In January President Trump signed an executive order meant to kneecap the regulatory apparatus that many small-business owners loathe. The order required that for every new regulation issued two would be eliminated, a process conceptually appealing if more complicated than the math suggests. But even if the administration could simply tug rules from the edifice, like a master Jenga player, where should it start in order to deliver the biggest gains for small companies?
At Inc.'s request, Vistage a peer-to-peer organization for CEOs and owners of small-to-midsize businesses, surveyed its membership about what rules they found most onerous. More than 800 responded. (The survey took healthcare off the table--much as the House did last week--given that it would likely be too big and hairy for this particular discussion.)
Not surprisingly the Dodd-Frank Wall Street Reform and Consumer Protection Act, viewed broadly by many as a constraint on lending, was called out frequently. But labor regulations attracted the most brickbats. "People are where their energy is focused right now," says Joe Galvin, chief research officer at Vistage. "They want greater wage flexibility and greater ability for the CEO to make decisions that allow them to bring in the right people and keep them in place."
Here are some of the rules business owners want scrapped:
A U.S. Department of Labor regulation that roughly doubled the salary threshold at which companies can avoid paying overtime floats in limbo, following a court injunction on the eve of implementation. Small businesses hated the rule, which forced many to raise pay or switch salaried workers to hourly status. Even if the rule is allowed to die, they are likely stuck with changes already made. Still they'd prefer it go away.
Roddey Player, president and CEO of Queen City Audio, Video and Appliance, a 75-employee company in Charlotte, North Carolina, regrets the need to switch about 15% of his workforce to hourly. "It created some tense discussions," he says. Although the rule never went into effect, at Queen City, it's a done deal. "We had to notify our employees 30 days ahead of time before any salary or payroll change," says Player. "It would have caused a bigger commotion if we'd retracted."
But Player thinks employees overall fare better under the old system. "People go to fill out a mortgage application or credit cards, and they want to be able to put down their salary," he says. "A salary adds a level of stability."
2. Equal employment reporting
The U.S. Equal Employment Opportunity Commission demands that--starting this year--companies not only report on the gender, race and ethnicity of their work forces but also break out data on pay and hours worked for each category. Some small-business owners worry that the reports don't take sufficient account of factors like experience that may affect pay levels. Others, who manage project-based or otherwise volatile work forces, complain about excessive reporting.
That burden is especially great on companies in the human-resources industry, such as temp firms and PEOs. Evergent Group, a staffing, recruiting and payroll company in San Ramon, California, must provide data on its 100 corporate employees--but also on another 5,000 who go out on assignment and for whom the company receives pass-though revenue. "That is 5,000 applications and bits of data that now have to be manually tracked, consolidated, audited and reported," says Evergent President Michael Larkins. The cost to Evergent, he says, is $70,000 to $100,000 a year. "The question is: Are there other ways to enforce equal pay?"
3. Prevailing wage
Not all regulations bugging small business are recent creations. The Davis-Bacon Act dates back to 1931 and mandates that companies on public-works projects pay employees the prevailing local wage. Enforcement is known to be strict on this Department of Labor rule, and penalties can be harsh.
Small companies complain about the complexity of adjusting wages for each worksite and also about the lack of clarity around job classifications. "If you use the wrong classification"--for example, misclassify an asbestos worker as a plumber--"you may end up paying them too little" and be punished, says Wendell Sawyer, CEO of Active Treatment Systems, a 20-employee water-treatment company in Loomis, California. "Or you might be paying them too much," and consequently not get the job because your bid is too high.
The competitive cost of playing by the rules bothers Sawyer more than the 5% to 10% additional cost of payroll management. "One of my competitors likes to get the lowest possible cost. So they find some classifications for their employees that is almost ridiculous," he says. "But if their wage rate is less than mine, then they typically will get the work."
