UNITED STATES ENVIRONMENTAL PROTECTION AGENCY [FRL-6576-4]
Small Business Compliance PolicyAGENCY:
Environmental Protection Agency (EPA)ACTION:
Final Policy StatementSUMMARY:
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. ADDRESS:
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 email@example.com. 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: firstname.lastname@example.org. 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 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 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.
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 ( all 9 Centers
available at http://www.epa.gov/oeca/main/compasst/compcenters.html) 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.
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
- SUPPLEMENTARY INFORMATION:
- Background and History.
- Changes to Policy.
- Other Issues Addressed by Public Comment.
- SMALL BUSINESS COMPLIANCE POLICY
- A. INTRODUCTION AND PURPOSE
- B. BACKGROUND
- C. APPLICABILITY
- D. HOW SMALL BUSINESSES CAN QUALIFY FOR PENALTY REDUCTION
- E. PENALTY REDUCTION GUIDELINES THAT EPA WILL FOLLOW
- F. ENFORCEMENT FOR VIOLATIONS NOT PROMPTLY CORRECTED
- G. APPLICABILITY TO STATES AND TRIBES
- H. EFFECTIVE DATE