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Secretary of Labor Thomas E. Perez
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DEPARTMENT OF LABOR PROCEDURES FOR COMPLIANCE WITH THE REGULATORY FLEXIBILITY ACT AND EXECUTIVE ORDER 13272

General

The purpose of the procedures is to help agencies understand and meet the requirements of the Regulatory Flexibility Act (RFA) 1 and E.O. 13272, Proper Consideration of Small Entities in Agency Rulemaking.

Both the RFA and E.O. 13272 require agencies to consider the potential impact of rules on small businesses, small governmental jurisdictions, and small organizations during the development of their rules. Executive Order 13272 reinforces the intent of the RFA by requiring agencies to establish policies and procedures (this document) to promote compliance with the RFA.

Several steps in the procedures require agencies to notify or send documents to the Small Business Administrations Office of Advocacy. The notification or documents should be sent via email to notify.advocacy@sba.gov.

An appendix to these procedures provides specific guidance for convening and operating Small Business Advocacy Review Panels. OSHA is the only DOL agency that must convene such panels.

Major steps to comply with RFA and E.O. 13272

The following lists the major steps DOL agencies (you) must follow to comply with the RFA and E.O. 13272. Note that not all steps are required for each rule; some are required only for rules likely to have a significant economic impact on a substantial number of small entities, and others only for rules that do not have such an impact. A more detailed description of the requirements follows the list.

Step 1. Determine whether the rule is subject to the RFA.

Step 2. Conduct an informal "screening" analysis to determine whether or not the proposed rule will have a significant economic impact on a substantial number of small entities.

If the rule will not have a significant economic impact on a substantial number of small entities, go to step 3. Otherwise go to step 4.

Step 3. Prepare a certification, and a statement of the factual basis supporting the certification, that the proposed rule will not have a significant economic impact on a substantial number of small entities.

Go to step 6.

Step 4. Prepare an initial regulatory flexibility analysis (IRFA).

Step 5. Notify the Chief Counsel for Advocacy of the Small Business Administration (Chief Counsel) (i) when you submit the draft rule to OMB under Executive Order 12866, or (ii) if submission to OMB is not required, at a reasonable time prior to publication of the rule.

Step 6. Include with the proposed rule published in the Federal Register either the certification and statement of factual basis or the IRFA. Transmit a copy of the certification and statement of factual basis or the IRFA to the Chief Counsel.

Step 7. In preparing the final rule, consider and respond to comments by the Chief Counsel.

If you have determined the rule will not have a significant economic impact on a substantial number of small entities, go to step 8. Otherwise go to step 9.

Step 8. Prepare a certification statement and a statement of the factual basis supporting the certification that the final rule will not have a significant economic impact on a substantial number of small entities.

Go to step 10.

Step 9. Prepare a Final Regulatory Flexibility Analysis (FRFA)

Step 10. Include with the final rule published in the Federal Register either the certification and statement of factual basis or the FRFA.

The following discussion elaborates on what agencies must do under each of the above steps.

STEP 1. DETERMINE WHETHER THE RULE IS SUBJECT TO THE RFA.

The RFA generally covers all rulemakings where an agency is required to publish a notice of proposed rulemaking (NPRM). You should consult with the Office of the Solicitor if you are uncertain as to whether the RFA applies to your regulatory action.

STEP 2. CONDUCT AN INFORMAL "SCREENING" ANALYSIS TO DETERMINE WHETHER OR NOT THE PROPOSED RULE WILL HAVE A SIGNIFICANT ECONOMIC IMPACT ON A SUBSTANTIAL NUMBER OF SMALL ENTITIES.

In order to determine whether a rule is likely to have a significant economic impact on a substantial number of small entities, it is necessary to first conduct an informal screening analysis.

The first step in the analysis is to identify what types of small entities would be subject to the rule's requirements -- businesses, governments, nonprofit organizations. In identifying small entities, you should use the SBA size categories unless your agency has adopted or intends to adopt alternative size definitions in accordance with the procedures established by the RFA.

To determine whether there is likely to be a significant economic impact on a substantial number of those small entities, you should identify the actions a small entity will have to take to comply with the requirements of the rule. This will help clarify the nature of the impacts (e.g., installation of new technology, revised recordkeeping system). You may then be able to deduce whether the potential impacts are of sufficient magnitude and scope to warrant preparation of an IRFA. In addition, some agencies have used "rules of thumb" to make this determination. For example, an agency may decide to prepare an IRFA if the costs of a rule are expected to exceed 1 percent of revenues or 5 percent of profits for the small entities. In addition, if you have other reasons for believing that the rule may have a significant economic impact on small entities, you should prepare an IRFA for the rule.

If you determine the proposed rule will not have a significant impact on a substantial number of small entities, go to step 3. Otherwise go to step 4.

