![[logo] US EPA](http://www.epa.gov/epafiles/images/logo_epaseal.gif){kind=logo}
Small Business Compliance Policy
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
[Federal Register: April 11, 2000 (Volume 65, Number 70)]
[Notices]
[Page 19629-19634]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11ap00-153]
[[Page 19629]]
-----------------------------------------------------------------------
Part VIII
Environmental Protection Agency
-----------------------------------------------------------------------
Small Business Compliance Policy; Notice
[[Page 19630]]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
[FRL-6576-4]
Small Business Compliance Policy
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final Policy Statement.
-----------------------------------------------------------------------
SUMMARY: The Environmental Protection Agency (EPA) today issues its
revised final Small Business Compliance Policy to expand the options
allowed under the Policy for discovering violations and to establish a
time period for disclosure. This Policy was originally titled the
Policy on Compliance Incentives for Small Businesses. This Policy is
intended to promote environmental compliance among small businesses by
providing incentives for voluntary discovery, prompt disclosure, and
prompt correction of violations. The Policy accomplishes this in two
ways: by setting forth guidelines for the Agency to apply in reducing
or waiving penalties for small businesses that come forward to disclose
and make good faith efforts to correct violations, and by deferring to
State, local and Tribal governments that offer these incentives. Major
revisions released today include lengthening the prompt disclosure
period from 10 to 21 calendar days and broadening the applicability of
the Policy to violations uncovered by small businesses through any
means of voluntary discovery.
DATES: This policy is effective May 11, 2000.
ADDRESSES: Additional documentation relating to the development of this
policy is contained in the Office of Enforcement and Compliance
Assurance (OECA) public docket (EC-P-1999-009). An index to the docket
may be obtained by contacting the Enforcement and Compliance Docket and
Information Center by telephone at (202) 564-2614 or (202) 564-2119, by
fax at (202) 564-1011, or by email at docket.oeca@epa.gov. Office hours
are 8:00 a.m. to 4:00 p.m., Monday through Friday, except legal
holidays. An additional contact is Ginger Gotliffe (202) 564-7072; fax
(202) 564-009; e-mail: gotliffe.ginger@epa.gov.
SUPPLEMENTARY INFORMATION:
Introduction
Five years ago, EPA reorganized its compliance programs. This
reorganization was undertaken by Administrator Browner with a goal of
making EPA's enforcement and compliance programs more effective in
protecting public health, safety and the environment. The
reorganization also improved and enhanced EPA's ability to reach out to
small businesses with information to help them comply with
environmental requirements. Five years after the reorganization, EPA
conducted outreach efforts to obtain feedback on compliance and
enforcement activities, on ways to further improve public health,
safety and the environment through compliance efforts, and on actions
the Agency has taken over the past five years. From these and other
outreach efforts and from meetings and conference calls with interested
stakeholder groups, OECA received feedback that improvements were
needed to both its Audit Policy and to its Small Business Policy. In
response to that feedback, OECA reviewed ways to improve these
Policies.
Background and History
EPA issued two incentives policies in 1995 and 1996. The
``Incentives for Self-Policing: Discovery, Disclosure, Correction and
Prevention of Violations,'' informally known as the ``Audit Policy,''
was issued in December 1995. See 60 FR 66706 (Dec. 22, 1995). The
purpose of the Audit Policy, which is available to entities of any
size, is to enhance protection of human health, safety and the
environment by encouraging regulated businesses to voluntarily
discover, promptly disclose, expeditiously correct and prevent
violations of federal environmental law. Benefits available to
businesses that qualify for the Audit Policy include reductions in the
amount of civil penalties and no recommendation for prosecution of
potential criminal violations. The Audit Policy has been recently
modified, and the Final revised Audit Policy is being published today
in the Federal Register.
