A5594

An Act concerning aspects of administrative rule-making that impact small businesses and small local government units and amending and supplementing P.L.1986, c.169 (C.52:14B-16 et seq.).

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 2 of P.L.1986, c.169 (C.52:14B-17) is amended to read as follows:

2. a. As used in this act [, "small business"] :

“Small business” means any business, or an affiliate of any business, which is resident in this State, independently owned and operated and not dominant in its field, and which employs fewer than 100 full-time employees or has gross annual sales of less than $6 million.

“Small local government unit” means a municipality, county, town, township, village, school district, or special district with a population of less than 50,000, as determined by the most recent federal decennial census or American Community Survey five-year estimate.

b. Following the effective date of P.L. , c. (pending before the Legislature as this bill), the $6 million gross annual sales threshold established by subsection a. of this section shall be adjusted triennially by the State Treasurer to reflect changes in the Consumer Price Index since the last adjustment, rounded to the nearest $100,000. For the purpose of this section, "Consumer Price Index" means the Consumer Price Index for All Urban Consumers, New York-Northern New Jersey-Long Island Metropolitan Area, All Items (1982-84=100), as published by the Bureau of Labor Statistics in the United States Department of Labor. An adjustment to the threshold shall be made only if the percent change in the Consumer Price Index for the period specified is greater than zero. If the reference base of the index is changed, the index used to determine the Consumer Price Index shall be the index converted to the new base by standard statistical methods. A public notice of such adjustment shall be published in the New Jersey Register and on the Department of the Treasury website.

(cf: P.L.1986, c.169, s.2)

2. Section 3 of P.L.1986, c.169 (C.52:14B-18) is amended to read as follows:

3. In developing and proposing a rule for adoption, the agency involved shall utilize approaches which will accomplish the objectives of applicable statutes while minimizing any adverse economic impact of the proposed rule on small businesses and small local government units of different types and of differing sizes. Consistent with the objectives of applicable statutes, the agency [, where feasible,] shall utilize such approaches as:

a. The establishment of differing or less stringent compliance or reporting requirements or timetables that take into account the resources available to small businesses and small local government units;

b. The use of performance rather than design standards; [and]

c. An exemption from coverage by the rule, or by any part thereof, for small businesses and small local government units so long as the public health, safety, or general welfare is not endangered; and

d. The consolidation or simplification of compliance or reporting requirements for small businesses and small local government units so long as the public health, safety, or general welfare is not endangered.

(cf: P.L.1986, c.169, s.3)

3. Section 4 of P.L.1986, c.169 (C.52:14B-19) is amended to read as follows:

4. In proposing a rule for adoption, the agency involved shall issue a regulatory flexibility analysis regarding the rule, which shall be included in the notice of a proposed rule as required by subsection (a) of section 4 of P.L. 1968, c. 410 (C. 52:14B-4).

Each regulatory flexibility analysis shall contain:

a. A description of the types and an estimate of the number of small businesses and small local government units, as applicable, to which the proposed rule will apply;

b. A description of the reporting, record-keeping and other compliance requirements being proposed for adoption, and the kinds of professional services that a small business or small local government unit is likely to need in order to comply with the requirements;

c. An estimate of the initial capital costs and an estimate of the annual cost of complying with the rule, with an indication of any likely variation in the costs for small businesses and small local government units of different types and of differing sizes; and

d. An indication of how the rule, as proposed for adoption, is designed to minimize any adverse economic impact of the proposed rule on small businesses or small local government units, or both.

[This section shall not apply to any proposed rule which the agency finds would not impose reporting, record-keeping, or other compliance requirements on small businesses. The agency's finding and an indication of the basis for its finding shall be included in the notice of a proposed rule as required by subsection (a) of section 4 of P.L. 1968, c. 410 (C. 52:14B-4).]

(cf: P.L.1986, c.169, s.4)

4. (New section) The Legislature finds and declares that:

a. A vibrant and growing small business sector is critical to creating jobs in a dynamic economy. However, small businesses bear a disproportionate share of regulatory costs and burdens.

b. Uniform regulatory and reporting requirements can impose unnecessary and disproportionately burdensome demands, including legal, accounting, and consulting costs, upon small businesses with limited resources. The failure to recognize differences in the scale and resources of regulated businesses can adversely affect competition in the marketplace, discourage innovation, and restrict improvements in productivity. Unnecessary regulations create entry barriers in many industries and discourage potential entrepreneurs from introducing beneficial products and processes.

c. The practice of treating all regulated businesses as equivalent may lead to inefficient use of regulatory agency resources, enforcement problems, and, in some cases, to actions inconsistent with the legislative intent of health, safety, environmental, and economic welfare legislation.