STEP 3. PREPARE A CERTIFICATION STATEMENT AND A STATEMENT OF THE FACTUAL BASIS SUPPORTING THE CERTIFICATION THAT THE PROPOSED RULE WILL NOT HAVE A SIGNIFICANT ECONOMIC IMPACT ON A SUBSTANTIAL NUMBER OF SMALL ENTITIES.

If you determine that a rule will not have a significant economic impact on a substantial number of small entities, you must prepare a certification statement to that effect, along with the factual basis for the certification. The certification is subject to judicial review, so you should clearly explain how you reached your decision and, where appropriate, describe or provide the information you relied on to make the decision. In its 2002 implementation guidance for agencies, the Office of Advocacy cautioned agencies that "Congress intended that agencies should do more than provide boilerplate and unsubstantiated assertions to support their RFA certifications."2

Go to step 6.

STEP 4. PREPARE AN INITIAL REGULATORY FLEXIBILITY ANALYSIS.

If you have determined that the rule may have a significant economic impact on a substantial number of small entities, you must prepare an IRFA for the rule. In accordance with the RFA, the IRFA must:

  • describe the reasons why the agency is considering the action;
  • succinctly state the objectives of, and legal basis for, the proposed rule;
  • describe and, where feasible, estimate the number of small entities to which the proposed rule will apply;
  • describe the projected reporting, recordkeeping and other compliance requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirements and the type of professional skills necessary for preparation of the report or record;
  • identify, to the extent practicable, all relevant Federal rules that may duplicate, overlap or conflict with the proposed rule;
  • describe any significant alternatives to the proposed rule that accomplish the stated objectives of applicable statutes and that minimize any significant economic impact of the proposed rule on small entities. Consistent with the stated objectives of applicable statutes, the analysis must discuss significant alternatives such as--
    (1) establishing differing compliance or reporting requirements or timetables that take into account the resources available to small entities;
    (2) clarifying, consolidating, or simplifying compliance and reporting requirements under the rule for such small entities;
    (3) using performance rather than design standards; and
    (4) exempting small entities from coverage of the rule, or any part thereof.

When OSHA identifies a rule as having a significant economic impact on a substantial number of small entities, the RFA requires the agency to convene a Small Business Advocacy Review Panel. OSHA has established its own guidelines for convening such panels and they are included in the Appendix.

STEP 5. NOTIFY THE CHIEF COUNSEL FOR ADVOCACY OF THE SMALL BUSINESS ADMINISTRATION (CHIEF COUNSEL) (I) WHEN YOU SUBMIT THE DRAFT RULE TO OMB UNDER EXECUTIVE ORDER 12866, OR (II) IF SUBMISSION TO OMB IS NOT REQUIRED, AT A REASONABLE TIME PRIOR TO PUBLICATION OF THE RULE.

If you have determined that the rule may have a significant economic impact on a substantial number of small entities, you must notify the Chief Counsel. In virtually all cases where a rule has a significant economic impact on a substantial number of small entities it also will be considered a significant rule under E.O. 12866, and will be submitted to OMB for review. In these cases you must notify the Chief Counsel at the same time you submit the draft rule to OMB (you may submit the draft rule to the Chief Counsel, but this is not required by the RFA or EO13272).

In those few instances when OMB review is not required, you must, following Secretarial approval, notify the Chief Counsel at a reasonable time prior to publication of the rule.

STEP 6. INCLUDE WITH THE PROPOSED RULE PUBLISHED IN THE FEDERAL REGISTER, THE CERTIFICATION AND STATEMENT OF FACTUAL BASIS, OR THE IRFA. TRANSMIT A COPY OF THE CERTIFICATION AND STATEMENT OF FACTUAL BASIS OR THE IRFA TO THE CHIEF COUNSEL.

When you prepare the NPRM for publication in the Federal Register, you must include in the document either the certification and statement of factual basis, or the IRFA. If the IRFA is lengthy and incorporated into the Regulatory Impact Analysis, you may summarize it in the Federal Register document and make it available for public review on the web site and in hard copy if requested. You also must provide a copy of either the certification and statement of factual basis or the IRFA to the Chief Counsel.

STEP 7. IN PREPARING THE FINAL RULE, CONSIDER AND RESPOND TO COMMENTS BY THE CHIEF COUNSEL.

During preparation of the final rule, in accordance with E.O. 13272, you must "give every appropriate consideration" to comments provided by the Chief Counsel, and respond in the final rule preamble to any written comments submitted by the Chief Counsel on the proposed rule (agencies do not have to respond in the final rule if the head of the agency certifies that inclusion of the response does not serve the public interest).

