Regulatory Flexibility, Small Business, and Job Creation

Memorandum of January 18, 2011

Regulatory Flexibility, Small Business, and Job
Creation

Memorandum for the Heads of Executive Departments and
Agencies

Small businesses play an essential role in the American
economy; they help to fuel productivity, economic
growth, and job creation. More than half of all
Americans working in the private sector either are
employed by a small business or own one. During a
recent 15-year period, small businesses created more
than 60 percent of all new jobs in the Nation.

Although small businesses and new companies provide the
foundations for economic growth and job creation, they
have faced severe challenges as a result of the
recession. One consequence has been the loss of
significant numbers of jobs.

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612,
establishes a deep national commitment to achieving
statutory goals without imposing unnecessary burdens on
the public. The RFA emphasizes the importance of
recognizing ``differences in the scale and resources of
regulated entities'' and of considering ``alternative
regulatory approaches . . . which minimize the
significant economic impact of rules on small
businesses, small organizations, and small governmental
jurisdictions.'' 5 U.S.C. 601 note.

To promote its central goals, the RFA imposes a series
of requirements designed to ensure that agencies
produce regulatory flexibility analyses that give
careful consideration to the effects of their
regulations on small businesses and explore significant
alternatives in order to minimize any significant
economic impact on small businesses. Among other
things, the RFA requires that when an agency proposing
a rule with such impact is required to provide notice
of the proposed rule, it must also produce an initial
regulatory flexibility analysis that includes
discussion of significant alternatives. Significant
alternatives include the use of performance rather than
design standards; simplification of compliance and
reporting requirements for small businesses;
establishment of different timetables that take into
account the resources of small businesses; and
exemption from coverage for small businesses.

Consistent with the goal of open government, the RFA
also encourages public participation in and
transparency about the rulemaking process. Among other
things, the statute requires agencies proposing rules
with a significant economic impact on small businesses
to provide an opportunity for public comment on any
required initial regulatory flexibility analysis, and
generally requires agencies promulgating final rules
with such significant economic impact to respond, in a
final regulatory flexibility analysis, to comments
filed by the Chief Counsel for Advocacy of the Small
Business Administration.

My Administration is firmly committed to eliminating
excessive and unjustified burdens on small businesses,
and to ensuring that regulations are designed with
careful consideration of their effects, including their
cumulative effects, on small businesses. Executive
Order 12866 of September 30, 1993, as amended, states,
``Each agency shall tailor its regulations to impose
the least burden on society, including individuals,
businesses of differing sizes, and other entities
(including small communities and governmental
entities), consistent with obtaining the regulatory
objectives, taking into account,

among other things, and to the extent practicable, the
costs of cumulative regulations.''

In the current economic environment, it is especially
important for agencies to design regulations in a cost-
effective manner consistent with the goals of promoting
economic growth, innovation, competitiveness, and job
creation.

Accordingly, I hereby direct executive departments and
agencies and request independent agencies, when
initiating rulemaking that will have a significant
economic impact on a substantial number of small
entities, to give serious consideration to whether and
how it is appropriate, consistent with law and
regulatory objectives, to reduce regulatory burdens on
small businesses, through increased flexibility. As the
RFA recognizes, such flexibility may take many forms,
including:

extended compliance dates that take into
account the resources available to small entities;
performance standards rather than design
standards;
simplification of reporting and compliance
requirements (as, for example, through streamlined
forms and electronic filing options);
different requirements for large and small
firms; and
partial or total exemptions.

I further direct that whenever an executive agency
chooses, for reasons other than legal limitations, not
to provide such flexibility in a proposed or final rule
that is likely to have a significant economic impact on
a substantial number of small entities, it should
explicitly justify its decision not to do so in the
explanation that accompanies that proposed or final
rule.

Adherence to these requirements is designed to ensure
that regulatory actions do not place unjustified
economic burdens on small business owners and other
small entities. If regulations are preceded by careful
analysis, and subjected to public comment, they are
less likely to be based on intuition and guesswork and
more likely to be justified in light of a clear
understanding of the likely consequences of alternative
courses of action. With that understanding, agencies
will be in a better position to protect the public
while avoiding excessive costs and paperwork.

This memorandum is not intended to, and does not,
create any right or benefit, substantive or procedural,
enforceable at law or in equity by any party against
the United States, its departments, agencies, or
entities, its officers, employees, or agents, or any
other person. Nothing in this memorandum shall be
construed to impair or otherwise affect the functions
of the Director of the Office of Management and Budget
relating to budgetary, administrative, or legislative
proposals.

The Director of the Office of Management and Budget is
authorized and directed to publish this memorandum in
the Federal Register.

THE WHITE HOUSE,

Washington, January 18, 2011