To address the special needs of small businesses EPA issued the
``Policy on Compliance Incentives for Small Businesses,'' which is
commonly called the ``Small Business Policy,'' in June 1996. See 61 FR
27984 June 3, 1996. The Small Business Policy implements section 223 of
the Small Business Regulatory Enforcement Fairness Act (SBREFA) of
1996. The term ``small business'' will be used throughout this Policy,
however this term will also cover entities such as small governments
and small organizations as defined in SBREFA. Under the existing Small
Business Policy, EPA will waive or reduce civil penalties whenever a
small business makes a good faith effort to comply with environmental
requirements by discovering violations as part of a government
sponsored compliance assistance program or a voluntary environmental
audit, promptly disclosing those violations, and correcting them in a
timely manner. If the small business meets all the criteria in the
policy, including violation history, correction timeframe, and lack of
harm, EPA will waive 100% of the gravity component of the civil
penalty. Moreover, EPA will defer to State, local and Tribal actions
that are consistent with the criteria set forth in this Policy. The
Small Business Policy provides penalty reduction as an incentive for
small businesses, who are less likely than large businesses to have
sophisticated environmental expertise, to ask for compliance
assistance. This policy was also simpler for small businesses to use.
There are several notable differences between the existing Audit
Policy and Small Business Policy. First, the policies allow penalty
reduction for violations discovered in different ways. The Audit Policy
addresses violations discovered through systematic methods such as
audits as well as through non-systematic methods. The Small Business
Policy applies only to violations discovered through audits and during
government sponsored on-site compliance assistance activities. Second,
the penalty reduction granted by the policies varies. The Audit Policy
provides 100% reduction of the gravity component of the penalty
(explained below) for systematic discoveries (i.e., part of a regular
audit program) and 75% for non-systematic discoveries. The Small
Business Policy grants provides up to 100% reduction of the gravity
component of the penalty for violations discovered either through
regular audits or during government sponsored on-site compliance
assistance activities. Finally, the period within which violations must
be corrected is different. Under the Audit Policy, businesses must
correct a violation within up to 60 days of its discovery of the
violation to qualify for penalty reduction. Under the Small Business
Policy, a business must generally correct a violation within 180 days
of its discovery to qualify for penalty reduction, and within 360 days
if the correction involves pollution prevention modifications.
In addition to these notable differences, the Audit Policy
addresses several issues not covered by the Small Business Policy;
criminal conduct and multi-facility disclosures. The Small Business
Policy is inapplicable for criminal violations. Violations that may
involve criminal conduct can be addressed under the Audit Policy. In
the unlikely situation where a disclosure involves a multi-facility
business, the Agency will identify the relevant
[[Page 19631]]
provisions of the Audit and Small Business Policies.
Changes to Policy
EPA is today making several major changes to the Small Business
Compliance Policy. All of these changes will make it easier for small
businesses to take advantage of the Small Business Compliance Policy.
These changes result from EPA's evaluation of comments received on our
proposed modification of the Small Business Compliance Policy, which
was published on July 29, 1999. See 64 FR 41116.
The following sections discuss the two major changes that we have
made to the Small Business Compliance Policy: expansion of options for
discovery of violations and lengthening the disclosure period.
1. Expanded Options for Discovery of Violations
Comments submitted to EPA suggested that this Policy should be
expanded to include violations that are discovered by a variety of
compliance assistance activities, including participation in compliance
programs or the use of tools that have been developed or sponsored by
EPA, the States, and local, private and non-profit assistance
providers. Based on its evaluation of those comments, EPA has decided
in the revised Small Business Compliance Policy to allow small
businesses to obtain penalty relief if violations are discovered by any
voluntary means in addition to discovery as the result of government
sponsored on-site compliance assistance activities or environmental
audits. For example, voluntary discovery could result from compliance
management systems (CMSs), pollution prevention assessments,
participation in mentoring programs, training classes, use of on-line
compliance assistance centers, and use of checklists. These programs
and activities need not be associated with environmental regulatory
agencies, but may be associated with any public, private, or non-profit
organization. The Agency wants to encourage participation in those
programs or activities that could increase compliance, improve
efficiency, and reduce pollution.
There are a variety of activities and sources of information that a
small business can use to learn more about environmental regulatory
requirements. EPA and the States provide various forms of compliance
assistance. Some State assistance programs are run as confidential
services to the small business community. If a small business wishes to
obtain a corrections period under this policy after receiving
compliance assistance from a confidential program, the business must
promptly disclose the violations to the EPA or the State or Tribal
government agency which is applying a similar policy and comply with
the other provisions of this Policy.