If you have determined the final rule will not have a significant impact on a substantial number of small entities, go to step 8. Otherwise go to step 9.

STEP 8. PREPARE A CERTIFICATION STATEMENT AND A STATEMENT OF THE FACTUAL BASIS SUPPORTING THE CERTIFICATION THAT THE FINAL RULE WILL NOT HAVE A SIGNIFICANT ECONOMIC IMPACT ON A SUBSTANTIAL NUMBER OF SMALL ENTITIES.3

If an agency determines that the final rule will not have a significant economic impact on a substantial number of small entities, it must prepare a certification statement to that effect, along with the factual basis for the certification. The certification is subject to judicial review, so an agency should clearly explain how it reached its decision and, where appropriate, describe or provide the information it relied on to make the decision. In its 2002 implementation guidance for agencies, the Office of Advocacy cautioned agencies that "Congress intended that agencies should do more than provide boilerplate and unsubstantiated assertions to support their RFA certifications."4

Go to step 10.

STEP 9. PREPARE A FINAL REGULATORY FLEXIBILITY ANALYSIS (FRFA).

If you have determined that the final rule may have a significant economic impact on a substantial number of small entities, you must prepare a FRFA for the rule. In accordance with the RFA, the FRFA must:

(1) succinctly state the need for, and objectives of, the rule;

(2) summarize the significant issues raised by the public comments in response to the initial regulatory flexibility analysis, the assessment of the agency of such issues, and describe any changes made in the proposed rule as a result of such comments;

(3) describe and estimate the number of small entities to which the rule will apply or explain why no such estimate is available;

(4) describe the projected reporting, recordkeeping and other compliance requirements of the rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record; and

(5) describe the steps the agency has taken to minimize the significant economic impact on small entities consistent with the stated objectives of applicable statutes, including a statement of the factual, policy, and legal reasons for selecting the alternative adopted in the final rule and why each one of the other significant alternatives to the rule considered by the agency which affect the impact on small entities was rejected.

STEP 10. INCLUDE WITH THE FINAL RULE PUBLISHED IN THE FEDERAL REGISTER, THE CERTIFICATION AND STATEMENT OF FACTUAL BASIS, OR THE FRFA.

When you prepare the final rule for publication in the Federal Register, you must include in the document either the certification and statement of factual basis (but see footnote 3), or the FRFA. If the FRFA is lengthy and incorporated into the Regulatory Impact Analysis as discussed above, you may summarize it in the Federal Register document and make it available for public review on the web site and in hard copy if requested.

Participation of small entities in rulemaking

If you determine that a rule will have a significant economic impact on a substantial number of small entities, you should assure small entities have an opportunity to participate in the rulemaking through techniques such as the following:

  • stating in an advance notice of proposed rulemaking, if issued, that the proposed rule may have a significant economic effect on a substantial number of small entities
  • publishing the NPRM in publications likely to be obtained by small entities
  • directly notifying interested small entities
  • conducting open conferences or public hearings concerning the rule for small entities
  • using computer networks to solicit and receive comments
  • adopting or modifying agency procedural rules to reduce the cost and complexity of participation in the rulemaking for small entities.

Agencies should attempt to interact with small entities early in the rulemaking process to help ensure that the eventual final rule will meet its objectives while minimizing adverse effects on small entities. Early and continued interaction with small entities will help agencies identify and resolve important issues and obtain information useful to the development of the rule. The Chief Counsel for Advocacy can serve as a resource for agencies in this regard.

Reservation of Authority

The statements in this document are intended solely as guidance. This document is not intended, nor can it be relied upon, to create any rights enforceable by any party in litigation with the United States. DOL may decide to follow the guidance provided in this document, or to act at variance with the guidance, based on its analysis of the specific facts presented. This guidance may be revised without public notice to reflect changes in DOL's approach to implementing the Regulatory Flexibility Act or to clarify and update text.

Relationship to DOL Regulatory Review Procedures

A copy of these guidelines will be appended to the Department's internal Regulatory Review Procedures. These procedures require confirmation at various points that an agency has complied with all applicable requirements of statutes and Executive Orders with respect to rulemaking actions. Appending a copy of these guidelines to those procedures will ensure they receive appropriate attention throughout the rulemaking process.


1All references to the Regulatory Flexibility Act refer to the RFA as amended by the Small Business Regulatory Enforcement Fairness Act.

2 U.S. Small Business Administration, Office of Advocacy, The Regulatory Flexibility Act: An Implementation Guide for Federal Agencies, 2002, p. 11.

3The RFA is not clear regarding certifying the final rule if you certified the proposed rule. However, SBA recommends that agencies certify twice to demonstrate that the certification remains valid after public comments.

4 U.S. Small Business Administration, Office of Advocacy, 2002, p. 11.

Appendix included