d. The regulatory and enforcement culture of State agencies can be more responsive to small business without compromising the statutory missions of the agencies. When adopting rules to protect the health, safety, and economic welfare of New Jersey, State agencies should seek to achieve statutory goals as effectively and efficiently as possible without imposing unnecessary burdens on small employers. Alternative regulatory approaches which do not conflict with the stated objective of applicable statutes may be available to minimize the significant economic impact of rules on small businesses.

e. Small local government units may also struggle to comply with uniform regulatory and reporting requirements because of limited staff, technological, and financial resources, and may benefit from alternative regulatory approaches that minimize the impact of rules on these government units.

f. Therefore, the process by which State rules are developed and adopted should require agencies to solicit the ideas and comments of small businesses and small local government units, as applicable, to examine the impact of proposed and existing rules on such businesses and units, as applicable, and to review the continued need for existing rules. Judicial review for compliance should be available for small businesses and small local government units.

5. (New section) a. To facilitate greater participation from small businesses and small local government units in the rulemaking process, an agency shall employ special participation methods, including direct electronic notices to affected businesses and local government units, hearing times that accommodate traditional business hours, accessible meeting locations, and simplified portals for the submission of public comments.

b. The agency shall designate a small business and small local government unit regulatory coordinator and shall publish the electronic mail address and telephone number of the coordinator in a prominent location on its Internet website. The coordinator shall act as the primary contact for small business and small local government unit regulatory inquiries for the agency.

6. (New section) a. In proposing a rule for adoption, the agency involved shall, in addition to the regulatory flexibility analysis conducted pursuant to P.L.1986, c.169 (C.52:14B-16 et seq.), prepare an Economic, Small Business, Small Local Government Unit, and Consumer Impact Statement. The statement shall:

(1) identify persons directly affected by, or benefiting from, the rule;

(2) present a cost benefit analysis, including ranges where appropriate, for the agency, political subdivisions, and directly affected businesses and local government units;

(3) quantify, to the extent feasible, small business and small local government unit compliance and administrative costs;

(4) consider potential challenges for compliance with the proposed rule, which shall include, but not be limited to, existing federal, State, or local laws or regulations, relevant licensing or permitting requirements, conflicting regulations, and market conditions;

(5) evaluate alternatives to reduce such challenges, including, but not limited to, the approaches provided in section 3 of P.L.1986, c.169 (C.52:14B-18), and explain why each alternative was adopted or rejected; and

(6) summarize and consider any Small Business and Small Local Government Unit Review Panel report prepared pursuant to section 8 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. Within 30 days after the adoption of any rule that has been determined to have a significant economic impact on a substantial number of small businesses or small local government units, or both, the promulgating agency shall publish on its Internet website, and file with the Office of Administrative Law for public access, a plain language small business and small local government unit compliance guide summarizing the requirements of the rule, the evaluation and explanation of alternatives required pursuant to paragraph (5) of subsection a. of this section, effective dates, and agency contacts for technical assistance.

c. If the head of the agency determines that the proposed rule will not have a significant economic impact on a substantial number of small businesses or small local government units, or both, the agency head shall certify such determination. Such certification shall be in writing, detail the factual basis for the determination, including data, methods, and assumptions, and be included in the notice of proposal. The certification, and its basis, shall be part of the rulemaking record.

d. Any person, small business, or small local government unit that stands to be adversely affected by the proposed rule may seek review of a certification provided pursuant to subsection c. of this section in the Appellate Division of the Superior Court, provided that the person, small business, or small local government unit files with the court within 45 days of publication of the certification. The court shall set aside any certification found to be arbitrary, capricious, or unreasonable, or issued without observance of procedure required by law.

7. (New section) a. An agency seeking to continue in effect an expiring rule by duly proposing for readoption of the rule, with substantive changes, prior to its expiration pursuant to subsection c. of section 10 of P.L.2001, c.5 (C.52:14B-5.1), shall consider, in addition to other analyses and statements required by law, the following factors to ensure that any adverse economic impact of the rule on small businesses or small local government units, or both, is minimized in a manner consistent with the objectives of the applicable statutes:

(1) the continued need for the rule;

(2) the nature of complaints or comments received from the public concerning the rule;

(3) the complexity of the rule;

(4) the extent to which the rule overlaps, duplicates, or conflicts with other federal and State rules; and

(5) 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.

b. The agency's consideration of, and findings regarding, these factors shall be described in the regulatory flexibility analysis issued on the proposed readoption of the rule in accordance with section 4 of P.L.1986, c.169 (C.52:14B-19).

c. An agency seeking to continue in effect an expiring rule without changes to the existing rule, or a proposed readoption with technical changes, shall consider the additional factors set forth in subsection a. of this section prior to providing notice of the adoption to the Office of Administrative Law. The agency's consideration of, and findings regarding, these factors shall be filed in writing with the notice of readoption, and a copy shall be provided to the New Jersey Business Action Center in the Department of State.

