NLRB Notice‑Posting Rule Economic Impact Analysis for Small Businesses

Federal Register/Vol. 76, No. 168/Tuesday, August 30, 2011/Rules and Regulations 54043 the Board does not have the means to calculate the number of small businesses within the Board’s jurisdiction. Accordingly, the Board assumes for purposes of this analysis that the great majority of the nearly 6 million small businesses will be affected, and further that this number is a substantial number within the meaning of 5 U.S.C. 601. However, as discussed below, because the economic impact on those employers is minimal, the Board concludes that, under 5 U.S.C. 605, the final rule will not have a significant economic impact on any small employers. The RFA does not define ‘‘significant economic impact.” 5 U.S.C. 601. In the absence of specific definitions, “what is ‘significant’ * * * will vary depending on the problem that needs to be addressed, the rule’s requirements, and the preliminary assessment of the rule’s impact.” See A Guide for Government Agencies: How to Comply with the Regulatory Flexibility Act, Office of Advocacy, U.S. Small Business Administration at 17 (available at hitp://www.sba.gov) (SBA Guide). As to economic impact and whether it is significant, one important indicator is the cost of compliance in relation to revenue of the entity or the percentage of profits affected. Id. at 17. More specifically, the criteria to be considered are: e Whether the rule will lead to /ong- term insolvency, i.e., regulatory costs that significantly reduce profits; e Whether the rule will lead to short- term insolvency, i.e., increasing operating expenses or new debt more than cash reserves and cash flow can support, causing nonmarginal firms to close; e Whether the rule will have disproportionate effects, placing small entities at a significant competitive disadvantage; and e Whether the rule will result in inefficiency, i.e., in social costs to small entities that outweigh the social benefits resulting from the rule. Id. at 26. Applying these standards, the Board concludes that the economic impact of its notice-posting rule on small employers is not significant. The Board has determined that the average cost of complying with the rule in the first year for all employers subject to the NLRA will be $64.40. It is unlikely in the extreme that this minimal cost would lead to either the short- or long-term insolvency of any business entity, or place small employers at a competitive disadvantage. Since this rule applies only to organizations within the NLRB’s jurisdictional standards, the smallest employer subject to the rule must have an annual inflow or outflow across state lines of at least $50,000. Siemons Mailing Service, 122 NLRB 81 (1959). Given that the Board estimates that this tule will cost, on average, $64.40, the total cost for the smallest affected companies would be an amount equal to less than two-tenths of one percent of that required annual inflow or outflow (.13%). The Board concludes that such a small percentage is highly unlikely to adversely affect a small business.193 And, in the Board’s judgment, the social benefits of employees’ (and employers’) becoming familiar with employees’ NLRA rights far outweigh the minimal costs to employers of posting notices informing employees of those rights.194 For all the foregoing reasons, the Board has concluded that the final rule will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605. As discussed in the NPRM, because it assumes that a substantial number of small businesses will be required to comply with the rule, the Board preliminarily considered alternatives that would minimize the impact of the tule, including a tiered approach for small entities with only a few employees. However, as it also explained, the Board rejected those alternatives, concluding that a tiered approach or an exemption for some small entities would substantially undermine the purpose of the rule because so many employers would be exempt under the SBA definitions. Given the very small estimated cost of compliance, it is possible that the burden on a small business of determining whether it fell into a particular tier might exceed the burden of compliance. The Board further pointed out that Congress gave the Board very broad jurisdiction, with no suggestion that it wanted to limit coverage of any part of the NLRA to only larger employers. The Board also believes that employees of small employers have no less need of a Board notice than have employees of larger employers. Finally, the Board’s jurisdictional standards mean that very small employers will not be covered by the rule in any case. 75 FR 80416. (A summary of the Board’s discretionary jurisdictional standards appears in § 104.204, below.) Thus, although 193 Tn reaching this conclusion, the Board believes it is likely that employers that might otherwise be significantly affected even by the low cost of compliance under this rule will not meet the Board’s jurisdictional requirements, and consequently those employers will not be subject to this rule. 194 See further discussion in section II, subsection C, Factual Support for the Rule, above. several comments urge that small employers be exempted from the rule, the Board remains persuaded, for the reasons set forth in the NPRM, that such an exemption is unwarranted. 195 Some comments contend that, in concluding that the proposed rule will not have a significant impact on small employers, the Board understates the rule’s actual prospective costs. One comment, from Baker & Daniels LLP, argues that the Board improperly focuses solely on the cost of complying with the rule—i.e., of printing and posting the notice—and ignored the “actual economic impact of the rule’s effect and purpose.” According to this comment, it is predictable that, as more employees become aware of their NLRA rights, they will file more unfair labor practice charges and elect unions to serve as their collective-bargaining representatives. The comment further asserts that the Board has ignored the “economic realities of unionization,” specifically that union wages are inflationary; that unions make business less flexible, less competitive, and less profitable; and that unions cause job loss and stifle economic recovery from recessions. Accordingly, this comment contends that ‘‘the Board’s RFA certification is invalid, and [that] the Board must prepare an initial regulatory flexibility analysis.” Numerous other comments echo similar concerns, but without reference to the RFA. The Board disagrees with the comment submitted by Baker & Daniels LLP.196 Section 605(b) of the RFA states that an agency need not prepare an initial regulatory flexibility analysis if the agency head certifies that the rule 195 Cass County Electric Cooperative says that, after estimating the average cost of compliance, “the NLRB quickly digresses into an attempt to estimate he cost of the proposed rule on only small businesses.” The Board responds that in estimating he cost of the rule on small businesses, it was doing what the RFA explicitly requires (and that ocusing on small businesses, which comprise more han 99 percent of potentially affected firms, is hardly a “digression”). The comment also asserts hat the Board concluded “‘that the cost of estimating the implementation cost will likely exceed the cost of implementation, and thus is not warranted. At best, this is a poor excuse to justify he rule.” This misstates the Board’s observation hat “Given the very small estimated cost of compliance, it is possible that the burden on a small business of determining whether it fell into a particular tier might exceed the burden of compliance.” This observation was one of the reasons why the Board rejected a tiered approach to coverage for small entities, not an ‘excuse to justify the rule.” 75 FR 80416. 196 In any event, the comment from Baker & Daniels LLP and related comments are difficult to square with the assertions made in numerous other comments that the notice posting is unnecessary because employees are already well aware of their NLRA rights and have made informed decisions not to join unions or seek union representation. HOUSE_OVERSIGHT_022314