What is a “Small Business,” Exactly? Two Concepts from OSHA’s Silica Proposal

OSHA’s proposed new silica standards promise to improve the health and safety of more than two million workers across the U.S. By reducing exposures to respirable silica dust, the standards are expected to save 700 workers’ lives and prevent 1,600 new cases of silicosis every year. Of course, these impressive benefits come at a cost to employers and those costs will be a major talking point for the business community as OSHA’s proposal moves through the rulemaking process. One argument that we’re sure to hear from the Chamber of Commerce and its allies is that the costs of complying with the new standards will fall disproportionately on small businesses.  The plight of small business owners somehow always seems to pull at the heartstrings of the big businesses owners when federal agencies propose new public health and environmental protections – in stark contrast to the rest of the time the big business owners spend trying to knock their competitors out. OSHA’s proposed silica standards include some surprising numbers regarding the costs of compliance.

Under the federal courts’ reading of the OSH Act, the agency must conduct industry-by-industry “feasibility” analyses for new standards. OSHA’s regulatory team studiously researches the technologies available for reducing or eliminating a given hazard (in this case respirable silica dust), the costs of implementing those technologies, and the ability of each industry to implement the controls without causing severe economic harm to the industry as a whole. The Regulatory Flexibility Act added to the agency’s burdens by mandating that OSHA study many proposed rules’ effects on small businesses.

OSHA has published a preliminary account of its small business analysis for the silica proposal, with numbers that are sure to be front and center in industry’s talking points. Under the Small Business Administration’s (SBA’s) definitions of “small business:”

• Two-thirds of the costs of complying with the standards would be borne by small businesses;
• Small businesses would be responsible for more than half the costs of compliance in 79 of the 129 industries studied (61 percent); and
• Small businesses would be responsible for more than 90 percent of the costs in 21 of the 129 industries studied (16 percent).

Remarkable, right? Well, as we’ve pointed out before, the SBA’s definition of “small business” doesn’t necessarily jibe with the picture in your mind of a mom-and-pop general store.  For instance, in the “ship building and repair” industry, a company can have up to 1,000 employees and still be considered a small business. That definition is so broad that it encompasses every single business entity potentially affected by the new silica standards.

OSHA deals with more typical small businesses – of the mom-and-pop variety – on a daily basis, so the agency provided some additional detail in the economic analysis that paints a more reasonable picture. In addition to using industry-specific size standards set by SBA, OSHA ran the numbers for business entities with fewer than 20 employees (incidentally, the standard that we’ve urged Congress to impose on SBA). Under the fewer-than-twenty-employee standard:

• Only 11 percent of the costs of complying with the general industry and maritime standards would be borne by small businesses;
• One-third of the costs of complying with the construction standard would be borne by small businesses;
• Small businesses would be responsible for at least half of compliance costs in just three of the 129 industries (2 percent); and
• No industry would see small businesses responsible for more than 90 percent of the costs of compliance.

Going back to the ship building and repair industry, OSHA’s reality-based small business standard, as I’ll call it, changes the picture significantly. Under that standard, only 11 percent of the business entities potentially affected by the proposal would be considered “small.” And those businesses would shoulder 2.4 percent of the compliance costs in the industry, rather than 100 percent.

In addition, when we urge policymakers to make distinctions about small businesses for the purposes of regulation, we must also recognize that the harms that regulations address do not make such distinctions.  A worker isn’t any less harmed because he contracts silicosis while working for a company with less than 20 workers.  So, it’s important we keep all these issues in mind when we talk about small businesses and regulation. 

OSHA has provided interested parties with a great service by including the reality-based size standard in the small business analysis. SBA has rigged the rulemaking process to make it seem like federal programs have a more painful economic effect on small businesses than the programs really do, and it’s great that OSHA has done something to change the terms of debate.