also like to thank Congressman Neugebauer for

championing this bill and Senator Vitter for his continuing work on

this bill in the Senate and the other issues that he is working on

for small business in that body.

When it comes to regulatory paperwork costs, small business gets

stuck with the bill. A recent study performed for the Small Business Administration estimated that $1.1 trillion of the cost of regulation falls disproportionately on small businesses with 20 or fewer

employees. That is $7,647 per employee per year.

For the average NFIB member, which employs five people and

reports gross sales of between $350,000 and $500,000 per year, this

price tag is huge. It is almost $40,000 annually, 8 to 10 percent of

revenues generated from a small business’s gross sales are paid out

in regulatory costs. That does not even include Federal, State and

local income taxes.

Small businesses face a 45 percent greater regulatory burden

than their larger counterparts. Unlike big businesses, small business owners do not have compliance departments or attorneys on

staff to warn them of each and every regulation in the pipeline. Instead, those responsibilities fall to them.

Does this mean that small business owners should get a free

pass? Of course not. After working on behalf of small business for

41⁄2 years, what I find most impressive about this constituency is

their respect for the law and their desire to do the right thing. For

example, according to an NFIB research foundation poll on the

Family and Medical Leave Act, small businesses grant virtually all

requests for family and medical leave, whether required to by the

law or not.

I thought it would be beneficial to provide a real life example of

the types of mistakes that would be forgiven under H.R. 5242. Importantly, H.R. 5242 does not forget these mistakes. It merely gives

well-meaning small business owners the opportunity to correct

them. Non-compliance is not an option under this bill.

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Nancy Kleinfelter, an NFIB member, is President of Baltimore

Glassware Decorators, a small 15-employee business. Her business

must comply with EPA’s toxic release inventory lead rule, which

requires small businesses to provide EPA with detailed information

regarding lead usage. Ms. Kleinfelter’s business prints small quantities of custom glass and ceramic ware for proms, weddings, restaurants and novelty stores. In fact, her decorated mugs have been

sold here at the House gift shop.

Her business sometimes uses lead-bearing colors on outside surfaces of mugs and glasses which become part of the glass after they

are fired and the lead does not leach out. After 95 hours of work

trying to comply with this rule, Ms. Kleinfelter could not have complete confidence that the numbers she was providing EPA were accurate.

H.R. 5242 would give small businesses like hers a chance to fix

mistakes that are made despite the small business owner’s best efforts. Economic studies, polls and real-life examples all indicate

why H.R. 5242 is such an important and necessary piece of legislation. Moreover, it enjoys bipartisan support going back to the Clinton administration.

NFIB supports strong regulatory reform measures that would

dramatically reduce the regulatory burdens placed on small business. However, until such reforms are enacted, H.R. 5242 is needed

to stop the bleeding. The bill recognizes the tremendous regulatory

burdens small businesses face while at the same time ensuring

that the public policy objectives those regulations are designed to

address are met. It does not reward or create loopholes for bad actors, but instead gives well-meaning, hard-working small business

owners a chance to correct unintended mistakes before being forced

to pay civil fines for failing to dot every I and cross every T.

On behalf of NFIB’s members, 92 percent of whom indicate that

they believe small business owners should be exempt from firsttime paperwork violations, I commend you, Madam Chairwoman,

for holding this hearing and inviting me to testify today. I would

be pleased to answer any questions that you have. Thank you.

[The prepared statement of Ms. Harned follows:]

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Mrs. MILLER. Thank you very much.

Our final witness today is Robert Shull, who is the deputy director of auto safety and regulatory safety for Public Citizen. Prior to

joining Public Citizen, he served as director of regulatory policy at

OMB Watch. Mr. Shull has worked at Children’s Rights, a nonprofit in New York that works nationwide filing class action civil

rights suits on behalf of abused and neglected children in order to

reform foster care.

So we certainly appreciate your attendance today and look forward to your testimony as well, sir. The floor is yours.

STATEMENT OF ROBERT SHULL

Mr. SHULL. Thank you, Madam Chair. I am pleased to be able

to come before you again, and I want to thank you for this opportunity, and I thank the subcommittee.