2. Clarify and Lengthen the Disclosure Period
This revised Small Business Compliance Policy extends the time
period within which the small business must fully disclose a violation
from 10 to 21 calendar days. The original Policy required ``prompt
disclosure'' for compliance assistance discovery and 10 day disclosure
for discoveries made through an environmental audit. Lengthening the
disclosure period to 21 calendar days regardless of how the violation
was discovered will give small businesses more opportunity to make use
of the Small Business Compliance Policy while allowing EPA to get
timely reporting of violations. Such timely reporting provides the
Agency with clear notice of violations that have or may have occurred
and the opportunity to respond if necessary, as well as an accurate
picture of a given businesses's compliance record. Lengthening the
disclosure period to 21 calendar days is also consistent with a similar
change that EPA made to the Audit Policy.
EPA received comment that there might be situations where small
businesses would not able to disclose within the 21 calendar day
period. Therefore the revised Small Business Compliance Policy
addresses this issue. Where the 21 calendar day disclosure period has
not expired and a small business knows that it will be unable to
disclose within that time period, the small business is advised to
contact the appropriate EPA Office before the period expires to request
additional time. For situations in which the 21 calendar day disclosure
period has already expired, the Agency may accept a late disclosure in
the exceptional case, such as where there are complex circumstances. In
such instances, the small business will need to demonstrate that an
exceptional case exists.
With the broadening of the options for the discovery of violations,
there was some concern by one commenter in a follow-up conversation
about the event that triggers the beginning of the 21 calendar day
disclosure period. The 21 calendar day disclosure period begins when
the small business discovers that a violation has, or may have,
occurred. Discovery occurs when any officer, director, employee or
agent of the facility becomes aware of any facts that reasonably lead
him or her to believe that a violation has or may have occurred at the
facility.
Other Issues Addressed by Public Comment
There were also issues that the public commented on, either through
outreach activities or in response to the Agency's proposed
modifications. These covered reduction of penalties, implementation of
the policy, and the combination of the Audit Policy and the Small
Business Compliance Policy.
1. Penalty Reduction
EPA did not change the Small Business Compliance Policy provisions
on reducing or eliminating the gravity component of civil penalties
that it would otherwise seek. Civil penalties are made up of two
components: a gravity component and an economic benefit component. The
gravity component typically reflects the nature of the violations, the
duration of the violations, the environmental, safety or public health
impacts of the violations, good faith efforts by the business to
promptly remedy the violation, and the business's overall record of
compliance with environmental requirements. Under this Policy, the
Agency will grant 100% reduction of the gravity component of the
penalty for violations provided all the other criteria in the policy
are met. The Agency believes the incentive of 100% reduction of the
gravity component should encourage small businesses to disclose
violations promptly and correct them within the specified time period.
The economic benefit component typically reflects any monetary
advantage a small business has derived from the violations. For
example, if a small business significantly reduced its expenses by not
purchasing and installing an emission control device to meet regulatory
requirements, then that small business has gained an economic benefit
or advantage over its competitors who have complied with the
environmental requirements. We received a comment that the possibility
of being subject to the economic benefit component of a civil penalty
would keep small businesses from using the policy. However, other
commenters stated that the economic benefit component should be
retained to protect law abiding small businesses from being placed at a
competitive disadvantage to those which do not comply.
EPA retains discretion to consider and collect economic benefit
where a significant benefit was gained, although based on its
experience, the Agency
[[Page 19632]]
does not anticipate the need to exercise this discretion often. To
date, the vast majority of the disclosures under the Audit Policy and
all of the disclosures under the Small Business Compliance Policy have
not necessitated recovery of economic benefit.
2. Implementation of the Policy
EPA has modified the Small Business Compliance Policy in format and
language to provide the information in a more understandable manner.
