Regulatory Flexibility Act: Key Terms Still Need to Be Clarified

The Regulatory Flexibility Act of 1980 requires federal agencies to examine the impact of their proposed and final rules on small businesses, small governmental jurisdictions, and small organizations and to solicit the ideas and comments of such entities for this purpose. Specifically, whenever agencies are required to publish a notice of proposed rulemaking, the act requires agencies to prepare an initial and a final regulatory flexibility analysis. However, those analytical requirements do not apply if the head of the agency certifies that the rule will not have a "significant economic impact on a substantial number of small entities." The Small Business Regulatory Enforcement Fairness Act of 1996 was enacted to strengthen the protections for small entities, and some of the requirements of that legislation are built on this significant impact determination. Although both of these reform initiatives have clearly affected how federal agencies regulate, their full promise has not been realized. The Regulatory Flexibility Act does not define what Congress meant by the terms "significant economic impact" and "substantial number of small entities" and does not give any entity the authority or responsibility to define them governmentwide. As a result, agencies have had to construct their own definitions, and those definitions vary.