I was really heartened to hear the opening words from you that

I heard at the beginning of this hearing, which is that you are

deeply concerned about finding a way to balance the needs of small

business while protecting the public interest. I want to observe that

when it comes to information collection and small businesses, there

are really two kinds of ways we can go to try to strike that balance.

One of them is a negative way which could reduce the amount of

information collected or reduce the incentives for businesses to provide the information that we need. And the other way to go is the

positive way, which is focused on helping small businesses to comply with their obligations without reducing the quality, the quantity or the utility of the information that we need to protect the

public. I am here today because we believe that this bill follows

this negative path rather than the positive path.

I have heard first of all that this bill focuses on first-time violations and doesn’t address or does not exempt repeat offenders. But

I do have to point out that there is a part of the bill that does allow

a business to have many first-time violations. A business could fail

to comply with an EPA requirement, that is the first time it has

failed to comply with the EPA requirement. But it could also have

a first-time violation of an OSHA requirement, a first-time violation of other Department of Labor requirements, a first-time violation of SEC filing requirements and so on.

So we really could have a really bad actor who is failing to comply with requirements across the board but getting multiple firsttime exemptions. I think that is one way that this bill does not address the possibility of a repeat offender.

I also am concerned about the public interest exceptions. I am

really glad to see that there are public interest exceptions here,

and as iterations of this bill have developed over the years, these

public interest exceptions have become more detailed. That is really gratifying. But the way this iteration of the bill has developed,

the public interest exceptions have a strange sort of sliding scale

for these exclusions.

There are two sections of the bill that would address the public

interest. One would address potential serious harms to the public

interest, and another would address violations that present a danger to public health and safety.

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So when we focus on these two, it really looks like a sliding scale.

If a violation has the potential to cause harm that isn’t serious

harm to the public interest, public interest being broadly construed

I presume to mean the public health and safety but also ecological

harms, consumer pocketbook harms and so on. For these potentials

to cause harm to the public interest, there is a 6-month safe harbor

for the first time violation. If there is a potential to cause serious

harm to the public interest, there is no safe harbor.

But if a violation presents an actual danger to this more narrow

class of public health or safety, there is this optional 24 hour safe

harbor for first-time violations. I think that these incentives just

seem really misaligned. There is sort of a sliding scale that slides

backward in a way that would need to be addressed.

But I think that really, the positive way to go is the way to go

that I want to recommend the subcommittee focus on. I don’t think

those options have been exhausted yet. We heard a lot about compliance assistance, and it is absolutely true: small businesses don’t

have the resources that their larger competitors have to stay on top

of all the requirements and to make sure that they are fully complying with their obligations under the law. So I think that the answer there is to provide small businesses that additional resource

through compliance assistance offices. There have been bills that

have been introduced in both the House and the Senate to provide

these compliance assistance offices in every district of the country.

There are other options that I have mentioned in my prepared

statement.

I see that my time is up, so I look forward to your questions.

[The prepared statement of Mr. Shull follows:]

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Mrs. MILLER. Thank you very much.

We certainly appreciate all the panelists and I think I would like

to direct a question to Mr. Wordsworth, since you really are the

only small business person on the panel that is working every single day in a small business and trying to understand and to comply. I am certain you are trying your darndest to comply with every

piece of legislation and all the rules and regulations and etc. at

every level of Government, the Federal level and the State level

and sometimes the local level can even be worse than the Federal

level, if that is even possible. But having come from a local level,

I know how that can be as well, with various kinds of things that

you have to comply with as well.

Would you just tell us generally how many hours a week you actually spend working at your business and in the context of that,

how much time would you guesstimate you spend during your average work week, maybe a percentage of your time, just trying to

comply with the various things that you have to comply with? And

as sort of an addendum to that, I know you have been at it for

many, many years, but maybe in the last 10 years, have you seen

a huge escalation in the amount of regulatory burden and the

amount of time you are spending for compliance? I guess just generally, how much time do you spend complying and are you seeing

it get better or worse?

