A recent court ruling on employee drug testing policies will help small businesses have a bigger say in the federal regulatory process, according to advocacy and trade groups.
A U.S. Court of Appeal last month ordered the Federal Aviation Administration to re-evaluate the extra costs of a proposed drug-testing program, which would have required all aircraft-repair subcontractors at every tier -- from machine shops to dry cleaners -- to test their employees.
The FAA says the stricter rules are necessary to ensure that "all people who perform any type of safety-sensitive maintenance function be subject to testing, even if the maintenance duties are not traditionally considered to be aviation-related," according to government documents.
Under the Regulatory Flexibility Act, federal agencies are required to assess the economic impact of proposed regulations on small businesses, while considering less costly alternatives. In its decision, the court ruled that the FAA had failed on both accounts.
"The regulations expressly require that the employees of contractors and subcontractors be tested," Judge Karen LeCraft Henderson said in the court's ruling, adding that the agency hadn't fully taken them into account.
The FAA had initially determined that fewer than 300 subcontractors would be affected by the new rules. According to the Aeronautical Repair Station Association, a Washington-based trade group, that number is closer to 20,000.
"We're not against drug testing, but this is one of the most ridiculous rules we've ever come across," said Sarah McLeod, the group's executive director. "The industry's job is to tell the agency when it's wrong -- this move would do nothing to improve safety, but would add significantly to costs."
McLeod, whose group led the legal challenge, said most aviation repair subcontractors would look for work elsewhere, rather than take on the added costs and responsibility of testing their employees. As a result, repair shops would be forced to move many services in-house, resulting in higher costs.
McLeod said the court ruling was good news for all small business. "It shows that courts are getting more suspicious of federal agencies in these sorts of challenges," she said. "You can't just say small businesses won't be impacted by new rules. You have to prove it with your own numbers, and these will be scrutinized."
Bruce Lundegren, the assistant chief council for the Small Business Administration's Office of Advocacy, said most federal agencies do a good job in considering small businesses in their impact assessments.
Last year, 16 federal regulations were challenged under the federal Regulatory Flexibility Act, resulting in a savings to small businesses of $7.2 billion, according to advocacy office figures.
"In this case, the FAA was put on notice that the regulation it proposed affected far more entities than they initially reported," Lundegren said.
Lundegren added that the decision means the agency will have to do a more robust analysis, identifying who is covered by the proposed rule and how much it's going to cost them. Also, it will now have to seek alternative regulations that will achieve the same goals.
"It's a very important decision for small businesses," Lundegren said. "It demonstrates that the Regulatory Flexibility Act can't be taken lightly."