Government Regulations - What Helps, What Hurts?

"The most terrifying words in the English language are: I'm from the government and I'm here to help."

-- Ronald Reagan

Workers' compensation. Family leave. Title VII. ADA. All government initiatives. All "helpful." But the devil is in the details.

Some business people argue that they are being asked to adhere to too many regulations, that the line between the breathing room businesses need to prosper and the welfare of workers is often buried in paper.

"We have no argument with regulations that keep workers healthier and safer," says Milan P. Yager, executive vice president of the National Association of Professional Employer Organizations (NAPEO). "We just want legislators and regulators to ask themselves, 'Do these rules always have to be so complex?'"

In June, NAPEO released the results of a survey focusing on employment regulations and how they affect small business. The responses revealed executives who recognize the importance of workplace regulations, but chafe under their increasing complexity.

Almost to a person, they said that local, state, and federal employment regulations have proliferated in the last decade; more than half said these regulations had grown faster than other types of rules. More than half also said that they are spending at least 10 percent more time complying with these workplace regulations than they did a decade ago. Some managers are spending more than a third more time on compliance than a decade ago.

[The full report, "Following the Rules: Small Businesses Cope with a Complex New World of Workplace Regulations," is available at www.napeo.org.]

Best and Worst Lists

The survey uncovered an interesting dichotomy. While 37 percent of the respondents said that workers' compensation was the single toughest employment law to follow, almost half also chose it as the one most helpful to workers.

Reporting and paying federal income and employment taxes for employees ranked as the second most onerous human-resources chore, according to 28 percent of the respondents.

Ranked third in the "tough to comply with" list (at 26 percent) was the controversial Family Medical Leave Act, which requires companies of more than 50 employees to provide up to 12 weeks a year of unpaid leave for family and medical emergencies. However, 42 of the survey respondents ranked FMLA second on the most-beneficial list.

The survey posed a multiple-choice question regarding the FMLA: "The Family Medical Leave Act has been controversial, and recently the federal government has undertaken a review of the regulations. Would you support: 1) allowing less leave time; 2) narrower reasons for leave; 3) leave the regulations alone; or 4) expand the ability to take leave?"

The respondents were almost evenly split in their answers. A surprisingly large percentage favored leaving the law unchanged (41 percent), and eight percent favored expanding employees' ability to take leave. The other half said they would support cutting the leave time available from the 12 weeks the law allows (21 percent), or would support narrower reasons for taking leave (30 percent).

The third most beneficial regulation, survey respondents said, is HIPAA, another hugely complex regulation.

Who Was Talking?

A third of the 429 companies responding to the NAPEO survey employ 10 or fewer workers; a quarter employ 11 to 20; 22 percent employ 21 to 50; 10 percent employ 51 to 100; and nine percent employ more than 100.

Twenty-seven percent of the companies are headquartered in the south-Atlantic region: Delaware, Washington, D.C., Florida, Georgia, Maryland, the Carolinas, Virginia and West Virginia. Twenty-five percent are in the west-south-central region: Arkansas, Louisiana, Oklahoma, and Texas. Twenty percent are the east-north-central region: Illinois, Indiana, Michigan, Ohio, and Wisconsin. Smaller percentages (eight percent or less) are in other regions.

By far the most respondents -- 30 percent -- are in services. Sixteen percent are in construction; 10 percent, manufacturing; and seven percent are nonprofits. Other trades with at least five percent each are technology, medical providers, and financial services.

What They Were Talking About

The 13 major employment laws and regulations cited in the NAPEO survey were:

?Federal employment taxes and reporting

?State and local taxes and reporting

?Fair Labor Standards Act (FLSA), or your state wage and hour laws if they supersede the federal law (sets minimum wage and overtime regulations)

?Workers' compensation

?Employee Retirement Income Security Act (ERISA)

?Immigration and Reform Control Act (IRCA)

?Consolidated Omnibus Budget Reconciliation Act (COBRA)

?Americans With Disabilities Act (ADA)

?Title VII, which prohibits discrimination by race, color, religion, sex, or national origin

?Family Medical Leave Act (FMLA)

?Involuntary deductions (employers are required to garnish wages of employees to collect child support, unpaid taxes, etc.)

?Health Insurance Portability and Accountability Act (HIPAA)

?Worker Adjustment and Retraining Notification Act (WARN), which requires large employers to give employees a minimum of 60 days written notice of layoffs

Another Year, Another Regulation

A solid majority (87 percent) of the NAPEO respondents said they thought local, state, and federal employment regulations have increased in the past 10 years, and it has been expensive. The cost of compliance with federal regulations alone exceeded $1 trillion in 2004, a "hidden tax" equal to half the size of the federal budget, says the conservative Competitive Enterprise Institute.

Money well spent? Yes and no. Along with the "best for workers" list, respondents were asked to name the top three of the 13 regulations mentioned in the survey they considered least beneficial to workers.

More than a third of the companies -- 35 percent -- named the Immigration Reform and Control Act, the 1986 law that made it an offense for employers to knowingly hire illegal aliens in an attempt to curtail an earlier wave of migration. The law also granted amnesty to almost three million people who were in the country illegally at the time.

Also not getting much respect from the respondents were the involuntary deductions that courts and government agencies require employers to make, such as garnishing wages to collect child support or unpaid taxes. One third said that this was the least helpful regulation for employees. Another third had little use for WARN.

Be Careful What You Ask For

All of this regulation began with such good intentions. Shortly after the first factories rose more than two centuries ago in England and America, well-meaning people began trying to protect laborers, many of them children, from the arduous hours, meager wages, and hideous injuries. First came child-labor laws, then abolition of the 70-hour work week, then workers' compensation, then minimum wage, the right to join a union, equal opportunity, and occupational safety.

It has all become so complicated.

Last year there were 787 rules in the federal regulatory pipeline with an impact on small businesses. These businesses, with fewer resources than large corporate entities, find it tough to comply with the blizzard of workplace regulations.

"Today, businesses are spending more and more time on regulatory paperwork. However, it is the smaller businesses most adversely impacted by this demand, as these are the companies with the fewest resources," says Dale Hageman, CEO/president of Accord Human Resources, Inc., in Oklahoma City, Okla. "So while a large business might commit five employees to meeting this challenge, these five employees represent only a small portion of the company's overall workforce and available resources. For a small business, however, five employees may represent one-quarter of its workforce."

In 2005, small businesses --- those with fewer than 20 employees -- spent more than $7,600 per employee complying with regulations, compared with $5,300 for companies with more than 500 workers, the federal Small Business Administration estimated. Workplace regulations alone cost the smallest businesses more than $900 a year per employee compared with $840 for the largest companies.

Some business people argue that in some areas, in some cases, we have gone too far. Critics say it's not just the profusion of new regulations; it's also the bureaucratese in which many of these rules are couched.

"The most frequently cited problem by small business when complying with federal regulations is unclear or confusing instructions," says the National Federation of Independent Business, the small-business lobby. "Simplicity can save small business and the federal government time, effort, and money."

Perhaps the government should heed the advice of renowned architect Ludwig Mies van der Rohe: "Less is more."