Mr. WORDSWORTH. First of all, my beginning experience was

with a large corporation before I started my own small business in

1974. So I have had a period of time to accumulate some experience. I am learning every day now.

Both my wife and I work 80 hours a week, maybe, 80, 85 hours

a week in our businesses 7 days. And we have a number of managers, but that is the life of the restaurant business. Of that time,

I would say a good 15 percent maybe is spent, and maybe even

more, in complying. You are so right when you say, these are Federal regulations in this book. I really invite you to entertain yourself by looking at this list. And you understand, these aren’t the

forms, these are just the names of the forms. The Chamber did an

excellent job putting this together. This should get some kind of

award.

But many times, the State forms and the local forms are as burdensome. In particular, in some jurisdictions we have meals taxes.

And almost the accounting meals taxes and the repercussions for

a meal, for properly filing a meals tax in many cases is almost

more impactful than filing a State sales tax. And so most people

don’t have the great opportunity to see the accumulation. No single

item will ever kill you. But it is the great accumulation and that

is what we deal with. We are the last guy, the total, the sum total.

And it is the accumulation of the regulations. I think many of

them, I truly believe, have unintended consequences. I don’t think

legislators really intended the consequence that it is on small business to comply.

Mrs. MILLER. Thank you. Death by 1,000 paper cuts, I suppose,

is a way to say it as well.

Ms. Harned, if I could ask you, one of the, actually this subcommittee has had a number of different hearings about burden.

We have really tried to analyze the construct of some of the modelVerDate 11-MAY-2000 12:59 Dec 02, 2008 Jkt 000000 PO 00000 Frm 00070 Fmt 6633 Sfmt 6633 C:\DOCS\45345.TXT KATIE PsN: KATIE
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ing that goes on with the various agencies about, as they are trying

to estimate burden, cost of compliance and the amount of hours

that people spend to try to comply with a number of the different

regulatory processes that they are looking at.

I am just wondering, from your experience, through your foundation there, and you were talking about the lady that was in the

business with the leaded glass and the EPA regulations. I think

you mentioned 90 some hours, I forget exactly what you said, less

than 100, that they thought that had estimated for her to comply

with that. Do you think that is a proper estimation of time, or have

you found in your experience that agencies often lowball the

amount of burden or cost of compliance, or do you think they are

usually generally on the mark?

Ms. HARNED. It varies by agencies. Unfortunately, all I would

really have to proffer there is anecdotal. But I think really the answer to your question goes to the point that Mr. Wordsworth just

made, which is, each agency looks at the regulatory obligations

they put on small business owners and the regulated community

in a vacuum. I sat in a 2-hour meeting with some officials from

EPA that went through just one section of one rule. I just sat there,

just thinking, if I am a small business owner, they said this is no

big deal, this will only take X amount of hours. But they are not

thinking about all the other forums that Mr. Wordsworth has to

comply with.

So again, anecdotally we hear, this is a top 10 issue for small

business owners, so I do think that there is probably something

there to your point as far as agencies, what they are estimating

what is actually happening out there. But that being said, I think

the bigger problem is that each agency is looking at the regulatory

obligations they are imposing and the paperwork requirements

they are putting forward in a vacuum, and they are not seeing, as

you said, the death by 1,000 paper cuts. As a result, that is really

where I think small business owners like Mr. Wordsworth get buried.

Mrs. MILLER. And a final question for Mr. Shull. Mr. Shull, I was

interested in your articulating repeat offenders. I have to tell you

the truth, whenever I think of repeat offenders, I think of a piece

of legislation I was involved with as a former Secretary of State of

Michigan, where I was the chairman of the traffic safety commission of our State and we were looking at drunk driving repeat offenders. It was an interesting type of a thing. I don’t think it is

particularly inherent to drunk driving offenses, where somebody

might have an extra glass of wine or something, and they go out,

and one time in their life they have an incident, as opposed to a

very small percentage of the driving population who are the repeat

offenders that have an inordinate amount of the problems out

there. They just flaunt the laws, they don’t care about the laws. It

is not like it happened once, OK, it can never happen really. But

I think it is a different kind of thing.

Obviously, as I say, I think the standard always has to be reasonable. And what is reasonable, there is often a lot of discussion

on that. But I also think you could put it in the context, and I

would ask your opinion on this, as a Member of Congress, this is

just my second term here, but we have to fill out a lot of different

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paperwork, forms, etc., for trips that might be taken or different

kinds of things that we are doing with our budget, budgetary constraints. I am a big believer of full transparency, etc. We try to

make sure we are filling out all the forms that we can. We have

taken lessons from the ethics committees and we understand what

it is that they are looking for. And when we fill out our financial

disclosure forms, we try and make sure we give them all the information they want.

