Small Business Exemption From Rules
Minn. Stat. § 14.127 provides a procedure for small businesses or small cities to claim exemption from certain state rules. Under the statute, an agency must determine if the cost of complying with a proposed rule in the first year after the rule will take effect will exceed $25,000 for a business with less than 50 full-time employees or a statutory or home rule charter city with less than 10 full-time employees.
[Note that under Minnesota’s administrative Procedure Act any proposed amendments to existing rules constitute a proposed rule. The statute is unclear in that context as to what would constitute “the cost of complying” with an amended rule. Specifically, it is silent as to whether the $25,000 figure is for incremental (that is, new costs) only or whether those incremental costs can be added to existing costs of compliance with the existing rule to reach the $25,000 threshold.]
That determination must be made before the close of the rulemaking hearing or, in cases where there is no hearing, before submission of the record to the administrative law judge. If the agency determines that the costs will exceed $25,000 or if the administrative law judge disapproves the agency’s determination that the costs do not exceed $25,000, the above defined business or city may file a written statement with the agency claiming exemption from the rules. Upon filing the statement, the rules do not apply to the business or city until the rules are approved by a law enacted after the agency’s determination or the administrative law judge’s disapproval. The law applies to any rule for which the record has not closed before July 1, 2005. Certain exemptions apply (e.g., Minn. PUC rulemaking).
Enhanced Federal Compliance Assistance
The federal Small Business Regulatory Enforcement Fairness Act was amended to require federal agencies that develop and publish rules for which a regulatory flexibility analysis is required by federal law to publish one or more guides to assist small entities in complying with the rule. The compliance guides, which are to be posted on the agency’s website and distributed to industry contacts of those potentially affected by the rule, shall include a description of the actions needed to meet the requirements of the rule to enable a small entity to know when such requirements are met and shall also include, if determined by appropriate by the agency, a description of possible procedures-such as tests-that may assist small entities in meeting the requirements.
CREDITS: This is an excerpt from A Guide to Starting a Business in Minnesota, provided by the Minnesota Department of Employment and Economic Development, Small Business Assistance Office, Twenty-eighth Edition, January 2010, written by Charles A. Schaffer, Madeline Harris, and Mark Simmer. Copies are available without charge from the Minnesota Department of Employment and Economic Development, Small Business Assistance Office.
This post is also part of a series of posts on Minnesota Environmental Protection Programs and how they affect starting a business in Minnesota. For related topics, see our guides on storage tank regulations, air pollution control requirements, environmental indemnity clauses in lease agreements, and zoning and land use compliance.
For more on real estate and environmental compliance, see our Real Estate practice area.
What is the small business exemption from Minnesota administrative rules?
Under Minn. Stat. § 14.127, a business with fewer than 50 full-time employees or a home rule charter city with fewer than 10 full-time employees may claim exemption from a proposed state rule if the cost of complying in the first year exceeds $25,000. The business or city files a written statement with the agency, and the rule does not apply until approved by subsequent legislation.
What triggers the $25,000 cost threshold for rule exemption?
The rulemaking agency must determine whether first-year compliance costs exceed $25,000 before the close of the rulemaking hearing, or before submission of the record to the administrative law judge if there is no hearing. If the agency finds costs exceed the threshold—or if the ALJ disapproves the agency’s determination that they do not—the exemption process is triggered.
What does the federal Small Business Regulatory Enforcement Fairness Act require?
Federal agencies that develop rules requiring a regulatory flexibility analysis must publish compliance guides for small entities. These guides must describe the actions needed to meet the rule’s requirements and be posted on the agency’s website and distributed to potentially affected industry contacts.