This in part helps to respond to comments about how we have implemented
the Policy. In addition, when they become available, EPA will provide a
fact sheet, contact list, and other information about the Policy at the
EPA web site (http://www.epa.gov/oeca/smbusi.html) to increase the
usefulness of the Policy. We will also ensure that other internet sites
such as EPA's Small Business Ombudsman web site and the Compliance
Assistance Center's web sites (9 Centers available at http://
www.epa.gov/oeca/centers) link to this information about the Policy.
EPA staff and other compliance assistance activities and initiatives
will also provide information about the Small Business Compliance
Policy.
Enhanced implementation of the Policy also involves improved
procedures and coordination within EPA. EPA Headquarters and Regional
staff working on the Audit Policy as well as this Small Business
Compliance Policy are coordinating on issues and procedures to ensure
national consistency in its application and to improve the timeliness
of the Agency's review of each disclosure. In most circumstances, EPA
will respond to a small business within 60 days of disclosure of a
violation.
3. Combining Both Compliance Incentives Policies
As part of the Agency's evaluations of the Audit and Small Business
Policies and given the similarities between the two Policies, EPA asked
for comments on the advisability of combining them. In particular, the
Agency was interested in whether small businesses would be more likely
to audit (or seek compliance assistance) and self-disclose violations
if the two policies were merged. EPA received a range of comments
supportive of combining the two policies if doing so would simplify the
process for small businesses. After a careful review, EPA decided that
it is preferable for small businesses to have a separate policy
tailored specifically for them. The Small Business Compliance Policy:
(1) Is shorter and simpler, (2) contains additional benefits for small
businesses such as a longer correction period and 100% penalty
reduction of the gravity component for all covered violations, and (3)
can be more easily distributed with compliance assistance materials
developed just for small businesses.
We expect these changes to enable more small businesses to use the
policy and thereby promote environmental compliance.
Small Business Compliance Policy
A. Introduction and Purpose
The Small Business Compliance Policy is intended to promote
environmental compliance among small businesses by providing incentives
for them to make use of compliance assistance programs, environmental
audits, or compliance management systems (CMS), or to participate in
any activities that may increase small businesses' understanding of the
environmental requirements with which they must comply. The Policy
accomplishes this in two ways: by waiving or reducing civil penalties
to which a small business might otherwise be subject, and by deferring
to States and local governments or tribal authorities that offer these
incentives consistent with the criteria established in this Policy.
EPA will waive or reduce the gravity component of civil penalties
whenever a small business makes a good faith effort to comply with
environmental requirements by:
(1) Voluntarily discovering a violation,
(2) Promptly disclosing the violation within the required time
period, and
(3) Expeditiously correcting the violation within the proper
timeframe.
To obtain the benefits of the Policy, the facility must also meet
criteria on violation history, lack of harm, and criminal conduct.
B. Background
This Policy implements section 223 of the Small Business Regulatory
Enforcement Fairness Act (SBREFA) of 1996.
C. Applicability
This Policy applies to facilities owned by small businesses as
defined here. A small business is a person, corporation, partnership,
or other entity that employs 100 or fewer individuals (across all
facilities and operations owned by the small business).\1\ Entities, as
defined under SBREFA, also include small governments and small
organizations. Facilities that are operated by municipalities or other
local governments may be covered under the Small Communities Policy
(see http://www.epa.gov/oeca/scpolcy.html). Facilities that are
disclosing violations involving multiple facilities should refer to the
sections on multiple facilities in the Policy on Incentives for Self-
Policing: Discovery, Disclosure, Correction and Prevention of
Violations ( the Audit Policy) of April 11, 2000.
---------------------------------------------------------------------------
\1\ The number of employees should be considered as full-time
equivalents on an annual basis, including contract employees. Full-
time equivalents means 2,000 hours per year of employment. For
example, see 40 CFR 372.3.
---------------------------------------------------------------------------
This Policy supersedes the previous version of the policy which was
called the Policy on Compliance Incentives for Small Businesses and
became effective on June 10,1996. To the extent that this Policy may
differ from the terms of applicable enforcement response policies
(including penalty policies) under media-specific programs, this
document supersedes those policies.