But if in advertently we somehow made a mistake and didn’t

give them all the information that they want, I guess I would just

say, if it is OK for Congress, it is OK for us, how about these small

businesses that it happens to them one time? I think, if I understand your testimony, too bad. It is OK for us to get away with it

but not for a small businesses. There can never be an exception to

the rule.

I think of it as the Government sort of saying, do as I say, not

as I do. What is your thought on that?

Mr. SHULL. Sure. Actually, I think there is a line in my prepared

statement where I do note that agencies already have enormous

discretion that they do exercise to waive off certain first-time or

technical violations. Although I am sure in your case, any little

slip-up will be noticed by your opponents and you will be roundly

criticized for it. So I am sure you are not even getting off scot-free.

But I do think there is a positive alternative. I just want to sort

of take this example as another opportunity to point another kind

of positive alternative. I am sure it would be a small chunk of time

would be taken off Form A, Form B, Form C and so on that cumulatively would make a difference. If something so simple as having

to fill out your name and your office number and your address, if

you could do that once and every other form that you sit down to

fill out, it were automatically completed for you.

I think that there are ways, by shifting to electronic reporting

and by giving small business key identifiers that they can take to

all their forms. There are things like that make it easier for businesses to report the things that they have to report or disclose the

things that they have to disclose without having to—but it would

give them a way to spend a little bit less time doing that.

I think that is something that would help small businesses and

still allow the public to receive the information that it needs. So

I think that is another example of the kind of positive way to go

that doesn’t reduce the information we receive and it gives small

businesses a special break.

Mrs. MILLER. I appreciate those comments. I think that would be

optimal in a perfect world. But in a Government that sometimes

can’t get the CIA and FBI to talk to one another, I am not sure

that we are going to be able to accommodate that. But perhaps. It

is certainly a goal.

At this time I would yield to recognize Representative

Neugebauer again, who is the author of this very interesting legislation, for questions.

Mr. NEUGEBAUER. Thank you, Madam Chairman.

Mr. Shull, I want to go back to the comment you made, because

I think sometimes, as I have listened to your testimony, I don’t disagree, but I think you are talking about a different issue in many

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cases. What you are talking about is someone that has, shortening

the time for paperwork. I think everybody on this dais would be for

that.

What we are talking about is not people, how long it took people

to fill out that form. What we are talking about is if you forgot to

fill out that form. So what this bill does is it addresses those people

that didn’t have, didn’t say, it is too long a form, I am not going

to fill it out, it is for those folks who thought that was a yearly report and it turns out it was a quarterly report.

So we are talking about people that inadvertently—then when

you talk about violations, I think we have to be talking about, a

violation, for example, of a failure to report an accident on your job

site. This bill doesn’t give you 6 months to correct that violation on

your job. It just says, if you forgot to fill out the appropriate report

when someone got hurt on your job, and the administrator believes

that the failure to fill out that report did not cause significant

health or hazard to the employee, that there is a forbearance. If

there was a serious violation on that job site, and you didn’t report

it, you don’t get any help under this bill.

So certainly, everybody here thinks we ought to cut down on the

number of forms. And as Mr. Wordsworth pointed out with his document, and the fact that you print out the instructions, there are

a lot of forms, I think everybody agrees with that. What we are

talking about is that, like we are talking about Lori, and Lori

writes me and says, Congressman Neugebauer, and I am paraphrasing here, my husband and I have a small business. My responsibility is to do the paperwork. She said, I am so afraid that

we are going to forget to fill out a form or we don’t fill it out correctly, and that we might be charged a huge fine or a penalty for

that. We have a very small business and we can’t afford that fine

for something we didn’t intend to do.

So what this bill does is say to Lori and her husband, you know

what, we understand that you are trying to comply with the law.

Now, for those people that have serious violations, this bill, as I

said earlier, I think that the Chairwoman pointed that out, it is not

for those folks. We all want to work to reduce the paper volume.