8. (New section) a. If, based upon the regulatory flexibility analysis conducted pursuant to P.L.1986, c.169 (C.52:14B-16 et seq.) or the Economic, Small Business, Small Local Government Unit, and Consumer Impact Statement prepared pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill), the agency determines that a rule is likely to have a significant economic impact on a substantial number of small businesses or small local government units, or both, the agency shall, prior to publishing a notice of proposed rulemaking pursuant to section 4 of P.L.1968, c.410 (C.52:14B-4), convene a Small Business and Small Local Government Unit Review Panel to obtain input on feasible regulatory alternatives.

b. The panel shall consist of nine members as follows:

(1) four members shall be agency personnel with subject matter and economic expertise;

(2) four members shall be individuals representative of affected small businesses or affected small local government units, or both. A member representative of an affected small business shall be identified in consultation with the New Jersey Business Action Center and relevant industry associations and chambers of commerce. The members shall be determined as follows:

(a) if a rule affects only small businesses, four members shall be individuals representative of affected small businesses;

(b) if a rule affects only small local government units, four members shall be individuals representative of affected small local government units; or

(c) if a rule affects both small businesses and small local government units, two members shall be individuals representative of affected small businesses and two members shall be individuals representative of affected small local government units; and

(3) one member shall be a representative designated by the Office of Administrative Law.

The members shall serve as long as may be necessary to complete a review of the prospective rule. Any vacancy in the membership of the panel shall be filled for the unexpired term in the manner provided by the original appointment.

c. The panel shall solicit, receive, and summarize advice and recommendations from representatives of at least 25 small businesses and small local government units of different industries and sizes regarding: (1) significant regulatory alternatives; (2) compliance or reporting timetables; (3) partial or full exemptions consistent with public health, safety, or general welfare; (4) the use of performance standards rather than design standards; and (5) any other approaches that would accomplish the objectives of applicable law without potential challenges.

d. The panel may review any draft material prepared in connection with the regulatory flexibility analysis required by section 4 of P.L.1986, c.169 (C.52:14B-19) or the Economic, Small Business, Small Local Government Unit, and Consumer Impact Statement prepared pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill), including any preliminary economic analyses, issue statements, or outlines of regulatory approaches, as those materials become available.

e. Not later than 60 days after convening, the panel shall issue a written report of its findings and recommendations to the head of the agency. The report shall be included in the rulemaking record and summarized in the preamble and in the regulatory flexibility analysis required by section 4 of P.L.1986, c.169 (C.52:14B-19) for the proposed rule.

f. This section shall not apply to an emergency adoption of a rule pursuant to subsection (c) of section 4 of P.L.1968, c.410 (C.52:14B-4); however, to the maximum extent practicable, the agency shall solicit input from at least 25 affected small businesses or affected small local government units, or both, prior to such adoption and shall conduct a panel review for any concurrent or subsequent non-emergency proposals addressing substantially similar subject matter.

9. (New section) a. At least once every 10 years, each agency shall review rules that have been determined, based upon the regulatory flexibility analysis conducted pursuant to P.L.1986, c.169 (C.52:14B-16 et seq.) or the Economic, Small Business, Small Local Government Unit, and Consumer Impact Statement prepared pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill), to have a significant economic impact on a substantial number of small businesses or small local government units, or both, to determine whether such rules should be continued without change, amended, or repealed to reduce potential challenges while achieving statutory objectives.

The review shall consider:

(1) the continued need for the rule;

(2) the nature of complaints or comments received;

(3) the complexity of the rule;

(4) the extent to which the rule overlaps, duplicates, or conflicts with federal, State, or local requirements;

(5) changes in technology, economic conditions, or other relevant factors; and

(6) the availability of alternatives that reduce potential challenges.

b. Each agency shall publish a review schedule, solicit public comments, and file review reports with the Office of Administrative Law for public access.

c. The review required pursuant to subsection a. of this section shall not be required if the adverse impacts of the rule were considered, and such consideration was documented and filed with the Office of Administrative Law, in accordance with section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill), at the time the rule was readopted.

10. (New section) a. A small business or small local government unit may commence an action in the Superior Court for injunctive relief to prevent the imposition of a penalty if the small business or small local government unit is subject to the penalty because: (1) the small business or small local government unit acted or failed to act due to the failure by an agency employee, officer, or agent with regulatory responsibility for that legal requirement to respond within a reasonable time to a specific written question; or (2) the small business or small local government unit acted or failed to act in reasonable reliance on inaccurate written advice given by such agency employee, officer, or agent. The action may be brought in the county where the property affected is located or, if no property is affected, where the dispute arose. The court may issue an order enjoining the imposition of the penalty if it determines that this subsection is applicable.

b. In any contested case in which a small business or small local government unit is the prevailing party, the tribunal shall award the reasonable costs and attorney’s fees incurred by the small business or small local government unit, unless the State’s position was substantially justified or special circumstances would make the award unjust.

