Obama Orders Re-Examination of Regulatory Impact on Businesses

On Tuesday President Obama signed an Executive Order (EO) designed to improve regulation and regulatory review of rules that potentially hamper economic growth and job creation. The issuance of this EO, which supplements a 1993 EO governing contemporary regulatory review, is widely viewed as an outreach gesture to the business community. Notably, the EO directs federal agencies developing regulations to “use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” In essence, the EO brings greater attention to the potential cost and burden of new regulations to businesses. According to a fact sheet on the President’s regulatory strategy, the “President requires Federal agencies to design cost-effective, evidence-based regulations that are compatible with economic growth, job creation, and competitiveness.”

Among other things, the EO calls for flexible approaches to regulations. “Where relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, each agency shall consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public.” To that end, the EO requires agencies to review existing regulations and modify, streamline, or repeal rules that are outmoded, ineffective, insufficient or excessively burdensome. Agencies must submit a preliminary plan for such review within 120 days.

Although the EO does not reference any particular regulation, the EO could lead to a re-examination of a number of rules impacting employers. For example, the call for “flexible approaches” and review of outdated regulations may lend support to efforts to amend wage and hour rules to promote workplace flexibility. The review may also prompt greater scrutiny of the economic impact of proposed workplace safety and health regulations.

In conjunction with the EO, the President issued a memorandum on regulatory flexibility, small business and job creation. Specifically, the memo directs the heads of executive agencies and departments “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” when initiating rulemaking that will have a significant economic impact on a substantial number of small entities. The memo explains that this flexibility can be in the form of:

• 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.

If such flexibility in formulating a final rule is not shown under these circumstances, the memo explains that the agency is to “explicitly justify its decision not to do so in the explanation that accompanies that proposed or final rule.”

The President issued a separate memorandum on regulatory guidance and enforcement. The memo requires federal enforcement agencies to make publicly available compliance and enforcement activities accessible, downloadable, and searchable online. In addition to greater agency disclosure of compliance and enforcement data to the public, the memo seeks to enhance sharing of such data among agencies.

As evidenced by the Department of Labor’s and Equal Employment Opportunity Commission’s Fall 2010 regulatory agendas and the National Labor Relations Board proposed notice-posting rule, employers are facing an active labor and employment regulatory agenda. This upcoming rulemaking activity impacting the workplace will demonstrate whether and how today’s EO will, in fact, alter the Administration’s regulatory strategy.