D. How Small Businesses Can Qualify for Penalty Reduction
EPA will eliminate or reduce the gravity component of civil
penalties against small businesses based on the following criteria:
1. Discovery is Voluntary
The small business discovers a violation on its own before an EPA
or State inspection. For example, a small business may discover
violations after receiving compliance assistance, conducting an
environmental audit or participating in mentoring programs. Other
activities that may be useful in discovering violations include
establishing CMS, using compliance checklists, reading materials on
complying with environmental requirements, using compliance assistance
center web sites, and attending training classes.
The violation must be identified voluntarily, and not through a
monitoring or sampling requirement prescribed by statute, regulation,
permit, judicial or administrative order, or consent agreement. For
example, emissions violations discovered through a continuous emissions
monitor (or alternative monitor established in a permit), violations of
National Pollutant Discharge Elimination System (NPDES) discharge
limits discovered through required sampling or monitoring, and
violations discovered through a compliance audit required to be
performed by terms of a consent order or settlement order are not
eligible for penalty reduction under the policy.
[[Page 19633]]
2. Disclosure Period is Met
i. The small business must voluntarily disclose a specific
violation fully and in writing to EPA or the State within 21 calendar
days after the small business has discovered that the violation has
occurred, or may have occurred. Prompt disclosure is evidence of the
small business's good faith in wanting to achieve or return to
compliance as soon as possible. For purposes of this Policy, the time
at which a small business discovers that a violation has or may have
occurred begins when any officer, director, employee, or agent of the
facility becomes aware of any facts that reasonably lead him or her to
believe that a violation may exist. If a small business has some doubt
as to the existence of a violation, EPA recommends that the business
make a prompt disclosure and allow the regulatory authorities to make a
definitive determination. This will ensure that the small business
meets the disclosure period requirement.
ii. The disclosure of the violation must occur before the violation
was otherwise discovered by, or reported to EPA, the appropriate state
or local regulatory agency. See section F.1 of the Policy below. Good
faith also requires that a small business cooperate with EPA and in a
timely manner provide such information requested by EPA to determine
applicability of this Policy.
iii. If a small business wishes to obtain a corrections period
after receiving compliance assistance from a confidential assistance
program, the business may still take advantage of the policy by
disclosing the violation to the appropriate regulatory agency.
3. Violation is Corrected
The business corrects the violation within the corrections period
set forth below. Small businesses are expected to remedy the violations
within the shortest practicable period of time. Correcting the
violation includes remediating any environmental harm associated with
the violation, as well as putting into place procedures to prevent the
violation from happening again.
i. For any violation that cannot be corrected within 90 calendar
days of its discovery, the small business must submit a written
schedule, or the agency may, at its sole discretion, elect to issue a
compliance order with a schedule, as appropriate. The small business
must correct any violations within 180 calendar days after the date
that they were discovered.
ii. If the small business intends to correct the violation by
putting into place pollution prevention measures, the business may take
an additional period of up to 180 calendar days, i.e., up to a period
of 360 calendar days from the date the violation is discovered.
4. When the Policy Does Not Apply
The Policy does not apply if:
a. The facility has the following noncompliance history:
i. It has previously received a warning letter, notice of
violation, or field citation, or been subject to a citizen suit or any
other enforcement action by a government agency for a violation of the
same requirement within the past three years.
ii. It has been granted penalty reduction under this Policy (or a
similar State or Tribal policy) for a violation of the same or a
similar requirement within the past three years.
iii. It has been subject to two or more enforcement actions for
violations of environmental requirements in the past five years, even
if this is the first violation of this particular requirement.
b. The violation was discovered through an information request,
inspections, field citations, reported to a federal, state or local
agency by a member of the public or a ``whistleblower'' employee,
identified in notices of citizen suits, previously reported to an
agency, or through an investigation unless the facility can demonstrate
that it did not know that the agency had initiated the investigation
and has disclosed in good faith.
c. The violation has caused actual serious harm to public health,
safety, or the environment;
d. The violation is one that may present an imminent and
substantial endangerment to public health, safety or the environment;
or
e. The violation involves criminal conduct.