11. (New section) The Office of Administrative Law shall, in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), adopt rules and regulations as necessary to implement the provisions of this section, including, but not limited to, timelines, identification of small business and small local government unit representatives, public availability of panel materials, and templates for panel reports and agency responses.

12. This act shall take effect on the first day of the sixth month following enactment.

STATEMENT

This bill modifies the scope of the “New Jersey Regulatory Flexibility Act” with regard to small businesses and small local government units.

The bill requires an agency to use, when developing rules, the consolidation or simplification of a compliance or reporting requirement for small businesses and small local government units as an approach to minimize the rule’s impact on small businesses and small local government units, so long as the public health, safety, or general public welfare is not endangered.

The bill also requires an agency to issue a regulatory flexibility analysis when proposing any rule for adoption, which must be included in the notice of the proposed rule.

Under the bill, an agency will employ special participation methods to facilitate greater participation from small businesses and small local government units in the rulemaking process. The agency will designate a small business regulatory coordinator, who will act as the primary contact for small business regulatory inquiries for the agency.

The bill requires an agency to also prepare an Economic, Small Business, Small Local Government Unit, and Consumer Impact Statement for each rule being proposed for adoption. Within 30 days after the adoption of any rule that has been determined to have a significant economic impact on a substantial number of small businesses or small local government units, or both, the promulgating agency will publish on its Internet website, and file with the Office of Administrative Law for public access, a plain language small business and small local government unit compliance guide. If the head of the agency determines that the proposed rule will not have a significant economic impact on a substantial number of small businesses or small local government units, or both, the agency head must certify such determination. Any person, small business, or small local government unit that stands to be adversely affected by the proposed rule may seek review of such certification in the Appellate Division of the Superior Court, provided that the person, small business, or small local government unit files with the court within 45 days of publication of the certification.

Under the bill, an agency seeking to continue in effect an expiring rule by duly proposing for readoption of the rule, with substantive changes, prior to its expiration, must consider a series of factors, in addition to the other analyses and statements required by law, which are set forth in the bill. This review will be described in the regulatory flexibility analysis issued on the proposed readoption of the rule. An agency seeking to continue in effect an expiring rule without changes to the existing rule, or a proposed readoption with technical changes, will consider the same additional factors and file such consideration in writing, with a copy to be provided to the New Jersey Business Action Center in the Department of State.

The bill also requires an agency to convene a Small Business and Small Local Government Unit Review Panel if the agency determines that a rule is likely to have a significant economic impact on a substantial number of small businesses or small local government units, or both. The panel will consist of nine members, who will serve as long as may be necessary to complete a review of the prospective rule. The panel will solicit, receive, and summarize advice and recommendations from representatives of at least 25 small businesses and small local government units of different industries and sizes regarding: (1) significant regulatory alternatives; (2) compliance or reporting timetables; (3) partial or full exemptions consistent with public health, safety, or general welfare; (4) the use of performance standards rather than design standards; and (5) any other approaches that would accomplish the objectives of applicable law without potential challenges. The panel will issue a report of its findings and recommendations to the head of the agency not later than 60 days after convening. Emergency adoptions of a rule will not be subject to these provisions. However, to the maximum extent practicable, the agency will solicit input from at least 25 affected small businesses and affected small local government units prior to such adoption and will conduct a panel review for any concurrent or subsequent non-emergency proposals addressing substantially similar subject matter.

Under the bill, each agency will, at least once every 10 years, review rules that have been determined to have a significant economic impact on a substantial number of small businesses or small local government units, or both, to determine whether such rules should be continued without change, amended, or repealed. Each agency will publish a review schedule, solicit public comments, and file review reports with the Office of Administrative Law for public access. The review will not be required if the adverse impacts of the rule were considered, and such consideration was documented and filed with the Office of Administrative Law, at the time the rule was readopted.

The bill also permits a small business or small local government unit to commence an action in the Superior Court for injunctive relief to prevent imposition of a penalty if the small business or small local government unit is subject to the penalty because: (1) the small business or small local government unit acted or failed to act due to the failure by an agency employee, officer, or agent with regulatory responsibility for that legal requirement to respond within a reasonable time to a specific written question; or (2) the small business or small local government unit acted or failed to act in reasonable reliance on inaccurate written advice given by such agency employee, officer, or agent.