Expanded Regulatory Flexibility Act Aims to Streamline Regulations for NJ Small Businesses

A Key State Senate Committee Recently Advanced Legislation that Would Expand the Existing Regulatory Flexibility Act

Rightsizing regulation so that it is appropriate to the needs of the regulatory objective while not being overly burdensome to small business is a challenge, particularly when institutional inertia sets in.  A key state Senate committee recently advanced legislation that would expand the existing Regulatory Flexibility Act with the intent of improving the process by which regulators strike that balance.

Regulatory Flexibility Act

The New Jersey Regulatory Flexibility Act currently requires that any state agency must minimize adverse economic impacts on small business when proposing new rules and regulations. Additionally, the statute states that whenever a state agency develops or proposes rules, the agency should take into consideration the effect that rule will have on small businesses and make accommodations to address such issues. The proposed bill, Senate Bill 2345, would expand the Regulatory Flexibility Act to cover more small businesses and allow businesses to enforce its provisions.

“The NJ Regulatory Flexibility Act has been in place for years, but it’s often ignored or forgotten. As a result, red tape stays in place and small businesses have nowhere to turn when the government makes it nearly impossible for them to create good jobs,” Sen. Steve Oroho said. “Employers deserve the opportunity to dispute onerous rules and regulations. By empowering entrepreneurs to challenge overbearing regulations, we can stop anti-business policies from constraining our local economy.”

Senate Bill 2345

Senate Bill 2345 amends the New Jersey Regulatory Flexibility Act to expand the scope of small businesses it covers to include businesses that employ fewer than 100 full-time employees or having gross annual sales of less than $6 million. Currently, the law only applies to businesses with less than 100 full-time employees.

The proposed legislation also requires an agency to use, when developing rules, the consolidation or simplification of a compliance or reporting requirement for small businesses as an approach to minimize the rule’s impact on small businesses, so long as the public health, safety, or general public welfare is not endangered. In addition, an agency seeking to continue an expiring rule must consider a series of factors, as part of the regulatory flexibility analysis. They include:

• The continued need for the rule;
• The nature of complaints or comments received from the public concerning the rule;
• The complexity of the rule;
• The extent to which the rule overlaps, duplicates, or conflicts with other federal and State rules; and
• The length of time since the rule has been evaluated or the degree to which technology, economic conditions, or other factors have changed in the area affected by the rule.

This review must be conducted by the agency at the time a rule is proposed for re-adoption (which is generally every seven years), to ensure that the rule continues to have a minimal impact on small businesses.

Significantly, the bill would provide for greater accountability for the regulators by creating a new process by which a small business that is adversely affected economically or aggrieved by final rule-making action may file a petition with the agency objecting to all or a part of a rule subject to regulatory flexibility analysis. The petition must be based on one of the following grounds: the agency failed to prepare a regulatory flexibility analysis; or the regulatory flexibility analysis issued failed to contain or consider a matter or factor required by law or contained a clear error or omission of a material fact which directly resulted in the agency’s failure to consider, or the agency’s underestimation of, an adverse economic impact. Should the agency reject the petition, businesses can appeal to the courts. 

It remains to be seen whether this process would be effective in its goals or would create more regulatory uncertainty by making the adoption process more complicated and subject to greater court oversight. 

We will continue to track the progress of the proposed legislation. In the meantime, we encourage you to contact one of Scarinci Hollenbeck’s experienced business attorneys to find out how we can help minimize the regulatory burdens on your small business.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Jeffrey Cassin, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.