But we need to, as the Chairwoman said, if I get a break to get

a second chance to fill out my form because I didn’t check that box

and should have checked that box, Lori and her husband ought to

get a second chance, too.

Mr. SHULL. Yes, sir. And I believe that in many cases Lori and

her husband might already be getting second chances. Because

agencies do have discretion in some cases to waive fines. And there

are times when they will choose not to, either because of the public

interest hazard that is at stake or because immediate compliance

is the essence of the requirement. For example, with the SEC and

Y2K compliance, waiting until after Y2K wouldn’t have really

helped things. So immediate compliance was absolutely a necessity.

I am pleased to hear that there is some interest in carving out

some room for the public interest. There are some other public interest issues, though, that haven’t been accommodated here that I

do want to point out. One of them is that what might look like at

the time a minor violation that doesn’t seem to cause a harm to

the public could ultimately, however, be something that contributes

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to early warning about hazards that are emerging. We might be

getting that early warning if an instance here and an instance

there that are not being reported. They are really sort of enormously complicated issues. I think because we haven’t exhausted

all of the other ways to help small businesses comply, I think this

kind of extraordinary remedy of giving people, letting people off the

hook for having failed to comply, this should be sort of the last resort.

I think the first resort really should be helping small businesses

comply. For example, small business compliance assistance. There

are two bills right now, I believe it’s H.R. 230 and S. 1411. These

are bills that would help establish small business compliance assistance programs, so that Lori would never have to worry about

missing out or failing to do something correctly. She could go and

get help to do it right. Because I am sure that Lori and all her colleagues in the small business community want to be good corporate

citizens. They want to provide the public or their employees the information that they need to provide.

And I really think that the first way to go about it is to help

them do that. Help them with the burden before eliminating the

information that the public needs.

Mr. NEUGEBAUER. If we really want to help them, we need to cut

that folder in about ten-fold. That would really help them, because

quite honestly, what we have done over the years is we have tried

to somehow think that writing a report or filing some kind of form

is going to somehow make the world a better place. I will tell you

that probably when we start boiling a lot of that down, somewhere

in a piece of compromise legislation was, well, let’s just have them

fill out a report. That is the kind of problem that is systemic in creating a business community in America that is not competitive.

That is the reason that companies start to say, you know, it is

easier to do business in Ireland or it is easier to do business in

China or it is easier to do business in India or it is easier to do

business offshore than it is in America, because we have taken this

viewpoint that if we burden business enough or try to make everybody play by the rules and create an enormous number of rules

that somehow things are better. And quite honestly, that is not the

mentality that works for this country. It doesn’t create jobs, it

doesn’t create opportunity. In fact, it creates an opportunity for liability because it causes people not to invest.

That is the reason I want to take my next question to Mr. Wordsworth, have you ever found yourself sitting down with your attorney and saying, how can we structure this little business venture

so that if we have some kind of a huge fine or a liability arises that

we can protect our other assets and our other businesses?

Mr. WORDSWORTH. That would be a luxury, a pure luxury to

have the time to calculate a risk. I think in most cases, just by living the business, you live a calculated risk. I think Mr. Shull’s

word here is correct, exhausted. You really get exhausted under the

burden of these.

I don’t think, as I understand this bill, this is not for the removal

of any form whatsoever. I think this is for amnesty on a one-time

occasion for a negligence that was unintended, a paperwork negVerDate 11-MAY-2000 12:59 Dec 02, 2008 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 C:\DOCS\45345.TXT KATIE PsN: KATIE
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ligence. I think that is the intent of the bill, and I think it is misunderstood.

Mr. NEUGEBAUER. Madam Chairwoman, thank you for allowing

a hearing on this bill, and I look forward to working with you and

helping continue. I know you are a great champion of small business. I know you understand the importance of what they contribute to our country. I look forward to working with you on this. I

want to also thank our panel today for their attendance.

Mrs. MILLER. Thank you very much, and I would echo that and

thank our panelists very, very much. We are delighted to have you

all, again in some cases, and look forward to continuing to work

with you all in a bipartisan spirit to make sure that American businesses prosper and succeed in this global marketplace. Thank you

very, very much for coming.

[Whereupon, at 3:25 p.m., the subcommittee was adjourned.]

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