4. Conflict minerals
A provision of Dodd-Frank requires that companies disclose use of minerals produced in war-torn regions: specifically the Democratic Republic of Congo and surrounding nations. That means small manufacturers must audit their supply-chains down through layers of even smaller vendors, who may have difficulty producing documentation.
Magnet-Schultz America, a 110-employee maker of electromagnetic and electrohydraulic devices in Chicago, uses steel with other materials blended in to achieve certain properties. "This requires us to inquire of the steel distributor, who then has to inquire of the steel manufacturer, who then has to find out where supposedly their raw materials come from," says Greg Roskuszka, the company's president and CEO. "It is something that in the last two years we have spent hundreds of hours on."
"Realistically I can't tell you whether these people are reporting factually to us," says Roskuszka. "Or are they just placating us because we are trying to follow the regs?"
Small companies and farms rail against the 2015 Waters of the United States law that expanded Army Corps of Engineers jurisdiction over bodies of water as small as ponds and creeks. They say WOTUS makes it harder for business owners who, for example, want to pave a parking lot or add onto their buildings. They also complain about regulation of storm-water runoff. Among their concerns: High fines imposed on home builders over water containment on construction sites.
Construction and agricultural businesses aren't the only ones affected. Dan Glier, owner of Glier's Meats, in Covington, Kentucky, says geography puts him at a disadvantage. His father founded the 28-employee manufacturing business after World War II in a building that sits at the lowest spot in the city, surrounded by hills that spill water into the parking lot. "All the water in the neighborhood comes to my property," says Glier, "so I get charged for storm water that I did not have anything to do with. Tell the good Lord: Stop putting rain down here."
Business owners typically don't quibble about the mandate to make premises accessible to people with disabilities. What they don't like are the specifications for things like sink and counter heights and the width of doorways. Some say their companies are accessible even if they don't meet those exact criteria, yet they remain vulnerable to significant fines under the American with Disabilities Act. (Several agencies administer ADA. Building access falls under the U.S. Department of Justice.)
Steve S. Keihner, founder of the 50-employee outdoor furnishings business Terra Outdoor Living, paid around $40,000 after one of his seven stores was visited several times by a man in a wheelchair whom Keihner characterized as a professional litigant who turns up at businesses looking for infractions. (In December Anderson Cooper reported on 60 Minutes about the practice--known as "drive-by lawsuits." The segment angered many disabled viewers.)
Keihner admits the store was out of compliance--he says he has made required changes there and, where necessary, at his other stores. "Our counter was off by an inch," he says. "The whole bathroom had to be reformatted even though a handicapped person could get in and use it." Among the violations: A disabled parking spot sign that did not specify the fine.
7. Industry-specific regs
Many respondents complained about regulations specific to their industries. Those included restrictions on the hours worked by truck drivers; rules related to the least invasive medical devices; and new requirements for food labels.
Construction company owners were the most vocal. Often cited was a rule regulating silica in the workplace that goes into effect in June. Silica dust is released when workers break up concrete or stone and can be inhaled: a health threat. The industry says compliance with the new rules is expensive and argues that better enforcement of existing rules would essentially solve the problem.
The new rule "is going to affect production and costs and even bidding," says Victor Macri, president and CEO of VMJR Companies, a Glen Falls, New York construction business that employs about 50 people year-round. He resents not only the need to purchase new equipment but also what he says is a too-short deadline. "We need time to put together written procedures to comply with the standards," Macri says.
Some respondents shrugged off the federal burden, instead blaming states and localities for most of their pain. Others argued in favor of government oversight. Seth Gray, co-founder and CEO of Cement Marketing, a 16-employee digital agency in Columbus, Ohio, mentioned the overtime rule, which raises his company's labor costs. "But I don't have an issue with that," he says. "Borrowing from my employees by not paying them overtime does not strike me as right."
Regulations "force business owners to think longer term about the decisions we make," says Gray. "If we are not forced to think long term, we are going to be in a world of hurt."