What You Don’t Know Can Surprise You
Preparing for government regulations can reduce small business anxiety.

By Kelly Lathrop

Every year, small business owners get a rude awakening about government regulations that affect their businesses and mean a change in compliance practices.

For example, with the first quarter of 2005 just completed, many Missouri small business owners have discovered that the taxable base to cover unemployment benefits has gone up. In 2005, businesses are taxable for the first $11,000 in revenue, up from $8,000 last year. Many owners did not realize they would face an increase until they determined their taxable wage base in preparing their first-quarter tax payments.

Regulatory Burden
Every year, the number and scope of government regulations, both big and small, surprise small business owners. In 2004, the Small Business Administration’s Office of Advocacy announced it had saved small business owners more than $17 million in regulatory compliance. If that’s how much they saved, think how much compliance costs: reportedly about $7,000 annually per employee for small businesses.

Fortunately, Congress is beginning to take seriously the burden regulations place on small businesses. The Regulatory Flexibility Act forces government agencies to consider small business concerns in the regulatory process. Some members of Congress have pledged to fix a few holes in the law, which should reduce the cost of regulatory compliance even more.
    
Government regulations, whether federal, state or local, cover numerous issues and can wreak havoc on the unprepared small business owner. Following are just three regulations, enacted in January that may have slipped under the radar of many business owners. In each of the cases mentioned here, preparation and planning can help business owners reduce the headaches created by increased or changing government regulations.

New Hiring Regulation
In 2005, as part of the Fair Credit Reporting Act, businesses that decide not to hire an applicant based on information in a consumer report must now communicate specific information to the prospective employee:
•    The contact information of the consumer reporting agency issuing the report
•    That the consumer-reporting agency did not make the hiring decision and is not able to explain why the decision was made
•    That the applicant has a right to obtain a disclosure of the file if it is requested within 60 days
•    That the applicant has a right to dispute the accuracy of the report

In addition, employers are required to maintain records involving consumer-reporting agencies for six years, up from two years previously. Employers who are prepared to communicate issues involving hiring decisions will avoid scrambling and potential mistakes that come from trying to comply on the fly.

New Firing Regulation
This year, Missouri’s Division of Labor and Industrial Relations has made it more complicated to terminate an employee for drug or alcohol abuse on the job. According to the Missouri 2004 Employment Security regulations, employers no longer can expect “reasonable suspicion” to serve as an adequate defense for an employee’s termination.

To collect evidence, employers now are expected to send suspected employees to a laboratory approved by the U.S. Department of Transportation for blood-alcohol testing. Tests are done in accordance with Department of Transportation drug-testing rules. The employee can ask for a second “confirmation” test, which is at the employee’s expense, only if he or she fails the first test.

This regulation should be the tipping point for Missouri small business owners who have not yet developed and communicated workplace drug policies. The new regulation encourages businesses to have a written policy and share it with workers.

New Benefits Regulation
The Small Business Health Fairness Act established rules for developing association health plans. These rules allow groups of small businesses to band together and offer health care coverage as a larger group. This opens broader choices for small businesses.

As you can imagine, association health plans are complex and must maintain reserves, develop boards of trustees and comply with a range of solvency provisions. The choice for small businesses comes down to broader coverage with higher premiums or lower premiums with less coverage.

Business owners often are torn between the paternalistic need to take care of employees and the financial cost of broad and deep health coverage. By developing a health care philosophy, business owners can begin making rational decisions about the new health care choices before them. By determining what constitutes appropriate coverage and what is a reasonable amount to pay for it, they can identify a workable solution.

These are just three of the new regulations small business owners face in 2005. Numerous federal and state agencies offer online newsletters that can help business owners keep government regulations on their radar.  A good place to start is the Small Business Adminstration’s publication. You can find it at www.sba.gov/advo/newsletter.html.

By keeping abreast of changes and preparing for as many of the regulations as possible, small business owners can avoid surprises.

Kelly Lathrop is the director of benefit services for Axcet HR Solutions, located in Lenexa. Darren DuPriest of Clarence M. Kelley & Associates and Tim Speir of Unemployment Insurance Service also provided information for this column. Lathrop can be reached at (913) 383-2999.