March 14, 2011
On March 9, 2011 Representative Torrey Westrom (IR Elbow Lake) introduced HF 997, a bill entitled the “Small Business Bill of Rights – Regulatory Fairness Act.” The bill was brought before the Minnesota House Civil Law Committee where Representative Westrom and Mike Hickey of the National Federation of Independent Business (NFIB) testified in support of the measure. The bill has a number of provisions that are designed to “level the playing field” for small businesses that are subject to state regulation. Representative Westrom asked environmental law attorney Joe Maternowski, who has experience as both a prosecutor and an attorney representing parties before the Minnesota Pollution Control Agency in enforcement matters, to testify in support of the bill.
Small businesses and their owners are subject to regulations and inspections and often find themselves contesting the orders of state agencies. In some cases penalty demands can cripple a small business and its owners. In cases where State authorities seek a large penalty but do not have a basis for their case, a demand may ultimately be deemed to be excessive. HF 997 is designed to introduce measures of fairness into the administrative process and in cases arising out of State laws or regulations.
- First, the bill creates penalty factors to be considered by state agencies and courts in assessing civil penalties. The bill provides that in its notice, order or demand for a penalty the agency shall document the application of the factors and that the regulated party be provided with such documentation 60 days in advance of the filing of and administrative or civil action.
- Second, the bill contains revisions to the Minnesota Equal Access to Justice Act (MEAJA) that broaden the scope of small business eligibility (revising the annual eligibility revenue threshold from $7 million up to $30 million). The change is being made to ensure that eligible small businesses, those with up to 500 employees as stated in current law, may seek relief under the law.
- Third, the bill provides a second avenue of recovery under MEAJA in cases where the court or an administrative law judge determines that the State’s agency’s demand was excessive. Under the current law, an eligible party may seek an award of fees and costs if a court or administrative law judge determines that the State’s case was not substantially justified. That term is defined to mean that the State did not have a substantial basis in law and fact to bring its case before and during the trial or hearing. The excessive demand language has been adopted by the U.S. Congress in the federal Equal Access to Justice Act.
- Finally, the bill expands MEAJA’s applicability to provide for the recovery of fees and costs in cases filed in district court where municipalities, which are defined to include cities, counties, towns, school districts and other units of local government are determined to be not substantially justified in pursuing cases or where it is determined that there was an excessive demand.
In testimony before the House Civil Law Committee environmental law attorney Maternowski discussed his past experience on cases in the environmental law field where he has represented small businesses on hazardous waste and stormwater matters. Maternowski noted that despite their good intentions and best efforts many small businesses struggle to maintain compliance.
Maternowski noted that he was not testifying on behalf of any client, but because he believed that the process of assessing penalties needed to be fair. He noted that: “The complexity of environmental regulations makes it very difficult for many smaller firms to comply. When penalties are assessed, they can be a crippling blow to a business and its owners.” Environmental law attorney Maternowski noted that in the environmental area Minnesota State statutes provide for penalties at $10,000 per day per violation for most violations and penalties of $25,000 per day per violation of hazardous waste rules can be devastating for many businesses. Maternowski noted that the penalty factor provisions are useful. The use and application of the factors would ensure that State agencies and reviewing court or judge properly balance factors such as the gravity and harm of potential violations and willfulness of the violation with other factors including the costs incurred by business to correct the violations, penalties issued to similarly situated parties for similar violations and other economic factors affecting the feasibility or practicality of compliance.
A copy of HF 997 can be found at: https://www.revisor.mn.gov/bin/bldbill.php?bill=H0997.0.html&session=ls87. The bill will be heard again in the Minnesota’s House Civil Law Committee and a Senate companion will soon be introduced. To learn more about the status of this legislation to support the rights of small business, please see:https://www.revisor.mn.gov/bin/getbill.php?number=HF0997&session=ls87&version=list&session_number=0&session_year=2011.
The views contained within this entry and on this website are my own and do not constitute those of Hessian & McKasy, a Professional Association.
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