E. Penalty Reduction Guidelines That EPA Will Follow
EPA will exercise its enforcement discretion to eliminate or reduce
civil penalties as follows.
1. EPA will waive the gravity component of the civil penalty if a
small business satisfies all of the criteria in section D. If, however
a small business has obtained a significant economic benefit from the
violation(s), EPA will still waive 100% of the gravity component of the
penalty, but may seek the full amount of the significant economic
benefit associated with the violations.\2\ EPA anticipates that such a
significant economic benefit will occur infrequently. However, EPA
retains its discretion to ensure that small businesses that comply with
public health protections are not put at a serious competitive
disadvantage by those who have not complied.
---------------------------------------------------------------------------
\2\ The ``gravity component'' of the penalty includes everything
except the economic benefit amount.
---------------------------------------------------------------------------
2. If a small business does not fit within the guideline
E.1.immediately above, this Policy does not provide any special penalty
reduction. However, if a small business has otherwise made a good faith
effort to comply, EPA has discretion, pursuant to its applicable
enforcement response or penalty policies, to waive or reduce civil
penalties.\3\
---------------------------------------------------------------------------
\3\ For example, in some media specific penalty policies, the
penalty calculation may be reduced to account for good faith efforts
to comply.
---------------------------------------------------------------------------
3. Further, the Agency's enforcement response and penalty policies
may allow for penalty reduction where the small business is able to
document an inability to pay all or a portion of the penalty. Penalty
reduction in this situation allows the small business to stay in
business and to finance compliance. See Guidance on Determining a
Violator's Ability to Pay a Civil Penalty of December 1986 (see http://
www.epa.gov/oeca/ore/aed/comp/acomp/a1.html). Penalties also may be
reduced pursuant to the Final EPA Supplemental Environmental Projects
Policy of May 1998 (63 FR 24796, June 5, 1998, available at http://
www.epa.gov/oeca/sep/sepfinal.html) and Incentives for Self-Policing:
Discovery, Disclosure, Correction and Prevention of Violations Policy
of April 11, 2000.
4. This Policy sets forth how the Agency expects to exercise its
enforcement discretion in deciding on an appropriate enforcement
response and determining an appropriate civil penalty for violations by
small businesses. It states the Agency's views as to the proper
allocation of enforcement resources. This Policy is not final agency
action and is intended as guidance. It does not create any rights,
duties, obligations, or defenses, implied or otherwise, in any third
parties.
F. Enforcement for Violations Not Promptly Corrected
To ensure that this Policy enhances and does not compromise public
health and the environment, a business remains subject to all
applicable enforcement response policies (which may include discretion
whether or not to take formal enforcement action) for all violations
that were not remedied within the corrections period. The
[[Page 19634]]
penalty in such action may include the time period before and during
the correction period.
G. Applicability to States and Tribes
Small businesses may take advantage of small business policies that
many States have developed. EPA recognizes that states and tribes are
partners in enforcement and compliance assurance and may have adopted
their own penalty mitigation policies in Federally-authorized, approved
or delegated programs. Therefore, EPA will generally defer to State and
Tribal penalty mitigation for self disclosures as long as the State
policy meets minimum requirements for Federal delegation and is
generally consistent with the criteria set forth in this Policy.
Whenever a State agency or Tribe provides a penalty waiver or
mitigation or a correction period to a small business pursuant to this
Policy or a similar policy, that State or Tribe should notify the
appropriate EPA Region to ensure coordination and to request that EPA
defer to that action. Similarly, EPA will notify the appropriate State
agency or Tribe whenever EPA applies this policy to ensure coordination
and request the States defer to EPA's action. Regional contacts, along
with other materials about the Policy, will be posted at the EPA web
page (http://www.epa.gov/oeca/smbusi.html) as they become available.
H. Effective Date
This revised Policy is effective May 11, 2000.
Dated: April 5, 2000.
Sylvia K. Lowrance,
Acting Assistant Administrator for Enforcement and Compliance
Assurance.
[FR Doc. 00-8955 Filed 4-10-00; 8:45 am]
BILLING CODE 6560-50-P